South America Commercial Debt Recovery: Issues

What are the typical issues companies encounter when attempting to collect an international debt from a business in South America?

Below we list eight issues we deal with in commercial debt recovery in daily practice.

Financial issues & insolvency

South America debt recovery insolvency

One of the of main issues commercial debt recovery in South America may run into is financial problems. Businesses are in bad weather, caused by economic micro- or macro factors, and cannot comply with their payment obligations. Sometimes the issue is insolvency on the debtor’s end. 

Disputes & misunderstanding

Often a reason for overdue payments in South America is a dispute or misunderstanding regarding the commercial deal or the services provided or products delivered. Reality does not match expectations. The amounts claimed during debt recovery are disputed or there is a misunderstanding as to the amount actually payable.

Incompatible paperwork

South America debt recovery documents

In some cases, the paperwork between client and the debtor in South America is incompatible. At least from debtor’s point of view, payment cannot be done as debtor requires other or additional paperwork in order to comply with local legal or accountancy rules and remit payment. Such paperwork can include the contract, order forms, order confirmations and invoices. 

Currency exchange controls

In some countries, debt recovery in South America can be challenged by foreign currency exchange controls. In some countries, like Brazil, international payments are subject to prior controls which can delay or obstruct payment. From other countries, notoriously Argentina and Venezuela (please see previous post about Venezuela),  it has become difficult or impossible to transfer monies out of the country. For more info on foreign currency exchange controls in South America, please click here.

Lack of leverage

International debt recovery gains strength with the leverage the collector and his or her client has. Leverage can be a commercial relationship the debtor still has an interest in to maintain or re-establish, the realistic option of enforcing payment legally if no payment is done or a payment agreement is not reached amicably, or the reputation debtor wants to safeguard. If there no such leverage, because debtor is not interested in re-establishing the commercial relationship or going legal is in reality, because of the local circumstances or an incomplete file, not an alternative, it can become an issue to collect an international debt in South America.

Communication

South America debt recovery communication

Often communication is an issue for commercial debt recovery in South America. Without knowledge of the Spanish language almost all over South America, or particularly Portuguese in Brazil, it is difficult and in most cases impossible to attempt debt collection in South America. Also the distance (physical or time zone wise) can be a major issue for debt recovery from a business in South America.  

Unprofessional behavior

Sometimes collectors and their clients are confronted with unprofessional behavior of businesses in South America. Although unprofessional behavior in business takes place all over the world, the level of informality in business in South America sadly enough regularly provokes unprofessional behavior and payment avoidance towards creditors abroad.

Unfamiliarity

An issue for creditors or their collectors can be the unfamiliarity with South America as a territory. Its infrastructure, (business) culture and collection alternatives are often unknown to businesses outside South America.

Debt recovery in South America

If you are interested in learning more or discussing issues that rise when attempting to collect an international debt in South America, or in general you would like to know more about debt collection in Latin America & the Caribbean, please connect with Cobroamericas on Linked-In or follow us on Twitter.

To participate in the conversation about debt collection in Latin America please join the Linked-In Group Debt Collection Latin America.

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