Due diligence on a Latin American distributor

The most expensive line in most entry budgets never appears in one: the year lost to the wrong distributor. Almost all of that loss is avoidable with checks that cost hours and require no travel, because the things that disqualify a candidate are documentary, and the documents are public or askable. The discipline is to check evidence rather than impressions, and to run the checks in the order that removes names fastest and cheapest: registries first, references last, enthusiasm nowhere.

One clarification before the list. Due diligence here answers two different questions, and both matter. Is this company what it claims to be, which is about registries, tax standing and finances. And is this company right for us, which is about registrations, portfolio and behaviour. A candidate can pass the first honestly and still fail the second.

Is the company what it claims to be?

This is the first hour of work and it removes names fastest.

Mexico. Ask for the deed of incorporation and the notarised power of attorney of whoever will sign, and confirm that person can bind the company and to what value. Ask for the RFC, the federal taxpayer registration, and check its current status. The SAT also publishes listings of taxpayers found to have invoiced non-existent operations under article 69-B of the Federal Tax Code, free to search and checked in minutes. A name on that list ends the conversation. The full Mexican method, from longlist to contract, is in finding the right distributor in Mexico.

Colombia. The counterparty needs a NIT, and if they will import your goods, the import activity must be recorded in their RUT with DIAN under the customs regime in Decreto 1165 de 2019. A distributor who claims to import but whose RUT does not show it is either buying from another importer, which is a margin you fund, or planning paperwork they have not started. The structural background is in four ways to sell in Colombia.

Everywhere. The same two questions, asked against whatever the national registry is: does the legal person exist as described, and is its tax standing current. The answers are documents. A candidate who responds to a document request with a relationship offer has answered a different question, and answered it badly.

Can they actually import and sell your product?

Commercial strength is worthless if the goods stop at the border, so check the regulatory position before the commercial one.

The import registration, and its suspension history. In Mexico, importing requires entry in the Padron de Importadores, and for some categories, steel, textiles and footwear, chemical precursors, tobacco and alcohol among them, an additional sectoral register that takes longer to obtain. The registers work by tariff fraction, so check your fraction rather than your product description. Registration can also be suspended, on grounds that are about the importer's own tax conduct and nothing to do with you, and a suspended importer cannot clear your consignments. Two questions belong in every Mexican distributor screening: which padrones are you registered in, and have you been suspended in the last three years, for what and for how long. An evasive answer to the second is itself the answer. The mechanics are in why a European company cannot be its own importer in Mexico.

The registrations they hold for other principals. For regulated categories in Colombia, ask for the current status of the INVIMA sanitary registrations the candidate already holds, and whether any have been cancelled or suspended. A distributor's regulatory track record with other people's products is the best available preview of how they will manage yours. It also opens the more important question, covered in your distributor holds the INVIMA registration: in whose name your own registrations would be filed, which is due diligence on the structure of the deal rather than on the counterparty.

Your trademark. Mexico operates a first to file system under the Ley Federal de Proteccion a la Propiedad Industrial. Search the register for your own brand before you appoint anyone, and register it yourself if it is free. Finding your mark already registered, by the candidate or by anyone else, changes the negotiation you are about to have.

Financial capacity, and what refusal tells you

Ask for two or three years of financial statements. Many mid-sized Latin American distributors will decline, and the refusal is not disqualifying in itself. What they offer instead is the information: bank references, import records, the shape of their customer concentration. A candidate who will show nothing at all has answered the question anyway.

Do not misread payment terms as a solvency signal. In Mexico, supplier credit is the financing system: Banco de Mexico's second quarter 2026 survey, published 20 August 2026, found 60.9 per cent of firms using supplier financing against 24.5 per cent using commercial bank credit, and the share rises with company size. A request for 90 days is the market talking, not the balance sheet: see why your Mexican distributor asks for 90 days. What is diagnostic is behaviour: payment performance against agreed terms with their existing principals, which is a reference call question, and the concentration of their own receivables, which is a statement question.

Reference calls that actually predict

The two references a candidate volunteers are advertising. Make three calls instead: two to principals the candidate currently represents, chosen by you from their portfolio rather than offered, and one to a principal whose line they dropped or lost. The third call is the one that predicts, and the candidate's reaction to being asked for that name is a preview of how disputes will go.

Ask all three the same things. Payment behaviour against agreed terms, in practice. What the distributor actually did in the launch year: training bought, stock carried, customers opened, or a price list forwarded to an existing base. And for the former principal, why the line ended, told from the other side.

Then go to the warehouse, unannounced if you can. Stock condition, order picking, whether the systems are real. An hour on the floor contradicts a capability deck faster than any document, and a candidate who resists an unannounced visit has told you the deck came first.

The questions an honest distributor answers readily

Due diligence ends with a conversation, and the conversation itself is a test. These questions cost a good candidate nothing, because the answers are their own sales material. Evasion on any of them is a finding.

1. Which import registers are you in, and has your registration ever been suspended?
2. What is the current status of the product registrations you hold for other principals?
3. Who, by name, will carry our line, and how are they paid relative to your other lines?
4. Which principals have you lost in the last five years, and may we call one?
5. What did your most successful product launch look like in year one, in numbers?
6. In whose name would our certificates and registrations be filed, and will you commit in writing to cooperate in transferring them if we part?

The sixth question does double duty. It screens the candidate, and it forces the structural decision, who holds the market access, onto the table while you still have the leverage to decide it. Every termination story that ends badly, in any of these markets, runs through certificates, registrations or trademarks that quietly accumulated in the distributor's name because nobody asked that question at the start.

Common questions

How do I verify that a Latin American distributor is legitimate?

Documentarily. Confirm the legal entity in the national registry, check the tax registration and its current status, and in Mexico search the SAT's article 69-B listings of taxpayers found to have invoiced non-existent operations. Then confirm the import and sectoral registrations your product needs, and ask directly about suspension history.

What financial information should a distributor provide?

Two or three years of financial statements is the reasonable ask, and many decline. The substitutes worth accepting are bank references, import records and a view of customer concentration. A refusal to show anything at all is an answer. Long payment term requests are not a solvency signal in markets where supplier credit is the norm.

What are the biggest red flags in distributor due diligence?

An evasive answer on import registration suspension, your trademark already registered in their name, a directly competing line inside their portfolio, refusal to name a former principal for a reference, and resistance to an unannounced warehouse visit. Any one of them is worth stopping for; two of them together are a decision.

Which reference calls actually predict distributor performance?

The call to a principal whose line the candidate dropped or lost. Current principals describe the relationship at its best, and the two names a candidate volunteers are chosen for that. The former principal describes how it ends, which is the scenario your contract exists for.