Credit Risk Guide – Spain and Portugal and how the World Views it (A 24 Part Guide)
In this third iteration of the Credit Risk Guide, today’s article explores the viability of doing business in and around the Spanish and Portuguese regions. Both are great nations where due to their Mediterranean weather people flock to each and every year, unlike the instable weather that the British climates bring.
(Risk Ratings in understanding Risky Customers are between 1 and 5, with 1 being the lowest and 5 being the highest.)
So to start off with the largest off the two within the Balearics region is Spain, and how the World perceives this country, are set out as follows:
Desigual, Iberia airlines, SEAT, Santander and Telefonica are just some of the well known brand names to crop out off this Country, taking over some of our brands in the past, such as Abbey National and or merging with telecommunications giants, such as 02.
From a Credit Risk Rating, Spain does not fare as well some of its other Western European Counterparts. It has an average credit rating awarded to it, due to severe austerity measures that have been placed on it by Spanish government, as a result of the global recession that hit the economic and property markets hard. Just a third of the country are unemployed, resulting in a lot of people trying to set up their own businesses.
Recent commentary on the local economy of Spain shows that they have come out of critical stage, and are now placed within a severe stage of trying hard to recover from the deficit incurred as a loss of employment, and a bigger bailout by the EU in assisting the benefits system of Europe.
Legal experience in this country is not recommended, unless a Credit Check shows that the company in question as a relatively good credit rating. This is only likely to be true, if your Spanish Customer is that of a well known brand name, or has significant market share.
It is recommended to try and buy time and negotiate a suitable payment plan to get your debt paid off. Legal action (Commission Rates vary between 20-30%) will amount unnecessary costs likely to spiral out of control and your not being able to get anywhere with it.
Based on the above comments, it is highly recommended to obtain at least a higher deposit contribution from your prospective Customer, if they are domociled in this Country, as in the event that if your relationship turns sour, then at least you are better placed to write the rest of the balance off as a bad debt.
Risk Rating = 3
A bit like its neighbour, but actually perceived to be a worst place until very recently, Portugal requested for a bailout from the EU, after Greece and Ireland and was awarded €78bn in exchange that it cleared down its deficit better.
As a result of the bailout, this forced the Portuguese government to implement austerity measures which meant restrictions on the population.
Although they are now out off crisis, one of the country’s largest banks face turmoil, a bit like what the UK experienced a couple of years ago, with the RBS, Northern Rock, HBOS debacle in having the government bail them out.
Like that of Spain, legal action is only suggestive if only it is a large well known brand name, and that they have been trading for some time. Similarly, legal action is not recommended in this area, unless it is to negotiate a payment plan to clear off debts that are owed to you. Commission rates vary between 20-25% depending on the type of work and/or recovery from this area.
The World unfortunately perceives Portugal as having a below par credit rating and although with the EU bailout awarded, they are still some way off before they can reach the black again. So, would exercise caution in doing business in this country, and would carry out some careful due diligence, with any prospective Customer in based in this Country.
Risk Rating = 3
What about you? Do you have any business or are thinking of doing business in these two Countries, or are you domiciled in these countries. If so, do you agree or disagree with these comments?