Companies that do international business will inevitably be faced with bad payers, overdue invoices and eventually outstanding debts. For several businesses, one of the most challenging regions to collect a debt is Latin America. Here are three suggestions to keep in mind when dealing with debt in Latin America.
First of all, try to prevent facing a debt in Latin America. This sounds obvious. However, often we see that the reasons companies are faced with outstanding debt in Latin America lay within the very process and procedures prior to reaching the point of overdue accounts. Strategic decisions when a market is entered, compliance and due diligence, know your client policies when clients are signed, formats and setup of contracts, order forms and invoices, involvement of local commercial or legal presentation; it is essential that these are all focused on the specific environment of your clients’ region.
Once there is a debt: don’t wait too long taking action! We regularly see foreign companies who continue to chase overdue accounts following the same routine. It is essential to be decisive and take action soon when an account becomes overdue. The chance for success diminishes with the ticking of the clock. Engage your local collection agency if they have an international network or an international debt collector with experience in Latin America, to assist with the debt collection process.
Be realistic. Expectations management is important. Effective amicable debt collection in Latin America is certainly possible, be it however that there are certain regions which are more challenging. Reasons can be an economic crisis (Brazil), currency exchange rates (Colombia, Mexico), payment moral, amongst others. And some countries are very complicated (Venezuela is a notorious example). Legal is generally not recommendable; in most countries, foreign debt is hard to legally enforce, and often legal costs are substantial. It is important to get proper advice on your specific situation, to get an idea of collection options.
We have the following three suggestions for you when you focus on collecting debts in Latin America: try to prevent having to deal with debts, don’t wait too long taking action when facing debts, and be realistic and manage expectations as to debt recovery.
Cobroamericas is a provider of international debt collection services and focuses on collections in Latin America and the Caribbean. If you are interested in learning more about debt collection in Latin America and 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.