Somos la aseguradora número uno en México especializados en seguros de crédito con presencia estratégica en más de 50 países.
Nuestra reputación se basa en un excelente servicio al cliente. Invertimos continuamente en la más novedosa inteligencia de mercado y herramientas de análisis para apoyar a tu empresa.
Nuestro interés es hacer que tu negocio crezca exitosamente y duermas tranquilo sabiendo que tus cuentas por cobrar están protegidas.
El servicio que hay detrás de nuestro seguro de crédito nos hace únicos. Promovemos la claridad para que nuestras pólizas sean fáciles de entender y sencillas de gestionar con fácil acceso. Además, nuestro objetivo es desarrollar relaciones duraderas, basadas en una sólida comprensión de las necesidades de tu negocio.
Sabías qué...
El 93 % de nuestros clientes renueva con nosotros año tras año; esto se debe a que nuestro equipo se compromete con nuestra filosofía de servicio al cliente y crea vínculos sólidos basados en la transparencia y la confianza con un administrador de cuentas dedicado y un pool de ejecutivos que están a tu disposición en todo momento.
Somos una empresa y un equipo: nuestra ambición es liderar el mercado y acompañarte en tus negocios, ayudándote a crecer y a maximizar las oportunidades comerciales.
Invertimos en tecnología para beneficiarte directamente desarrollando herramientas para hacermuy amigable la gestión de tu portafolio.
GESTIÓN INTEGRAL DE RIESGOS
Monitoreo constante de los riesgos: Tendrás coaching de nuestros analistas para informarte cada vez que exista un cambio en el riesgo del deudor. Nuestro sistema online Atrium, te permitirá acceder a la información sobre cambios en la calidad de los riesgos de los compradores ya que analizamos tendencias del mercado para anticipar posibles riesgos.
Nos importa tu tranquilidad:
Por lo tanto, la prevención, vigilancia y control de los riesgos, están a cargo de los mejores analistas de riesgos en todo el mundo. Ellos realizan la clasificación integral de tu cartera apoyados de nuestra empresa filial Informes México quienes ponen a nuestro alcance información propia para el beneficio de nuestros asegurados, lo que nos permite ser mucho más ágiles en el monitoreo y respuesta a los límites de crédito.
Además, el costo de cobranza es de CERO.
Tenemos el costo de gastos de estudio más bajos del mercado: $600 mxn doméstico y 56 usd exportación (más IVA).
Tenemos el porcentaje de retención más alto del mercado, debido al excelente servicio al cliente.
Nuestros análisis no solo se basan en la información financiera de los clientes, si no también consideramos la información cualitativa para las decisiones de líneas de crédito.
Somos la aseguradora de crédito que ofrece el monto de indemnización más alto (40x default).
Te avisamos por qué y cuándo en caso de una cancelación o reducción de líneas de crédito.
Somos el número uno en apetito de riesgo, con las mejores tasas y porcentajes de aceptación en líneas de crédito.
Queremos tu confianza: Por lo tanto, te ayudaremos en la gestión de tu negocio poniendo a tu alcance un equipo de profesionales durante todo el proceso: Gerentes de ventas especializados en la materia para crearte una póliza a la medida de tus necesidades.
Especialistas con experiencia al cliente que te darán acompañamiento en todo momento durante la vigencia de tú póliza. Contamos con el porcentaje de retención más alto del mercado.
Equipo de cobranza que ocupará todos los recursos amistosos y legales para la recuperación de los adeudos de tus clientes.
Agencia de reportes comerciales, que proporcionará información veraz y oportuna para darte respuesta inmediata de tus líneas de crédito.
¡Haz crecer tu negocio con nosotros, estamos seguros que cubriremos tus necesidades nacionales como de exportación con la inversión más baja del mercado y con la empresa número 1 de seguros de crédito en México!
¿Qué esperas? Haz tu cita con uno de nuestros ejecutivos
Company Report
Table of Contents
4 Expert Contributor
Karel Van Laack | Former Country Manager Mexico | Atradius
6 View From the Top
Karel van Laack | Former Country Manager Mexico | Atradius
9 View From the Top
Karel van Laack | Former Country Manager Mexico | Atradius
Stéphane Feytmans | Country Manager Mexico | Atradius
12 View From the Top
José Antonio Genesta | Former New Business Director | Atradius
14 View From the Top
Stéphane Feytmans | Country Manager Mexico | Atradius
16 View From the Top
Daniel Llano | Commercial Director | Atradius
Expect No More Than a Partial Economic Rebound in 2021 for Mexico
Karel Van Laack
Former Country Manager Mexico | Atradius
As difficult as 2020 was, Mexico is expected to see only a partial economic rebound this year, with its recovery process likely stretching into 2024. There are many reasons why Mexico finds itself at this juncture. While the brunt of the downturn can be blamed on the COVID-19 pandemic, the virus is not the only factor in play.
At Atradius, part of our role as providers of trade credit insurance and debt collection services is to assess risk. In Mexico, what we see is economic policy uncertainty and concerns about contract enforcement and rule of law under the current government that will continue to have a negative impact on business confidence and private investments, ultimately hampering growth.
The source of much of the uncertainty swirling around the country is the federal administration under President Andrés Manuel López Obrador. Even before the pandemic — and the handling of the crisis by the government has drawn severe criticism for its comparatively weak national response to contain the spread of the virus — there were issues rattling the business community that remain in place today.
These concerns include López Obrador’s economic policy direction; doubts over the enforcement of contracts, despite the government’s claims they would be respected; the administration’s reversal of landmark energy reforms; and the suspension of oil auctions amid other moves to reassert the dominance of the state-owned oil company PEMEX. Some of these last measures have ended up in the courts, as private companies have launched legal actions to prevent their implementation.
Outside of government policy, high crime rates and endemic corruption continue to undermine the business environment and state functions in Mexico. The economic repercussion of the pandemic particularly hit workers in the informal sector, who account for about 60 percent of the total labor force. Consequently, we believe rising poverty could become a social and political issue.
Economic Performance
Although Mexico’s economic performance deteriorated steeply in 2020 due to the coronavirus pandemic — GDP contracted 8.7 percent, mainly due to steep declines in consumption and investment — the virus only exacerbated an already weak economic situation. In fact, Mexico had entered 2020 in a mild recession due to fiscal tightening and falling investments on the back of rising policy uncertainty.
Mexico’s high vulnerability to the effects of the pandemic stems from its relatively weak healthcare system, the close synchronization of its economy with the US business cycle (making it more susceptible to external shocks) and its relatively high dependence on the services sector (including tourism). The automobile sector, Mexico’s leading source of exports, suffered from a sharp fall in external demand and severe supply chain disruptions. At Atradius, our performance forecast (ranging from “Excellent” to “Bleak”) for both the automotive and services sector is “Bleak.” This means we see a credit risk situation that is poor and a business performance that is weak compared to its long-term trend.
To mitigate the economic impact of the coronavirus, the central bank cut interest rates several times in 2020, to a still relatively high 4.25 percent in June 2021. Additionally, it took measures to support credit lines for consumers and SMEs. But the fiscal policy support has been very limited so far, at just 1 percent of GDP, as the government remains committed to fiscal discipline for the time being. This is despite a sustainable government debt rate of 47 percent of GDP in 2019.
In the absence of comprehensive government support, some states and the private sector have stepped into the void. States have offered to suspend tax payments for businesses and, together with the Inter-American Development Bank (IDB), the Mexican Business Council launched a loan scheme for SMEs.
Due to the meager fiscal support and comparatively tighter monetary policy, the recovery will be protracted, and Atradius believes that GDP will only return to its pre-pandemic level in 2024. In 2021, GDP is forecast to partially rebound, increasing by 5.6 percent after plummeting by 8.5 percent in 2020 on the back of the pandemic.
Exports from the manufacturing sector should receive a boost from higher US growth prospects, while an infrastructure plan will contribute to a partial recovery of investment. However, this recovery expectation remains subject to a timely containment of the pandemic, now experiencing a third wave, and the successful roll-out of the vaccination campaign. Inflation will remain at the upper end of the Bank of Mexico’s 2 percent to 4 percent target range, mainly due to higher fuel prices and shortages due to persistent supply-side disruptions.
After increasing from 47 percent of GDP in 2020 to 57 percent of GDP in 2021 due to the repercussions of the economic contraction, the government debt ratio is expected to level off in 2022. The government debt structure is generally favorable (70 percent in local currency). The main vulnerability is a relatively high share of debt held by non-residents (45 percent) but refinancing risks are mitigated by a favorable maturity structure (average maturity of more than 18 years for external debt) and prudent debt management. The vulnerability to oil price declines has been mitigated by fiscal reform and an oil price hedge.
The main risk for government finances remains the contingent liability related to heavily indebted state-oil company PEMEX (11 percent of GDP). The financial situation at PEMEX has become more uncertain following the shift from exploration to lossmaking refining. Due to the company’s net losses, financial debt increased further in 2020. President López Obrador has prioritized supporting state-owned energy companies financially over further liberalizing the market. In December 2020, he announced the spending of another US$24 billion to support PEMEX and its refineries.
Shock Absorber
After a sharp depreciation against the US dollar in March 2020 on the back of high capital outflows and oil price deterioration, the peso exchange rate has since recovered most of its lost ground. While the exchange rate will remain volatile in 2021, it is expected to continue its appreciating trend, supported by a global recovery in manufacturing.
Former Country Manager Mexico | Atradius
Q: As a specialist in insurance, risk management and debt collection, how does Atradius’ business model adapt to the needs of the Mexican market?
A: Atradius is an international group headquartered in Madrid and Amsterdam. We operate in 45 countries and each country has very specific characteristics that make it impossible to have one model that applies everywhere. We have been operating in Mexico for 50 years.
Mexico is a unique country, but we can compare it to how we operate in The Netherlands. In The Netherlands, companies sell on credit and they ask if credit insurance is in place before even considering shipping the goods. It is very difficult to find companies that sell their products on credit without trade insurance. In Mexico, very few people are aware of the existence or benefits of trade insurance. While companies look for us in The Netherlands, in Mexico we have to be proactive in finding customers, explaining how credit insurance works and convincing them about its benefits.
The second big difference is that in The Netherlands, every company is obligated to publish its annual results in the public registry. In Mexico, this requirement does not exist and only companies listed on the stock exchange (BMV or BIVA) have the obligation to publish financial results. That represents a tiny part of the corporate world in Mexico. Even in the Netherlands, where information is publicly available, companies decide to insure the risk of nonpayment. In Mexico, where there is no such information available, companies still are quite reluctant to insure their receivables. We have to adapt our business model by being highly detailed in our activities, obtaining financial information about companies that really do not want to publish this. That has been probably our biggest challenge.
Your Clients May Not Be Ready for a Liquidity Crunch,
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The third variable that is typical in Mexico is nonpayment due to insolvency. In The Netherlands, companies that do not pay are either bankrupt or have gone into receivership. In Mexico, companies just say they cannot pay you and claim protected default. Dealing with those issues and recovering the money in circumstances like that requires a completely different business approach than in other countries. You need to be much more involved in dialog and look for solutions, considering risk management and having an enormous emphasis on collection, which is what we do through an affiliated company, Mexico Atradius Collections.
Q: What are the next steps when a customer notifies you that they are no longer receiving payments?
A: If a company wants to sell water bottles on 60-day credit, it goes to Atradius, tells us who it wants to sell to, how much money the order is for, and the limit it wants covered. We then analyze the risk associated with the buyer to determine how much we can insure. Once this is done, if the buyer stops paying our client, there first is a period of 60 days, depending on the details of the policy, during which the client approaches the buyer directly to reach an agreement. After that time, the client notifies Atradius. We analyze the situation together with the client to determine the risk and depending on our conclusions, we may or may not give our client another 60 days to come to an agreement with its client. About 80 percent
Karel van Laack
of these situations are solved by the client with our support. Usually, it is a matter of providing some time and being constructive to ensure a good relationship.
If this does not work, the client comes back and asks us to file the claim. When the client file the claim through Atradius Collections, one of two things can happen. Atradius Collections solves the problem before we lay the claim or it does not and we pay it. What does it mean when we pay a claim? It means that our insured client will receive the value of the insured order minus 10 to 15 percent of the amount of the invoice, depending on the level of coverage. As soon as we pay a claim, we flag the buyer with the credit bureau. Then, depending on the situation, our client may start legal action against the buyer.
The best route in our business is to avoid a claim because as soon as we pay, the client can no longer trade with the buyer. The relationship between the two companies is destroyed. Sometimes, the best solution is to set up a payment plan. However, sometimes our client needs the money om order to pay its suppliers or other creditors.
Q: Would it be beneficial to oblige companies to have trade credit insurance through regulation?
A: No, I think we need to do a better job of convincing companies why it makes sense to have trade credit insurance. A company might be selling to 250 clients but three represent 75 percent of their business. If one of the other 247 does not pay, it will cost some money but it will not put the business in jeopardy. However, if one of the main three cannot pay, then the client has a problem. We can insure just those three companies. There are also companies that only insure their export business because their domestic business does not have enough risk exposure to justify the investment.
Some businesses separate their sales into different sectors or industries. For example, a company that is selling glass to
the automotive, construction and consumer industries can only insure the industry with the highest risk. This can be done; however, we do not endorse negative selection. This means we will not allow a company to choose, based on their judgment, between companies. We need to be very objective in the selection of risk. We will not just take the bad risk and leave the rest uninsured.
Q: How has the COVID-19 crisis affected your business, and which lessons have you learned and implemented?
A: The inferno was on its way and we expected the year to be an absolute disaster, it felt like we were going back to the Great Depression. Everybody said the 2008 crisis was peanuts compared to this, and we thought it would be a terrible year for Atradius. Of course, it was not a good year but we still achieved a positive result last year.
Internally, we learned from our mistakes from 2009. Back then, when the crisis started, we just cut limits left and right and sent clients notes saying, “As of next Monday, these 50 limits that you have are no longer valid; we are canceling them all.” That was dumb because that is not the way to help your clients through a crisis. Moreover, since we were not supporting our clients, they were not able to support theirs either. That was a big mistake at the time and, therefore, we received claims from customers who stopped receiving payments.
We did not do that this year. We had much better control of our risk portfolio than we had back in 2009 and we were much closer to our clients. We tripled our service level in terms of communication with clients, finding out what they needed, helping them get through the difficult situation and asking them to let us reduce risk where they did not need the limits.
During the first months of the pandemic in Mexico, nobody paid their bills and we saw an uptake in overdue payment notifications. Companies did not know what was going to happen and decided to stick to their cash as much as they could. As of June 2020, companies started paying and the economy partly reopened. Banks gave their borrowers an extension to pay by the end of the year or early 2021. This was fantastic as companies started paying their suppliers, which was another reason why we did not pay as many claims as we thought would need to when the pandemic hit.
The situation is changing in 2021. Banks are starting to collect and are no longer giving extensions. What we expect to see this year is that banks are going to take an enormous amount of liquidity out of the market. That will seriously affect the ability of companies to pay employees but especially their suppliers. There are dark clouds on the horizon. Large companies are prepared for this liquidity crunch but SMEs are typically not well prepared because many operate on a dayto-day basis. Given the current circumstances, we could call 2021 a good year for Atradius if we make money and are able to add 40 to 50 good new clients to our client portfolio.
Atradius specializes in trade credit insurance and debt collection. The company is present in 54 countries and has a retention rate of 93 percent
Client Focus Is Key in Export Credit Insurance
Q: Why do companies invest in trade credit insurance?
KVL: The first reason is to not lose sleep at 2 a.m. If companies do not get paid, they cannot pay their staff and suppliers. The second reason why companies contract trade credit insurance is because they are entering new markets. If a company that is well-established in the Mexican market is entering international markets, this means dealing with unknown buyers. That is the perfect opportunity for a trade credit insurance company because we have the infrastructure to analyze companies in different countries. We operate in 45 countries and we have around 25 risk centers around the world. The third reason for contracting trade credit insurance is because of transparency with investors. If unpaid receivables are insured, investors are much more at ease.
Q: What are the main elements that define Atradius’ relationship with its customers?
SF: Relationships are key to our industry. As a client-oriented service company, we want our customers to see us as partners who are here to help them prevent and mitigate risks. We want to help them run their business by providing solutions tailored to their different needs. To do this, we need to understand their sector and the country they are in so we can be there during the credit insurance process, which goes beyond simple assessment to include risk prevention.
Communication is vital because there are common misconceptions about insurance companies that need to be overcome. We stress to our clients that their success is our own. Furthermore, we work in tandem with our clients to customize our products to meet their needs. The pandemic caused some in-person limitations so it was key for us to transform our approach and find new digital ways to work together. This has allowed us to build closer relationships with clients and has also boosted our internal performance. It has resulted in business continuity and a strategy to build solutions for today’s economic reality, which is driven by general uncertainty due to the economic crisis caused by the pandemic.
Q: What have been your client retention priorities during the pandemic?
SF: We achieved a high client-retention rate last year, which reflects the customer-oriented actions we have been implementing despite the pandemic.Some sectors have experienced a deeper impact from the pandemic, such as tourism and entertainment, which makes them more receptive to credit insurance. But while receptive, companies also want to make the most of their investment. Credit insurance and risk assessments allow companies to boost their sales.
The will to use credit depends on the company, where it is based and its clients. In Mexico, for instance, there is a cultural barrier we need to break. A common challenge is a company’s client defaulting. Companies need to expect that but there are ways to identify and prevent those risks. For our part, if we fail, we cover our client’s loss and take legal action against the debtor.
KVL: The perception of insurance as a cost is slowly changing, at least in our existing business. We retained 95 percent of our
Karel van Laack
Stéphane Feytmans
premium clients despite significant price increases. The risk environment changed and therefore protection against risk became more expensive.
We also reduced a great deal of exposure. In July 2020, risk analysis was quite different from how we saw risk in January. There were new risks that were hard to measure. Nevertheless, our clients stayed with us. In all the surveys that we have done and conversations we have had with them, they have said we have done a really good job in helping them through this crisis.
Q: What are the main differences between the challenges that your clients were facing in the summer of 2020 versus 2021?
SF: In 2020, we were all going through the initial stages of the pandemic. The common thinking was that the lockdown would be short and everyone would be back to work soon after. The economic and health uncertainty was latent at the time.
Today, the international vaccine rollouts are helping businesses recover economically but the scenario is different depending on the country. In Mexico, the situation is influenced by the US, as usual. The US vaccination program has been fast and successful, which has supported Mexico’s economic reactivation.
Mexico also held its midterm elections recently, which resulted in new expectations. The political environment plays a big role in the direction investment is going to take. The current scenario provides greater certainty, so the exchange rate is expected to react positively. In effect, the midterm elections introduced more certainty to the market than the government’s reforms or market policies.
A market that promotes certainty is likely to see a prosperous economic recovery. It is certainly good for the insurance sector.
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If companies feel safe and comfortable, they view insurance as a safe bet.
In Mexico, insurance is seen as an expenditure, not an investment. Companies are not willing to pay very much for something they do not see the need for. When economies suffer, companies are more selective in their credit purchases.
Q: How do you help clients in balancing risk and new business development?
SF: We provide the company with an assessment of the risks their own clients present. That is what credit insurance is about. We need to be straightforward with clients when building a plan and credit limit. We guide them through potential risks, including bankruptcy. We want them to grow but also to understand the importance of prevention.
As a credit insurance company, we have a responsibility to assess our client’s market and deliver the right risk assessment of their main customers.
Q: What opportunities do you see in the Mexican market and how do you plan to take advantage of them?
KVL: We will continue to grow our presence given the low penetration of trade credit insurance in Mexico and the size of the economy. How aggressive we will be in 2021 depends on the economic outlook and what happens with the pandemic.
In the medium term, we are planning to launch a simple and efficient credit insurance product. In Mexico, 92 percent of companies are SMEs and yet, we do not have a product for them. Right now, our product is too complex and our service is too expensive for these players.
Working with SMEs is a riskier business; it’s almost more of a collection business than insurance. As soon as an invoice is overdue, companies go after the buyer, which means the product needs to be simpler, with lower limits and immediate collections. This also entails being able to visit buyers. We cannot even do that at this moment so it will not happen this year. However, we want to play a useful role in the Mexican economy as a trade credit insurer and I think that is the segment we need to focus on.
José Antonio Genesta
Former New Business Director | Atradius
Security in Uncharted Markets
Q: How does credit insurance support new business ventures?
A: Credit insurance is the principal tool Atradius uses to protect its policyholders’ accounts receivables, following an in-depth analysis of their respective customers. This is Atradius’ core business and is particularly relevant for policyholders interested in expanding to new geographic markets worldwide, for which they lack market intelligence. In this sense, our investigative analysis and coverage provides our clients with the peace of mind and confidence needed to tackle new markets without hesitation.
Credit insurance is not a static policy used only when clients default on their corresponding payments; it is a dynamic tool that clients can and should use weekly, if not daily, to gauge markets, monitor clients and discover new market opportunities. There are many examples in which Atradius has helped policyholders grow their sales by extending a greater line of credit to their clients based on real-time market intelligence flagged by our analysts. Our most proactive policyholders have deferred to Atradius to identify new commercial leads, assess the viability of a sale and calculate the coverage they are able to extend to new clients. Ultimately, Atradius accompanies clients as their most valuable strategic partner as they expand into and scale up in new markets.
Q: What do companies’ risk profiles look like when proceeding without credit insurance?
A: Mexico is a market with a limited culture of credit insurance in comparison to neighboring markets, despite its international-enterprise business community. Insured companies are the minority in Mexico, which largely stems from a lack of education and market penetration. This is counterintuitive to business economics that consider accounts receivables as one of its most important active assets. In Mexico, payments are often the final priority. A cost-benefit analysis between a policy fee and a potentially devastating client default makes it abundantly clear which is the better alternative.
Our policyholders can sleep peacefully, augment their credit lines for their clients and even take on more risk to continue growing. Meanwhile, non-policyholders are left exposed to payment defaults and fraud schemes, which are on the rise and can ultimately compromise a company’s longevity. For these reasons, Atradius is incessantly cultivating a greater culture of credit insurance awareness in Mexico, not only as a means of extending its added value but as a strategic approach to fostering the country’s economic recovery and competitiveness.
Q: How are high inflation rates likely to impact companies and by extension Atradius in 2022?
A: The global economic context generated by the prolonged COVID-19 pandemic and recent events has accentuated payment defaults, as reflected in data from 4Q21 and 1Q22. Our policyholders have begun to flag these occurrences, with several reporting delayed payments extending beyond the average granted period of 30 to 60 days to somewhere between 90 and 180 days. Fortunately, while claims remain
below year-to-year averages, we are carefully monitoring the market and our policyholders’ portfolios for any indicative market tendencies.
Uncertainty is also prevalent in a market with high volatility and most companies will first cut back on suppliers payments before touching other alternatives. This behavior has reduced financial liquidity, threatening to feed into forecasted recessions in the US, the EU and other markets, even without considering other consequential socio-political and economic factors.
Q: How is Atradius prepared to protect itself and its clients in the event of an economic downturn?
A: It is too soon to consider this possibility but Atradius has first-hand experience navigating these conditions from the 2008 market crash. That year, as the economic recession consumed the global economy, Atradius faced a wave of claims that hit the company hard. It had to cut credit lines of the buyers from our policyholders and our policy coverage shrunk almost overnight. During this period, Atradius was among those insurance companies with the highest payouts but it got out and ahead. This experience helped Atradius’ leadership navigate the trying economic conditions created by the COVID-19 pandemic. This time, we created strategies in hand with our clients that minimized risk without curbing our ability of credit management. It was a successful strategy that allowed us to retain the majority of client portfolios during the two years of high economic volatility. If another economic recession were to take hold domestically or internationally, Atradius will once again harness the wisdom from these experiences and again come out on top.
Q: Given the present volatility of the market, what industry sectors should be particularly cautious of proceeding without credit insurance?
A: The most complicated industries in Mexico nowadays are oil and gas, construction and hospitality. While some were able to recover in 2021, the global economic context remains highly volatile. The industries best positioned to succeed in 2022 are pharmaceuticals, chemicals, financial services and the food industry, among others.
Mexico to Continue Fighting Inflation Throughout 2H22
Q: With a potential domestic and global recession on the horizon, how is Atradius mobilizing to keep its client portfolio from shrinking in 2022?
A: Despite continuous supply chain disruptions, ballooning inflation, the Russia-Ukraine war and recent energy supply concerns, northern economies—including Mexico—have demonstrated resilience and are performing well. As a credit insurance company, we have stayed on top of these developments so we can anticipate changes and counsel our clients accordingly.
Current data projections indicate that a domestic slowdown will likely take place in Mexico in the latter half of 2022, which is largely contingent on high interest rates and the economic performance of the US. Economic projections were already shaky at the beginning of the year and were further distorted by the Russia-Ukraine war, whose full impact is yet to be felt by the global economy.
Q: How will these major macroeconomic factors affect Mexico’s manufacturing industries?
A: These developments have prompted an additional review of our portfolio holdings’ most exposed sectors: fertilizer, automotive and construction. Russia is one of the largest exporters of fertilizers in the world but its productive and export capacity has been greatly diminished by the war. The disruption threatens to undo the productive capacity of Mexico’s agricultural sector and, by extension, that of all of Latin America.
On another front, the global economy also depends on Russia for the production of nickel, a metal essential for the production of batteries. Resurgent COVID-19 cases in China are closing aluminum production plants, increasing the price of this commodity by 42 percent at the beginning of 2022, with prices still climbing. These two factors, combined with continued disruptions to the production and supply of semiconductor chips, are likely to significantly hurt Mexico’s struggling automotive sector.
Within the construction industry, cement manufacturers, which have already been losing steam, will be further crippled by their inability to attract investment and generate trust. This is despite multiple large-scale infrastructure projects that are under development by federal and state authorities.
Overall, we anticipate a challenging second half of the year for companies but credit insurance will help our clients to keep trading, despite these macroeconomic conditions.
Q: How are high inflation rates likely to impact companies and, by extension, Atradius in 2022?
A: Inflation is definitely the main problem. The US was the main reason Mexico was able to grow again after the COVID-19 outbreak. If the US economy slows down, it will certainly impact Mexico. In the US, inflation hit its highest point in 41 years in March 2022. In Mexico, it is now at its highest in two decades. It is impacting both the economy and companies. The economy was recovering from COVID-19 and
Stéphane Feytmans
Country Manager Mexico | Atradius
when we thought that inflation was going to recede but it went up. We expect that inflation will climb further because normally when there is a trend pointing to rising inflation, it means that it has not reached its peak. Therefore, we might expect inflation to continue climbing during 2022.
The main risk for Mexican economic growth is inflation. Banxico will likely continue increasing interest rates to control inflation but that is a big dilemma for the country. On one hand, inflation has to come under control. On the other hand, higher interest rates will cause a slowdown in the local economy, which could turn into a recession depending on how much rates climb and for how long.
Q: How has the digital transformation influenced the credit insurance market?
A: Innovation is essential to the credit insurance industry. We are modernizing our internal and customer-facing digital platforms to increase our efficiency. By introducing data analysis, AI and machine learning tools into our practices, we are extending our risk underwriting value proposition.
Risk Management Should be Performed Before a Recession
Q: What risks are likely to arise from a recession and how should companies be preparing to mitigate them?
A: All analysts at Atradius have confirmed the likelihood of a global deceleration, which will be most visible in early 2023. The signs pointing to this deceleration are many and include high interest rates in the US, which have clear implications for the Mexican economy; the ongoing Russia-Ukraine war, which is causing continued supply chain disruptions; other logistical challenges caused by talent scarcity; lockdowns in China; and the looming antagonism between China and Taiwan. In short, the panorama does not look good.
These challenges reduce liquidity in the market, raising the cost of capital. In turn, companies tend to become more speculative when investing, which limits the circulation of money in the market. Companies with limited lines of business will not be able to secure financing so easily, which means they may choose to delay or default on payments. At Atradius, we cover the pending charges. There is still time to look for and secure credit insurance because Mexico has still not entered an economic recession. Atradius still has a risk appetite and helps establish lines of credit for new clients at an affordable rate.
Q: How have economic warning signs helped to generate interest in Atradius’ services?
A: We have observed greater interest from companies. They are investigating and attempting to understand the benefits of credit insurance and how it works. We have received many more calls and have seen better reception at companies. However, many remain undecided because they have not seen the problem materialize. Mexican companies rarely engage in prevention; they wait until they experience the problem to look for solutions. This is a completely erroneous approach. When the economy enters a recession, costs increase, risk appetite decreases and businesses lose negotiating power.
Q: Despite rising inflation, Mexico has demonstrated economic stability. How can organizations both capitalize on this opportunity and protect against risks?
A: 2021 was a fantastic year for business in Mexico because consumption increased dramatically as lockdowns eased, which translated into earnings for companies. However, this trend began to recede at the beginning of 2022 in parallel with a decelerating US market. Because Mexico’s economy is tightly intertwined with the US, a lull in the latter’s economic performance foreshadows similar consequences for the Mexican market. As has been repeatedly observed, Mexico is usually some months behind the US, so the effects of a recession in the US will not be felt in the Mexican market until early next year.
Q: The National Commission of Insurance and Finance (CNFS) reports that Atradius leads the credit insurance market. To what does Atradius owe this success?
A: In 1H22, we held 38 percent of Mexico’s market share, keeping our position as the leading credit insurance company in the country. The driver that has allowed us to maintain this
Daniel Llano
Commercial Director | Atradius
share is our excellent client retention rate, which is above 95 percent and indicates that our clients are comfortable working with Atradius. Additionally, we have grown our client portfolio significantly over the last year.
Due to the accelerated economic recovery of global economies and inflationary pressures, companies were able to make significant profits despite moving fewer products, which translated into more business for Atradius. As clients sell more, there is more risk that must be covered, so we augmented credit lines to help companies boost their business. AM Best recently confirmed Atradius’s stability with an A+ rating, the top rating achieved by a Mexican business.
Q: Considering the risk landscape, will Atradius reduce its lines of credit as it enters 2023?
A: We will not reduce our credit lines, which is why we have an excellent client retention rate. We follow a rigorous process of data analysis to determine a party’s capacity to complete a payment. For that reason, we are confident that our portfolio is well balanced even in the face of a global recession. It will not force Atradius to reduce lines of credit to our existing clients. While there may be unexpected outliers, we are confident that they are in the minority.
Atradius provides trade credit insurance, surety and collections services worldwide through a strategic presence in more than 50 countries. Atradius has access to credit information on over 240 million companies globally.
