Negotiations are essential when you aim to collect an international commercial debt.
Here are four reasons.
Settlement and or payment plan as a way out
When confronted with an international claim, often a settlement or a payment plan are a way out to solve the situation amicably without incurring legal fees or long term, potentially with multiple efforts without reward. In order to reach a deal, creditor and debtor will need to negotiate.
The claim may be disputed by the debtor
You may be in a situation where the debtor disputes a claim. The reason might be linked to quality of productions or services provided, or any other reason. Fact of the matter is that to enforce full payment of a disputed, international claim, is generally very complicated and may be practically impossible. To find an amicable solution, creditor may have no choice but to start negotiations to deal with the potential issue and at the same time, reach an agreement or partial payment or another sort of compensation.
Limited leverage on international claims
International claims means that there are two (or more) jurisdictions involved. Contracts may be subject to a particular country’s law, while each of creditor and debtor faces the reality of the legal system and obstacles of each other’s country. In many cases, going legal is economically not an attractive option because of potential costs involved. This means that leverage for collection of international debts may be limited. This pushes creditor and debtor to the negotiation table, to find an amicable solution for the claim.
Continuous Commercial relationship with debtor
It is not uncommon that creditor and debtor continue to have a commercial relationship, even if there is an existing debt. The international relationship is simply too important to break because of the commercial interests. If there is a continuous commercial relationship, then it is in the interest of both creditor and debtor to negotiate the most convenient solution for the outstanding debt rather than playing hard game on the collections side.
Conclusion: negotiations are essential
Negotiations in international B2B collections are essential. Often a settlement or a payment plan are the best way out, and this requires negotiations. Furthermore, the claim may be disputed, Creditor may have limited leverage on the legal side, and there may be a continuous commercial relationship which pushes creditor and debtor to opt for negotiations.
If you want to know more about negotiations in the case of international B2B collections, feel free to contact us via 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.
Debt Collection plays an important role in the payment chain for import and export in Latin America.
In this article we will look at how import and export is defined, what the import and export markets look like in Latin America, and which elements import and export companies will have to take into account when dealing with debt collection related to import and export in Latin America.
Import and Export, Expressions of International Trade
How can we define import and export?
An import is a good or service bought in one country that was produced in another. Imports and exports are the components of international trade. Imported goods or services are attractive when domestic industries cannot produce similar goods and services cheaply or efficiently. Free trade agreements and tariff schedules often dictate which goods and materials are less expensive to import.[1]
Export is the opposite side of import, namely carrying or sending something (a service or a good, such as a commodity) to some other place, such as another country.[2]
International trade allows countries to expand their markets and access goods and services that otherwise may not have been available domestically. As a result of international trade, the market is more competitive. This ultimately results in more competitive pricing and brings a cheaper product home to the consumer.[3]
Import and Export to and from Latin America
How do the import and export markets in Latin America look like?
The Latin American economy has been growing due to the GDP of the region’s four biggest economies: Brazil, Argentina, Colombia, and Mexico. These countries’ economies contribute to the region’s 6% growth. As the largest nation in the region, Brazil generates almost half of all Latin American exports.[4]
According to the Worldbank, overall exports and imports for Latin America & Caribbean in 2019 showed a total value of exports (FOB) of US$ 998,109 million, and a total value of imports (CIF) of US$ 980,570 million. In 2019, 4,520 different products were exported to 230 countries and 4,629 products were imported from 237 countries.[5]
Almost three-fourths of South America’s imports consist of machinery, vehicles and parts, chemicals and pharmaceuticals, paper and paperboard, textile products, and other manufactures.
South America’s major exports, in terms of value, are mostly primary commodities, including foodstuffs and plant products, fuels, and raw materials. Within the first group the most important commodities are sugar, bananas, cocoa, coffee, tobacco, beef, corn, and wheat.[6]
Below is a summary of exports from the biggest Latin American export markets: Argentina, Brazil, Chile, Colombia, Ecuador, Mexico and Peru[7].
Exports from Argentina
Argentina is a major agricultural exporter, second only to Brazil, and an important part of the Latin American economy. Argentina’s total agricultural exports average $42 billion per year. Because of Argentina’s temperate climate and extensive area, the production of row crops is vast. The most important crop is the soybean complex, and Argentina is the largest exporter of soybean oil and soybean meal in the world. They also export beans, corn, wheat, meat, dairy, wine, and fruit. Argentina’s top exports: Soybean meal ($9.2 billion), corn ($4 billion), soybean oil ($3.88 billion), delivery trucks and cars ($7.38 billion), soybeans ($2.82 billion), meat ($2.5 billion) and mineral fuels including oil ($2.9 billion)
Exports from Brazil
The third-largest agricultural exporter in the world is Brazil, making it key to the Latin American economy. The nation is the largest exporter of coffee, sugar, and orange juice around the world. They also export soybeans, poultry, and beef. Brazil is the biggest competitor to the United States in the international sales of soybeans. It’s also the third-largest producer of corn and the largest cereal exporter. Brazil’s top exports: soybeans ($26.1 billion), crude petroleum ($24.3 billion), iron ore ($23 billion), corn ($7.39 billion) and sulfate chemical woodpulp ($7.35 billion).
Exports from Chile
The fourth-largest agricultural exporter in Latin America is Chile. They export an average of $19 billion per year. Chile exports nuts, edible fruit, salmon, and other types of fish. In lesser quantities, they also export cellulose pulp and paper, wine, and beef. The Chilean agribusiness is expected to keep growing. Chile’s top exports: copper ore ($18.4 billion), refined copper ($13.4 billion), sulfate chemical woodpulp ($2.82 billion), fish fillets ($2.79 billion) and pitted fruits ($1.96 billion).
Exports from Colombia
The seventh-largest exporter in Latin America is Colombia. Their annual sales are about $6.6 billion. They export large amounts of coffee and fresh flowers that account for two-thirds of agricultural exports in Colombia. They also export sugar, fruit, and cereals. Colombia is a key player in the global market as the third-largest exporter of coffee after Vietnam and Brazil. Colombia’s top exports: crude petroleum ($13 billion), coal briquettes ($5.62 billion), refined petroleum ($2.91 billion), coffee ($2.38 billion) and gold ($1.48 billion).
Exports from Ecuador
Ecuador exports about $9 billion per year in agricultural goods. It is the fifth-largest exporter in the region. Ecuador’s exports include bananas, tuna, flowers, cocoa, and shrimp. They have consolidated themselves as a leading global supplier of fruit with a market share of about 30%. Ecuador also exports fresh roses, making them the third-largest fresh flower exporter worldwide. Ecuador’s top exports: crude petroleum ($7.85 billion), crustaceans ($3.89 billion), bananas ($3.43 billion), processed fish ($1.2 billion) and refined petroleum ($947 million)
Exports from Mexico
Mexico’s agricultural exports total $26 billion with 6% annual growth. It is the third-largest exporter after Brazil and Argentina. Most Mexican exports remain concentrated in the United States but they have found new markets such as Europe, Hong Kong, China, Japan, and Canada. Mexico is the leading exporter of avocados, tomatoes, hot sauce, papayas, beer, and tequila. Mexico’s top exports: cars ($53.1 billion), computers ($32.4 billion), vehicle parts ($31.2 billion), delivery trucks ($26.9 billion), crude petroleum ($26.6 billion).
Exports from Peru
Peru exports an average of $7.4 billion in recent years. Peru is the sixth-largest exporter in Latin America with diverse exports including fish oil, fishmeal, fruits, nuts, and vegetables. Peru is also developing new large-scale crops such as avocados, cranberries, asparagus, and peppers. Peru’s mild winters allow the country to grow its crops all year long, making it excellent for business. Peru’s top exports: copper ore ($12.2 billion), gold ($6.76 billion), refined petroleum ($2.21 billion), zinc ore ($1.65 billion) and refined copper ($1.62 billion).
Debt Collection for Import and Export in Latin America
Because the import and export sector is part of international trade, debt collection also crosses borders.
In Latin America, this means that import and export companies will have to take into account a couple of elements when they are faced with unpaid invoices, such as cross-border supply chains, multiple jurisdictions and local socio-economic environments.
Cross-border supply chains
Global logisticsis the process of managing the flow of goods through what is called a supply chain, from its place of production to other parts of the world. This often requires an intermodal transport system, transport via ocean, air, rail, and truck[8].
Import and export companies often have to deal with the supply chain and logistics management. There may be several companies involved in the chain. Each of these companies will need to do their due diligence, issue and comply with the appropriate documentation, issue invoices and meet obligations and timelines.
In case of unpaid invoices, the creditor will need to collect and eventually, should debt collection be the only option left, carry out the debt recovery procedure abroad, in the country the debtor is based out of.
Multiple jurisdictions
Import and export into and from Latin America, from or to either European countries, the US, or anywhere else, implies that business is carried out through several countries. This means that the business transaction may be subject to multiple jurisdictions. Requirements for contracts, import or export related documentation, and invoices, will be differ between the countries of the contract parties. This can become very relevant once invoices remain unpaid and a creditor needs to hire a debt collection agency. The debt collection agency will initially try to collect amicably, but if the debtor does not pay, legal proceedings may be the only option left to try to enforce payment. Whether or not legal proceedings are realistically an option, depends amongst others on the jurisdiction in which they will need to be carried out, and how solid the case (read: contracts, invoices and related documents) is in the applicable jurisdiction.
Local socio-economic environments
In case of an outstanding debt, the debtor may face circumstances which are different and maybe even unknown to the creditor. This is because each company involved in the business transaction are based in different countries, and each company is subject to its local social-economic environment. Although the same factors may affect companies anywhere in the world, particularly economic downfall, political instability, and currency fluctuations can hit companies based in Latin America hard. Local socio-economic environments may have a considerable impact on debt collection in Latin America and may determine the actual likelihood of collection success and legal options.
The import and export sector in Latin America, is of vital worldwide economic importance. Debt collection in Latin America, for import and export transactions, plays an important part for companies to get invoices paid. Important elements to keep into mind when collecting a debt, related to import and export in Latin America, are cross-border supply chains, multiple jurisdictions, and the effect of local socio-economic environments.
If you want to know more about debt collection for import and export in Latin America, 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.
Debt Collection Latin America & the Caribbean 