Middle Market CFOs in Latin America See Working Capital as Strategic Tool

Latin America and the Caribbean (LAC) ranks first among the five regions analyzed in the “Growth Corporates Working Capital Index.” In the past 12 months, 84% of Growth Corporates in the LAC region accessed working capital solutions — the highest use rate across all five regions in the study. More than 8 in 10 LAC CFOs state that these solutions help companies achieve better costs of capital and payment terms when venturing into new partnerships and business initiatives. The region’s Growth Corporates appear to experience operational efficiency advantages by using external working capital for strategic objectives rather than tactical ones.

Among the five regions studied, LAC is particularly well situated to take advantage of the financial benefits of extending the use of external working capital solutions. Growth Corporates in LAC are poised to augment their use of working capital solutions for planned growth investments. In the last year, 84% of firms accessed these solutions, but 94% plan to do so next year.

These are just some of the findings detailed in “The 2023–2024 Growth Corporates Working Capital Index: LAC Edition,” a PYMNTS Intelligence and Visa collaboration. This edition is based on a survey of corporate CFOs or treasurers at companies that Visa calls Growth Corporates — those generating revenues between $50 million and $1 billion. The report examines the working capital solutions available to Growth Corporates to raise short-term cash or credit, the preferred use of these proceeds and the impact these solutions can have on operational efficiency and business performance.

Other findings from the report include:

LAC Growth Corporates lead in the strategic use of working capital.

Forty-one percent use working capital for planned initiatives to grow their businesses, receiving the greatest efficiency. Growth Corporates in LAC use external working capital solutions strategically rather than tactically, illustrating mature operational efficiency. This use of external working capital solutions for the explicit purpose of business growth via planned initiatives is especially high among LAC fleet and mobility companies. Nearly 6 in 10 cite this as the primary driver of use — the largest share across our analysis.

In LAC, 88% of top performers accessed working capital for planned expenses, particularly those in the agriculture and commercial travel sectors.

Growth Corporates in LAC tend to be top performers, and for good reason. Roughly 34% of agricultural companies in LAC were top performers, far higher than the corresponding 18% of North American and 14% of European Growth Corporates in the sector. LAC’s higher share may be because of the region’s uniquely developed agriculture sector based on large-scale commercial farming. In contrast, European Growth Corporates in agriculture rely heavily on European funding programs, specialized agriculture credit institutions and financial instruments provided by the Common Agricultural Policy.

Top performers in LAC are 35% more likely than the average LAC Growth Corporate to access corporate virtual cards next year and represent half of the projected LAC users.

While 8.1% of companies in LAC plan on accessing virtual cards next year, 13% of top-performing companies in the region plan to do so. These top performers make up 50% of projected users in 2024. Virtual cards streamline payments and help improve vendor relations by eliminating payment delays when users submit an invoice via procurement systems and paper checks that need to be processed.

Growth Corporates in LAC have adapted to the challenges in the region’s business environment, as evidenced by how they use working capital solutions. Download the report to learn more about how Growth Corporates in LAC leverage working capital solutions.