Coronavirus has shuttered 1 million small businesses

More than 1 million small and medium-sized businesses have closed permanently since the middle of last year, mainly due to the economic impact of the coronavirus pandemic, according to a study by the national statistics agency Inegi.

The agency determined that 1,010,857 businesses have shut their doors for good since May 2019, a figure that represents 20.8% of the 4.86 million small and medium-sized businesses counted by Inegi that month.

Inegi president Julio Santaella told a virtual press conference that business closures increased during the pandemic period, which in Mexico’s case began in March.

“We can’t confirm the cause [of the closures] but we can definitely say that the pandemic is a factor,” he said.

José Luis de la Cruz, director of the Institute for Industrial Development and Economic Growth, a think tank, said the “massive closure” of businesses was “historic” and indicative of the depth of the impact of the coronavirus on the economy.

The businesses that closed employed almost 3 million people, while those that continue to operate have reduced the size of their workforces by 1.15 million positions. All told 4.12 million jobs have been lost since May 2019.

On a more positive note, almost 620,000 new small and medium-sized businesses have opened since Inegi’s 2019 economic census. Those businesses created 1.23 million jobs.

The net result is that there are now 4.46 million small and medium-sized businesses, 8% fewer than in May 2019, and 11.77 million people are employed by them, a reduction of 2.89 million or 19.7%.

Inegi also determined via a survey that 86.6% of businesses in Mexico were negatively affected in some way by the coronavirus pandemic. Almost 80% of companies surveyed said that their revenue decreased, 51% said that they faced low demand during the pandemic and 23% said they had difficulties obtaining supplies and products.

Almost 16% of businesses said that they would only be able to continue operating for another three months if their revenue remained at the current level. Almost half – 46.6% – said that they could survive the next three to 12 months without an increase in income while 37.6% expressed confidence that they will be able to continue operating for more than a year even if their revenue doesn’t pick up.

Marco Arias, an analyst with the Monex financial group, said there is more optimism among businesses now than when Inegi conducted the same survey in April.

“But beyond the improvement, the impacts of the virus [on business] are very serious and profound,” he said.

The most recent Inegi survey also found that the vast majority of businesses received no financial support from the government to help them weather the coronavirus storm.

Only 5.9% said that they received support – the government offered small loans to small businesses but refused to help larger companies – while 94.1% said they did not.

Just over 61% of businesses surveyed by Inegi said that the assistance they most require to survive the pandemic is fiscal support. Just over 40% said the postponement of loan repayments and the payment of services such as electricity would help them while 30% said that they need new loans.

Almost 38% of businesses said they expected they would be late in making debt repayments in the coming months, although that figure dropped to 19.3% among large companies.

President López Obrador dismissed the findings at Thursday’s press conference, saying he was not worried by them.

“… I have information showing that private consumption hasn’t fallen, jobs are being recovered, there are no food shortages, there isn’t a high cost of living, there is no devaluation of the peso, we haven’t put ourselves in debt, taxes haven’t increased.”

Source: El Financiero (sp)