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ER$ Consulting Services
Presents for
NACM WRCC
Securing Your Transactions in
Latin America & Mexico10:30 AM – 11:45 AM
Las Vegas
The Palms Hotel
October 16, 2014Copyright: Eddy A. Sumar 2014
Securing Your International Transactions
Getting Paid in International Trade
Where Are We in the Region?
Where Are We in the Region?
Where Are We in the Region?
Where Are We in the Region?
Where Are We in the Region?
Where Are We in the Region?
• Dealing with Change• Understanding the ROUTE
Risk
Uncertainty
Opportunity
ExplorationThreats
Dealing with Globalization
1. What are you exporting?2. Where are you exporting?3. Who will receive your item?4. What will your item be used for?
Have you answered these four questions?
Our Focus
1. The Framework or the Pattern2. The Resources and Human Connections
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
Framework: Doing business in a particular country with a new prospect / customer
Continuum of RiskPEST AnalysisCMCS ICMCS IIThe MatrixThe Cs of Credit
….Region….Country….Prospect / Customer
Framework: Tools
• Strategic Assessment
– Assess the nature of the environment
– Audit the environmental influences
Requirement for Success
Doing Business with Latin America
0 Stable
10 Unstable
Continuum of Risk
Con
fid
ence
0 Certain
10 Uncertain
Continuum of Risk
Con
fid
ence
0 Static
10 Changing
Continuum of Risk
Con
fid
ence
0 Simple
10 Complex
Continuum of Risk
Con
fid
ence
A Strategic Approach in A Diverse RegionStrategic Assessment--Assess the nature of the environment
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)
PEST Analysis
• Political factors• Economic factors• Sociocultural factors• Technological factors
Requirement for Success
– 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
Building the CMCS I [Credit Manager’s Country 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)
Building the CMCS II [Credit Manager’s Customer Scorecard]
Willing
Unable
AbleApprove!!!
Unwilling
Think OutsideThe Box
Seek Alternatives
Work the DealProtect YourTransaction
Reject This
Applicant!!!
Classify your Customer---Character
Master the Matrix [Credit focus]
Master the Basic Cs of Credit
The 21 Cs
Open Account
Usance L/Cs
Documentary CollectionD/A or D/P
CIA
L/Cs At Sight
High Risk
Low Risk
Understanding the Options
Credit Terms
Knowing the prospect / Customer [Micro]AW MatrixThe Cs of Credit
Framework: 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
Framework: The Prospect or CustomerDoing business in the World
You got an order from a company in Mexico, how do you proceed? You never did business in Mexico..
Follow the framework….
Scenario
Understanding the Region
[The Latin America Context]
Framework: Doing business in Mexico
Understanding the Latin American Scene
Doing Business with Latin America
• 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
Population: 7 countries above 15 million
Doing Business with Latin America
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
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
Core Values of Latin America
Doing Business with Latin America
– Culture
– History
– People
– Law & Bureaucracy
– Social status & Hierarchy
Understanding Latin America
Doing Business with Latin America
– They leap before they listen– They seek harmonious relationships– They want long-term profit– They are interested in the current deal
When Negotiating with Latin Americans remember:
Doing Business with Latin America
1. Extrovert
2. Impatient
3. Talkative
4. Inquisitive
5. Gregarious
6. Plans in grand outlines only
7. Does several things at once
A Multi-Active Culture: [30 points]
Doing Business with Latin America
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
A Multi-Active Culture:
Doing Business with Latin America
15. Emotional
16. Pulls strings
17. Gets round all departments
18. Seeks favors
19. Delegates to relations
20. Completes human transactions
21. Interrelates everything
A Multi-Active Culture:
Doing Business with Latin America
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
A Multi-Active Culture:
Doing Business with Latin America
29. Interrupts frequently
30. Interweaves social/professional
A Multi-Active Culture:
Doing Business with Latin America
Vital needs for Success
• Master the no fixed paradigm scene
• Acquire a Global Mindset
Latin America not a
Homogeneous Region
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)
Requirement for Success
Doing Business with Latin America
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.
1. Chile:
2. Peru:
3. Colombia:
4. Mexico:
5. Brazil:
6. Argentina:
7. Venezuela:
34
42
43
53
116
126
181
Understanding the Target Country [Macro]
Framework: Doing business in Mexico
http://www.export.gov/mexico/
• Strategic Assessment—Target Country = MEXICO
– Assess the nature of the environment
– Audit the environmental influences
Doing Business in 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.
Mexico
MexicoCountry 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
The Ratings:Doing business in Mexico
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)
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
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 177Billion14th largest economy in nominal terms (Source: IMF)
Second Largest in Latin America
Low labor cost
Multiple trade agreements
Doing Business in Mexico
http://www.focus-economics.com/en/economy/reports/economic-indicators/country/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
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
Doing Business in Mexico
Doing Business in Mexico
Knowing the prospect / Customer [Micro]AW MatrixThe Cs of Credit
Framework: Doing business in Mexico
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
Framework: The Prospect or CustomerDoing business in the World
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
The Checklist for Resources and Human Connections
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
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………………………………………….
Internet Resources http://export.gov
Internet Resourceshttp://exim.gov
Internet Resources http://www.edc.ca/en/Pages/default.aspx
Internet Resources http://www.dfat.gov.au/
Internet Resources http://www.ukti.gov.uk/export/countries.html
The Credit & Collection Dept –Skills, Due Diligence
The Credit Professional
The Resources and Human Connections
EXIM
From Securing your transactions to …………Getting Paid
Laws and Regulations
Credit Insurance
Credit Information
Banking & Finance
Documentation & Logistics
Your Credit Association
“The cave you fear to enter holds the treasure you seek.”— Joseph Campbell
Gracias Obrigado
Thank YouMerci
Dank, Bedankt Q&A
Pagui
Maltiox
Rasyas
Pachi Paylla
Kúta'ùná
Dios bootiki'
Thank You!