Five Alternative Ways To Get Paid From Venezuela

140729.1 Five Alternatives VenezuelaIn the collection business the aim is to collect as much of a debt as possible within as little of a time range as possible. In order to do so, one has to deal with all kinds of hurdles that are put up in the way towards success.

Debtors may not have money to pay, may not want to pay or simply your debt is not a priority to them. Or invoices are not paid because of a dispute over goods or products. These are circumstances caused within the individual case.

But what if the reason of the overdue is caused by issues outside the control of creditor and debtor? Foreign exchange restrictions, economic downfall, political unrest or social disruption, inflation and devaluation, ineffectiveness of legal systems; all potential factors that may hit you if you do business abroad. And if you are owed money or if you collect in Latin America.

In my first series of blogs I will talk about these topics. I will start with one of the main issues we have been running into from the moment we started the collection business in Latin America: foreign currency exchange restrictions.

Take Venezuela. A country ruled by a self-proclaimed socialist government, the “Republica Bolivariana de Venezuela”. As of 2003 the country is subject to one of the world’s severest foreign currency exchange restrictions, introduced by the Chavez government. Not only has it had a major impact on Venezuela’s society and economy (with a scarcity in products and goods available in an economy that produces and exports only a few things itself, one of them being oil). It has also made it virtually impossible for residents to wire money out of the country, and therefore for foreign business to get paid for services and goods.

A short background. Let’s for our purposes focus on private businesses and individuals. In principle all payments in foreign currencies by individuals or businesses have to be run through CADIVI (Comision de Administracion de Divisas), a government body. CADIVI basically regulates how much money in foreign currencies residents may buy and who is allowed to buy. Approval procedures are lengthy (it may take up to between 9 or 12 months before a payment is approved, if at all) and lack transparency (it is unclear as to what documentation accompanies a request). But what makes the system unpredictable is the fact that there are annual, accumulative quotas (which are national) on the amounts of foreign currencies, which means that even if documentation meets approval the request may simply be rejected because it exceeds the quotas.

This makes Venezuela an extremely complicated case in terms of collections. How can one still successfully collect monies owed from companies or individuals based in Venezuela?

Naturally, it pushes businesses and collection agencies to look for alternatives to wire transfers from Venezuela. Possibilities depend on the circumstances and alternatives may also not be straightforward. However, there are alternatives:

Payments from reserves held abroad: Those companies or individuals who have a bank account outside Venezuela can pay from abroad. Accounts in the US and Spain are especially popular; we have successfully collected in Venezuela in several cases because of this alternative. Downside is that the group of companies and individuals that do have an account with reserves abroad is limited.

Credit card payment or Paypal: An alternative for a wire transfer is a payment by creditcard or Paypal. However, also creditcard payments are subject to government restrictions. Approval from CADIVI is needed and it can take up to 2-3 months to get permission, if granted at all. Range of amounts permitted is US$300-US$3,000 per person on an annual basis, subject to amongst others reason and destination. As in the case of bank accounts abroad, some businesses and people have foreign credit cards and may escape from being subject to CADIVI;

Payment with Western Union: This seems to be an alternative for payment to family members abroad or for educational purposes, like universities;

Payment by check: There is thepossibility of sending checks in abroad (there seem to be banks that accept that in Venezuela). However, also check payments are subject to CADIVI and generally a maximum allowance is mentioned of between US$500-US$700;

Acceptance of payment in bolivars: Although this alternatives sounds only hypothetical, there are actually webpages in Venezuela dedicated to this;

Digital currencies: Although I do not have any experience in practice, Bitcoins may certainly be worth investigating. It all depends however if creditors accept payments in Bitcoin. Downside is the instability of the value of Bitcoins. Furthermore, it is to be seen if how long government will hold off restricting Bitcoin. Regional neighbor Bolivia for example has as first country in Latin America prohibited the use of Bitcoin.

Drawing to a conclusion. Wire transfer payment from Venezuela are subject to approval from and quotas set by CADIVI. Most feasible ways to collect monies due from Venezuela are still to circumvent the system by looking for less conventional payment methods or by having the transaction take place outside Venezuela. Five alternatives may be payment by the party in Venezuela from reserves held outside Venezuela, payment by creditcard (or Paypal), payment by check, payment through Western Union, payment in Bolivar and payment in digital money (Bitcoin). These alternatives may however depend on access to alternative payment methods, or they may still be subject to CADIVI’s rules and regulations or may in practice turn out to be only hypothetical options.

Since Nicolas Maduro took over presidency in Venezuela, there have been signs that the foreign currency exchange restrictions may be softened. In practice the impact still has to be seen. Only time will tell.

If you are interested in learning more on the subjects of collections in Venezuela, foreign currency exchange restrictions, CADIVI, or collections in Latin America please leave us a message, or please connect on Linked-In or follow me on Twitter.

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

Five Alternative Ways To Get Paid From Venezuela

In the collection business the aim is to collect as much of a debt as possible within as little of a time range as possible. In order to do so, one has to deal with all kinds of hurdles that are put up in the way towards success.

Debtors may not have money to pay, may not want to pay or simply your debt is not a priority to them. Or invoices are not paid because of a dispute over goods or products. These are circumstances caused within the individual case.

But what if the reason of the overdue is caused by issues outside the control of creditor and debtor? Foreign exchange restrictions, economic downfall, political unrest or social disruption, inflation and devaluation, ineffectiveness of legal systems; all potential factors that may hit you if you do business abroad. And if you are owed money or if you collect in Latin America.

In my first series of blogs I will talk about these topics. I will start with one of the main issues we have been running into from the moment we started the collection business in Latin America: foreign currency exchange restrictions.

Take Venezuela. A country ruled by a self-proclaimed socialist government, the “Republica Bolivariana de Venezuela”. As of 2003 the country is subject to one of the world’s severest foreign currency exchange restrictions, introduced by the Chavez government. Not only has it had a major impact on Venezuela’s society and economy (with a scarcity in products and goods available in an economy that produces and exports only a few things itself, one of them being oil). It has also made it virtually impossible for residents to wire money out of the country, and therefore for foreign business to get paid for services and goods.

A short background. Let’s for our purposes focus on private businesses and individuals. In principle all payments in foreign currencies by individuals or businesses have to be run through CADIVI (Comision de Administracion de Divisas), a government body. CADIVI basically regulates how much money in foreign currencies residents may buy and who is allowed to buy. Approval procedures are lengthy (it may take up to between 9 or 12 months before a payment is approved, if at all) and lack transparency (it is unclear as to what documentation accompanies a request). But what makes the system unpredictable is the fact that there are annual, accumulative quotas (which are national) on the amounts of foreign currencies, which means that even if documentation meets approval the request may simply be rejected because it exceeds the quotas.

This makes Venezuela an extremely complicated case in terms of collections. How can one still successfully collect monies owed from companies or individuals based in Venezuela?

Naturally, it pushes businesses and collection agencies to look for alternatives to wire transfers from Venezuela. Possibilities depend on the circumstances and alternatives may also not be straightforward. However, there are alternatives:

Payments from reserves held abroad: Those companies or individuals who have a bank account outside Venezuela can pay from abroad. Accounts in the US and Spain are especially popular; we have successfully collected in Venezuela in several cases because of this alternative. Downside is that the group of companies and individuals that do have an account with reserves abroad is limited.

Credit card payment or Paypal: An alternative for a wire transfer is a payment by creditcard or Paypal. However, also creditcard payments are subject to government restrictions. Approval from CADIVI is needed and it can take up to 2-3 months to get permission, if granted at all. Range of amounts permitted is US$300-US$3,000 per person on an annual basis, subject to amongst others reason and destination. As in the case of bank accounts abroad, some businesses and people have foreign credit cards and may escape from being subject to CADIVI;

Payment with Western Union: This seems to be an alternative for payment to family members abroad or for educational purposes, like universities;

Payment by check: There is thepossibility of sending checks in abroad (there seem to be banks that accept that in Venezuela). However, also check payments are subject to CADIVI and generally a maximum allowance is mentioned of between US$500-US$700;

Acceptance of payment in bolivars: Although this alternatives sounds only hypothetical, there are actually webpages in Venezuela dedicated to this;

Digital currencies: Although I do not have any experience in practice, Bitcoins may certainly be worth investigating. It all depends however if creditors accept payments in Bitcoin. Downside is the instability of the value of Bitcoins. Furthermore, it is to be seen if how long government will hold off restricting Bitcoin. Regional neighbor Bolivia for example has as first country in Latin America prohibited the use of Bitcoin.

Drawing to a conclusion. Wire transfer payment from Venezuela are subject to approval from and quotas set by CADIVI. Most feasible ways to collect monies due from Venezuela are still to circumvent the system by looking for less conventional payment methods or by having the transaction take place outside Venezuela. Five alternatives may be payment by the party in Venezuela from reserves held outside Venezuela, payment by creditcard (or Paypal), payment by check, payment through Western Union, payment in Bolivar and payment in digital money (Bitcoin). These alternatives may however depend on access to alternative payment methods, or they may still be subject to CADIVI’s rules and regulations or may in practice turn out to be only hypothetical options.

Since Nicolas Maduro took over presidency in Venezuela, there have been signs that the foreign currency exchange restrictions may be softened. In practice the impact still has to be seen. Only time will tell.

If you are interested in learning more on the subjects of collections in Venezuela, foreign currency exchange restrictions, CADIVI, or collections in Latin America please leave us a message, or please connect on Linked-In or follow me on Twitter.

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