World Bank authorizes loan to Mexico for 1,000 million dollars; What will you use them for?

The Ministry of Finance made the request for the loan on April 11 of this year, and it was approved by the World Bank on June 3, one day after the presidential elections in Mexico.

The multinational financial organization indicates that Mexico has made significant progress in economic sophistication, export expansion and growth in foreign direct investment (FDI) in recent decades.

But the country’s potential to evolve towards a more sustainable and productive economy, as well as to alleviate poverty and income disparities, is limited by limited availability of credit and underdeveloped private equity markets.

In addition, it says that the execution of Mexico’s revised Nationally Determined Contributions, which are the commitments made for the reduction of greenhouse gas (GHG) emissions and adaptation to climate change, highlights the need for greater volumes of private sector capital to finance Mexico’s transition to a more sustainable economy.

Mexico is the second largest GHG emitter in Latin America, representing 1.3% of global emissions, and is highly exposed to climate dangers.

“The urgency of these measures increases as Mexico experiences a wave of investment opportunities with global value chains repositioning closer to demand (nearshoring). This also requires improved ESG (environmental, social and governance factors) standards” , says the World Bank.

He adds that Mexico also needs more inclusive financial access, particularly for MSMEs and women.

In 2021, MSMEs represented more than 95% of companies in Mexico, contributing around 70% of employment and 50% of added value. However, 57% of these have never received any type of credit.

And while Mexico has made progress in several aspects of gender financial parity, there are still areas for improvement, such as a 12.4 percentage point disparity between the proportion of men and women who own at least one financial product.

Only 37% of companies run by women have received funding since their creation, compared to 45% of those run by men.

The World Bank comments that better access to financing for underserved companies will help Mexico maximize the benefits of nearshoring.