Mexico stepped into the spotlight in Q3 of 2012 as multinational executives began to shift their operations and increase their investments into Mexico. Reignited interest into Mexico has been largely driven by higher labor costs in China and expectations that the presidential-elect and business friendly Enrique Peña Nieto will implement structural reforms aimed at boosting long-term economic growth. A common trend in Q3 was the growing interest for companies pursuing SME customers as larger client markets became increasingly saturated. However, limited financing opportunities for SMEs is preventing multinationals from achieving additional growth. SME lending is mainly restricted by three main inhibitors: weak regulatory systems, poorly trained state development funds unable to assess credit risk, and overwhelming control of the banking sector by large foreign commercial banks in Mexico.
Multinationals may consider applying a best practices approach to SME financing. Sun Microsystems applies a credit assessment technique in another emerging market by using a quantitative and qualitative approach in order to determine credit worthiness for a potential SME client. In an attempt to assuage the multinational and lender concerns for SME financing, the Mexican government is considering an institutional reform creating a centralized development bank that will function as a main source of financing for underserved markets in Mexico. Public-private partnerships have served as an approach by commercial lenders to expand their portfolios to include SMEs as lenders provide credit lines to SMEs by partnering with a government agency that provides loan guarantees.
Antonio Martinez and Erick Soto contributed to this piece