Another foreign trader has been severely impacted by Argentina.

Last night, my friend H received a message from a client, who stated that since December of last year, a new policy in Argentina requires payment for a shipment to be made in four installments:

First payment: 30 days after the client receives the goods  

Second payment: 30 days after the first payment  

And so on... This means it takes a total of 120 days to pay the full amount, and it's a case of "goods first, payment later"...

The difficulty of receiving payments from Argentina has become the most frustrating issue for foreign traders in the Argentine market, as they live in fear of not receiving their money.

H is worried; does this mean losing a major client? Is it impossible to tackle the tough issue of "Argentine payments"?

The goods have been shipped, the payments cannot be recovered, and foreign traders are suffering.

I asked another friend in the Argentine market, and the situation is not optimistic either.

In November of last year, Mr. Liu’s old Argentine client, whom he had worked with three years ago, placed an order for over $30,000.

In previous collaborations, the client had a good credit history.

However, due to Argentina's foreign exchange controls, the client said they could only pay after receiving the goods.

Because Argentina has upgraded its foreign exchange control, importers with B-type SIMI permits need to apply to enter the foreign exchange market for trading 180 days after completing customs clearance.

Since this client had worked with Liu before, his company agreed to allow payment after the goods were received.

According to the contract, the client was supposed to make payment on April 1 this year, but the client has continuously postponed the payment date, originally promising to pay in early April, early May, and by the end of June, but they still haven’t paid.

During this time, before April, the purchasing agent A, who had been in contact with Liu, left the company, and A handed over the payment issue to the new purchasing agent B.

B's last promise for payment was by the end of June, but when Liu contacted B again in early July, he found that B had also left. Even more frustratingly, B did not hand over the payment issue to the new purchasing agent C, leaving Liu feeling quite disheartened.

The shipper called the client’s company and finally got in touch with the new purchasing agent C. After understanding the situation, C said they would resolve the payment issue.

Last night, Liu received an email from C, who promised that payment would not be possible for at least another 90 days. How can Liu trust that C will make the payment on time after 90 days?

In less than a year, they have changed purchasing agents three times, and such frequent personnel changes may indicate that their company has experienced significant turmoil.

Liu feels that the possibility of recovering this debt is now extremely slim.

Abandoned old clients

Ann, a top sales performer, once had loyal Argentine clients from 2013 to 2018.

She had handled at least 15 orders from Argentina during that time.

She mentioned that Argentine orders used to be quite good, and the clients were easy to communicate with, not bargaining much, and very loyal; once they made a deal, they would continue to purchase from her.

From 2013 to 2018, Argentine clients would place orders with her 2-3 times a year, with each order ranging from $30,000 to $50,000.

After placing an order, they would wait for the client to apply for foreign exchange and import permits from the local government, so every time she made a PI, she would also prepare the packing list in advance, and generally, they would receive payment within 1-2 months.

Initially, her payment method was 30% deposit and 70% final payment before shipment, but after 2018, due to instability in Argentina, the longest wait for payment stretched to over four months.

Argentina’s imports are regulated by customs quotas, meaning that if an importer wants to bring in goods, they must apply for an import permit from Argentina’s customs or government. The amounts and quantities imported must also be reported, and these permits are not long-term; they often need to be reapplied for every few months or annually.

Moreover, it is not an exaggeration to say that "a 1,000 peso bill can only buy 1 kilogram of tomatoes in Argentina" is a real economic phenomenon in the country.

Whether in dollars or renminbi, payments made in trade currencies are subject to foreign exchange controls. This means that payments must be made through a bank-issued letter of credit (which also undergoes scrutiny), and only after the supplier ships the goods and submits the documents to the relevant bank, will the bank pay the exporter upon confirmation from the importer.

The approval process is lengthy and can take up to 180 days for foreign exchange payments to be approved, and such a lengthy application process may not even guarantee approval.

To this day, the once-frequent cooperative market has become a picture of economic downturn and hyperinflation. It looks like a large cake, but there is no fork to get a bite.

Some clients have gone bankrupt, while others are considering the payment difficulties, and Ann has almost given up.

Difficulties in Argentine payments, but there are solutions

Returning to the initial question, is it really impossible to tackle the tough issue of Argentine payments?

First of all, it’s not that Argentine orders cannot be accepted; of course, they can be accepted. Once an order is received, patience is essential. Many clients have reported that this year’s situation is much better than last year, and some companies can pay a 20% advance.

Argentina’s domestic market clearly cannot pay in dollars anymore. Now, larger companies or individuals in Argentina who have some money have exchanged it for dollars, as the peso has depreciated so severely that no one wants it.

China CITIC Insurance currently can provide a 20% down payment and the balance a month after the goods arrive at the port. Unless your client has a foreign company applying and the Argentine company provides a guarantee, it is challenging for local Argentine companies to apply. Additionally, you could also inquire with China’s People’s Insurance.

Using third-party countries to pay in dollars is a solution many foreign trade companies are using, such as Switzerland, Uruguay, and others. Once the client can transfer money from the Argentine bank, you can then repay the client by depositing it into a designated account.

When receiving orders from Argentina, try to ensure that the PI states 100% payment in full before mass production. If your amount is not very large, the Argentine clients who can do business with you are usually relatively large, so they can still pay amounts like tens of thousands of dollars. For larger amounts, such as $100,000, it is advisable to collect a 50% deposit and the remaining 50% before shipment.

Do not produce without receiving payment, or only collect a very small deposit, regardless of how good your relationship with the client is, because sometimes Argentine clients may not get the foreign exchange approved for various reasons and may cancel the order.

Also, do not ship the goods without receiving the final payment; ensure that payment is received before shipment, or you will be in a very passive position.

These are some suggestions that I hope can help those entering or preparing to enter the Argentine market.

The Latin American market is volatile, but the risk rate in Argentina is extremely high.

Foreign traders in the Argentine market need to manage risks effectively to prevent issues such as buyers abandoning goods at the destination port or not making payments, to avoid losses from both money and goods.