2. What other formal means of securing payments are available in Mexico?

During the last couple of years Mexican Commercial Laws have evolved in considerable fashion to the extent of giving us useful tools for securing payment in financed sales. During this section we will point out only the few devices that we believe are more common, and those that will more likely help during the sale of goods:

· Commercial Pledge. The pledge is a device that helps secure a loan by creating a security interest on debtor's personal or "movable" property (such as goods recently acquired out of an international sale). For years, Mexican law had followed traditional Roman Law principals which required that goods securing a loan be delivered to the lender (seller). Not anymore. Recent amendments to the Negotiable Instruments and Credit Transactions Law on May, 2000 have made it possible for lenders to retain an interest in the pledged property while debtors retain possession. Another main feature of this new pledge is the possibility of creating a security interest in present and future collateral, as well as to secure present and future obligations. (Future collateral include after-acquired property, proceeds, account receivables, etc.)

· Conditional Sale. Through this device seller reserves title to the goods sold until buyer completes full payment. This method has proven very effective when the goods sold can be identified and can also be recorder in the City's Public Registry of Commerce (in buyer's place of business). Proper recording allows a seller immediate repossession of the goods sold should buyer default payment, even in bankruptcy proceedings.

· Bond and Guaranty. Through this mechanism the issuer of a bond or guarantee undertakes to be responsible for the fulfillment of a contractual obligation in the event of a default by the buyer. Bonds can be granted by individuals, but are usually furnished by bonding companies. On the other hand, a guarantee is often granted by either individuals or companies in general, and is also known as a personal guarantee, or an unconditional guarantee endorsement. The grantor of this last device is jointly and severally liable for the debt, and can be sued directly regardless of the action against the original debtor being exhausted or not (it so happens with bonds).

· Letter of Credit. Through a letter of credit the issuing bank commits up front to pay on behalf of buyer a specified amount of money to the seller when presented with a specified set of documents: invoices, packing list, bills of lading, etc. Although this is the safest way of securing payment, it is also the more difficult to get since buyer will have to secure a line of credit from the issuing bank. A letter of credit issued by a Mexican bank and dishonored can usually be enforced through summary proceedings.

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