Mexico leader of the senate demands cheaper bank loans for an economic recovery

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Mexico Senate majority leader Ricardo Monreal (a member of the Morena political party), is working on a bill that would pressure banks to make cheap loans to small and medium-sized businesses as part of efforts to revive the country’s stalled economic recovery.

The bill will be aimed at helping the “great many” businesses that were badly hit by the pandemic, Monreal told El Financiero in an interview. He plans to gain the consensus of the central bank, banking associations, and the banking commission before moving forward with the bill, the senator said, without providing details of the proposal.

“It’s important that banking is opened up to make low-interest loans to people who lost their businesses or people who closed their businesses during the pandemic,” Monreal, 61, said Wednesday. It will help “people who need a bank guarantee and need fresh money to do their activities in the country.”

Mexico’s recovery stalled in the second part of 2021 as the government of President Andres Manuel Lopez Obrador declined to inject any major spending to keep activity afloat. The country spent far less than its peers on fiscal stimulus to help prop up its economy, putting the burden of recovery on its business sector and citizens.

Mexico’s banking association chief Daniel Becker responded to the comments by saying he supported efforts to give more bank loans, but that a cap on interest rates would stifle competition. Monreal didn’t specify whether his proposal would put a limit on rates.

“I think it’s historically proven that establishing caps to rates doesn’t take you to the correct place and doesn’t generate incentives that people are aiming for,” Becker told Bloomberg Linea. Becker said he plans to discuss the proposal with Monreal.

Bank lending in Mexico as a percentage of gross domestic product is typically one of the lowest among the region’s larger economies and inflation is close to a 20-year high, reducing the purchasing power of Mexican families. Total performing consumer loans by the country’s banks are still about 4% below their pre-pandemic peak, according to El Financiero.

Source: El Financiero

Mexico Daily Post