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Mexico to Grant Loans Amid ‘Extraordinarily Complex’ Times (1)

March 13, 2020, 6:01 PM

Mexico is planning to grant loans to commercial sectors that could be hit hardest by the coronavirus, as the economy faces its biggest challenges since the 2009 crisis.

Development bank loans would be granted to counteract liquidity shocks for tourism, restaurant and air travel sectors, Deputy Finance Minister Gabriel Yorio said in an interview. The nation is even considering tax payment delays, he said.

Companies that already have development bank credits may be allowed a grace period, or to refinance, if they’re facing liquidity problems, Yorio said Thursday on the sidelines of Mexico’s banking conference in Acapulco.

“We can give loans from development banks. We are already working with Nafin to design credits,” he said, referring to Nacional Financiera, one of Mexico’s state-controlled development banks.

“Another option may be tax incentives, but we have to study them well,” he said.

Read More: As Outbreak Roils Markets, Mexico Bankers Jet Off to Acapulco

The increasing risks of a pandemic-driven global recession come at a bad moment for the Mexican economy, which contracted in 2019 for the first time in a decade. Economists are quickly dialing back their growth forecast for this year, with Barclays now seeing the country shrinking again in 2020 by 2%, the most since the 2009 recession.

“We are in an extraordinarily complex situation,” Finance Minister Arturo Herrera said during his presentation at the conference, which is attended by the country’s top bankers, mentioning shocks from the virus to the recent oil price slump, “which for a country like ours is clearly very important.”

The Finance Ministry will revise its above consensus 2% growth forecast in early April.

During his interview, Yorio also said that Mexico will have to cut government spending as a depreciated peso and falling oil prices impact finances. That’s necessary despite Mexico’s lucrative oil hedge and even as a slump in gasoline prices is allowing the government to completely remove its fuel subsidies, he said.

Yorio said that back in 2009, when Mexico’s economy was battered by the H1N1 outbreak, restaurants, cinemas, tourism companies and airlines were most deeply affected. That’s where government stimulus will be directed most this time, he said.

“What we are asking of all banks is that they are open to refinancing, to define products to provide liquidity to companies.”

(Updates with Herrera comments in seventh paragraph.)

To contact the reporter on this story:
Michael O’Boyle in Mexico City at moboyle7@bloomberg.net

To contact the editors responsible for this story:
Daniel Cancel at dcancel@bloomberg.net;
Juan Pablo Spinetto at jspinetto@bloomberg.net

Nacha Cattan

© 2020 Bloomberg L.P. All rights reserved. Used with permission.

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