Government Assistance

Home - Government Assistance

elcovid

Covid-19 has caused economic collapse around the world, and Latin America is no exception. Multinationals operating in the region to be smart about how to spend the resources they have, and to take advantage of assistance from host governments. Unlike the United States, most of this aid is literal life-saving assistance. Most Latin American countries are targeting poor workers and those in the informal economy. There are many people in existential danger because of the crisis in these highly unequal countries.

In the case of more business-oriented options, assistance may come at too high of a cost. For example, in Argentina one can receive a loan for 24% interest. Many international corporations would be too large to qualify for these programs, or find the qualification process too onerous to be worth it.

The question of how this affects businesses under a PEO model is an open one. Perhaps a government loan would be issued to the PEO itself, maybe some sort of salary guarantee could be given to employees. There are quite a few complexities here, but my initial suggestions to clients in LatAm that are looking to stay afloat are:

a.)     Pursue lines of credit in their home country

b.)    Understand how assistance could help support staff in case of layoffs

c.)     Determine if they qualify for any government assistance whatsoever, and apply immediately

The bottom line is that many of these nations were on the ropes even before the crisis. Business owners can hopefully avoid closures or layoffs by, among other things, cutting their labor costs, renegotiating rents, etc. But in the case of the toughest choice, we all need to consider what, if anything, is waiting to support and employee if one has to let them go.  Weak social safety nets and institutions mean that first and foremost, these government have to attempt to protect the poorest. Let’s hope it’s not too little, too late.

Argentina

A government-backed loan program offering emergency assistance to cover payroll. They provide the generous interest rate of 24%. We can see that the Central Bank of Argentina defines the interest rate normally as 38%, so even that rate is better than what they could expect in normal times.

Brazil

Tax payments are delayed for several months for many small business owners in Brazil. A government scheme for businesses under about $70k USD in revenue would cover 30% of two months’ revenue. That doesn’t necessarily apply to your clients. However, Mercado Pago, the financial arm of Mercado Libre, is offering $114m USD for a loan fund to SMBs in Brazil.

Chile

The government seeks to address the needs of the poorest first, considering the massive unrest that engulfed the country for five months last year. To that end they are authorizing $2b USD for assistance to the neediest members of society. This may apply to some of the employees of your clients. They are also moving forward with a $3b USD government-backed loan program for businesses to cover operating expenses.

Mexico

The Mexican government is ramping up a loan program for small businesses, around $1,053 USD per business. Mexico’s president, Andrés Manuel López Obrador (AMLO), is broadly hostile towards business interests, and thus far has resisted high-level assistance for enterprises. Do not expect much sympathy or support from him.

Peru

The Peruvian government has authorized a $8.5b USD loan program, a value that constitutes up to 12% of GDP. Businesses that take loans from the fund will have a grace period of 12 months and a total of 3 years to pay back the loans. This is mostly targeted at small businesses.  Broadly speaking the Peruvian government is pro-business and pro-FDI.

Sources:

Argentina:

https://www.clarin.com/economia/economia/coronavirus-argentina-gobierno-prepara-nuevos-anuncios-aliviar-situacion-empresas_0_ovFc20YJa.html

Brazil:

https://brazilian.report/business/2020/04/03/small-business-owners-next-firing-line-covid-19-crisis/

https://www.pymnts.com/coronavirus/2020/brazil-plans-small-business-coronavirus-bailout/

https://www.reuters.com/article/health-coronavirus-mercadolibre/mercadolibres-financial-arm-to-extend-loans-to-small-businesses-in-brazil-idUSL2N2C30W1

Chile:

https://www.reuters.com/article/us-health-coronavirus-chile/chile-government-negotiates-bill-paying-delay-for-poor-as-coronavirus-bites-idUSKBN21E3KT

https://www.aa.com.tr/es/econom%C3%ADa/chile-anuncia-millonario-plan-econ%C3%B3mico-para-hacer-frente-al-covid-19/1797921

Mexico:

https://www.wsj.com/articles/mexicos-leader-resists-relief-for-businesses-as-coronavirus-hits-economy-11586624401

https://www.infobae.com/america/mexico/2020/03/23/no-habra-rescates-lopez-obrador-descarto-condonacion-de-impuestos-y-apoyo-a-grandes-empresas-por-coronavirus/

Peru:

https://www.infobae.com/america/agencias/2020/04/03/gobierno-peruano-garantizara-usd-8500-millones-en-creditos-a-empresas-por-coronavirus/

Write your comment Here

Terms and Condition | Privacy Policy

Icon Scroll