The coronavirus crisis forced the permanent closure of an average of 164 businesses per day in April and May.
Data from the Mexican Social Security Institute (IMSS) shows that a total of 9,984 formal sector businesses shut down for good in the two-month period – 6,689 in April and 3,295 in May. The combined figure is equivalent to 42% of all new businesses that opened in 2019.
The total number of formal businesses in Mexico at the end of May was 997,767, according to IMSS.
Experts say that the coronavirus-induced economic slowdown and the lack of financial support from the government were the main factors that caused the closure of almost 10,000 businesses in just two months. Mexico shed about 900,000 formal sector jobs in the same period.
Jesús Rubio, a public policy researcher at the College of the Northern Border in Monterrey, said that a lot of businesses, especially small and medium-sized ones, simply didn’t have enough cash flow to meet their fixed expenses and as a result were forced to close.
He predicted that the economic recovery will be slow and that more businesses – restaurants and entertainment venues, in particular – will close due to lower demand for their goods and services.
The government is offering loans of 25,000 pesos (US $1,120) to help businesses weather the coronavirus storm but has acknowledged that many small business owners haven’t even applied because the amount is too small. It has rejected calls for businesses to be allowed to defer their tax obligations until the worst of the economic crisis is over.
Armando Guajardo Torres, president of the Mexican Employers Federation’s labor commission, said that more government support is needed if further business closures and job losses are to be avoided.
He said that it would likely be two years before the total number of formal businesses in Mexico returned to the level seen at the start of 2020.
José Luis de la Cruz Gallegos, general director of the Institute for Industrial Development and Economic Growth, a think tank, said that once IMSS publishes information that indicates the sectors in which the shuttered businesses operated, the government will be able to better target financial support.
But even though the economy is predicted to contract by about 8% this year, President López Obrador has ruled out increasing public debt to support the private sector, stressing that he wants to keep the nation’s finances healthy.
Source: Reforma (sp)
