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The impact of COVID-19 on International Business

By: Collaboration of Geraldine Angulo Rendon, student of International Business at CETYS University System and Terry Ahtziry Cárdenas Banda, attorney, humanitarian, and law professor.

The year 2020 started in a very strange way. We started on the “left foot”, a new leap year. A possible Third World War, a gigantic forest fire in Australia, the famous basketball player Kobe Bryant dies in a plane crash, the month of January seemed that it would never end. The feminist movements, the strike on March 9, and all the aforementioned made up the first quarter of the year. However, what we never thought would happen before all of the aforementioned would be the start of a new virus, which came to change life as we know it.

The arrival of the new coronavirus (COVID-19) became a pandemic that attacked all nations without notice and without distinction. COVID-19 showed us that whatever country you are, we are all human and no one is exempt from disease. Around the world different measures have been taken in the face of this health crisis, such as the case of Spain, who closed borders definitively as a preventive measure, leaving Mexicans students, who were in exchange, locked in quarantine in a foreign country, without being able to reunite with their families or receive the support of their loved ones.

For its part, in Mexico, the actions to combat the pandemic varied and were not as severe at first. This virus spread so quickly that there are still those who, even seeing the situation, do not believe in the virus. Decision-making in Mexico has been highly criticized not only internally but globally, a number of opinions agree that national government action has not been ideal. The brake on day-to-day activities occurred gradually depending on the federal entities, at the beginning of this pandemic there were no cancellations of both national and international flights, borders were not closed immediately, likewise, the measures implemented were not duly respected which lead to an accelerated spread of the virus.

So, the following question arises: How is this new virus affecting the economy?

According to Jorge A. Chávez Presa (2020), “the impact on the global economy will be titanic.” First, production chains were abruptly interrupted, and the measures adopted to avoid contagion caused a decrease in demand. These two shocks in the global supply and demand for goods and services is one of the factors that have caused the drop in the price of oil.

On the other hand, Manuel Romo, General Director of Citibanamex, reported that, according to the financial results of this quarter, the fall of the Gross Domestic Product (GDP) in 2020 will be 9.0%, which will cause a significant impact on the Mexican economy before the coronavirus pandemic. In a press conference, the banker expressed that the crisis “will be more severe than the one of 2009 or the one of tequila in 1994”, adding that, based on economic studies of the institution, unemployment is estimated to close at 7%.

Now, if we ask ourselves the following: Will Mexico enter an economic crisis?

We will respond that Mexico is already in an economic crisis. Our industrial activity has fallen for 16 months and hand in hand with foreign investment. The country is transitioning from an economic crisis to a financial crisis, which triggered the depreciation of the Mexican peso from mid-February to mid-March at 24%.

The reality is that the country’s commercial activities are being severely affected and this leads to an economic deficit, especially because there is no government support for this crisis for medium and small companies. Although we are experiencing a health crisis, and it must be essential to address health issues, we are also experiencing a severe impact on international business, which we cannot ignore in a border city that lives on investment foreign.

We only have left to continue contributing from our trench, seeking to collaborate from wherever we can, always for the common well-being of our community.

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