Conscious of the enormous need of small and medium-sized businesses in Latin America for secured commercial credit, the Center undertook from 1992-1994 an extensive research and drafting project focused initially on Mexican law and practice as compared with those of Canada and the United States. This study revealed the virtual absence of commercial credit in Mexico at reasonable rates of interest. It also revealed the negative effect that existing law and practice had upon the availability of commercial credit. The findings by Center research staff subsequently tracked similar findings in Central and South American countries. The Center study concluded with a suggestion that an Inter-American model law on secured transactions be drafted together with rules for the modernization of the commercial and land registries.

The Center and the Mexican Ministry of Commerce and Industry (the then SECOFI) started drafting a law of secured transactions for Mexico in 1995. Part of this law was adopted in 2000, although it contained serious departures from the original draft. These departures prevented the desired improvement because, among other problems, they perpetuated the existence of the same secret liens that plagued Mexico’s and Latin America’s asset-based lending. In 2002, some of the original departures were eliminated and a new version of the secured transactions law was enacted by Mexico. At the same time, with the sponsorship of the Office of the Legal Advisor of the U.S. Department of State, the original Center-SECOFI draft was introduced at the OAS as a draft Model Law on secured transactions. This draft was presented jointly by the governments of Mexico and the United States. Eventually in 2002, with the active participation of the leading specialists in the Americas, the draft Model Law was approved by the OAS as part of its CIDIP-VI process. An appendix to this Model Law, named Inter-American Rules on Electronic Documents and Signatures (IAREDS), was also approved and recommended for adoption.

The enactment of the OAS Model Law in Latin America and the Caribbean, together with IAREDS and with the modernization of land registries, would make it possible to extend commercial and construction credit throughout the region at rates of interest approximating those of Canada and the United States. This modernization and harmonization work will result in the creation of an active regional and international credit market for Latin America’s small and medium-sized businesses and build trade capacity throughout the Americas.

Under the direction of Center president and executive director Boris Kozolchyk (and with the participation of its research director Mariana Silveira, research attorney Marek Dubovec, and commercial law reform specialist Dale Furnish), the Center is currently involved in secured transactions reform initiatives, consistent with the OAS Model Law, in various countries throughout the Americas, with a particular (but not exclusive) focus on Central America.

See also, The NLCIFT 12 Principles of Secured Transactions Law in the Americas.