- Large differences between countries in government approach to the corona crisis
- Companies in Mexico (81 percent) much more optimistic than in Canada (36 percent)
- Almost half of companies in the US are dealing with payment defaults
In the trade region USMCA - the United States, Mexico, and Canada - enormous differences are emerging in both the sentiment and payment morale of companies. More than 8 out of 10 companies in Mexico expect to perform better in the coming year, while this is only true for just over a third of companies in Canada. The US occupies a middle ground and shows a moderately positive picture. About 60 percent of American companies expect to achieve growth. This is concluded by Atradius in the annual Payment Barometer for USMCA, in which they examined the payment morale of companies in Mexico, Canada, and the US in the second quarter of 2021.
Atradius notes that there is a deep divide when it comes to payment morale and sentiment among entrepreneurs in the region. These large differences partly stem from the significant differences in impact that the corona crisis has had in the north and south of the region. "The past year was a period of great uncertainty for many economies worldwide due to the corona crisis. A clear divide is beginning to emerge between companies in the north and south of the USMCA region. In Mexico, Canada, and the US, companies have been affected by the crisis in different ways. National governments have chosen different approaches to cope with the consequences of the pandemic. The government in Mexico opted for a 'soft approach' and decided not to lock down the economy, allowing many companies to continue their activities. In Canada, the opposite was true. The Canadian government also announced a large package of support measures, while in Mexico most support for companies came from local initiatives," says Edwin Kuhlman, head of Acceptance at Atradius Netherlands.
Companies in Canada and the US concerned about ending government support
According to Atradius, differences in fiscal policy in the US, Canada, and Mexico also play a role in the emergence of the large differences between the three countries. "Companies in Canada and the US are bracing for the end of government support in the second half of this year. Many analysts predict that the number of bankruptcies will increase from that point on. The negative sentiment among Canadian companies reflects these gloomy prospects, which pose significant financial risks for many companies," says Andreas Tesch, Chief Market Officer of Atradius.
Stronger focus on trade credit during crisis
On average, 41 percent of all companies in the region indicate that the payment morale of their customers has deteriorated in the past year. This is especially true for the US (47 percent), followed by Mexico (44 percent) and Canada (32 percent). In the survey, Atradius also mapped the financial health of companies based on several performance indicators and preferences, such as whether or not to grant trade credit, payment terms, DSO, and credit management. It shows that more than half of all business transactions during the corona crisis were handled on credit. Moreover, as many as 44 percent of companies increased their use of trade credits after the outbreak of the pandemic. This was particularly the case in Mexico (62 percent), followed by the US (51 percent) and Canada (20 percent). The US reported the highest number of payment defaults and write-offs. Additionally, more than a third of all companies in the region indicate that they are giving their customers more time to meet their financial obligations. This applies to 41 percent of companies in the US, 40 percent of Canadian companies, and nearly a quarter of enterprises in Canada.
Unpredictable consequences of corona worry entrepreneurs
Despite the optimism in Mexico, the consequences of the pandemic rank highest on the list of concerns for companies. In particular, the unpredictability of the consequences of the crisis combined with liquidity risks are cited as the two main points of concern. More than one in five companies across the region considers this to be the two biggest challenges for their business, followed by controlling costs (18 percent) and a decline in demand for products and services (13 percent).
The Atradius Payment Barometer USMCA 2021 can be downloaded at www.atradius.nl (Publications section)
