SMEs, Family Businesses Need Support to Enter the Formal Economy

Q: What are the priorities of CONCANACO SERVYTUR’s members as the country moves through a government transition? 

A: We have been visiting various states to establish strategic objectives along four strategic pillars: institutional strengthening, financial autonomy, digital transformation of the sector, and human capital development. These pillars expand into nine axes for a better future for the commerce, services, and tourism sector: rule of law and security, sustainable development, human capital development (shared prosperity), family, business, and public safety risks, economic development, linking Mexico with the world, family businesses, wellness tourism, digital economy and reducing over-regulation. Which we discussed with the incoming administration.

The common issues that affect companies include security, infrastructure, investment, rule of law, over-regulation, formalization, human capital development, and healthcare. These long-standing concerns have been evident in CONCANACO’s historical documents, which date back to 1929, highlighting unresolved systemic problems.

To strengthen tourism, we need to focus on promoting lesser-known areas, like Tlalpujahua and Patzcuaro, Michoacan; Mexicali and Tijuana, Baja California; and San Cristobal de las Casas, Chiapas, in addition to popular destinations, to promote local development.

Q: How can regulations and larger companies better support SMEs and family businesses?

A: To genuinely discuss SMEs and family businesses, one must be part of them. Our organization is composed of family businesses, so it has firsthand experience that gives us a unique perspective and responsibility. The chamber’s leaders have a strong influence in their region. 

While agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) or USMCA mention SMEs, the country lacks concrete support policies like a Law for Family Businesses or an SMEs Law. To address this issue, we are developing a public policy proposal to genuinely support SMEs. Effective public policies that support the development and transition of companies from informality to formality. This includes improving governance and the business climate, and creating an appropriate legislative and regulatory framework.

Addressing informality is also critical, with 55% of jobs in the informal sector and 10 million workers earning below the minimum wage. This informality leaves them without access to vacations, profit sharing, bonuses, and reduced work hours.
 

Q: What are the areas regulations should specifically address? 

A: There are three essential elements for supporting SMEs and family businesses: developing human capital, improving the regulatory environment, and addressing security, energy, infrastructure, and financing. Developing human capital involves working with young people according to regional needs. Our NIDO Empresarial program teaches practical entrepreneurship skills, aiming to create more entrepreneurs and fewer employees. The future of our country depends on whether we focus on labor-intensive industries or on adding value through innovation and technology. Preparing our youth for these future areas is critical.

Starting a business in Mexico remains challenging despite government efforts to streamline administrative processes. The country needs to redesign its fiscal and regulatory framework to better support businesses and encourage formal employment. Improving services in exchange for taxes is crucial. This includes enhancing infrastructure, security, education, and health. Security is essential for business growth, while energy is critical for productive processes. Infrastructure must support logistics by providing necessary routes and channels.

One of our proposals to the future administration is to implement a universal single window for the incorporation of new companies within a maximum period of 24 hours. 

Financing is also key. In Mexico, those who do need loans fall into unregulated markets, making them vulnerable to crime. Policies should focus on human capital development, security under the rule of law, and tailored financing based on each state's capabilities. State policies should also be consistent across administrations. States should invest in sectors where they have a natural advantage and prepare their populations accordingly. Mexico is a large country with diverse opportunities, yet the economy does not match its potential. Other countries have found niches and excelled in them, and Mexico should do the same. Each state and municipality must understand and invest in its unique strengths.

Claudia Sheinbaum’s administration will likely take a more structured and systematic approach to these issues. She has a constructive and structured academic profile, we expect that the pillars of her government will be based on specific objectives and projects.

CONCANACO SERVYTUR will enhance bridges of collaboration with the ministers, appointed by the president-elect to strengthen the more than 4.8 million family businesses that it legitimately represents.
 

Q: How does CONCANACO plan to address the issue of unfair competition from foreign products to bolster support for national industries?

A: Mexico must adopt public policies that decisively support technological advances and address informal markets. The informal economy, which often involves unregulated and unfair practices, contributes to poverty and undermines fair competition.

It is crucial to address this issue by enforcing regulations that prevent informal trade practices and ensure that workers' rights are upheld. Cooperation is vital to creating a fair and safe trading environment, and protecting consumers and family businesses.

Moreover, Mexico should leverage its extensive network of trade agreements to not only protect domestic industries but also support Mexican products in international markets by including technology to make processes more efficient. We should avoid the trap of victimizing ourselves instead of taking action. 
 

Q: How do CONCANACO's members anticipate nearshoring will impact their businesses? 

A: This trend has a significant impact on areas such as housing, healthcare, security, and infrastructure. The establishment of a factory generates cross-cutting effects: people working there need housing and also require services and products in the local market. Data shows that commerce, services, and tourism represent over 90% of the employer registrations in the country, while these sectors constitute 66% of the economy.

To integrate the industry that arrives in Mexico, it is crucial to have a network of quality suppliers, who need to be certified. Obtaining these certifications requires significant investment. If states do not invest in developing a formal labor economy with training and certification, companies may turn to their external suppliers.

The challenge is twofold: not only is there a desire to create formal employment in the industrial sector, but also to integrate this chain into the reality of the Mexican economy. It is vital to strengthen sectors such as services and tourism, as these sectors offer great opportunities for people. Tourism, by its nature, tends to offer good wages because it requires specific skills, such as proficiency in English and the use of technology. However, this sector represents only 9% of the economy, indicating a need to support it.

Nearshoring is not just about attracting investments to Mexico. To fully leverage this phenomenon, appropriate capabilities must be in place. Nearshoring investors seek the best investment conditions and profitability. If another country offers better conditions, companies might choose those locations.

 

The Confederation of National Chambers of Commerce, Services, And Tourism (CONCANACO SERVYTUR) founded in 1917, represents a network of 257 business chambers in Mexico with presence in more than 900 cities that advocate for economic development. It fosters a favorable business environment by being a bridge between the private sector and authorities. Defend and represent more than 750 thousand companies in organized commerce, services and national tourism.