By Carlos Alberto Ferro[1]
Introduction: Insolvency as a Catalyst for Resilience in the Digital Age
Latin America, a land of creativity and drive, is home to a vibrant entrepreneurial ecosystem. According to a 2024 report[2], it is the most entrepreneurial region in the world: 33% of women and 37% of men intend to start a business, and 21% of women and 25% of men are currently creating or running a new company.
Every year, thousands of startups and SMEs emerge, driven by the promise of innovation and, increasingly, by the ease of access to credit offered by digital platforms. The days of long bank queues are over; today, many debtors obtain loans by simply swiping on a screen. While this speed democratizes financing, it presents a paradox: it exposes entrepreneurs to new and complex risks of over-indebtedness, rooted in what could be called the «algorithmic veil.”
Faced with this reality, a crucial question arises for the economic resilience of our region: are our current insolvency frameworks a barrier to entrepreneurship, or can they become a true engine for second chances and learning—dispelling the outdated notion that insolvency is a punishment?
I. The «Algorithmic Veil»: A New Terrain for the Old Challenges of Over-Indebtedness
Algorithms—defined as the search for patterns through data—have also been dubbed “weapons of math destruction.”[3] Far from being neutral tools, they operate as complex systems that not only interpret but actively shape and condition the financial behavior of users. The speed at which technology platforms influence consumption and debt habits outpaces legislative timelines, forcing insolvency law to adapt more rapidly to the digital economic reality.[4]
For Latin American entrepreneurs, these platforms seem to offer a lifeline, especially in countries like Mexico and Argentina, where recurring economic crises and instability have eroded trust in traditional financial systems, damaging savings and distorting perceptions of bank credit.[5] But are these entrepreneurs truly aware of how much power algorithms wield over their borrowing decisions? The question regarding over-indebtedness is no longer what algorithms do to debtors, but rather what they do to their ability to project alternatives.
The inherent lack of transparency in credit scoring and the interconnectedness of the digital system contribute to opacity in operations, making it difficult to assess risks and to understand the true financial situation of the digital debtor—often beyond the reach of banking regulations. This becomes critical when entrepreneurs, eager for rapid growth, take on liabilities without fully understanding them, frequently leading to insolvency scenarios where the root of the problem is more cultural than merely financial or technological.
II. Destigmatizing Failure: From Insolvency as Condemnation to Restructuring as Learning
In many ways, Latin American culture still bears a strong stigma associated with business failure. This aversion to risk and visibility of ‘failure’ even extends to investment, where Latin Americans remain distant from stock market investments, widening the gap with countries like the United States.
As BlackRock has noted, one of the challenges for financial inclusion in the region is the lack of products and services tailored to the economic realities of large segments of the population—an obstacle for startups. Within this cultural framework, the entrepreneur who experiences insolvency is often transforms into a barrier for startups[6]. Within this cultural framework, the entrepreneur who goes through insolvency is often seen as a “failure,” and insolvency proceedings as a “condemnation” or the “end of their productive life,” effectively exiled from the business and investment world.
This perception—rooted in customs that predate legal norms—is an invisible yet powerful brake on innovation. How can we expect entrepreneurs to take risks, learn from their mistakes, and pursue new solutions if the legal and social system punishes failure instead of offering a runway for rebooting?
The reality is that insolvency proceedings are, by nature, a legal tool designed for restructuring and reorganization—not commercial annihilation. It is a mechanism that seeks to balance the interests of the debtor and creditors, allowing a viable project to recover or an individual to re-enter the economy. In the entrepreneurial context, this means that insolvency proceedings, far from being an end, should become the “legal pivot” enabling entrepreneurs to learn from experience, adjust their business model, or even start a new venture with greater knowledge and maturity. No one learns from just one fall.
III. The «Legal Pivot»: Insolvency as a Platform for Reinvention and Learning from Mistakes
How can we design systems that allow entrepreneurs to “fail fast” and learn without being financially ruined for life? To achieve this, insolvency law must deeply integrate an understanding of how debt is formed in today’s technological landscape. We must acknowledge that software not only redefines the debtor’s assets but also offers sophisticated methods for detecting irregularities and reconstructing financial operations.[7] This demands a shift from purely accounting-based evaluations to an analysis that incorporates the particularities of digital debt and the subtle but powerful way algorithms influence the will of both the consumer and the entrepreneur.
Although digital consumers and entrepreneurs are different actors when it comes to over-indebtedness, they converge in today’s world through their deep interaction with technology and the algorithms that shape their financial decisions. While the consumer may fall into debt due to the ease of online credit or impulsive digital purchases, the entrepreneur faces an added risk by financing innovative projects or expanding quickly—often without a strong foundation in financial education to navigate the complex digital ecosystem. Nevertheless, the solution to their vulnerability lies in a common approach: preventive education that empowers them to understand and manage the inherent risks of this new economic reality—whether for personal consumption or business development.
IV. Toward a Resilience Ecosystem: The Role of Public Policy and Technology in Enabling “Second Chances”
Digital financial education and institutional support play a decisive role in mitigating insolvency risks for entrepreneurs, enabling them to navigate the complex world of digital credit with greater discernment. Suggestively, this means that legal education—especially in insolvency law—must innovate to incorporate the technological and algorithmic dimensions imposed by current realities. It is about forging the new tools and theories necessary to protect the debtor and ensure justice in a future where debt is unavoidably digital.
If algorithms can induce over-indebtedness, could they also be designed to identify risk patterns and restructuring potential? This is the next step in our reflection: technology not only as a source of problems but as part of the solution.
Insolvency law, like software, needs a theory to drive it. We can aspire to legal frameworks that promote a “culture of second chances,” where insolvency laws are seen as mechanisms of resilience rather than revenge. The challenge is ensuring that these laws are not confined to paper, but that their spirit permeates judicial and social action—transforming the perception of insolvency from a condemnation to a springboard for learning and reinvention. This, in turn, will significantly boost entrepreneurial momentum in our region—an essential factor for Latin America’s socio-economic development.
V. Conclusion: The Challenge of Balancing Innovation and Protection in the Age of Resilience
The dizzying pace of technological advancement has radically transformed the dynamics of indebtedness, placing the digital debtor and the entrepreneur at an unprecedented crossroads. We have seen how algorithms shape and condition financial behavior, presenting a profound challenge for insolvency law. However, the true essence of this transformation lies in our ability to redefine the role of insolvency proceedings.
Ultimately, the future of entrepreneurship in Latin America will depend on our ability to balance technological innovation with strong debtor protection and credit oversight. This requires redefining insolvency not as a “punishment” but as a path to resilience, learning from failure, and a genuine second chance.
The insolvency law of the future is an instrument of economic policy—it must go beyond merely resolving insolvency and integrate preventive education in financial literacy for entrepreneurs. It is both possible and necessary for this area of law to provide business founders with tools to project alternatives and manage their finances, fostering a culture of planning that prevents over-indebtedness.
In this way, we don’t just resolve crises—we build a stronger path toward economic stability and long-term business success for all of Latin America. It is time to embrace the vision of an insolvency system that fuels, rather than hinders, the innovative spirit of our region within a new ecosystem of digital economy and finance.
About the Author:
Carlos Alberto Ferro is a lawyer specializing in bankruptcy trusteeship and insolvent entities. He has pursued doctoral studies in Law and New Technologies at the University of Mendoza. He is a member of the Ibero-American Institute of Insolvency Law.
www.linkedin.com/in/especialista-derecho-insolvencia
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[1] Carlos Alberto Ferro es abogado y profesor universitario de Derecho Comercial II en la Universidad Aconcagua (Mendoza-Argentina).
[2] BBVA. (2025, 14 de abril). Día Mundial del Emprendimiento 2024: ¿Cuál es la región más emprendedora del planeta? BBVA. https://www.bbva.com/es/sostenibilidad/dia-mundial-del-emprendimiento-2024-cual-es-la-region-mas-emprendedora-del-planeta/
[3] O’Neil, C. (2018). Armas de destrucción matemática: Cómo el big data aumenta la desigualdad y amenaza la democracia. Ver https://info-biblioteca.mincyt.gob.ve/wp-content/uploads/2024/11/Armas-de-destruccion-matematica-Cathy-ONeil.pdf
[4] Ferro, C. A. (junio, 2025). Endeudamiento en la era digital: El rol de los algoritmos en la cristalización de pasivos concursales. Errepar, Doctrina Societaria y Concursal www.errepar.com
[5] López, I. (2025, 1 de junio). CAME: crónica de la insolvencia en un sector que se vuelve menos confiable. Bloomberg Línea. https://www.bloomberglinea.com/latinoamerica/mexico/came-cronica-de-la-insolvencia-en-un-sector-que-se-vuelve-menos-confiable/
[6] Salazar Castellanos, D. (2025, 9 de mayo). Latinoamericanos siguen alejados de inversiones en bolsa y se amplía brecha con EE.UU. Bloomberg Línea. https://www.bloomberglinea.com/
[7] Bratton, B. (2025). The Stack: Sovereignty and Software. Adriana Hidalgo Editora.
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