How difficult it is to include in the same analysis such different markets as those of the diverse countries of the American continents that make up the ‘New World’, as the European colonists called our lands.

The way in which our Credit & Collection industry has evolved in the U.S. and Canada is well known. It is very interesting to analyze the challenges that present themselves in these countries: new technology, new integration, consolidation, and globalization processes.

Let us take this opportunity to stop and analyze a less developed market that has many things yet to do, understanding that the best opportunities to take action in our industry are found in this growth process.

We are referring to Latin America.

Background

Latin America currently has a population of 815 million people that are highly concentrated in only four countries. Brazil, Argentina, Mexico, and Columbia make up 42% of the total population and consist of 350 million residents.

• Brazil: 170 million
• Mexico: 98 million
• Columbia: 42 million
• Argentina: 37 million

Within these four countries, the population is highly concentrated in a few large cities: Monterrey, Mexico City, Bogota, San Paulo, Brasilia, Rio de Janeiro, Buenos Aires, Rosario, and Cordoba.

By 2010, it is estimated that there will be a total population of more than 430 million people in these four countries. Also, they make up 78% of the total Latin American gross domestic product (GDP).



Apart from their common cultures, the Latin American countries have economic integration, which is on the rise. The languages spoken in the region are Portuguese (in Brazil) and Spanish (in the rest of the countries), a fact which creates an even more intense tie.

The creation of MERCOSUR (a regional economic alliance among the countries of the region) has been the first step in the evolution of these countries into the concepts of Globalization and regional alliance.

Here we can see a graph of ECLAC, which shows where these countries are exporting their products. ECLAC is The UNITED NATIONS’ Economic Commission for Latin America (ECLA) (the Spanish acronym is CEPAL).



The population of Latin America is growing more rapidly than that of other regions of the world, such as Europe or North America (the U.S. and Canada). Here we can find some projections.



The cultural integration of all the Latin American countries has set the stage for similar stories of evolution and involution, which in turn have created similarities in our industry.

There are practically no regulations in the Credit & Collection industry in our region that go beyond those of the basic individual rights of its inhabitants.

There are no special licenses needed in the installation of agencies (at least in the most eminent economies), and local associations of members of the industry have not yet fully developed.

On the one hand, Latin America has acceded to credit, consumption, technology, and very professional resources, which would put it on the same level as any other region in the planet. But on the other hand, its principal limitation is cultural. It is very complicated to educate society and fellow colleagues in the importance of having professional collection associations as the nucleus of actions that would help to adequately develop and regulate the industry.

On the one hand, the lack of regulations offers a simpler panorama, in terms of the collection process. (Of course there is a limit of professionalism and ethics applied to our jobs). On the other hand, the complicated economic situation that these countries are going through makes it really a game of chance in which winning strategies for different portfolios, in different regions, and for different products are used.

Factors very different from those of other regions must be dealt with, for instance: failure to pay on time, the various economic crisis that the countries are going through, the wearing thin of the relationship between consumers and the Stock Market, and the devaluation of their different monetary denominations, among other things.

Latin America is a region of under-developed countries, some of them growing year by year at a very interesting GDP rate. The region covers a total GDP of 1.9 trillion dollars. The Latin American average Annual Per Capita GDP is 3,800 dollars.


Economic context:

The fluctuations caused by an irregular growth in this market are also obvious opportunities.

The challenge of a leader is to be able to see opportunities that others don’t see. The breaking of mental paradigms taught by one’s own culture makes it so that sometimes, from outside the region, the potential and the opportunities generated by the region are not adequately seen, even in times of crisis.

Let’s take the case of Argentina, where in December, 2001 there was a devaluation of approximately 260%, ending the 1 to 1 relationship between the Argentine peso and the dollar that had been established about ten years earlier. According to ‘The Economist’, the Argentine peso is the most undervalued currency of the world (Big Mac Currencies).



If we consider the price of a Big Mac, for instance, local prices in terms of American dollars are really convenient. So far this year, inflation has only gone up 40-50%, very little in relation to the devaluation that already occurred. Apart from this, many local companies need cash and in sales are at a historic low. Property value has gone down as well.


Nevertheless, the Argentine market is now full of very interesting opportunities in the area of collections for the principal collection agencies in the market. Its current growth rate is 9% annually, even though there isn’t any extra pressure to bring in substitute products.

WIDE VISION

But apart from the Argentine market, the total cost of setting up a collections agency in some Latin American cities is really low for the rest of the region and for the rest of the continent.

Let us analyze comparative costs of call centers in different countries of the region.



After taking a quick glance at these figures, the logical conclusion is the facility with which collections can be done from Latin America in the rest of the continent and Spain (in Spanish) and Portugal (in Portuguese). But we don’t believe that this trend is only circumstantial or short-term. The local currencies will continue to devaluate in relation to the American dollar, and the technological solutions allow for this type of work to be done with qualified resources as well as experience.

But it is equally important to analyze the situation in the U.S. in this context. You surely know that the Hispanic population is growing faster than any other in the U.S. and that Spanish is the second most spoken language there.

In the last census, one in eight people reported being of Hispanic origin. This constitutes eight million households and 35 million people that have an estimated purchasing power of as much as $ 452 billion/year. (*Source: Bank of America & Census USA 2000).

So what better way to reach the debtor than in his/her native language, which creates immediate empathy and helps to solve his/her problem?

The level of professionalism that collections professionals have in this part of the continent is very high, and it makes us especially skilled in reaching the goal of all collectors: “our debtor’s heart”.

If we have the ability to identify the needs of our debtors and if we can win the client (and of course doing all this at a reduced cost, which is a competitive advantage in the market), then undoubtedly there will be a happy ending.

On a competitive note, there still aren’t very many important international collections agencies in Argentina or in Columbia, there are quite a few in Mexico, and there are a few in Brazil.

Nevertheless, the main leaders of world’s financial industry are present. And these same leaders offer very interesting opportunities in the purchasing of portfolios, an industry that is not very developed in the region.

There are opportunities, now and in the future, in the purchasing of portfolios in the region. The market has a very good predisposition toward this type of solution.

Undoubtedly, as with the first colonists, people in our industry will appear to take these opportunities to start a continental project with a solid future.

It’s all a question of paradigms and being able to see something where others see nothing.