Coronavirus in Mexico: the complicated picture to revive an economy that is quickly broken down

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With the entry of the Phase 3 of contingency pandemic coronavirus (COVID-19), on the 21st of April, the health authorities have extended the preventive measures as the social isolation, to avoid a rapid rise of infections and a breakdown in the already careciente health system.

However, the COVID-19 has not only affected the health of thousands of mexicans. The closure of businesses, the loss of countless jobs and the lack of a plan efficient by the Federal Government has led to a hard blow to the economy of the country.

So said the columnist Isabella Cota in the journal The Country, who in his text titled The economy of Mexico is broken down in leaps and bounds he points out that this health emergency complicated the tax collection and put the business sector in a serious risk of getting into a the crisis is deep and fast.

“The heart of this economic crisis, detonated by the coronavirus is the uncertainty; the lack of knowledge about how long does not allow to the economic actors, whether employers, employees or informal workers, or make plans to know when will be your next income. To safeguard the income of the families is, therefore, one of the keys that will define if the economy is reactivated quickly or not” one reads in his text.

One of the signs was the last announcement of the Secretariat of Labor and Social welfare (STyPS) in which it reported that from march 13 to April 6, had been lost 346,800 jobs, but the current figure is closer to 600,000, he said José Luis de la Cruz, in charge of economic affairs of the Confederation of Chambers of Industry (Concamin).

According to the organization, every day you lose close to 20 thousand jobs. And that only refers to the jobs of the 20.5 million registered in the social security, as the informal economy in Mexico is around 56%so that it is not possible to know with certainty the total number of workers who have lost their source of income.

“These companies are taking the pulse of the operation, in a strict sense, in the internal market (…) which starts to show it is weakening fast and rapid growth of the national economy,” said Cross.

The sectors hardest hit

One of the sectors that have most deeply felt the stroke is the cheap. The cancellation of flights all over the world, as well as sanitation measures to prevent the spread led to the collapse in hotel occupancy.

For example, in Cancunthe most important destination of the country, hotel occupancy is on a 4,3%compared with the 82% registered before the first measures of isolation. The same figures from the government suggest that Quintana Roo it is the state where more jobs were lost between march 13 and April 6.

Another sector hurt is the restaurateurthat , although many changed their business model and offer food to bring, a third of the restaurants in the country have closed by the pandemic, the fall in sales on a 90%.

The National chamber of the Industry of Restaurants and Spicy Food ensures the industry restaurant provides 8% of all jobs in the country with 2.14 million.

While the Mexican chamber of the Construction Industry estimated that are at risk of disappearing half a million jobsbecause more than six thousand companies lack of cash to pay to their employees.

It should be remembered that the construction companies entered this crisis already in a vulnerable position due to a dramatic drop of government spending on infrastructure, to the degree that in 2019 had its worst contraction in almost two decades.

Governmental supports of insufficient

According to an estimate of the Laboratory Analysis in Trade, Economy and Business of the National Autonomous University of Mexico (UNAM), the country will suffer a loss of approximately 2.1 billion pesosonly in the fall of consumption in general between April and may, which will have an impact on the collection of taxes.

In addition, about 8% of the Government revenues come from the sale of oil by the state-owned company Pemex, and this month, the price of the mexican mix fell to its lowest price in history because the demand has dropped in all over the world.

Against this background, the president Andrés Manuel López Obradorannounced this week that it will apply the Law of Austerity, Republican in a rigorous manner. Ordered to close ten secretariats and reduce the salary of the public officials of the highest rank.

On the other hand, mentioned that will increase the number of loans to micro-enterprises three million, for a total amount of 25 thousand pesos, as well as will also increase the expenditure in social programs already existing in 622.556 million pesos, the equivalent to around 3% of the national GDP.

These decisions reflect an attempt to maintain both of these goals: protect the economy and maintain the austerity.

However, for the Confederation of Chambers of Industry these governmental supports could be insufficientas they are not designed to contain the fall in employmentbecause , even, most small businesses in the country, with three employees, have monthly expenses greater than 25 thousand pesos that the Government is offering.

“It is a resource that will not soothe their lack of liquidity that quickly it would be consumed and it won’t change the situation in which you are living” explained Cross.



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