Mexico struggles to keep economy alive as coronavirus measures bite

Salvador Almonte traded in roaring citrus antiviral cocktails at his stand in Iztapalapa, a sprawling working-class neighborhood in Mexico City. He earns about $ 9 to $ 13 a day by selling juices and sandwiches and – like his customers – can’t consider staying at home to slow the spread of Covid-19.

“We live day by day,” he said. “If we don’t work, we don’t eat.”

A few days earlier, after urging the Mexicans to take their families to a restaurant to advance the local economy, President Andrés Manuel López Obrador finally began Friday to urge everyone to “step up.” . . sacrifice ”and stay inside as Mexico prepares for a spike in infections. The country currently has 848 confirmed cases out of a population of 126 million.

Balancing competing needs to keep citizens healthy without devastating the economy is particularly tricky in Mexico. Despite being the eleventh world economy and houses one of the richest men in the world, almost 50% of Mexicans live below the poverty line, an additional 30% are likely to fall into poverty and 30 million work in the informal sector, where they receive no social benefits.

If the economy plunges 5% this year – and some estimates are worse: JPMorgan predicts a collapse of 7% – economist Luis de la Calle estimates that 1.7 million jobs could be lost, including 700,000 in the formal sector.

“There is nothing that could cushion the shock,” said Marcos Casarin, chief economist for Latin America at Oxford Economics, who estimates that a two-week lockout in Mexico, plus four weeks of social distancing and plant closings could reduce gross domestic product to an astonishing extent. 0.7% per week.

Ricardo Salinas, billionaire media and banking tycoon and president’s business advisor, sparked controversy last week when he said shutting down the Mexican economy would do more damage than the virus. “The way we are going, we are not going to die from the coronavirus, but from hunger,” he said.

The government’s response to date has been piecemeal, despite the advice of Santiago Levy, a respected economist who was under-secretary of finance in the 1990s amid the “tequila crisis” and its aftermath. Write in the magazine Nexoshe said past crises had taught that governments should “act quickly and without timidity – it is better to do too much than too little”.

Architect of a famous social conditional cash transfer program, he urged the government to help companies by granting loans guaranteed by the state; do not add extra debt to very small businesses; and to suspend state infrastructure projects for the duration of the crisis – a reference to López Obrador’s controversial airport, train and refinery projects.

So far, the government has promised to boost social programs and provide loans at low interest rates. But Raymundo Vargas, who owns a garage, is now suffering from a lack of auto parts from China as supply chains are disrupted, said a three-month tax break would be preferable. The Mexican tax agency, SAT, instead, urged taxpayers to pay quickly and “participate” so that there are funds to buy fans.

Angel Chora, owner of a print shop in Iztapalapa, said sales are already down 70%. He could only manage for three months if the activity dried up completely “and it was without paying expenses like electricity and the telephone – that would be the last thing we would pay”.

“Whenever there is a crisis, inequality increases in Mexico,” said Viridiana Ríos, a professor at Harvard, who urged the government of the country to turn the crisis into “an opportunity for tax reform”, including by offering tax breaks now in exchange for higher taxes in the future; and more efficient tax collection among the wealthy in Mexico. However, Mr. López Obrador did not promise any new debt or tax.

Cuauhtémoc Rivera, head of the Association of Small Businesses, warned that a quarter of a million convenience stores could close, with the loss of 500,000 jobs. He called on the government to give food coupons to those in the informal sector and small business loans.

“In such a shock, vulnerable people can fall into poverty for good. . . it’s a poverty trap that can be intergenerational, “said Ricardo Fuentes-Nieva, head of the Oxfam charity in Mexico, noting that when incomes go down, some families stop sending children, or at least girls, at school.

“My concern is that the government is not intervening with a massive program[of aid for companies]. . . we are entering a period of depression with a very high unemployment rate, ”said Luis Téllez, a former minister, last week during a Wilson Center webinar. “The US government should also think about it, given the migratory flows that will result.”

Mexican migration has dried up in recent years, but last year the country received record $ 36 billion in remittances from Mexicans in the United States – a vital lifeline that will be hit hard by the fall of the American economy.

“If this continues for a long time, I don’t know how we will all survive,” said Enrique Rosas, who owns a fleet of 20 taxis. “We are talking about an apocalypse.”

Leave a Comment