The clamor of businessmen in Mexico seems not to reach the ears of the President and his cabinet, the situation is that the health contingency that occurs worldwide, due to the Coronavirus (COVID-19), is seriously affecting everyone.
Although Mexico has managed to contain the massive spread of infections, it is expected that it may rebound in April. What is not expected to rebound anytime soon, or contained, is the imminent economic crisis in Mexico due to the quarantine.
Economic indicators were showing signs of a possible recession as economic growth was at -0.1% in the last quarter of 2019. This is in large part due to the new economic direction that the President, Andrés Manuel López Obrador has implemented focusing his strategy on social assistance programs, but forgetting about business incentives, and the fact that SMEs (Small and medium-sized enterprises) are the engine of the country’s growth. According to Inegi’s current figures, in Mexico, micro-enterprises (from 1 to 10 employees) represent 95.4% of the total companies in the country, while small companies make up 3.6% and medium-sized companies 0.8%.
Inevitably, with the arrival of the Coronavirus, and the damage it caused in the stock markets around the world, such as forcing oil to decrease its price to historical levels, increased the uncertainty in the Mexican economy, which had already suffered the effects of the Trade War between the United States and China, as well as threats of export taxes, damaged Mexico’s image as an investment destination, now the business sector faces a greater threat in the face of the pandemic.
COVID-19 has made things even worse by worrying companies and their employees who are concerned about their jobs.
There has been little response by the Mexican Government when it comes to announcing or proposing a fiscal stimulus package that could help solve the present situation. The lack of action by the government has created a grim future for everyone.
Unlike countries like France, where President Emmanuel Macron announced a rescue package of 300 billion euros, ensuring that he will not allow any company to go out of business due to the pandemic. The President of the United States, Donald Trump, signed the largest economic rescue program in history, which consists of two trillion dollars, including direct support of $1,200 for low-income people.
The business sector in Mexico has raised their concerns because of the lack of financial support for small and medium-sized companies to help them with the burden of their expenses and payroll for their employees since they don’t know how long will this health emergency last, in some sectors, like in the case of restaurants, where owners are worried about their income reduction to over 80% which is affecting their ability to continue with their regular business operations and pay employees’ salaries, utilities and fiscal obligations the government is forcing them to comply with.
Employers are now in a dilemma, as the ministry of health in Mexico has recommended for weeks to do everything possible to stop activities so that everyone stays home to flatten the curb while employees work from home and continue to get paid. The truth is the government has not officially declared a state of emergency, which makes it hard for business people to carry out this sanitary measure, while expenses such as water and electricity bills continue to accumulate.
The President of the Chamber of the Transformation Industry (Canacintra) in Mexicali, Eugenio Lagarde Amaya, said they want to protect the well-being of the business sector but they need the support of the federal government as well. Federal Labor Law in Mexico establishes that if a “health emergency” is declared, the worker has the right to receive at least 50% of his salary within a period of 30 days.
On the other hand, the Employers’ Confederation of Mexican Republic (Coparmex), are asking the federal government, and especially the Tax Administration Service, to extend the tax payment deadline because of these uncertain times. They also questioned the lack of a fiscal stimulus package to help workers and their families in the nation.
The demands grow and the crisis worsens as the days go by. Public Health Minister, Hugo López-Gatell, has all the attention on him as he asks people to follow social distancing rules. The economic scenario is being set aside as if there was no relationship with the current health crisis.
President López Obrador continues to travel to different communities while asking citizens to stay at home. The enormous gap that exists in terms of the average worker that is being told to stay home and support his family with his salary and that of the employer that needs to support his employees while trying to remain in business has not been addressed.