Saturday, December 2, 2023

Development bank announces US $12bn to support business

The Inter-American Development Bank (IDB) and the Mexican Business Council (CMN) have announced a loan scheme that will provide up to US $12 billion a year to small and medium-sized businesses to help them through the coronavirus crisis.

IDB Invest, the development bank’s private sector arm, and the CMN, an elite group made up of 60 of the largest businesses in the country, said in a joint statement on Sunday that the program is supported by the federal Finance Ministry and will aim to provide loans to 30,000 businesses.

The two entities called for local commercial banks, international investors and other development banks to participate in the  scheme in which small and medium-sized businesses will be offered loans “at very attractive rates.”

The aim, the statement said, is to offer revolving credit lines with an average term of 90 days. IDB Invest and the CMN are also seeking to build a $3-billion program in reverse, factoring lines of credit that would complement existing schemes run by the IDB in Mexico.

Reverse factoring is when a financial institution, such as a bank, commits to paying a company’s invoices to suppliers at an accelerated rate in exchange for a discount.

With the $12-billion loan scheme, IDB Invest and the CMN are seeking “the expansion, acceleration and democratization of access to credit for small and medium-sized businesses that make up the value chains of large companies,” the statement said.

“This is part of the strategy to support the economic stability of the [Latin American] region through the private sector, since maintaining liquidity in value chains and trade multiplies the social and economic benefits.”

According to IDB Invest and the CMN, there are about 4.1 million small and medium-sized businesses in Mexico, and they contribute to 42% of GDP and create 78% of all jobs in the country.

However, just over one-fifth of them obtain financing from commercial banks, a situation that poses a threat to their survival, the statement said.

President López Obrador said on Monday that he wasn’t opposed to the IDB Invest/CMN loan program as long as it doesn’t come at a cost to public finances.

“If it’s not at the expense of the [government] budget, go ahead, but if it is at the expense of the budget, I don’t accept it,” he said.

The president, who has been criticized for not offering enough support to business amid the coronavirus crisis, rejected the claim that the scheme had the backing of the Finance Ministry.

“We can’t give that support because we don’t want to put the country into debt,” López Obrador said, adding that he doesn’t like the way in which the IDB and CMN are trying to “impose their plans” on the country.

“It’s not like before anymore; before the economic power and the political power were the same, they fed off each other, nourished each other, not anymore. The government now represents everyone, there is a separation between the economic power and the political power,” he said.

Source: El Economista (sp), El Universal (sp), El Financiero (sp) 

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