President Ivan Duque called on the “solidarity” of Colombia’s financial sector on Sunday to help minimize the incalculable damage of the coronavirus pandemic on the country’s economy.

The president’s call on the banks to help small and medium-sized businesses comes days after the central bank told Congress it “has deployed all its resources to deal with this emergency” without daring to make a growth projection.

Central Bank

Times too uncertain to make projections

The central bank’s report indicated that international organizations were already expecting a global economic slowdown, and added that “all these projections were made before the expansion of the pandemic, so significant downward revisions are expected  in the next few weeks.”

While the central bank expected international measures to confront the global economic crisis, Duque announced the creation of a fund of 70 trillion pesos ($17 billion).

“Of those 70 billion, at least and exclusively for micro, small and medium enterprises we have 20 trillion pesos ($5 billion), said the president.

Economy cannot afford stingy banks

This, however, would not be enough unless Colombia’s historically stingy banks step up to the plate and become more flexible in extending loans to small and medium sized businesses, according to Duque.

President Ivan Duque

Duque stressed that funds made available both by the Central Bank and the government should allow the banks to, for example, not demand a guarantor to extend credit “as there exists a guarantee from the state.”

The country’s banks, owned largely by two families, are traditionally conservative when it comes to extending loans, often asking guarantees that are virtually impossible for small and medium-sized businesses.

With the exception of pharmacies, banks and food suppliers, all of Colombia’s businesses closed last week when the country entered into quarantine to slow down the spread of the coronavirus.

Tourism half dead, what’s next?

The closing of the border and the quarantine triggered the almost instant bankruptcy of many tourism providers, a major job creator in the country.

Restarting these businesses would require credits while the uncertainty of how long it takes for the global travel industry to recover continues.

The tourism industry’s near-death experience is just the beginning, the central bank informed Congress; the global economic consequences of the pandemic are also threatening domestic consumption and the export of raw materials, manufactured goods and services, which could lead to a depression.