Coface's latest Latin America Corporate Payment Survey 2024 reveals a challenging year ahead for businesses in the region, as they grapple with more restrictive credit terms and longer payment delays. These trends underscore the financial strains faced by companies operating in Latin America amid an uncertain global economic backdrop.
A shift toward caution: tighter credit terms in 2024
In 2024, Latin American businesses are navigating a complex environment marked by a reduction in credit flexibility. Companies across the region have responded to heightened financial risks by tightening credit terms, reducing average payment periods to 53 days from 60 days in 2023. This change reflects a cautious approach by businesses aiming to maintain liquidity and limit credit exposure amid economic uncertainties.
Our survey shows that 51% of Latin American companies continue to experience payment delays, with this percentage holding steady year-over-year. These findings signal a persistent challenge, as firms face difficulties in securing timely payments despite adjusting their credit policies.
Insights from the Latin America corporate payment survey
Coface’s Latin America Corporate Payment Survey 2024 gathered data from 468 companies across Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, and Peru. Conducted between July and September, this survey provides a comprehensive view of the evolving economic and credit environment across the region.
We forecast that the Latin American economy will continue to face growth challenges, with GDP expansion expected to remain subdued at 2% in 2024 and 2.1% in 2025, down from 2.2% in 2023. This weak growth outlook can be attributed to several factors, including a slowdown in global economic activity and a gradual deceleration in key export markets such as the United States and China. As these economies slow, Latin American exports—and the industries reliant on them—face added pressure, particularly in terms of fluctuating commodity prices.
Key challenges ahead: business risks and economic pressures
While many businesses anticipate an improvement in activity in 2024, nearly half of the companies surveyed express concern over several notable risks that could hinder growth in the coming year. Key concerns identified by respondents include:
- Lower Economic Activity: Global demand has been muted, impacting Latin America’s export-dependent economies, particularly in sectors tied to commodities and manufacturing.
- High Competition: Intense competition within regional markets is squeezing profit margins, especially as companies strive to capture limited consumer spending in an inflationary environment.
- Elevated Labor Costs: Rising labor expenses, driven by inflation, continue to erode profitability for companies, placing additional pressure on bottom lines.
- Higher Interest Rates: As regional central banks maintain elevated interest rates to combat inflation, businesses face rising borrowing costs, which impacts their ability to invest and manage cash flow effectively.
Each of these risks reflects a convergence of external and internal economic pressures, shaping a challenging outlook for companies operating across Latin America.
Strategic adjustments to manage credit and financial stability
In response to these pressures, many Latin American businesses have strategically adapted their credit policies. By implementing more restrictive payment terms, companies are taking a proactive approach to manage liquidity and mitigate credit risk. However, the stability in reported payment delays suggests that even with these adjustments, the region’s economic challenges are likely to continue impacting cash flow and financial stability well into 2025.
For companies operating in this environment, proactive credit management remains essential. In the current climate, we recommend that businesses maintain diligent credit risk monitoring practices to stay agile amid evolving economic conditions.
Outlook: preparedness for an uncertain economic path
Coface’s report highlights the importance of a cautious, risk-managed approach as Latin American businesses move forward into 2024. While some optimism remains, with companies expecting business activity to improve compared to 2023, the interplay of global economic factors and local pressures requires vigilance.
At Coface, we will continue to support our clients in navigating these challenges, offering comprehensive credit management solutions to help companies mitigate risks and sustain financial stability amid the uncertainties ahead. The findings of the Latin America Corporate Payment Survey 2024 emphasize the value of robust credit strategies and underscore our commitment to delivering insights and solutions that empower businesses across Latin America to adapt and thrive in the face of economic headwinds.
