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.

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Currencies in the Caribbean

The Caribbean consists of multiple nation states and overseas territories. Several languages are spoken, of which English, French, Spanish and Dutch are the most widely spoken official languages.

Common business activities in the Caribbean are tourism, logistics and finance.

If you do business in, and consequently, invoice to businesses based out of, and collect payments from, the Caribbean, it is important to understand the monetary landscape.

Below is a list of the official currencies used in the Caribbean (*):

East Caribbean Dollar

The East Caribbean Dollar is the official currency of the following Caribbean nations: Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines.

Euro in the Caribbean

Caribbean Currency EuroThe Euro is the official currency in Guadeloupe, Martinique, Saint Barthelemy, and Saint Martin. All these territories are either overseas departments or overseas collectivities of France.

US Dollar in the Caribbean

Caribbean US DollarThe US Dollar circulates as the official currency in the Caribbean Netherlands, Turks and Caicos Islands, United States Virgin Islands, Puerto Rico, and the British Virgin Islands.

Caribbean Countries with Local Currencies

Several Caribbean nations and overseas territories issue their own currencies: Aruba (Aruban Florin), Bahamas (Bahamian Dollar), Barbados (Barbadian Dollar), Cayman Islands (Cayman Islands Dollar), Cuba (Cuban Peso & Cuban Convertible Peso), Sint Maarten, Curacao (Netherlands Antillean Guilder), Dominican Republic (Dominican Peso), Haiti (Haitian Gourde), Jamaica (Jamaican Dollar), and Trinidad and Tobago (Trinidad and Tobago Dollar).

Notwithstanding the foregoing, the US Dollar, and, to a lesser extent, the Euro and the Pound Sterling are used in international business in the Caribbean. Invoicing in particularly US Dollar is very common.

The main official currencies in the Caribbean are the East Caribbean Dollar, the Euro, the US Dollar, and several local currencies. For business transaction, the US Dollar is widely used and to a lesser extent, also the Euro and the Pound Sterling.

If you are doing international business in the Caribbean and you are interested in learning more on foreign currencies and debt collection in the Caribbean, 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.

(*) Source: wikipedia

Settlement Negotiations In Latin America

You may have been in a situation that, while doing business in Latin America, your Latin American client refuses to pay because of issues.

Provided that your client is a professional party with good intentions, there may be plenty of reasons not to go for hardline collections or legal measures, but rather take on the approach of settlement negotiations.

The following are in our experience the most common categories of issues that may be the reason Latin American companies default on payments with foreign business partners.

Your Client May Have Financial Issues

Latin America financial issuesYour counter party might have stopped or slowed down with payments because it encounters financial issues. This could be because of business specific situations, including bad commercial decisions, mismanagement, start-up difficulties and therefore struggles with cashflow, or just bad luck with its products or services.

Sometimes the issues are sector related, and a whole sector may suffer because of natural disasters (epidemies, earthquakes, draught or wildfires), technological development with products or servicing becoming less needed or completely out of use, or otherwise.

And finally, your business partner in Latin America may suffer financially because of a whole nation or region being in an economic crisis. This can be de result of national economic circumstances (Brazil), political decisions (Venezuela), or national disasters (earthquakes in Mexico and hurricanes affecting Caribbean nations).

Exchange Rate Issues In Latin America

It could be that your debtor in Latin America is facing exchange rate issues.

This can be the result of economic factors, or political decisions. In recent years we have seen Colombia, Mexico, Brazil, Argentina and Venezuela, all to a larger or lesser extent, been affected by exchange rate fluctuations, especially the exchange rates with the US Dollar and the Euro, two of the main trading currencies for Latin American companies that do business internationally.

For companies that import from abroad, or use global services, prices of international products may rise substantially in a short period. If the volume is considerable, and especially if their markets are local and they earn in local currencies, unable to compensate for the increase in import costs, companies in Latin America may face serious issues because of changing exchange rates.

For more info on exchange rate issues in Latin America check out our previous blog post.

Product Or Service Related Issues

Latin America product issuesYour debtors in Latin America may have genuine issues with your products or services provided. Now this can be the result of bad expectation management on the debtor’s side, or mistakes in commercial communication between both parties. It can also be that the local markets, unexpectedly, do not embrace your products and your counter part in Latin America, being the middle man, fails to sell the products. Or your counter part feels it is experiencing problems with the delivered products or provided services.

If any of these issues apply to your debtor in Latin America, it is very important to consider settlement negotiations as opposed to hardline collections or legal proceedings, and here are five arguments why.

 Avoiding Legal Proceedings In Latin America

 Settlement negotiations are aimed at finding an amicable solution. By doing so, you will avoid going legal. This is highly recommendable as legal measures in Latin America are in general expensive, slow and often impractical or even impossible. Please read for more info our previous blog post about legal proceedings in Latin America.

Settlement Negotiations Reduce Costs

Focusing on settlement negotiations mean that the parties will intent to find an amicable solution within a limited period of time. This will not only avoid legal fees and costs, but also costs you would incur during the whole amicable collection process.

Settlement Negotiations Reduce Time Spent

Collection procedures in Latin America can be very slow and time consuming. By focusing on settlement negotiations, you will reduce the time spent substantially and therefore, you will have more time to dedicate on other, perhaps more rewarding activities.

Concrete Solution For The Outstanding Debt

The outcome of settlement negotiations should be a concrete solution, which is to be signed off by both your debtor in Latin America, and yourself. Concrete solutions reduce or even eliminate future misunderstanding and room for interpretation and discussion.

Solution Driven Approach May Save Commercial Relationships

Latin America trade issue solutionGoing for the solution driven approach of settlement negotiations, as opposed to hardline collections and legal, substantially increases the chances of saving the commercial relationship with your business partner in Latin America. This means you will not only collect outstanding amounts, but you will also continue to do business and earn money on your Latin American business partner.

The reason that your Latin American client slows down or stops paying your invoices, may be because they face financial issues, exchange rate issues or issues related to delivered products and services.

If the relationship between your client and yourself is genuine, it is recommendable to take on the approach of settlement negotiations. Five arguments in favor of settlement negotiations as opposed to hardline collections are: avoiding legal, reductions of costs, reduction of time spent, focus on obtaining a concrete solution, and a solution driven approach may save commercial relationships.

If you are interested in learning more about settlement negotiations in Latin America for outstanding debts and commercial issues, 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.