New Credit Insurance Report Sheds Light on NAFTA and Hemispheric Trade Issues

With ongoing questions regarding the future of the North American Free Trade Agreement (NAFTA) yet to be resolved, Supply Chain Managers still involved with cross-border trade have concerns about financial settlement.

This, and other related conclusions surfaced recently in the report, Payment Practices Barometer for the Americas, compiled by the global credit insurer Atradius

The report includes an analysis of data collected from Atradius' annual survey of corporate payment practices through businesses operating in the region.

Insights from the report include:

• Average payment duration increased from 61 days in 2017 to 63 days in 2018.
• The frequency of late payments in the Americas declined slightly from 91.3% in 2017 to 90.3% this year.
• The proportion of overdue B2B notices increased from an average of 48.8% in 2017 to 50% this year. The U.S. was the only country surveyed that experienced a decrease (dropping from 52% in 2017 to 47.6% this year).

Aaron Rutstein (Senior Manager – Buyer Underwriting, Risk Services Americas – Americas) told SCMR in an interview, that throughout the hemisphere “payment behavior still remains challenging.”

“In 2018, the average Days Sales Outstanding (DSO) figure recorded in the Americas is 37 days, two days longer than in 2017.,” adds Rutstein.

Mexico (94.4%) and the U.S. (90.9%) had the highest percentag- es of respondents reporting frequent late payments by their B2B customers. The percentage in the U.S. declined markedly from last year when it was the highest in the region. Respondents in Canada were the least likely to report frequent payment delays (on average, 86.7%).

Mexico continues to be the country with the highest proportion of domestic and foreign past due B2B invoices. Additionally, the proportion of overdue B2B invoices here increased from an al-ready high average of 55.4% in 2017 to 57.9% this year. Interest-ingly, this is not reflected in the country's DSO figure, which de-creased by three days in 2018. After Mexico, the USA is the most impacted by late payments (on average, 47.6% of B2B invoices overdue).

Brazil – which is not part of NAFTA – has the lowest average proportion of domestic and foreign past due B2B invoices in 2018 (45.5%).

“Growing insecurity due to – among others - protectionist measures and the NAFTA talks may be influencing export trade within the region,” said Rutstein. “That’s why we feel that having sufficient credit insurance is key this year, no matter how the Agreement is altered.”

Based on the survey results, 33.3% of respondents said that they currently do not trade with other NAFTA members, 26.5% said that up to 50% of their export trade is done within NAFTA, and 23.7% that the percentage of trade within the region is higher than 50%. 16.5% of respondents seem to trade only within NAFTA.

SC
MR