Introduction to SMEs in Mexico
Small and Medium Enterprises (SMEs) in Mexico, known as Pymes, have long been central to political discourse and remain an elusive hologram for financial institutions. Despite their significant contribution to the Mexican economy, representing around 90% of productive units, SMEs face challenges in accessing the financial resources they need.
The Current State of SMEs and Financial Institutions
For decades, SMEs have been featured in political campaign promises and government plans. However, most programs have remained unfulfilled. SMEs are often family-owned businesses led by heroic entrepreneurs who navigate bureaucratic red tape and face indifference from most financial institutions.
Even the North American Free Trade Agreement (NAFTA) signed in 1994 and its subsequent wave of modernization and transformation for a significant portion of Mexico’s productive sector did not elevate SMEs. They remain fragmented and, in most cases, have failed to integrate into export-oriented production chains.
The Central Problem: Access to Financing
SMEs struggle with formal and informal business operations due to a lack of corporate structure and governance that would make them eligible for bank credit or capital market financing.
President Claudia Sheinbaum recently urged commercial banks to lower interest rates on SME financing. She also requested that the Secretary of Finance, Edgar Amador, work with both development and commercial banks to reduce interest rates. Despite the Bank of Mexico lowering interbank interest rates, accessing credit for SMEs remains complex.
Government and Financial Institutions Collaboration
The issue is central, and it remains to be seen how the government and bankers will collaborate to achieve this goal. Previous administrations have failed to push SME growth through credit, and finding a pathway to secure funding for this crucial segment has proven elusive.
However, recent progress in the stock market sector offers hope for expanding SME financing through the stock market. Mexican stock exchanges, intermediaries, and financial authorities (Hacienda, Bank of Mexico, and the National Banking and Securities Commission) successfully pushed for the new Securities Market Law.
New Securities Market Law Benefits
This new framework enables new financing schemes for SMEs at lower interest rates, longer terms, and with fewer requirements. While it won’t happen overnight, the head of the Mexican Intermediaries Bursátiles Association (AMIB), Álvaro García Pimentel, acknowledges that the new law will contribute to democratizing stock market financing.
In Mexico, there are 1.8 million formally established companies, but only one-third (600,000) receive institutional financing. This leaves 1.2 million companies without formal financing, often resorting to expensive, risky, and unreliable informal lenders or pawning assets.
Of these 1.2 million companies, approximately 51,000 could potentially secure financing through the stock market. With an average of 10-12 employees per SME, securing financing could create around 600,000 formal jobs in two to three years.
New Law Provisions
The new Securities Market Law modified Article 54, allowing Mexican and foreign entrepreneurs to list or sell shares without voting rights. This change enables companies to secure financing through stock sales without risking control over their businesses.
Given that 92% of SMEs are family-owned, this provision is particularly significant. Despite trade tensions under President Donald Trump, the stock market remains an attractive investment option. As the new Securities Market Law is implemented, it will likely create more opportunities for SMEs.
