A prompt payment law, a solution for MiPymes?

After the Economy, Commerce and Competitiveness Commission of the Chamber of Deputies ruled on October 12 on the Pronto Pago initiative -through the addition of article 83 Bis of the Commercial Code-, if approved by the Congress of the Union soon, Micro, Small and Medium Enterprises (MiPymes) could enjoy a reduction to 45 days of the current term for the correct collection of invoices that today reaches an average of 120 days. The initiative established an asymmetric regime to favor small businesses that provide services to large economic agents, according to the stratification criteria by number of workers determined by the ruling and established by the MiPymes Competitiveness Law. The ruling also established that, exceptionally, the parties may mutually agree on a term longer than the indicated period – not to exceed 60 days – provided that this is justified and does not constitute an abusive practice. However, there is a risk that this legal reform will have effects contrary to those desired by discouraging large companies from entering into commercial transactions with small ones, as indicated by the Federal Economic Competition Commission (COFECE), and by encouraging agents economic take advantage of the exceptions to the rule to gradually extend the deadlines through amending agreements. By the way, COFECE recommended that this reform not be approved by establishing a risk of affecting the process of competition and free competition that would limit the ability of MiPymes to compete.

In principle, the purpose of this reform is understood to allow a more agile flow of working capital for small businesses, that is, the money necessary for daily operation. It should be noted that, if the regulation is approved, it would not apply to sales to the government or Pemex, which currently has pending payment of 119.6 billion pesos to suppliers. According to COFECE, in Mexico, financing through suppliers is a common practice. With data from Banco de México (BANXICO), it is estimated that 61% of companies used supplier financing in the last quarter of 2021. Furthermore, the average financing period for companies from suppliers ranges from 49 days to 5 months, according to the National Banking and Securities Commission. MiPymes are the main source of work for Mexicans; they generate 72% of employment in the country and 52% of the Gross Domestic Product, with more recent figures from the Institute of Statistics and Geography (INEGI). However, 39% of these companies presented delays in the payment of their invoices in 2021, according to data from the Radiography of Entrepreneurship in Mexico. Likewise, the percentage of entrepreneurs who initiate legal processes due to late payments reached close to 18% last year -almost a fifth of all start-ups-, and only 8% recovered their total invoice and invested in This is more than 100,000 pesos, on average.

In Latin America there are similar laws, such as the one that came into force in Chile in 2019, called the “30-day payment law”, which establishes that invoices from any type of company must be paid, as a general rule, within a maximum period of time. 30 days from receipt. In Colombia, the Fair Payments Law, issued by Decree 1733 of December 22, 2020, stipulates that SME customers must pay invoices within 60 calendar days during 2021 and within a maximum period of 45 days from from 2022. But not only large companies are obliged to comply with this rule, also MiPymes themselves must pay their suppliers that meet the requirements defined by the Law in these terms.

The purpose of the prompt payment reform in Mexico is, perhaps, laudable by establishing an asymmetric rule to level the field between large and small companies, and improve the liquidity of MiPymes. Therefore, a deeper and more complete analysis would be required to discern which is the optimal solution for small businesses in Mexico and to establish incentives for large companies to support small ones in productive chains. For example, there are codes of best market practices through which companies can self-regulate with the supervision of the Ministry of Economy (SE) and the Federal Consumer Attorney’s Office (Profeco). Also, COFECE has proposed to make better use of the “Coordination Agreement for the Continuous Improvement of Competitive Commercial Practices”, entered into between industrial, agricultural and commercial business groups, also with the intervention of the SE and Profeco. As can be seen, no alternative requires that the prompt payment obligation be established by law. This could be linked to broader opportunities, such as those promoted in Chapter 25 of the T-MEC, dedicated to promoting foreign trade through supply chains that involve MiPymes and encourage them to professionalize and become more competitive. It would be interesting to observe public policies that take advantage of this path.

The promotion of the use of more flexible mechanisms would favor a greater and better interaction between economic agents to grant greater freedom in the determination of the terms for commercial exchanges and according to the characteristics of the industrial sectors, their particular forms of commercial relations and their financial circumstances. and economic. What is clear is that public policies should be established in favor of MiPymes that broaden the conditions so that they can compete more, especially in times of recession, and as learning and prevention after losing nearly 2 million companies during the pandemic due to the lack of government policies and support that would have, at least, guaranteed their survival.