18 million Mexican jobs are at risk due to the COVID-19 crisis

Millions of Mexican entrepreneurs, micro, and small businesses will not be able to resist a temporary suspension of activities

18 million Mexican jobs are at risk due to the COVID-19 crisis
A quarantine for the productive sector will be devastating – Photo: Germán Espinosa/EL UNIVERSAL
English 25/03/2020 16:16 Ivette Saldaña Mexico City Actualizada 16:33

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Quarantine for the productive sector will be devastating. Millions of entrepreneurs, micro and small businesses will not be able to resist a temporary suspension of activities and even, some have started to dismiss personnel due to lack of liquidity and the reduction of clients over COVID-19.

In addition, other big industries and activities already register impacts because of the health emergency, such as tourism, and the automotive, electric, and electronic industries.

Yesterday, EL UNIVERSAL published that one of the most concerning issues for analysts is the lack of a tax strategy to help companies and thus minimize the effects on jobs.

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According to a report from BBVA Mexico’s economic analysis area, April will register the toughest effects of unemployment.

David Cervantes, the author of the analysis, wrote that, initially, a negative impact in temporary jobs, a halt in permanent ones and, depending on the extension of the paralysis, the loss or destruction of posts will be higher.

He added that the most vulnerable sectors are trade, restaurants, transportation, and tourism, with 32.7% of the 55.7 million employees in Mexico, that is, 18 million people.

Harsh impact in Mexico City
The president of the Chamber of Commerce, Services and Tourism, Eduardo Contreras, said that, in conservative figures, 10% of businesses in Mexico City will close, that is, there are 42,000 stores that are vulnerable to the drop of demand due to coronavirus.

All small businesses are vulnerable but it will mostly affect stationeries, taxis, uniform stores, Internet cafés, inns, and convenience stores because they are businesses that depend on daily sales, which fell by 80% only this week.

For instance, a convenience store that sold between MXN $2000 to $3000 per day, is now making MXN $300, which is a serious impact on its continuity and financial feasibility.

“For street vendors, the forecast is worse; we have an active population of 4,084,000 people of which 25% have an informal business and if they don’t sell one day, it’s hard for them to recover… they can be left helpless.”

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The president of the National Chamber of the Restaurants and Spicy Foods Industry (CANDIRAC) IN Mexico City, Mario Antonio Buendía, said that with inactivity of between 10 and 12 weeks, “the industry would be over,” as well as with the suppliers since those who provide tortillas, soft drinks, meats, vegetables, and cleaning supplies will also suffer the impact.

The coordinator of the Analysis, Trade, Economy, and Business Laboratory of the National Autonomous University of Mexico (UNAM), Ignacio Martínez, said that all companies will be affected by COVID-19, regardless of their size or whether they are formal or informal.

In addition, with the closing of schools from March 20 to April 20, the fortnight was not concluded properly, so companies will have to figure out how to pay their workers.

This will affect the federal government because if businesses do not sell and generate income, the raisings from different taxes, in a moderate scenario, will have a fall of 31% from tax revenues and of 21.7% in oil revenues.

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No plan for disasters
The CEO of the logistics consulting company LDM, José Ambe, said “There is an important impact, we can’t deny it; the worst one is that no business is ready for this level of crisis. 90% of small and micro companies do not have a disaster recovery plan or do not have healthy finances or are in debt.

“Small businesses with a plan can have credit lines, those that can undergo technical suspensions that do not affect their liquidity, with good agreements with suppliers to postpone actions, will be safe. But those in debt that do not have enough to cover fortnight payments will be affected,” he said.

Hence, he mentions that businesses with a drop in sales have to evaluate their future liquidity in 60 and 90 days, if they will have supplies, the essential purchases to be made. In order to do so, they have to define an action plan in what is called a war room, with an accountant, a salesperson, the owner, and those who take decisions in the business, to plan the strategy every 24 hours.

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Danger for small businesses
The president of the Latin American Association for Micro, Small, and Medium Entrepreneurs (ALAMPYME), Alejandro Salcedo Pacheco, warned that if the government does not grant fiscal stimulus, 100,000 units could close permanently.

Although he said that most entrepreneurs keep opening their stores, they register losses for MXN $30 billion. With calculation that once the health emergency is over, there will be MXN $250 billion in losses.

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