A little-known Panama growth industry

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Factoring business tipping $1 billion

By Staff at Panama Offshore Legal Services

E-Mail: info@pos-inc.com Phone: (507) 227 – 6645

There is a growing industry in Panama helping merchants whose invoices are not being paid on time. Factoring is a contract whereby a merchant can assign an invoice or other credit document to a company that extends credit as a full or partial money advance. The invoice is then paid directly to the factoring company. This provides much-needed cash flow to merchants when contractors, namely governments or other businesses, are slow to pay.

The factoring business in Panama is growing at a rate of 10% – 20% reaching up to $1 billion a year. The financing mechanism is controlled by 24 companies, mostly banks, says a report published on PanamaAmerica.com.

According to Joaquin Rodriguez, Vice President of Factoring and Finance at Global Bank, any company which has accounts receivable, as long as it’s client has a demonstrable ability to pay, is a potential user of this product.

Aileen Nuñez, manager of Factoring at BBVA Panama, said companies discounting their bills with factoring belong to various sectors such as industrial, construction and services which have been contracted by the government or private sectors.

“We all know that in Panama projects carried out by the State are on the increase, and because the economy is more stable and dynamic there are more projects for housing developments, hydroelectricity and mining companies. More companies are entering the market for imports and exports, therefore there are more clients for factoring services,” said Ariadne Larissa Sandoval, Factoring Manager at Multibank.

One of the biggest reasons why factoring is becoming popular is because Panama’s Colon Free Zone (CFZ) companies are not being paid by their biggest customer, Venezuela companies unable to obtain U.S. dollars to pay for their imports.

President Martinelli recently visited President Maduro in Venezuela to resolve this problem.

According to Panama’s Foreign Minister, Fernando Nunez: “We are talking about very substantial figures of hundreds of millions of dollars.”

In 2012, Panama exported goods worth $15 billion, 20% went to Venezuela, its main market. “Right now in Venezuela what is lacking is dollars, and if there aren’t any dollars, entrepreneurs (Venezuelan) can’t do anything else but offer Bolivars and these are no good,” said Surse Pierpoint, president of the Association of Users of the Colón Free Zone (CFZ).

Any Panama company, including those that are foreign-owned, with outstanding unpaid invoices can use factoring services but should consult with a competent Panama law firm before signing a contract.

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