MEXICO CITY – Mexican business owners are trying to cling to life — often unsuccessfully — in an economic recession profoundly deepened by the COVID-19 pandemic and with almost no assistance from the government.
Business owners report extending credit to clients while laying off workers, cutting their hours or reducing their salaries.
The National Small Business Alliance said Tuesday that more than 150,000 mostly small businesses have been forced to close amid the pandemic. Last week, the government’s statistical agency said that 92% of businesses of all sizes reported they hadn't received any government support in April and May due to the pandemic, according to its most recent survey.
According to the U.N. Economic Commission for Latin America and the Caribbean, the Mexican government increased spending to confront the pandemic’s economic effects by just 1.1% of its gross domestic product, among the lowest in the entire region. Meanwhile, the administration has stuck to its austerity goals, which have included lowering the salaries of many government workers.
“The economic recession through which the country is passing is of a greater dimension than what the government is doing now,” said Cuauhtémoc Rivera, president of the small business alliance, which counts some 95,000 members.
Rivera’s alliance represents the neighborhood shops — corner stores, tortilla makers, butchers — who are closest to the consumers, many running family businesses out of their own homes. They’re seeing their clients struggle, increasingly buying essentials on credit and appearing emotionally exhausted, he said.
Their most recent survey, presented Tuesday, showed that 79% of business owners said their clients didn’t have enough money to cover the basic food basket, he said.
“The recession means unemployment, means desperation,” Rivera said. “The people don’t have the energy to restart the engine.”
But Mexico’s cheerleader-in-chief, President Andrés Manuel López Obrador, assures that the worst is over.
“I believe we’ve already hit bottom,” López Obrador said Friday. “I would tell you that the worst was at the end of April.” In April, Mexico lost 555,000 jobs in the formal economy, about half of the formal jobs lost so far.
However, López Obrador notes often that more than half of workers toil in the informal economy, where estimates are that many times that number have lost their employment.
The president has maintained throughout that significant financial support to businesses would only result in corruption. Instead, he has offered $1,000 in low-interest credits to small businesses, as well as credits to some workers in the informal sector.
The government response has been panned by businesses big and small as insufficient.
López Obrador instead has pushed to reopen the economy quickly even as COVID-19 infections and deaths continue to rise. The government has reported nearly 400,000 confirmed infections and more than 44,000 deaths, both considered significant undercounts due to a lack of widespread testing.
Papamía restaurant, a 10-table breakfast and lunch spot offering affordable set menu options, is usually busy with office workers. But with most of those offices still closed it is only making about 30% of the sales it made before the pandemic, said owner Minerva de la Garza González.
It remained open throughout the pandemic, though for months it was only allowed to fill takeout orders. So far, de la Garza has been able to stay open on the savings she had accumulated, but said Monday she had burned through that now.
She reduced her employees’ pay — they knew they wouldn’t find work elsewhere — and her landlord has so far let her slide on the rent, but she’s feels the weight of the accumulating debt.
If sales don’t pick up by the middle of August, she said, she’s not sure she’ll be able to hang on. She said the government is doing well in a difficult situation, but she hasn’t sought what little government help is available.
“Not because I don’t need it or want it, but I feel like there are other people who more urgently (need it) than me,” she said.