B2B collections in LATAM: negotiate, mediate, settle

If you are dealing with B2B collections in Latin America, you may run into nonpaying debtors, commercial or financial issues the debtor may have, and local situations in Latin America that may considerably complicate succesfull collection.

In order to deal with such situations, change your mindset to negotiations, mediation and settlement.

Negotiations in B2B collections in Latin America

My advice is to be prepared to negotiate. A trigger to negotiate is often the lack of alternatives. Debtors may otherwise take the stand that they will not pay, and the only way to enforce payment, is to start legal proceedings. The latter is a rather unattractive (and sometimes, practically impossible) alternative. This will be discussed in more detail below. Please read the following articles about negotiation in international debt collection and settlement negotiations in Latin America for more insight.

Mediation in B2B collections in Latin America

Another alternative is to look for mediation in Latin America, especially if the amount owed is substantial. An independent third party will in such case be appointed as mediator between creditor and debtor. For more thoughts on mediation in international debt collection, please read this previous article.

Looking for a settlement

The aim of negotiations and mediation with the debtor in Latin America is reaching an amicable settlement. An agreement between creditor and debtor that both parties can live with. A settlement agreement may consist of a one-time payment as full and final settlement, or a payment plan, or a combination. Sometimes, continuation of the commercial relationship between the parties is also agreed, which can be continuation of import / export of delivery of services, whereby for each future payment (usually on a pre-payment basis) part goes towards payment of the debt.

Avoid legal proceedings in Latin America

The recommendation is to at all times avoid legal proceedings in Latin America. Generally speaking, as legal systems and requirements between countries differ, sometimes substantially, cross border files are not sufficiently solid in order to enforce payment by means of legal proceedings. Also, legal may be expensive and with little likelihood to collect, the creditor may end up with high legal bills which cannot be recovered from the counter party, the debtor.

In dealing with a debtor in Latin America, be prepared to negotiate, to mediate, and to settle. Avoid legal proceedings because of its complexity and costs.

If you are doing international business in Latin America and you are interested in learning more on B2B collections, please reach out to Cobroamericas, on Linked-In or follow us on Twitter.

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

David Zannoni

International B2B claims in Latin America

Collecting international B2B claims in Latin America is in many ways not comparable local collections. The nature of the claims, as well as the collection options available, are essentially different.

Focus should be om amicable collections

Due to the complexity of cross boarder documentation and procedures, and differences in legislation between the jurisdictions of creditor and debtor, generally speaking, legal enforcement of international B2B claims is unattractive, unpracticable and often, impossible. This means that the focus of collection of international B2B claims, also in Latin America and the Caribbean, will be on finding amicable solutions.

Amicable solutions: full payment, payment plan or settlement?

With an amicable approach to collection of an international B2B claim in Latin America, the objective is still to achieve payment for the creditor, as soon as possible. In looking for an amicable solution, it is important to be prepared to negotiate with the debtor. If full and immediate payment cannot be achieved, provided there are no disputes, counter claims or insolvencies, the alternatives are to negotiate a payment plan with the debtor (which entails a more long-term approach) or to look for a partial payment as full and final settlement (if the creditor prefers a short-term solution).

How to deal with disputes in international B2B claims?

international business claims Latin AmericaIf the debtor disputes the claim, it is important to determine the reason. If feasible, the dispute should be dealt with and if the issue (whether service or product related) cannot be fixed, then the most convenient approach would be to negotiate a settlement and look for partial payment. From a commercial point of view, the creditor should try to solve the dispute, especially if creditor and debtor have the intention to continue working together and doing business.

What to do if a company is insolvent

If a company in Latin America is insolvent, whether in bankruptcy or administration, or any similar or comparable situation, then the likelihood that the creditor will be paid is limited. For each country, the formal procedures differ, and also international B2B claims can be included in insolvency procedures. However, as these usually are very long lasting and hence come with potentially relatively high (legal) costs, it might not be attractive for foreign creditors to further pursue if a debtor in Latin America is insolvent.

As legal enforcement of international B2B claims in Latin America is unattractive, unpractical and often, impossible, the focus for debt collection should at all times be on amicable collections. Amicable solutions include the objective to look for full payment, to negotiate a payment plan with the debtor, or to otherwise look for a settlement (leading to partial payment). From a commercial perspective, it is important for a creditor to try to solve disputes with debtors and to look for a settlement, if possible. If a debtor company in Latin America, however, is insolvent, usually there is little that can be done on behalf of the creditor, to achieve payment.

If you are doing international business in Latin America and you are interested in learning more on collecting international B2B claims, please reach out to Cobroamericas, on Linked-In or follow us on Twitter.

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