Creating a model that streamlines payment to State providers would change the landscape of many companies, especially MiPyMEs that provide services to public entities and depend largely on these inputs, with this spirit Bill 462 was born, which after two years in the National Assembly is about to enter the second debate.
In Panama, around 97% of the business fabric belongs to micro, small and medium enterprises (MSMEs).
According to data from the National Institute of Statistics and Census of the Comptroller General of the Republic, 3 out of 4 Panamanians work in MSMEs or in the informal sector, and according to statistics from AMPYME and UNPYME, only 8% of MSMEs have access to credit bank at this time. In other words, if these companies do not obtain liquidity, the national economy will not be reactivated, and they will not have the capacity to pay their financial commitments, which affects everyone in the country.
The participation of the sector in economic and social development is decisive for Panama, despite this, not all companies have the necessary liquidity to operate comfortably, which led thousands to cancel work contracts, and in extreme cases to close doors in the midst of the crisis generated by the Covid-19 pandemic.
Experts argue that improving the conditions of MSMEs and guaranteeing cash flow would not only ensure the recovery of the sector, but would also help maintain thousands of formal jobs, and boost the country’s reactivation.
Hence, for many SMEs that provide services to the State, their lifeline could be that payments are accelerated and waiting times to collect invoices are shortened.
In this context, Bill 462 was born, presented in October 2020, whose goal is to establish “a measure to facilitate rapid liquidity to State suppliers, authorizing public entities to certify debts with suppliers that can be negotiated to support the issuance of short-term commercial securities.
This Bill has great benefits because it is free for the State, and it gives you up to 360 days to pay your certified accounts in favor of private trusts at no financial cost, while providers collect their certified accounts receivable quickly and investors have access to a short-term investment instrument that pays higher returns than fixed terms.
The President of the National Assembly, Crispiano Adames, said that the initiative prioritizes the establishment of “mechanisms” that guarantee the cash flow of companies that contract with the State under the concept of “prompt payment.”
Any provider that owns an invoice certified by the State can discount it and obtain liquidity without having to present financial statements or credit analysis, since the investor’s risk is the Panamanian State.
Congressman Adames explained that the initiative is about to enter a second debate of three that it needs in the National Assembly and the subsequent signature of the country’s president to become law, while the talks with different sectors advance.
The Minister of Economy and Finance, Héctor Alexander, assured that advancing in the cancellation of debts that the State contracted with companies is a priority, but acknowledged that the situation has become more complicated after the fall in income, and the increase in subsidies in the context of the pandemic.
Alexander recalled that in 2019, when the current government took office, they received obligations to pay for some $1.8 billion inherited by the previous administration, which included debts with different sectors, including the Social Security Fund and companies.
Despite the initiatives, the companies are asking the government for faster payment of invoices, and less bureaucracy in the process, that way they would have liquidity for operating expenses, pay their financial commitments and invest in expansion.
Basis of the project
According to the Chamber of Commerce, Industries and Agriculture of Panama (CCIAP), Project 462 basically establishes “certifications of internal public debts to suppliers of goods, works and/or services of the State, with a fixed irrevocable date of payment, as a measure of economic reactivation.
In October 2020, the business association sent a letter to the National Assembly in support of Bill 462, considering the importance for companies of reinforcing liquidity at a crucial moment in the recovery after the worst of the pandemic.
“If MiPyMEs can count on this cash flow in an expeditious manner, this would help them speed up their recovery,” added the CCIAP.
In the statement of reasons, the project highlights that the law “seeks to provide immediate liquidity to all suppliers of State entities, without the State having to borrow, incur interest expenses or debt structuring expenses.”
“All State entities will be authorized to certify the existence of debts with their suppliers of goods, works and services, which may be negotiated by them, through assignment to a duly regulated private trust without recourse against the State supplier under discount for prompt payment”, according to the project. }
“The certification entails an irrevocable commitment to pay, of the certified amount, on a fixed and immovable date, which can be charged to the State budget for the following year,” the document states.
The economist, Eddie Tapiero said that the mechanism will work under the figure of “private trust” regulated for greater “transparency” of financial activities in the context of small and medium-sized companies, in addition to eliminating the bureaucracy “that they face in the collection process. to the State.
The certification of the accounts or invoices assigned to the Trust, the negotiation of the accounts or invoices already certified by the State and the commercial values supported by them, must be carried out on a digital platform or secure digital stock exchange that can be accessed by ” Internet”.
“What you want is to put a private part in it, that is capable of being the link that allows you to maintain advanced technology and that does not have interference from the government,” explained Tapiero.
The expert stated that the bill comes at a crucial moment for the country where many companies have accounts receivable as a result of which “they cannot be reactivated.” “They don’t want to go bankrupt,” he said.
In a speech before legislators, the President of the National Assembly recalled that until October 2019, some 62,000 MSMEs were registered in Panama, in April 2021, in the midst of a pandemic, about 20,000 had canceled the operation notice.
The foregoing makes Bill 462 the hope of MSMEs and a vital tool for the economic reactivation of Panama, for which this sector is awaiting prompt approval.
