AMLO Announces Loans for Microbusinesses to Face Pandemic

The strongest contributor to Mexico’s job creation and GDP generation, its smallest companies, finds itself in a precarious position due to the economic slowdown caused by the COVID-19 crisis. Mindful of their importance to the economy, president Andrés Manuel López Obrador proposed economic incentives that would allow these companies to stay afloat through the crisis.

Mexico’s economy is supported by its smaller economic units. Out of Mexico’s 4.2 million businesses, 99.8 percent are micro, small and medium enterprises (MSMEs), according to INEGI. These companies, generate 78 percent of all jobs in Mexico and contribute 42 percent of the national GDP. These companies, however, are expected to be hit the hardest by the economic slowdown created by the COVID-19 outbreak. To reduce the spreading of the virus, public and private entities are promoting social distancing and encouraging people to stay at home. Mexico City’s government announced on March 22 that it would close bars, theaters, movie theaters, museums, gyms and zoos throughout the week. Restaurants are not included in the directive but are expected to soon follow suit.

The Latin American Association of Micro, Small and Medium Businessmen (ALAMPYME) stated that MSMEs in Mexico had already lost MX$30 billion (US$1.2 billion) due to COVID-19 and that these numbers could rise up to MX$250 billion (US$10 billion) by the end of the crisis. Alejandro Salcedo, President of ALAMPYME, told El Financiero that thousands of businesses, service providers and industries are operating at between 20 and 40 percent of their capacity due to the crisis. Moreover, thousands of these companies are at risk of closing their doors permanently should the situation continue for a long time.

Considering the importance of these companies to the economy and the impact of their closing to individuals, their families and communities, President López Obrador announced no-interest or low-interest loans for 1 million microbusinesses that will be affected by the COVID-19 crisis. How these loans will be distributed and to which companies is still to be announced but these measures are expected to contain the impact of the pandemic to these vital pieces of Mexico’s economy.