Rios Aguilar 2023 Mexico And Colombia Fiscal Policy Applied In Support Of Mypimes During T
Summary
A 2023 article by Rolando Rios-Aguilar, Victor Pedro Rodriguez Vidal and Cristina Ordaz Mota of the Autonomous University of Coahuila, Mexico, in the Scientific Journal of Applied Social and Clinical Science, v. 3, n. 4, 2023, DOI 10.22533/at.ed.216342315028. It compares the fiscal measures Colombia and Mexico used to protect their productive base and employment during the 2020-2022 health emergency, from payroll-payment support in Colombia to loans for small businesses in Mexico. Both are set against a structure in which MiPymes are 99% of firms and employ around 70% of the labor force (ECLAC, 2019), in a region with average growth of 0.1% and weak public revenue. The authors note business closures in the thousands during March-August 2020, a gradual return toward normality by 2022, and decline to call the strategy a success or failure.
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“Rios Aguilar 2023 Mexico And Colombia Fiscal Policy Applied In Support Of Mypimes During T.”
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v. 3, n. 4, 2023
MEXICO AND
Scientific COLOMBIA: FISCAL
Journal of POLICY APPLIED IN
Applied SUPPORT OF MYPIMES
DURING THE 2020-2022
Social and HEALTH EMERGENCY
Clinical Rolando Rios-Aguilar
Science
Professor at the Faculty of Fiscal and
Financial Administration of the Autonomous
University of Coahuila. Mexico
Victor Pedro Rodriguez Vidal
Professor at the Faculty of Fiscal and
Financial Administration of the Autonomous
University of Coahuila. Mexico
Cristina Ordaz Mota
Professor at the Faculty of Fiscal and
Financial Administration of the Autonomous
University of Coahuila. Mexico
All content in this magazine is
licensed under a Creative Com-
mons Attribution License. Attri-
bution-Non-Commercial-Non-
Derivatives 4.0 International (CC
BY-NC-ND 4.0).
Scientific Journal of Applied Social and Clinical Science ISSN 2764-2216 DOI 10.22533/at.ed.216342315028
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Abstract: The governments of Colombia in the midst of a process of deteriorating
and Mexico carried out different actions economic conditions, characterized by:
of a fiscal nature, aimed at mitigating the • Slowdown in economic activity
effects of the economic crisis caused by the
• Average growth of 0.1%
COVID 19 pandemic, in particular actions
were carried out to protect the productive • Slowdown in domestic demand
plant and employment. The concern of both • Fall in GDP per capita, investment and
governments was based on the characteristics exports
of the productive structure that these two
countries have: with 99% of micro, small • Increased social demands to reduce
and medium-sized companies (MiPymes) inequality
that employ around 70% of the labor force. (ECLAC, 2019)
Avoiding the collapse of the productive
system in the face of the strike forced by Among the various shortcomings in
the sanitary isolation measures ordered by the economic structure of Latin America,
the health authorities, was undoubtedly the the meager amount of public revenue as a
top priority in the series of actions that the percentage of GDP stands out, which, without
Colombian and Mexican authorities had to going very deeply into the causes that cause
take. The fiscal measures put into practice it, clearly shows the reduced fiscal space
covered a wide range of aspects, from available to the governments to face the needs
support for payroll payments (Colombia) to of social development, and now aggravated
word loans for small businesses (Mexico). by the problems caused by the COVID 19
Despite the losses and closure of businesses pandemic that required enormous resources
that numbered in the thousands during the for the health sector, in the first instance, and
first six months of the pandemic (March- for the attention of the economic crisis during
August 2020), recent indicators mark a the darkest period and now for the apparent
gradual return to economic normality and period of recovery.
the recovery of economic units and jobs. The following graph 1 shows the almost
work that had been lost. The foregoing is not zero growth in collection during the last 10
conclusive about the success or otherwise years in Latin America.
of the fiscal strategy followed in favor of the This structural problem of weak public
protection of MiPymes since, as has been sector tax revenue as a percentage of Latin
observed throughout the year 2022, the American GDP also afflicts Mexico and
economic variables in the world remain in a Colombia, being one of the main factors
situation of uncertainty that makes analysis that explain the reduced capacity of the
and categorical statements difficult. governments of these countries to have a
Keywords: MiPymes, credit, fiscal policy, budget that allow efficient care of the social
Mexico, Colombia. problems that have accumulated since
previous years, as well as fresh resources to
THE PRE-PANDEMIC CONTEXT encourage productive investment, leaving
IN LATIN AMERICA AND THE behind the inertial exercise of the public
CARIBBEAN budget.
The crisis caused by COVID 19 caught the In graph 2 we will appreciate the
countries of Latin America and the Caribbean relationship that the tax revenues of Colombia
Scientific Journal of Applied Social and Clinical Science ISSN 2764-2216 DOI 10.22533/at.ed.216342315028
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GRAPH 1 Percentage of income of Latin American countries* in relation to GDP and comparison
with OECD countries.
* Argentina, Brazil, Chile, Colombia, Costa Rica, Guatemala, El Salvador, Nicaragua, Honduras, Panama,
Ecuador, Peru, Paraguay, Uruguay, Dominican Republic, Mexico.
Source: Own elaboration based on ECLAC (2019) Preliminary balance of the Latin American economy and
Tax Statistics ( Revenue Statistics ) of the OECD (2021).
Graph 2: Tax revenues in Colombia and Mexico as a percentage of GDP.
Source: Own elaboration based on: OECD (2022) tax statistics for Latin America and the Caribbean.
https://www.oecd.org/tax/tax-policy/estadisticas-tributarias-america-latina-caribe-colombia.pdf
Scientific Journal of Applied Social and Clinical Science ISSN 2764-2216 DOI 10.22533/at.ed.216342315028
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and Mexico have in relation to the GDP PRESENCE OF MSMES IN THE
and compare it with the same percentage ECONOMIES OF COLOMBIA AND
observed in the OECD countries, of which, MEXICO
by the way, both countries are already part. Following the State Administrative
For its part, the economic situation in Department of Statistics of Colombia
terms of economic growth showed different (DANE, 2022) it is observed that, in terms
signs in Colombia than in Mexico. While in of participation in the generation of GDP,
the first country, economic growth registered taking into account that the national GDP
an increase of 2.8% in 2018 and 3.3% in 2019, amounts to approximately 1 thousand trillion
in Mexico, on the contrary, the trend was 177 thousand million pesos, the contribution
downward, being 2.2% and -0.1% respectively. of microbusinesses is approximately 40%
(ECLAC, 2020). close to 470 billion pesos for the Colombian
In the case of Mexico, despite the null economy.
economic growth, the economic and fiscal Likewise: “at the national level, the
measures adopted by the government since 5,780,623 micro-businesses, estimated in
its inception in December 2018, among 2021, generated $54.9 billion pesos in added
which are: value, DANE (2022, Page 6).
• Austerity in the exercise of public In the case of Mexico, the participation
spending of MiPymes in the generation of GDP is
• No increase in tax and non-tax taxes 28% and they contribute 67.9% of formal
employment.
• No contracting of foreign debt
Due to this situation that MiPymes
• Expansion of social spending, mainly present as great job capturers, fiscal policy
aimed at the most vulnerable sectors would have to be clearly oriented towards
through the following programs: favoring the development of these companies
• Older adults that, as we saw previously, lack an adequate
• working mothers management mechanism for their financing.
• Young people building the future Let us now review the economic impact
• disabled people caused by the pandemic in Colombia and
• sowing life Mexico, particularly in MiPymes.
These measures provided a relatively
FISCAL MEASURES FOR THE
positive context to face the crisis a year later.
PROTECTION OF MIPYMES IN
To the previous programs was added, in a
COLOMBIA AND MEXICO FROM
relevant way, the inflow of remittances from
THE ECONOMIC EFFECTS OF THE
the United States, which in that year of 2019
PANDEMIC
totaled 36,049 million dollars, almost 100
million dollars a day (CEMLA, 2020), which In the case of Colombia and Mexico, the
has undoubtedly lightened the burden of the governments implemented the following
Mexican government throughout this period fiscal actions (Table 3).
of crisis. The measures taken alleviated the drop in
income in 2020; In the case of Colombia, in
addition, the profits drawn by the Banco de
la República were equivalent to 0.5 of GDP,
while in Mexico the collection increased 1.3%
Scientific Journal of Applied Social and Clinical Science ISSN 2764-2216 DOI 10.22533/at.ed.216342315028
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Size Economic Units Busy Staff
0 -10 94.9 37.2
11-50 4.0 14.8
51-250 0.9 15.9
251 And Over 0.2 32.1
Table 1 Economic units and total employed personnel according to size (2018).
Source: Own elaboration based on INEGI (2020) Economic Censuses 2019.
Economic units: Absolute employment:
4 800 157 27 132 927
Activity Percentage Percentage
Services 39.6 40.0
Trade 46.8 27.6
Manufactures 12.1 23.9
Transportation, mail, storage 0.5 3.7
Construction 0.4 2.5
Fisheries and aquaculture 0.5 0.9
Electricity, water and gas 0.1 0.8
Mining 0.1 0.7
Table 2 Economic units by activity and employment generation.
Source: Own elaboration based on INEGI (2020) Economic Censuses 2019.
Country Fiscal measures Application period Benefit or obligation
Until October 31, 2020, taxpayers could pay only
80% of the balance of outstanding taxes, fees,
contributions and fines owed to territorial entities,
Legislative Decree 678 of From May 20, 2020
without being charged interest or fines. Between
2020 as of May 31, 2021
November 1 and December 31, 2020, they had to
pay 90%, and between January 1 and May 31, 2021,
100%, in each case without interest or fines.
Colombia
Single tax with a rate of 15% applied to the tax base.
In the case of repatriating the assets and investing
Tax normalization of active Until the 25th of
them permanently in the country, the tax base could
or passive not declared. September 2020
be reduced by 50% and the taxpayer could benefit
from a reduced rate of 7.5%.
Oversight was increased to prevent tax evasion and
Mexico Increased control Permanent
avoidance
Table 3: Fiscal actions by Colombia and Mexico to increase collection in the scenario of the crisis caused
by the COVID 19 pandemic.
Source: Own elaboration based on ECLAC (2021).
Scientific Journal of Applied Social and Clinical Science ISSN 2764-2216 DOI 10.22533/at.ed.216342315028
5
of GDP and 0.8% in real terms, thanks to • Support for production: Promote the
the inspection measures indicated.(ECLAC, production of goods and services: these
2021). measures especially consider support
The crisis came at a bad time for Colombia for entrepreneurship and innovation in
and Mexico, although for different reasons. solutions to face the pandemic, as well
While Colombia registered an economic as actions to promote the reactivation
growth of 3.2% in 2019, Mexico, for its part, of productive activities (biosafety
had a decline of 0.2%. For the following year, protocols, online sales platforms ,
when the crisis began, Colombia registered among other). It also includes the
a fall of 7% and Mexico of 8.2% (Expansion, simplification of procedures.
Macro Data 2020). • Financing: Facilitate access to credit :
Likewise, regarding the measures of a fiscal these measures include the creation of
nature applied to protect the productive plant new programs and the improvement
in Colombia and Mexico, Table 5 makes a of existing programs, with respect
comparison of such measures. to the amounts of the credits, access
In addition to the above, actions were requirements, extension of payment
carried out to protect vulnerable groups in the terms, etc. Both special lines of credit
face of job loss. and guarantee funds are included”
It is important to highlight the speed with (Page 13).
which governments had to act in the face of
the unknown dynamics of the pandemic. There are some indicators that can give
The measures that were taken did not have us a measurement parameter that helps
sufficient information support that could give us identify the effectiveness of anti-crisis
a margin of certainty to what was put into policies, with the caveat that these are partial
practice, creating a short-term scenario where and cannot offer an overview of the entire
trial and error were the pragmatic tool used phenomenon.
by the authorities (Rodríguez, 2020). This is the case of the indicator that
In general terms, the meaning of each of measures the number of disappeared
these thematic axes is the following: (ECLAC, companies against the number of new
2021b) companies and how it has evolved in at least
two periods of time.
• “Liquidity: Maintain liquidity in the In the case of Mexico, INEGI (2021)
short term: these measures include published the Business Demographic Survey.
the postponement of payments for In the press release of that study it is stated:
basic services, tax charges, employer “Of the 4.9 million establishments, the EDN
contributions and credit obligations. 2020 estimated that 619,443 establishments
• Employment: Protection of the labor were born while 1,010,857 closed their doors
market : these measures contemplate permanently. The EDN 2021 estimated that
the payment by the State of a part of the 1.2 million were born and 1.6 million closed,
salaries and employer contributions, which means that between October 2020 and
rules to limit layoffs, as well as more July 2021, the proportion of births increased
flexible contractual terms (reductions and the proportion of deaths decreased
in working hours or suspension of compared to what was observed from May
contracts). 2019 to September 2020” ( p.1)
Scientific Journal of Applied Social and Clinical Science ISSN 2764-2216 DOI 10.22533/at.ed.216342315028
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Measures Colombia Mexico
Ban on layoffs Yes Yes
Remote work Yes Yes
Changes in working hours, establishment of exceptional working hours and reductions
Yes Not
salary
Mechanisms for temporary suspension of work contracts Yes Not
Use of expired or early vacation Yes Not
Licenses for workers and workers who are in groups vulnerable to covid-19 or who are in
Yes Not
charge of girls, boys or adolescents who attend virtual or in-person classes sick or elderly
Job creation programs Yes Not
Special training programs Yes Not
Table 4: Some employment protection measures carried out by Colombia and Mexico.
Source: Own elaboration based on ECLAC (2021b) Labor dynamics and employment protection policies.
Applied measure Colombia Mexico
Business support programs, including micro and small and medium enterprises Yes Yes
Prohibition of service cuts or reductions in the rates Not Yes
Investment stimulus programs (private and public) Not Not
Credit rescheduling Yes Yes
Mechanisms to facilitate payment or return of taxes Yes Yes
Support for specific economic activities Yes Yes
Mechanisms to reduce or facilitate payment of the social contribution for employers and
Yes Not
employers or workers and independent workers
Payroll support Yes Not
Table 5: Comparison of the fiscal measures taken by the governments of Colombia and Mexico to protect
the productive plant.
Source: Own elaboration based on ECLAC (2021b) Labor dynamics and employment protection policies.
Extent Colombia Mexico
Emergency income or special bonuses to support the most affected households because of
Yes Not
the pandemic
Strengthening assistance programs to facilitate the payment of expenses food or housing Yes Yes
Use of resources from funds pension or unemployment Yes Yes
Support to groups of workers and workers informal and independent Yes Yes
Bonuses and transfers to make up for the loss of jobs Yes Not
Table 6: Complementary measures for the protection of vulnerable groups taken by the governments of
Colombia and Mexico in the face of the impact of the COVID 19 crisis.
Source: Own elaboration based on ECLAC (2021b) Labor dynamics and employment protection policies.
Scientific Journal of Applied Social and Clinical Science ISSN 2764-2216 DOI 10.22533/at.ed.216342315028
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Extent Colombia Mexico
Financing 15 4
Liquidity 5 3
Employment 5 2
production support 4 1
Total 29 10
Table 7: Number and type of fiscal measures carried out by Colombia and Mexico in favor of MiPymes in
the face of the economic crisis caused by COVID 19.
Source: Own elaboration based on ECLAC (2021c) Analysis of support policies for SMEs to face the
COVID 19 pandemic.
Extent Colombia Mexico
Financing -Special Finagro Credit Line – Colombia Agro - Word Credit Program (Financial Support Program
Produce: for Family Microenterprises.
-Increase in coverage of guarantees from the National - Credit to the word: aimed at non-agricultural
Guarantee Fund (FNG). family micro-businesses.
-FNG Special Guarantee Program – United for -Solidarity support for the word: aimed at companies
Colombia. that retained the average number of their workforce.
-Bancóldex lines of credit: Colombia Responds, -Program of microcredits for the well-being known
Colombia Responds for All, Reactivate, Competitive as Programa de Tandas del Bienestar (PTB): aimed at
MiPymes, Economy for the people. small family businesses (microentrepreneurs,
-Guarantee lines for MiPymes: payroll, working merchants and artisans)
capital, independent workers. -Support Credit 10 thousand from the Institute of
-Lines of credit: Sectors most affected, Large company. the National Fund for the Consumption of Workers
- Line of credit from the FINDETER Territorial (FONACOT):
Development Bank – Colombian Commitment Aimed at workers who have been working for at least
1 year with an indefinite or permanent contract.
Production -Certification processes in biosafety protocols - - MSMEs MX: platform of the Ministry of Economy
support biosafety seal. for MSMEs
-Compra Lo Nuestro Strategy: strategy led by -Solidarity Market: platform of the Ministry of
Colombia Productiva, which provides trade tools Economy that generates a socialization space for
electronic and digital transformation for MSMEs . exchange of commercial information for MSMEs
-Support to the tourism sector: affected by the pandemic.
- Biosafety seal -E-business roundtables: aimed at small and
- Tourism export route medium-sized exporting companies.
-Registration for online self-assessment of company
health safety protocols.
Liquidity -Accompaniment Program for Debtors -low consumption rates for users of domestic
-Exemption from sales tax (VAT) for certain products electricity service
-Exemption from sales tax (VAT) for hotel and tourist -Deferral of total or partial principal or interest
services; restaurants, cafeterias, pastry shops payments for up to 4 months, with the possibility of
and bars extension for 2 additional months.
-Modification of the calendar for the payment of the
second installment of income tax.
-Legal provisions to agree payment terms in the lease
of real estate for residential use
or commercial.
Employment -Formal Employment Support Program (PAEF) -Digital Attorney, virtual tool for the protection of
-Service Premium Payment Support Program (PAP) labor rights.
- Temporary suspension of pension contributions to
improve the cash flow of companies.
- Subsistence resources for tourist guides registered in
the National Tourism Registry
Table 8: Tax measures carried out by Colombia and Mexico in favor of MiPymes in the context of the crisis
caused by COVID 19.
Source: Own elaboration based on ECLAC (2021c) Analysis of support policies for SMEs to face the
COVID 19 pandemic.
Scientific Journal of Applied Social and Clinical Science ISSN 2764-2216 DOI 10.22533/at.ed.216342315028
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In the case of Colombia, DANE (2022a) the policies applied in defense of MiPymes in
states: Colombia and Mexico avoided the collapse
“In the fourth quarter of 2021, the of the productive system and the generalized
Microbusiness Survey estimated a 4.5% and permanent unemployment of the labor
reduction in the number of these economic force.
units compared to the same period in 2019.”
(Page 9) CONCLUSIONS
DANE (2022a) reports that the total 1. Going forward and within the
number of micro-establishments amounts framework of policies for the recovery and
to 5.6 million. After the pandemic hit, growth of the economy, the policy towards
in 2020 the loss of more than 500,000 of MiPymes should be considered as a state
these productive units was estimated-small policy, essential to achieve sustainable
companies, businesses that operate from development of Colombian and Mexican
homes, mobile stands or semi-fixed units. societies.
(Portfolio, 2022). To achieve the above, private financing
Another important indicator is related to must go from favoring mainly the 0.4% that
the ratio of jobs lost to those recovered, since, make up large companies, to developing
as indicated above, MiPymes are generators of innovative mechanisms that allow financial
around 70% of jobs in Colombia and Mexico. resources to reach the 99.6% that make up
In the case of Mexico, in 2020, which was MiPymes.
the most critical period of the crisis, 12.5 2. For their part, government financing
million jobs were lost, of which 10.4 million institutions must act strategically:
corresponded to informal jobs and 2.1 to • Mainly and strategically directing its
formal ones. (SHCP, 2021). By the year 2022, resources towards MiPymes
the Mexican Social Security Institute reports
(IMSS, 2022) that the formal jobs lost in • Clearly establishing a national guarantee
that initial year of the pandemic have fully fund, with accessible and efficient rules
recovered, now totaling 21 million, 8,483 • Expanding service coverage
affiliated workers.
• Facilitating national production chains
With regard to Colombia, in 2020 5 million
and the integration of MiPymes into the
629 thousand jobs were lost, which have been
export market
fully recovered by 2022 as 5 million 668
thousand have already been created, reaching • Enabling permanent campaigns to
a national total of 22 million 346 thousand Job strengthen the management capacity of
positions. (DANE, 2022b). MiPymes
Likewise, the GDP growth rate in the two • Avoiding the disintegration of efforts
countries analyzed here, despite the prevailing
uncertainty in the international economy, has • Reducing your bureaucratism
shown signs of recovery, reaching positive 3. The economic crisis caused by the
growth for the year 2022, registering a rate of COVID 19 pandemic showed, for those
7.5%. for Colombia (DANE 2023) and 3% for who want to see it, that a healthy and
Mexico (INEGI 2023). strong economy is built internally from the
The previous economic indicators can give structure of the internal market. In this, the
us an overview of a tentative explanation that private financial system, due to its strategic
Scientific Journal of Applied Social and Clinical Science ISSN 2764-2216 DOI 10.22533/at.ed.216342315028
9
responsibility in financing MSMEs and the
state, as promoter and protector of these play
a fundamental role.
4. Now it is offered that, in addition to
thinking about having automatic economic
stabilizers, rapid response mechanisms are
added to attend to MiPymes in the event of
catastrophic phenomena such as the one
experienced since 2020.
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