IDB-CMN Will Lend US$12 billion to MSMEsBy Alessa Flores | Tue, 04/28/2020 - 12:15
The Inter-American Development Bank (IDB) announced on Monday that MSMEs will be able to access a financing program in Mexico through companies that are members of the Mexican Business Council (CMN) and its IDB Invest branch. The representative of the IDB in Mexico, Tomás Bermúdez, explained that the agreement made with the CMN is intended to help finance MSMEs that have been impacted by the COVID-19 emergency and it could also benefit the government to prevent it from taking on additional debt, according to a note from El Financiero. In addition, according to Bermúdez’s representative, these funds will be delivered directly to only CMN company suppliers for an amount of approximately US$12 billion.
The Mexican Business Council (CMN) is an organization that brings together the wealthiest and most powerful businessmen in Mexico. For many years, it has been considered a semisecret group that has had a significant influence on the country's economic decisions across at least five presidential governments, according to a BBC News note. In addition, the group has been recognized for having key participations in the history of the country. One of those distinctive moments was when the CMN participated in the NAFTA negotiations in the 1990s or when, during the presidential term of President Enrique Peña Nieto, it supported the implementation of constitutional reforms in the field of energy and telecommunications, according to the same note.
The counterpart of this plan is IDB Invest. It belongs to the IDB, one of the largest regional development banks in the world, which has been the principal source of financing for multilateral economic, social and institutional development projects for more than 60 years. It has also supported trade and regional integration in Latin America and the Caribbean. In the same way, IDB Invest offers financial and non-financial solutions to different actors, both public and private. One of the non-financial solutions offered to MSMEs is to work with financial institutions and other intermediaries to support them, according to IDB Invest's official website. MSMEs represent 99 percent of companies in Latin America and the Caribbean and 67 percent of employment, according to the OECD, and they generate a third of the region’s GDP, according to a note by IDB Invest.
IDB Invest highlights that the heart of the problem for MSMEs lies in the lack of access to adequate financing. Therefore, its solutions seek to offer financing options for working capital, exports and imports, as well as innovation activities that can improve productivity and promote growth, explains its official website. In addition, IDB Invest explains that if MSMEs have no financing, they could be more exposed to economic shocks and may be unable to acquire inventory or make timely payments to suppliers or employees.
Moreover, according to INEGI figures, it is estimated that in Mexico there are some 4.1 million MSMEs that contribute 42 percent of the GDP and generate 78 percent of employment in the country, but only 23 percent obtain financing from the commercial banking sector, which represents one of the main limitations for these companies’ expansion and survival.
During the same conference held with the IDB representative, the CMN representative, Antonio del Valle explained that to access this credit, companies needed to participate in the value chain of CMN member companies. By Monday, six CMN Mexican members have joined the program: Mabe, Cemex, Nemak, Genomma Lab, Axtel and Xignux, according to a note from Forbes México.
There have been different arguments from public officials regarding this program. At the morning conference on Tuesday, President Andrés Manuel López Obrador stressed the Ministry of Finance will not endorse the IDB-CMN loan and explained that he will support the program “if and only if it does not affect the federal government’s budget. In case it affects the budget, it will not be possible to support the loan since his administration does not want to indebt the country.”
Likewise, President López Obrador stressed during the morning conference that the Ministry of Finance will not give its endorsement (to the IDB Invest-CMN program) because “the government will focus on supporting those most in need.” Also, López Obrador said he was not pleased that the agreement did not take into consideration the federal government. "I don't like the way they agree to this and impose their plans on us. It is no longer like before, we are not adornment," said López Obrador. Del Valle explained that the president's opinions were due to a misunderstanding. “Our loan has been already cleared with the Ministry of Finance," he said. "Communication through the appropriate channels was conducted with the Ministry of Finance and the president."
Other public figures like, Marko Cortés, President of the PAN party, explained that it is necessary to carry out alliances such as the IDB-CMN loan, since "loans of MX$25,000 (US$1030.64) are not really going to be a real palliative so that MSMEs can keep their people and stay open at the same time," said Cortés today in an interview with Aristegui News. In addition, Cortés stressed that he hopes that more alliances are done for the benefit of other sectors of society.