Why Sign Contracts in Central America?

Judicially enforcing a contract takes 1402 days in Guatemala, 920 in Honduras, 852 in Costa Rica, 786 in El Salvador, 686 in Panama, and 409 in Nicaragua.

Tuesday, November 5, 2013

The data comes from the 2014 Doing Business report by the World Bank.

The extreme difficulty of enforcing contracts by means of the administration of justice systems is endemic in Latin America, which, as stated an article in Miamiherald.com by Andres Oppenheimer, contributes "to slow economic growth."

Augusto Lopez-Claros, head on the topic in the Doing Business Report, notes that "In countries where litigation drags on for a long time, entrepreneurs will think twice before signing a contract for a new business."

" ... The delay in resolving commercial disputes not only slows economic growth in many Latin American countries, but also encourages millions of entrepreneurs to operate in the underground economy. It is no coincidence that 56 percent of the population of Latin America work in the informal economy and do not pay taxes, according to figures from the Inter-American Development Bank, so if you can not enforce a contract, why sign it?" .

See Chapter Enforcing Contracts in the 2014 Doing Business report.



More on this topic

Dissolution of Contracts: Changes in the Rules

March 2019

The reforms to the State Contracting Law under discussion in Guatemala establish five criteria for the Government to terminate the contract with a company in advance.

The proposal is currently under discussion in the Public Finance and Currency Commission of the Congress of the Republic, and among its main objectives is to solve the problems arising from litigation between contractors and state entities, because of issues related to unfinished works.

Panama: Changes in Charges for Turnkey Projects

March 2015

A government resolution states that if the state wants to defer payments to the contractor for the project, it may do so 60 days before the 90 days of presentation of the debt recovery.

From the order given by the Ministry of Economy and Finance of Panama, published in La Gaceta:

Guatemala: Substitute Sought for Jaguar Energy

February 2015

Although Jaguar Energy says it will be ready to provide power on May 1st, in line with the contract, the state electricity company is contemplating hiring a third party if the plant is delayed.

The odds that the plant will start commercial operations on May 1st are 50-50, therefore Energuate is evaluating getting an alternative supply from a third party.

Insecurity Over Projects Due to Change in Government in Panama

May 2014

The incoming Minister of Finance has announced that the tenders for the Chan II hydroelectric station and for Government City will be revised, as well as the policy for ethanol in gasoline.

In addition, adjustments will be made to the parity formula for calculating the price of fuel by eliminating barriers to imports of fuels and changes will be implemented in the modes and methods of payment in state projects.

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