Small businesses across Mexico have been slow to apply for the federal government’s coronavirus aid loans of 25,000 pesos (US $1,036). 

As of Tuesday, almost a month after the start of the aid program, the Mexican Social Security Institute (IMSS), which issues the loans, had only handed out 146,621 loans, representing just 20% of the official target of 645,000. 

Due to a lack of demand, the last day to apply for the loans will be May 15, IMSS director Zoé Robledo announced. 

Experts cite two reasons for the lack of enthusiasm in the program, one being the low amount offered, and the other being that many businesses have not been able to meet the government’s stipulation that they have maintained staffing levels during the coronavirus crisis.

Raymundo Tenorio, an economics and business professor at the Monterrey Institute of Technology and Higher Learning, pointed out that the government’s condition that small businesses did not lay off staff in the first three months of 2020 has proven impossible for many business owners. 

He calls it a program with good intentions but bad foundations.

“How do they want companies not to fire anyone if commerce and all activity dropped off? The program is headed for failure because of the kind of conditions they set,” Tenorio warned.

The government needs to urgently change its criteria, he said. One of the conditions could be that small business owners use the loan funds to rehire workers they have had to lay off. 

Mario di Costanzo, former president of the consumer protection agency Condusef, agreed with the Tenorio that the program is poorly designed, and the low numbers of applicants are due to the inability to comply with the non-layoff requirement.

“More than half of businesses have reduced their workforce, many others no longer plan to resume operations, at least this year, and for others, the 25,000-peso loan is of little use,” di Constanzo said.

A better option, he said, would have been for the government to pay employers’ social security costs for workers, or that the government itself pays workers minimum wage, which he argues would be more effective ways to spend the federal funds allocated for loans.

Source: Jornada (sp)