Monday, March 1, 2021

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Debt collection in Peru

Debt collection in Peru

By Gonzalo Calle Morelli

If you are doing business in Peru or planning to do it, here you have some information and advises which could help you to decide the most secure way to do it.

If your client tells you that issuing a letter of credit in Peru is very expensive, you have to believe him because it is certainly true. Other alternatives, however, requires that you are aware of its consequences. One of the usual and inexpensive alternative is to issue a Promissory Note, to be signed in Peru the most suitable are : Letra de Cambio and Pagaré.

When you use this alternative you have to take care about the following:

1. Local Jurisdiction.- Some companies requires its Peruvian client to sign a contract where it establishes jurisdiction of foreign courts. That will not be advisable since in that sense you probably will not able to execute the Promissory Note in Peru. Besides, you will have to seizure or get a lien on assets which for sure are located in Peru.

2. Promissory Notes.- In Peru PN are enforceable only if they are issued according to law, so it is not a good idea to issue it according to a foreign country regulation. Besides, in order to avoid misunderstanding it is also better to issue it in Spanish.

3. Guarantor.- It is better to require your client a guarantor who should sign also the Promissory Note. If the guarantor or your client is not a company be sure to get its wife’s signature too, since law requires that, if you will seize some asset or goods which belongs to the couple.

4. Procedure.-  Some Promissory Notes , when payment time is over, requires to be presented before a Notary public and others do not (according to a new law). Therefore keep in mind to issue it without this requirement since you can lose one of its most important legal effect of the Promissory Note if you do not fulfill this requirement on time.

5. Debtor location.When you suit someone in Peru you have to look first where the Defendant is located since the judge of that location is the only empowered to process him. Lima is the capital city and if your client’s address is located here, then you will not have problems to find all necessary conditions to collect your debt ( fast communication; law firms, clerical people; agents; bilingual personnel etc) as you have in major cities; however, the Defendant is located outside Lima, then you could face some problems to deal with finding the best resources.

Therefore, the best way to deal with this problem is to sign with your client a short contract where both companies agree that all legal problems should be solved by judges and Courts located in Lima.

6. Attorney´s fee.- Normally, a collection debt, before filing a law suit, is carried out by lawyers or law firms, if you do not have an agent or representative in Peru. Fees are establish as a percentage of total debt to be recovered. If a law suit is filed the same rate applies but some times fix fee is agreed if the case requires some special time to evaluate it or to give its opinion.

7. Law suit timing.- A law suit in Peru normally lasts more than what is established in the law. A process, can last, on average, 12 months. It will depend if the case is quite clear or not, if the Defendant has some argument against the plaintiff or finally according to the judge’s work load. Sometimes an extra-trial arrangement could be advisable.

8. Court´s expenses.Any law suit has certain judicial fees and costs to bare. A law suit, in general speaking, is not expensive. However, when you want to seize some asset by a judge’s order you have to pay a special tariff according to its value. For instances: a seizure which amounts U.S. $ 280,000 or more requires to pay a tariff of U.S. $ 1,000.00 .

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Expatriates contracts are subject to certain limits settled down by law and should comply with an specific procedure.


It is an obligation of the local company which hires foreign personnel to match with the limitations imposed by law as follows:

n Number of foreign workers : Local company will only be able to hire foreign personnel up to 20% of total payroll;

n Salaries : Total salaries of foreign workers can not excess of 30% of the total payroll’s salaries.

A local company can request to discharge these limitations in the following cases :specialized technician and general managers and those who will come to work due to an agreement signed with government agencies.


All foreigners should credit its professional activity or specialization by attaching all University’s certification and work experience. These documents should come duly legalized by Peruvian Consulate from the foreigner’s country.


Work Contract procedure .-

The foreigner has to sign a contract, which has to be authorized by the Ministry of Work and Social Promotion. This contract should include some compulsory conditions which are not applied to contracts for local workers . These are to train the national personnel in the same occupation; the employer's commitment of transporting back to its country the foreign worker and the members of its family . certain other clauses are convenient to add for tax reasons.

Certain cases have settled down in which it is not necessary the approval of the work contract taken place with foreigner, such as in the case of the foreigner with Peruvian spouse, ascendancies, descendants or Peruvian siblings. Also, in the case that of a foreign investor with a permanent investment , among others. These foreigners are governed by the same norms of the Peruvian workers.

The work contract is approved during the first 5 labor days counting from the day that all necessary documents have been filed to the Ministry of labor. Documents to be attached to the contracty are those which certifies education and work experience duly legalized in the Peruvian consulate of the country of the foreign worker.

Immigration procedure.-

Once the contract is signed it is necessary to request a Migratory qualification which is given by Immigration authorities. It is very important to keep in mind that a foreign worker can not be included in the payroll if the resident visa has not been issued.

To obtain this migratory qualification, the foreigner ´s documentation should be filed before the Immigration authorities . If he is already in Perú he had to have entered the territory with a Business visa, NOT a TOURIST ViSA, then he can request what is so called CHANGE OF MIGRATORY QUALITY, which means that its Business Visa will be changed to a Resident Visa.

This is the usual and more convenient procedure.

Once approved the Change of Migratory Quality to a resident visa , the foreigner will be able to begin working in the country and an identity card will be issued .