The health emergency derived from the Covid-19 pandemic led businesses to pause their activities or even close permanently. In the case of Mexico, “of the 4.9 million establishments, the Study on the Demography of Businesses (EDN) 2020 developed by Inegi estimated that 619,443 establishments were created while 1,010,857 closed their doors permanently.
“The EDN 2021 calculated that 1.2 million were born and 1.6 million closed, which means that between October 2020 and July 2021, the proportion of births increased and the proportion of deaths decreased compared to what was observed from May 2019 to September 2020” However, the figures are heartbreaking.
Regarding the deaths of establishments, the state of Quintana Roo remained the entity with the highest proportion of establishments that closed definitively: 31.88% in 2020 and 46.59% in 2021. And with this, the level of employment is also affected, A At the national level, for every 100 people who were employed in 2019, 20 people stopped working for the establishments that died in 2020. In 2021 the proportion increased to 27 people.
In the EDN 2020, the highest proportion of deaths of establishments was observed in private non-financial services with 24.92%, followed by commerce with 18.98% and manufacturing with 15% of definitive closures of establishments. For its part, the EDN 2021 registered the following proportions of mortality of establishments: non-financial private services with 38.16%, followed by commerce with 29.88% and manufacturing with 25.69 percent.
And it is that the 2019 Economic Census calculated that 99.8% of establishments in Mexico are micro, small or medium. Due to their characteristics, these economic units tend to present greater changes with respect to large companies, in terms of income, employed personnel, location, closings and openings, among other aspects.
Tools
Help small and medium-sized enterprises (SMEs), not only because they are the largest in number and carry out large activities in the country, but also because they are the most vulnerable, as José Luis Iranzo, CEO of Solunion México, considered.
He explained that SMEs generate 52% of GDP in Mexico, however, during the pandemic 20% of companies died, therefore, they are changing our products and we are focusing on Credit Insurance also for SMEs.
Currently, Credit Insurance premiums amount to 1,800 million pesos and that represents 0.008%, a very low level compared to all the insurances that are handled in the Mexican market.
José Luis Iranzo, who arrived in Mexico in August 2021, considered that Credit Insurance has enormous potential in Mexico, “it is a very young market with 75 million dollars in premiums, however, a mature market like the Spanish one, manages resources for around 600 million dollars in premiums.
Concept
Bernardo Barrera, marketing director of Solunion Mexico, explained that the Credit Insurance covers the risk of non-payment of credit sales, both in the domestic market and in the export market. “It constitutes a tool that facilitates the expansion of business and therefore promotes trade and the creation of capital. And in case of non-payment, the insured receives compensation for the percentage agreed in the terms of the policy.
Barrera said that Solunion contemplates with three functions of the Credit Insurance:
1.- Risk management: Prevention through analysis and continuous monitoring of the financial situation of clients.
2.- Collections: Where they develop strategies to recover defaults.
3.- Compensation: Where if they fail to recover the debt, they indemnify based on the guarantee established in the policy.
He insisted that SMEs have to take action, “during the pandemic a significant number disappeared and they are coming back with financing.
“In recent weeks, some companies have asked us for quotes regarding policies to cover themselves abroad in the face of the war between Russia and Ukraine.”
For his part, Roberto Ricarde, risk director of the insurer, said that in times of crisis, payment defaults occur more frequently, not only in Mexico but also worldwide, even with clients considered until then very solvent.
He stressed that the global uncertainty generated by the shortage of raw materials (grains and fertilizers), the increase in commodities, the lengthening of credit terms, among others, “means that we must manage our accounts receivable very well with good risk management such as it is the Credit Insurance policy”.
Mexican SMEs are digital drivers of economic recovery, (49.2%) suspended activities in 2020, and 48.8% had to seek additional financing resources. “Credit insurance is insurance against commercial risks, it has nothing to do with financing, however, it allows them to move forward even in adverse times.
In 2021, Solunion launched policies for SMEs, they are currently making some changes to the product. “We are adjusting these products so that the National Insurance and Surety Commission (CNSF) allows registration and that everything can come out in a couple of months, before the end of the first half of 2022 and be on the market,” said Barrera.
He explained that among the products, the following stand out: the Confianza policy, excess loss coverage, the Commitment policy, for when there is, on average, a medium-term purchase offer.
Also, they are putting the finishing touches on Pre-Shipment policies for those companies with international business, whether in the United States, Central America or other countries. And the Single Risk policy that focuses on directly covering a debtor or one of its buyers, Barrera mentioned.
“The insurance culture in Mexico is null. Credit insurance is unknown, but it is advancing, it has touched me that it is word of mouth. SMEs have to take measures, in the Covid-19 crisis a significant number disappeared and they can avoid it by managing the risk”, concluded Iranzo.