Cross-Border Insolvency in Latin America: Why Restructuring Teams Must Plan Locally From Day One

Cross-border restructurings involving Latin America (LATAM) are rarely solved by a single court order or insolvency proceeding. Increasingly, multinational companies are using Chapter 11 in the United States as a central platform to coordinate creditor negotiations, liquidity, asset sales, and a restructuring plan. But practical experience demonstrates an important limitation: the strategy can be centralized, but execution is local.

A US bankruptcy court can provide an effective "command center" for the restructuring. Yet it cannot, by itself, move cash from a local bank account, release collateral governed by local law, transfer a license, replace a director, or complete the sale of an asset located in another country. Those steps continue to depend on local courts, regulators, banks, corporate approvals, and counterparties.

This distinction is particularly important in LATAM , where recognition regimes, insolvency laws, and practical enforceability can differ significantly from country to country. For restructuring leaders, the work required to preserve value locally must begin well before the global restructuring plan is finalized. In my recent presentation at the ABI panel, I spoke about my experience guiding various companies, including a global coffee supplier and another case involving cross-border operations. These examples show how local legal and operational realities can shape whether a global restructuring strategy succeeds. See several practical lessons from each experience below:

Recognition Is a tool to preserve value

A global coffee supplier and its affiliated debtors filed Chapter 11 in the Southern District of New York in late 2023, with entities and operations across multiple jurisdictions. The US proceeding provided the central restructuring framework, but implementation required different approaches in Brazil, the Netherlands, and Nicaragua:

• Brazil provides an example of recognition working effectively. Because Brazil had incorporated the UNCITRAL Model Law on Cross-Border Insolvency into its framework, the Brazilian court recognized the US proceeding and suspended individual enforcement measures against the coffee company's assets. Recognition was not simply procedural; it translated protections obtained in New York into protections capable of preserving value locally. The lesson for restructuring teams is to determine early whether local recognition can convert US protections into practical control over assets and operations.
• The Netherlands required a different approach. The coffee supplier commenced a parallel Dutch local WHOA proceeding, and the court-to-court coordination protocol had to be adapted to Dutch procedural requirements before approval. The lesson is important: effective cross-border cooperation does not require identical proceedings, but it does require flexibility in adapting the global strategy to local law. While the legal mechanisms may vary, the same principle applies: the restructuring plan must account for each jurisdiction's practical path to implementation.
• Nicaragua demonstrated the other end of the spectrum. The US process was unable to protect certain local assets, including approximately $10 million of coffee inventory that had been seized by local authorities. The experience underscores a critical limitation: a worldwide automatic stay is not the same as worldwide enforceability.

The global coffee supplier's case illustrates why there is no single approach to implementing a global restructuring, and teams must build a local execution plan alongside the Chapter 11 strategy from the outset. A centralized proceeding may set the direction, but value is preserved only when the team understands and can work within the legal and operational realities of each jurisdiction.

Build the cross-border architecture early on.

From the outset, restructuring teams need a clear view of the local entities, assets, decision-makers, and operating dependencies that could affect the process. One organization's restructuring case that involved cross-border matters (across the United States, Mexico, Barbados, the Cayman Islands, the Dominican Republic, and Italy, among other countries) revealed two considerations that are particularly important to guide a successful approach:

• Map the operational and corporate structure. The bankruptcy perimeter matters. An interest in a foreign subsidiary may ultimately be affected by a Chapter 11 case, but the subsidiary's assets, contracts, employees and local liabilities do not automatically become subject to the US proceeding. They continue to be governed by local corporate and regulatory frameworks. Restructuring teams therefore need to understand where cash sits, which accounts or shares are pledged, who has signing authority, what approvals are required, and which local stakeholders are essential to keeping the business operating.
• Establish value of cross-border architecture early. At the outset, the debtors sought authority for the Chief Restructuring Officer to serve as foreign representative where recognition might be required. The team may not know on day one precisely where recognition or additional local relief will ultimately be necessary, but ideally, it should establish the infrastructure, decision-making authority, and local adviser network early enough to respond quickly when it is. A Chapter 11 proceeding can provide the overall restructuring strategy, but effective execution depends on building the local infrastructure needed to carry that strategy out across each jurisdiction.

Local execution ultimately determines recovery

The same principle applies to the financial side of a restructuring. A multinational company may have a single consolidated 13-week cash-flow forecast, but the underlying liquidity sits across different entities, currencies, and bank accounts. A certain level of starting cash does not necessarily mean that those funds are readily available or can be accessed and deployed without restriction.

The relevant questions quickly become local: Can the cash be moved? Is the account pledged? Who is authorized to sign? Are there foreign-exchange restrictions? Which local creditors must be paid to keep the business operating?

Three practical considerations

• Think globally, but plan locally. The central proceeding establishes the strategy; local law and local operating realities determine how much of that strategy can actually be implemented.
• Start the cross-border work early. Map assets, cash, collateral, corporate authority, licenses, regulators, employees and critical counterparties before they become obstacles.
• Focus on execution, not recognition alone. Recognition creates a framework. Value is preserved when the team can actually protect the business, move the cash, release the lien, obtain the approval and close the transaction.

Ultimately, Chapter 11 can provide a highly effective command center for a multinational restructuring. But at the country level, local law and local execution control the last mile - and the last mile is often where value is either preserved or lost.

Related Reads

• Cross-Border Restructuring for a Distressed Global Automotive Supplier - Riveron
• Addressing Business Complexities in LATAM: How Leaders Can Rethink Litigation Support to Safeguard the Most Value - Riveron
• Rethinking LMEs: Financial Engineering Without Operational Reform Is a Path to Value Destruction - Riveron
• Quarterly Brief: What's New, What's Next Across Industries in Restructuring & Turnaround (Q2 2026) - Riveron