One day after President Andrés Manuel López Obrador slammed the door on a rescue plan to help Mexican companies overcome the coronavirus pandemic, some Mexicans are afraid that the timid response will strike a fatal blow at the small businesses that run the second largest economy in Latin America.
Rather than following the lead of many other large economies in implementing measures such as tax breaks and other stimulus packages to help private sector businesses survive the deep shocks caused by widespread closings, the Populist president said on Sunday that he would prioritize social spending.
More than 2 million loans to individuals, households and small businesses would be available, including 25 billion pesos ($ 1 billion) to finance 1 million loans to small businesses, and social programs and aid for nearly half of the population living in poverty would be increased, he added. .
He also said the government would step up housing construction, public works programs and its flagship airport, train and refinery infrastructure projects. The measures will create 2 million new jobs, he said, without giving details. They will be funded by tighter government austerity and salary cuts for senior officials rather than by new debt.
Business leaders fear that by stopping all but essential activities to slow the spread of the coronavirus without major stimulus, up to 1.2 million jobs will be lost. Small and micro enterprises account for seven in 10 formal jobs and just over half of Mexico’s gross domestic product. If they are thrown out of business, more people are at risk of being plunged into poverty.
“What has disappointed me is that these policies he applies will not leave us in the future once this is over,” said Cuauhtémoc Barrios, a 38-year-old entrepreneur in the city of Monterrey, the north of the country, whose pallet trade provides a corn flour manufacturing company. for tortillas.
Nathan Poplawsky, head of the National Chamber of Commerce in Mexico City, estimated that consumption fell by 2 billion pesos a day in an economy that was already in trouble before the pandemic.
Gabriela Siller, research manager at Banco Base, said that in the worst case, the economy could contract by up to 10% this year, its worst performance since contracting 14% in 1932.
“People need jobs. I don’t want money, I don’t want [a government social] program, “said Mr. Barrios, whose vote helped Mr. López Obrador to an overwhelming victory in 2018.
The Mexican peso plunged to a new historic low of 25.8 per dollar overnight, as the markets abandoned the president’s plan. “The later he reacts, the more it will cost,” said one of Mexico’s top businessmen. “What is today a liquidity crisis will quickly become a solvency crisis and the recovery will take years.”
The leader of the left insisted that Mexico was facing a “transitional crisis” despite criticism from various circles, including doctors lacking protective equipment and waiters asking for help.
“Despite the adversities, the transformation of Mexico will not be interrupted,” López Obrador said Sunday in his quarterly state of the nation address. “We will beat the coronavirus. We will reactivate the economy and Mexico will remain standing, showing the world its glory and greatness.”
He added on Monday: “We think [our plan] will be a model to follow for other countries. “
Mexico currently has 2,143 confirmed cases and 94 deaths from coronavirus. All businesses, except essential, were closed until the end of April.
“There is no Plan B. There is no Plan A,” said Carlos Ramírez, head of Integralia, a consulting firm and a former member of the government’s financial stability board. “Ideology really interferes with key decisions,” he said.
Ramírez said Sunday’s address on an empty patio – the crowd was banned because of the coronavirus – sent “a very powerful message: I don’t need anyone here. I call the shots. “
Business leaders say they don’t want taxes exempt, just a few months of relief so they can pay workers as their incomes decline.
But without their tax revenues, “how are we going to give to the poor?” asked the president.
“It is becoming more radical,” said the senior business manager. “Reality will overtake us.”
Mexican workers, meanwhile, have prepared for the pain to come. “The government has said it will help everyone,” said Efigenio Arana, a carpenter, in a poor neighborhood of Mexico City, where many people work in the informal sector and cannot afford to follow government exhortations to stay at home. “Let’s see if they take us into account.”
Joel González, selling exhausts in a small shop and struggling to pay suppliers and cover overhead, was optimistic.
“There is no government support. There are going to be a lot of job losses. “