Introduction
Last week, the Agreement between the Association of Banks of Mexico (ABM) and the federal government was signed to boost credit for small and medium-sized enterprises (SMEs) in Mexico. This is a crucial step towards reviving the nation’s economic growth, but the pressing question remains: can credit be increased through this agreement?
Julio Carranza’s Perspective
Kudos to Julio Carranza, former ABM president and Bancoppel’s Board of Directors president, for highlighting that credit increase depends on multiple factors, not just banking sector decisions. During the agreement presentation, it was mentioned that achieving the goal requires additional guarantees from the government, new regulatory facilitation, advisory services, training, and schemes to reduce formalization costs.
The Importance of SMEs in Mexico’s Economy
Micro, small, and medium-sized enterprises (SMEs) are the backbone of Mexico’s economy, comprising around 5 million establishments generating nearly 50% of the GDP and 70% of formal employment. However, 30% of remaining employment comes from a few large companies generating the other 50% of GDP, indicating a significant productivity challenge.
Addressing the SME Challenge
The solution isn’t merely increasing financing by decree; instead, an integral support vision for this vital economic sector is urgently needed. Here are key areas to address concurrently:
- A New SME Agency: Marcelo Ebrard should lead the creation of an independent, robust organization for advisory, accompaniment, and linking SMEs. Countries like the US (SBA) and Brazil (SEBRAE) have shown success with such organizations. In Mexico, support is even more critical, as 50% of micronegocios’ owners have only primary education, and 40% are over 41 years old.
- Simplifying Procedures and Improving Fiscal Schemes: 66% of SMEs are informal, and 97% operate in cash. Mexico ranks 4th in business complexity globally, with 241 hours spent on taxes annually compared to 159 hours in OECD countries. Deduction schemes for labor benefits, reduced declaration frequency, and eliminating redundant SAT data requests are necessary.
- Industrial Policy Focus: Prioritize linking SMEs with large production chains. Increase national content in global value chains, connect SMEs to large tractor companies and global value chains, and strengthen regional clusters. Altagracia Gómez should focus on creating linkage spaces, connecting SMEs with large domestic and foreign companies, increasing national integration, ensuring government procurement benefits SMEs, and enforcing timely payments from large to small businesses.
Conclusion
It’s time to support small businesses, and the recent ABM-government agreement is a positive start. However, the involved parties must recognize that their efforts are only beginning and more actions are needed to benefit Mexico’s SME sector.
