Week in Review

Global Roundup

November 4, 2019

Lebanon “days” away from economic collapse if no political solution to protests found, says central bank governor. In an interview, Lebanese Central Bank Governor Riad Salame said that a political solution is needed within days to avoid economic collapse. (CNN)

Argentina election: Centre-left Alberto Fernández wins presidency. Centre-left opposition candidate Alberto Fernández has been elected president of Argentina in a vote dominated by economic concerns. (BBC)

Quarter of world's pig population to die due to African swine fever. World Organization for Animal Health warns spread of disease has inflamed worldwide crisis. (The Guardian)

France outshines Germany as eurozone economic gloom deepens. Strong domestic stimulus is helping France shrug off a global slowdown even as export-dependent Germany heads closer to a recession, starkly divergent data on the eurozone’s two leading economies showed on Oct. 30. (HSN)

Jordan-Israel ties strained by detentions. Israel is holding two Jordanian citizens without charges on vague security grounds; Jordan has detained an Israeli and recalled its ambassador for consultations. (New York Times)

U.S., Gulf countries impose joint Iran-related sanctions on 25 targets. The United States and six Gulf countries agreed to jointly impose sanctions on 25 corporations, banks and individuals linked to Iran’s support for militant networks including Hezbollah, the U.S. Treasury Department said on Oct. 30. (Reuters)

Chile cancels climate, trade summits amid protest chaos. Chilean President Sebastián Piñera said on Oct. 30 that he is canceling two major international summits so he can respond to protracted nationwide protests over economic inequality that have left more than a dozen people dead, hundreds injured, and businesses and infrastructure damaged. (Business Mirror)

China promises no forced tech transfers, access to finance. China on Oct. 29 promised more improvements in conditions for foreign companies including an end to officials pressing them to hand over technology—a key irritant in its tariff war with Washington. (AP News)

German companies suffer Brexit extension angst. German businesses are nonplussed with the new Brexit extension, thanks to the uncertainty it preserves. But export forecasts are nonetheless seeing an increase, something which has more to do with Donald Trump than with the U.K.’s pending EU exit. (EurActiv)

How long before Argentina goes bankrupt? Argentina elected a new government on Oct. 27. At least one of the top two on the ticket hates the International Monetary Fund (IMF) with gusto. The IMF is pretty much the only thing keeping the lights on in Argentina. How long before Argentina goes bankrupt again? (Forbes)

The vulnerable state of Islamic State. Abu Bakr al-Baghdadi was likely trying to forge an alliance to stave off fighters defecting to other jihadi groups. (Interpreter)

Worried about trade wars’ impact on your supply chain? Here are three ways to manage risks. Companies live in a world now where a tweet about tariffs and trade wars can rattle markets, prompt uncertainty, and question whether supply chains and global operations are positioned to handle the speed, unpredictability and interconnectedness of the global economy. (Global Trade Magazine)

What Brazil’s 2013 protests tell us about Chile 2019. It has become conventional wisdom to compare the current protests in Chile to Brazil’s “Marches of June,” which took place six years ago. Looking back, there may be some lessons that 2013 Brazil can impart to Chile in 2019. (Americas Quarterly)


Back to the Ballot Box in the UK

Chris Kuehl, Ph.D., NACM Economist

The British are going to be facing another election in the next few months. The decision on Brexit has been pushed off until January of next year, so the threat to tumble out of the EU has been temporarily averted. The EU agreed to extend the deadline, and Parliament prohibited the actions Prime Minister Boris Johnson wanted to undertake.

Now there will essentially be another referendum on Brexit because this will be the sole issue in the coming election. The decision by the Labor Party to support the election was the key to calling a new vote.

The polls suggest voters are not in a very positive frame of mind. Neither Boris Johnson nor Jeremy Corbyn are popular with the majority of the voters. Most of those voters who have responded to the polls indicate they will be voting on a Brexit policy rather than for either of these candidates. It will now be up to Labor and the Tories to articulate just what that policy will be.

The reality is the EU will continue to have final say over what the British do as far as withdrawal. It is not likely that Britain will change its mind and want to stay in the EU and even less likely the EU would take them back.

There are some positions the EU will not budge on. One of them is the status of Northern Ireland. The EU will not accept a situation where Ireland becomes a back door to the EU, while the U.K. doesn’t want a hard border between the Irelands. That has been a major sticking point and will remain one.

There are dozens of other issues involving trade, residency, immigration, rules and regulations and overall obligations. None of these can be worked out until there is a government in place in the U.K. with a new mandate.

The sense at this point is the election will not provide that clear mandate. The polls suggest a very deep split in the voting population. It is one that is likely to yield a divided Parliament with no clear path to a Brexit plan.

Pundits have suggested both parties should jettison their current leaders and find people more popular with the public, but both Johnson and Corbyn play to their hardcore base. That has been enough to keep them in place even as they continue to fall in popularity with the bulk of the British voting public. The one development that could shake things up would be the emergence of the Social Democrats as king maker in a divided Parliament.



Mexico: Payments Slowing

Cash flow issues are the No. 1 reason for late payments from customers in Mexico, according to the latest FCIB International Credit & Collections Survey. Customer payment policies came second followed by billing disputes and unwillingness to pay.

The majority of survey participants noted no change in payment delays. About a quarter of them were experiencing increases in delays, 7% decreases and 2% no delays. More than three-quarters of the credit professionals were offering terms between zero to 60 days, 18% offered 61 to 90 days and 5% offered 91 or more days. Average days beyond terms were 21.1 days.

Wire transfers were used by 94% of the respondents followed by credit cards (17%) and seller-initiated EFTs and checks (tied at 12%).

Participants offered a wide range of advice for conducting business in Mexico. One credit professional cautioned having customers pay in advance for a period of time before extending credit. “Unless it is a financially well-established firm with a proven track record, you may want to consider cash in advance or advance wire transfer.”

Another suggested having a local presence in the country in case of payment disputes. “Using a trusted local agent is helpful.”

Yet another emphasized the importance of building a relationship with customers. “Overall in Latin America and Mexico, you have to build friendship first and then business,” he said. “Face-to-face communication is more effective than emails. Having a bilingual member on your collection team can make a difference. They like to be spoken to in their language. They are proud of their heritage.”

The September 2019 International Credit & Collections Survey also covers Argentina, Brazil and Panama. FCIB members can access the full results of the survey as well as the survey archives via the FCIB Knowledge Center. Nonmembers who participated in the survey will receive the results via email. Participation in the survey guarantees you will receive the results whether you are a member or not and furthers the collective knowledge of global credit professionals by sharing real-time credit and collection experiences. The monthly survey is open to all credit and risk management professionals.

The current survey covers Japan, South Korea, Taiwan and Thailand.

Western Europe Businesses' Financial Stability at Risk

Slowing economic growth, the escalation of the U.S.-China trade war and looming uncertainty surrounding the future relations between the U.K. and the EU are the key drivers of the upswing in business failures across Western Europe, according to Atradius.

“There is no end to challenging times in sight this year, and the forecast for next year is not positive either,” said Andreas Tesch, chief market officer of Atradius. “The global business environment has deteriorated and is expected to remain troublesome over the coming months. Insolvencies are expected to increase again in 2020, putting the financial stability of businesses under severe strain.”

The October 2019 Atradius Payment Practices Barometer survey for Western Europe finds businesses are offering trade credit to their business-to-business (B2B) customers, far more often than last year, to support growth of domestic demand and stay competitive on foreign markets.

On average, suppliers surveyed in Western Europe transacted 60.4% of the total value of their sales to B2B customers on credit (up from 41.4% last year). This compares to 67.2% in Eastern Europe, 50.9% in the Americas and 55.5% in Asia-Pacific (up from 38.8%, 45.8% and 48.1% last year, respectively).

However, the use of B2B trade credit varies markedly across the countries surveyed. Respondents in Denmark seem to be the most likely to offer trade credit to their B2B customers (75.5% of the total value of their B2B sales was reported to be transacted on credit, up from 61.5% last year). Across the other countries surveyed in the region, the proportion of B2B sales made on credit ranges from a high of 68.1% in Greece, to a low of 44.6% in France.

On average, nearly 30% of the total value of the B2B invoices issued by respondents in Western Europe over the past year remained unpaid at the due date. By country, this percentage climbs to a high of 35.1% in the U.K. and 34.8% in Greece and drops to 20.3% in Denmark, the lowest of the countries surveyed.

Payment terms have remained fairly consistent, with businesses showing reluctance to offer longer terms. Not unexpectedly, due to the ongoing uncertainty surrounding the future relations between the U.K. and the EU, and the related bleak insolvency outlook for the U.K. and Ireland, suppliers surveyed in both countries requested B2B payments much earlier than last year. In the U.K., average payment terms stand at 20 days (down from 24 days last year) and in Ireland at 28 days (down from 31 one year ago).

Assessing buyers’ creditworthiness is the most common credit management activity in Western Europe. The survey data shows respondents from Greece (53%) perform creditworthiness checks significantly more often than their Western European peers (35%). Western European businesses also send dunning letters (outstanding payment reminders) to chase unpaid invoices. Dunning is used by 28% of respondents in the region with respondents from Greece being the most active (39% of respondents on average).

The survey was conducted in Austria, Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Spain, Sweden, Switzerland, the Netherlands and the United Kingdom.


 Week in Review Editorial Team:

Diana Mota, Associate Editor and David Anderson, Member Relations