Securing Your Transactions in Latin America and Mexico, 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org

1. ER$ Consulting Services
Presents for
NACM WRCC
Securing Your Transactions in
Latin America & Mexico
10:30 AM – 11:45 AM
Las Vegas
The Palms Hotel
October 16, 2014
Copyright: Eddy A. Sumar 2014

2. Securing Your International
Transactions
Getting Paid
in International Trade

3. Where Are We in the Region?

4. Where Are We in the Region?

5. Where Are We in the Region?

6. Where Are We in the Region?

7. Where Are We in the Region?

8. Where Are We in the Region?

9. Dealing with Globalization
• Dealing with Change
• Understanding the ROUTE
Risk
Opportunity
Uncertainty
Threats
Exploration

10. Have you answered these four questions?
1. What are you exporting?
2. Where are you exporting?
3. Who will receive your item?
4. What will your item be used for?

11. Our Focus
1. The Framework or the Pattern
2. The Resources and Human Connections

12. Framework:
Doing business in a particular country with a new prospect / customer
Understanding the Region [Global]
 Understanding the cultural & business context
 Core Values
 Role requirements
Understanding the Target Country [Macro]
Knowing the prospect / Customer [Micro]
From general to particular
….Region….Country….Prospect / Customer

13. Framework:
Tools
Continuum of Risk
PEST Analysis
CMCS I
CMCS II
The Matrix
The Cs of Credit
….Region….Country….Prospect / Customer

14. Doing Business with Latin America
Requirement for Success
• Strategic Assessment
– Assess the nature of the environment
– Audit the environmental influences

15. 0
Stable
10
Unstable
Continuum of Risk
Confidence
0
Certain
10
Uncertain
Continuum of Risk
Confidence

16. 0
Static
10
Changing
Continuum of Risk
Confidence
0
Simple
10
Complex
Continuum of Risk
Confidence

17. A Strategic Approach in A Diverse Region
Strategic Assessment--Assess the nature of the environment
W Approaches to Make Sense of the Environment
– Historical analysis
– Forecasting
– Scenario planning
– Experience and learning
– Decentralization of organizations
Based on Johnson & Scholes
Corporate Strategy (p. 101)

18. Requirement for Success
PEST Analysis
• Political factors
• Economic factors
• Sociocultural factors
• Technological factors

19. å Building the CMCS I
[Credit Manager’s Country Scorecard]
– Block1: Understanding the environment for the country
– Block2: P: What is the political situation in the country?
– Block3: E: What is the economic situation?
– Block4: S: What are the socio-cultural factors?
– Block5: T: What is the technological state of the country?
– Block6: Assess the banking system and FDI
– Block7: Look at Country rating & IMF standing
– Block8: Listen to the news! Listen to the locals!
– Block9: Seek input from FCS, USEAC, State & Commerce
– Block10: What is your company strategy and appetite for risk

20. å Building the CMCS II
[Credit Manager’s Customer Scorecard]
– Block1: 10Cs of credit (excluding Credit Insurance)
• Subjective (qualitative) factors [trade & bank references;
forecast economic reports; history and country assessment]
• Objective (quantitative) factors [financial analysis; payment
history; historical economic data]
• Mixed factors [credit reports; credit scoring]
– Block2: Avoid bad Cs of credit
– Block3: Security instruments and guarantees
– Block4: Trade financing
– Block5: Credit insurance (Coverage)

21. Master the Matrix [Credit
focus]
Classify your Customer---Character
Willing
Able Approve!!!
Unable
Unwilling
Think Outside
The Box
Seek Alternatives
Work the Deal
Protect Your
Transaction
Reject
This
Applicant!!!

22. The 21 Cs
Master the B asic Cs of Credit

23. CIA
L/Cs
At Sight
Usance L/Cs
Documentary Collection
D/A or D/P
Open Account
High Risk
Low Risk
Understanding the Options
Credit Terms

24. Framework:
Doing business in the World
Knowing the prospect / Customer [Micro]
AW Matrix
The Cs of Credit

25. Framework: The Prospect or Customer
Doing business in the World
Due Diligence:
Credit application
Credit report
Financial analysis
Determine the needed documentation
Decide on security instruments & payment mechanism
Deciding on the credit limit
Deciding on the credit terms
Explore coverage [credit insurance]
Explore trade financing

26. You got an order from a company in Mexico, how do you
proceed? You never did business in Mexico..
Follow the framework….
Scenario

27. Framework:
Doing business in Mexico
Understanding the Region
[The Latin America Context]

28. Doing Business with Latin America
Understanding the Latin American Scene
• Area: approx.7,880,000 sq mi ;
3.9% of earth’s surface
• Population: 588 million (est. 2013 )
• GDP: USD 5.57 trillion (combined)
• Language : Spanish, Portuguese, & English, French, Dutch
• Regional diversity
• Region rich in natural resources & commodities

29. Doing Business with Latin America
Population: 7 countries above 15 million
1. Brazil:
2. Mexico:
3. Colombia:
4. Argentina:
5. Peru:
6. Venezuela:
7. Chile:
201,032,714
122,456,000
48,165,000
41,660,417
30,613,000
29,525,000
17,556,815
491.01 millions

30. Core Values of Latin America
1. La Fimilia (the family above all else)
2. Religion, Tradition, & Education
3. Relationship, Friendliness, & Trust
4. Hospitality & Helpfulness (where one eats, two share a meal)
5. Personalismo & Machismo
6. Authoritarianism (el Caudillo, el Patron)
7. Civility & Dignity
8. Wealth, Food, Soccer & Rhythm
Doing Business with Latin America

31. Doing Business with Latin America
Understanding Latin America
– Culture
– History
– People
– Law & Bureaucracy
– Social status & Hierarchy

32. Doing Business with Latin America
When Negotiating with Latin Americans remember:
– They leap before they listen
– They seek harmonious relationships
– They want long-term profit
– They are interested in the current deal

33. Doing Business with Latin America
A Multi-Active Culture: [30 points]
1. Extrovert
2. Impatient
3. Talkative
4. Inquisitive
5. Gregarious
6. Plans in grand outlines only
7. Does several things at once

34. Doing Business with Latin America
A Multi-Active Culture:
8. Works any hours
9. Unpunctual
10. Lets one project influence another
11. Changes plans
12. Juggles facts
13.Gets first-hand (oral) information
14. People-oriented

35. Doing Business with Latin America
A Multi-Active Culture:
15. Emotional
16. Pulls strings
17.Gets round all departments
18. Seeks favors
19. Delegates to relations
20. Completes human transactions
21. Interrelates everything

36. Doing Business with Latin America
A Multi-Active Culture:
22. Talks for hours
23. Rarely writes memos
24. Seeks out (top) key person
25.Has ready excuses
26. Confronts emotionally
27. Dialogue
28. Unrestricted body language

37. Doing Business with Latin America
A Multi-Active Culture:
29. Interrupts frequently
30. Interweaves social/professional

38. Vital needs for Success
• Master the no fixed paradigm scene
• Acquire a Global Mindset
 Latin America not a
Homogeneous Region

39. Doing Business with Latin America
Requirement for Success
The Latin American Role Requirement
• Become Global in your approach
• Learn to deal with uncertainty & change
• Master the ROUTE; keep the finger on the pulse
• Master Relationship-building
• Enter the Inner Circle (find your pituto = internal
connection; someone who will get your foot in the door)
• Learn the rhythm of body & soul
• Adapt & be Patient (there is always MAÑAÑA)

40. 1. Chile:
2. Peru:
3. Colombia:
4. Mexico:
5. Brazil:
6. Argentina:
7. Venezuela:
34
42
43
53
116
126
181
Economies are ranked on their ease of doing business, from 1 – 189. A high ranking on the ease of doing
business index means the regulatory environment is more conducive to the starting and operation of a
local firm. This index averages the country's percentile rankings on 10 topics, made up of a variety of
indicators, giving equal weight to each topic. The rankings for all economies are benchmarked to June
2013.

41. Framework:
Doing business in Mexico
Understanding the Target Country [Macro]
http://www.export.gov/mexico/

42. Doing Business in Mexico
• Strategic Assessment—Target Country = MEXICO
– Assess the nature of the environment
– Audit the environmental influences

43. Mexico
This page summarizes Doing Business 2014 data for Mexico. The first table lists the overall "Ease of
Doing Business" rank (out of 189 economies) and the rankings by each topic. It also lists the economy's
distance to frontier (DTF)** measure. The rest of the tables summarize the key indicators for each topic
and benchmark against regional and high-income economy (OECD) averages.

44. The Ratings:
Doing business in Mexico
Mexico
Country Rating & Outlook
S&P: BBB+ Stable
Moody A3 Stable
Fitch BBB+ Stable
Closest Average Rating: BBB+
http://en.wikipedia.org/wiki/List_of_countries_by_credit_rating
Mexico needs a pact of unity, which allows advancement with respect to the following
fundamental matters: economic growth and a better distribution of wealth among Mexicans and
updating the political and legal structure of the country. (mexicoreport.com)

45. Doing Business in Mexico
P: Sovereign risk is low
Bureaucracy
Corruption (eliminating it high priority)
Criminal violence threat to country’s security
Kidnappings
Drug war
Political reforms is in progress

46. Doing Business in Mexico
E: Growth linked to US factors
Government remains investment grade
Great dependence on oil (negative)
FX levels at records high of 177Billion
14th largest economy in nominal terms (Source: IMF)
Second Largest in Latin America
Low labor cost
Multiple trade agreements
http://www.focus-economics.com/en/economy/reports/economic-indicators/country/Mexico

47. Doing Business in Mexico
S: Income distribution unequal
Increased citizens' insecurity
Indigenous population not treated justly
Skilled labor availability
Mix of highly educated and low educated
Large population source of business opportunities

48. Doing Business in Mexico
T: Mixture of modern & outmoded industry
and agriculture
Infrastructure need modernization
Need to modernize seaports, airports, rail…
IT spending is growing but is below OECD level

49. Doing Business in Mexico

50. Framework:
Doing business in Mexico
Knowing the prospect / Customer [Micro]
AW Matrix
The Cs of Credit

51. Framework: The Prospect or Customer
Doing business in the World
Due Diligence:
Credit application
Credit report
Financial analysis
Determine the needed documentation
Decide on security instruments & payment mechanism
Deciding on the credit limit
Deciding on the credit terms
Explore coverage [credit insurance]
Explore trade financing

52. The Checklist for Resources and Human Connections
Securing:
 Acquire, build, & continually hone
your credit & collection skills
&fundamentals
 Have a system. Adopt a framework
& pattern
 Acquire credit information
 Perform credit due diligence
 Banking & financing
 ECAs
 LCs & payment mechanisms
 Documentation & logistics
 The role of laws & regulations
 Trade associations
 Credit insurance
Getting Paid:
 Acquire, build, & continually hone
your credit & collection skills
&fundamentals
 Have a system. Adopt a framework
& pattern
 Acquire credit information
 Perform credit due diligence
 Banking & financing
 ECAs
 LCs & payment mechanisms
 Documentation & logistics
 The role of laws & regulations
 Trade associations
 Credit insurance

53. Internet Resources
• http://export.gov
• http://exim.gov
• http://www.edc.ca/en/Pages/default.aspx
• http://www.dfat.gov.au
• http://www.ukti.gov.uk/export/countries.html
• Etc………………………………………….

54. Internet Resources http://export.gov

55. Internet Resources
http://exim.gov

56. Internet Resources http://www.edc.ca/en/Pages/default.aspx

57. Internet Resources http://www.dfat.gov.au/

58. Internet Resources http://www.ukti.gov.uk/export/countries.htm
l

59. The Resources and Human Connections
From Securing your transactions to …………Getting Paid
The Credit & Collection Dept –Skills, Due Diligence
The Credit Professional
Your Credit Association
Laws and Regulations
Credit Information
Documentation & Logistics
Banking & Finance
Credit Insurance
EXIM

60. “The cave you fear to enter holds the treasure you seek.”
— Joseph Campbell

61. Dios bootiki'
Gracias
Obrigado
Thank You
Merci
Dank, Bedankt
Q&A
Pagui
Maltiox
Rasyas
Pachi
Paylla
Kúta'ùná

62. Thank You!