Latin America: Despite economic challenges, payment delays remain generally contained

Coface conducts payment surveys for several dif ferent economies and regions. The objective of this inaugural survey for Latin America is to better understand the region’s corporate payment habits and the health of its economy.

The survey was carried out over the April – May 2023 period which saw 330 companies participate in the study across 10 countries : Argentina, Brazil, Chile, Colombia, Guatemala, Ecuador, Mexico, Paraguay, Peru and Uruguay.
Latin American companies currently face a challenging economic environment. Coface forecasts the region’s GDP growth to slip from 3.8 % in 2022 to 1.7 % in 2023. The softening economic momentum can be attributed to cooler global activity and its side effect on commodity prices, and on demand for Latin American exports through the price and volume effect.

Additionally, most central banks in the region (notably those of Brazil, Chile, Colombia, Mexico, and Peru) have also tightened monetary policy since the end of Q1 2021 in an attempt to tame rising inflationary pressures that were aggravated by the beginning of the war in Ukraine in February 2022. While inflation has recently started to ease across the region – Argentina is the main exception – and companies look forward to lower cost pressures as a result, consumer prices are likely to remain above the tolerance range of the central banks to converge
towards their targets only by 2024.

That said, while the monetary tightening cycle in the region now seems to have run its course, policy rates should remain restrictive in the short-term. Consequently, the tighter local and external credit conditions are expected to affect activity and companies’ payment experience in 2023. Despite this backdrop, the general picture on the payment experience in Latin America has so far remained broadly contained according to our survey. While 76 % of companies reported payment delays, most said that the number of cases remained stable in the period during 2022 to early 2023 compared with 2021. By country, the lion´s share of respondents in Ecuador cited a deterioration in payment experience over the period. In addition, in other countries except Mexico, many more companies reported an increase rather than a decrease in payment delays, reflecting a gradual deterioration in trade conditions. Overall, while the slowdown of economic activity is seen as the key risk for 2023, over 50% of companies surveyed expect their cash flow to improve and sales to increase (Argentina is an exception).

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