Factoring Investment In Colombia

If I had a quarter for every time someone has written in to tell me I’m out of my mind for suggesting people move to or invest in Colombia, I’d have a whole lot more money to invest in Colombia.

This past week in Medellín, where I’ve been spending time with colleagues, friends, and our Live and Invest in Colombia Conference attendees, we’ve all bonded over this common refrain. Their families and friends tell them they’re crazy, too.

Colombia continues to suffer the stigma of its troubled past. As I reminded all those in the room with me in Medellín, however, this isn’t all bad, for it means world-class opportunities remain on the table for us forward-thinking investors.

One specific opportunity was presented at this week’s conference by a group in Medellín I’ve been working with for six years.

This investment opportunity stems largely from the troubles that created the stigma Colombia continues to work to overcome. Some Colombians who have been affected in one way or another by their country’s past troubles have sued their government. In some cases, it’s families that have been displaced or have lost family members as a result of FARC actions. In other cases, it’s Colombians who have been affected adversely by other actions or inactions of the Colombian government. For the investor, the reason for the suit doesn’t really matter.

The point for the investor is that it can take years for these suits to process through the courts. It takes five to eight years on average before a judgment is passed down. Once a judgment has been made, it can take another 12 to 24 months for the government to pay out. Many of the families can’t or don’t want to wait this additional year or two before getting their money.

That’s where we investors come in. The firm that I know in Medellín offers the families cash today in exchange for their judgment money due from the government. It’s called factoring, and it’s common around the world.

The benefit to the family is that they get some money today. However, taking the payment early means they don’t receive the full payment. That’s the trade-off… and the opportunity for the investor. The investor pays out the family at a discount and then collects the future cash payment from the government in full. In addition, the government is required to pay interest on the amount owed from the date the payout is stipulated by the court until the date the payment is made.

If the government takes longer than 10 months to pay off a judgment, then the statutory interest rate increases, and investors make a bit more money each month. The current average payoff date is more than a year, meaning investors can expect to earn that higher level of interest for at least a few months.

The group in Medellín I’ve been working with finds and vets the cases. Then they package the judgments for investors who receive 13% annualized interest for the first 10 months and then 16% annualized interest after the penalty rate kicks in.

It’s an established industry in Colombia, with close to US$1 billion worth of these judgments being handed down each year. Only the best, surest cases are processed by my colleagues for factoring. The timing is important. This is the kind of thing where you need to be in the room with the right people at the right time and ready to take action once the due diligence has been completed and a new round of judgments is offered.

If you’d like more information and to be in the room for the next offer, you can get in touch here.

The minimum investment is US$25,000.

Lief Simon

“Lief, I am always amazed at how civilly you respond to some of the emails you get. I’m referring this time to the recent one about you and your partner being fixated on Central America. The only thing I can imagine is that they don’t really read your newsletters or read only one or two. I, for one, got tired of hearing about Portugal, Croatia, Spain, etc., since I only ever wanted to live in Central or South America. Where was that reader when those newsletters came out?

“Keep up the good work. I’ll even read about Asia but never want to go there.”

C.B.

“Lief, I wanted to take the time to thank you, Lee Harrison, and the entire Live and Invest Overseas staff for a great seminar in Colombia this week.

“The content and materials exceeded my expectations, and I now feel empowered to make business decisions about living in foreign countries going forward.

“I would be happy to post a comment or testimonial on your behalf.”

M.S.

Thanks for writing, and I’m glad to hear you found this week’s event in Medellín worthwhile. It was my pleasure to spend time with you and your fellow conference attendees. And it’s always a pleasure to have a reason to return to Medellín.