Does Mexico’s coronavirus economic rescue plan fall short?

AMLO says his administration will not incur public debt, bail out companies or give tax breaks to people or firms.

Business and labour groups in Mexico worry about whether small and medium-sized companies, like restaurants and retail shops, can survive the next few months in the shadow of the coronavirus [File:Bloomberg]
Business and labour groups in Mexico worry about whether small and medium-sized companies, like restaurants and retail shops, can survive the next few months in the shadow of the coronavirus [File:Bloomberg]

Mexico City, Mexico – Until three weeks ago, Manelig Rivera, 42, was a tour guide in Tulum, a tourist destination on Mexico’s Caribbean coastline that is usually packed at this time of year for spring break, but which is now on lockdown as part of Mexico’s response to contain the coronavirus pandemic.

“People have no idea of what lies ahead of us, and we need to start producing our own food,” Rivera tells Al Jazeera with urgency in his voice. Mexico declared a national emergency to stop the spread of COVID-19 on March 30th, ordering all non-essential activities to be suspended for a month. It did so, however, without a clear plan to protect an economy that had already contracted in 2019 and is still struggling because of the sharp decline in global oil prices. Further compounding a dire situation, since March, Mexico’s currency has lost approximately 25 percent of its value against the United States dollar.

Rivera, like many workers in Mexico, is concerned that the country’s newly-announced plan to fight the economic consequences of the pandemic will fall short.  He’s worried about how he is going to get food in the upcoming months. “I’m thankful I don’t have a family to feed right now,” he says. “I can’t imagine what that would be like.”

AMLO’s plan: late and controversial

Mexico’s President Andres Manuel Lopez Obradorwaited six days after he declared a national coronavirus emergency to announce his economic strategy. 

Mexico’s President Andres Manuel Lopez Obrador holding up his amulets, which he says serves him as “protective shields” against the coronavirus disease, during a news conference at the National Palace in Mexico City, Mexico [Mexico’s Presidency/Handout via Reuters] [

The president says his administration will create two million jobs within nine months, keep up with the existing social programmes that mainly consist of direct subsidies for people with low incomes, and secure more government funds for housing and personal loans for employees with full-time jobs. His administration also plans to move forward with all projects that had been planned before the epidemic came knocking on Mexico’s door. 

“I think our model will be a reference to other countries … because the neo-liberal model is crashing down and coronavirus only made an already doomed model to come down even faster,” Lopez Obrador told reporters this week. “A pandemic shouldn’t be affecting the economy so much.”

Lopez Obrador also said his administration will continue with its austerity measures, will not incur public debt, and will not bail out companies or give tax breaks to people or companies.

“Very disappointing,” is how Manuel Molano, director of the Mexican Institute for Competitiveness (IMCO), a public policy think-tank in Mexico, described Obrador’s announcement.

Molano told Al Jazeera that the lack of specific measures tailored to the world’s ongoing health and economic crisis “will only make Mexico’s current crisis even worse”.

Most concerning to business and labour groups is whether small and medium-sized companies, like restaurants and retail shops, can survive the next few months. Such businesses account for 52 percent of the gross domestic product (GDP) in Mexico.

“It’s imperative to protect the small and medium business owners that provide over 70 percent of jobs in Mexico, and we don’t see any such measures in his plan,” Maria Fernanda Garza, president of Mexico’s International Chamber of Commerce, told Al Jazeera. “His plan is basically not changing the course of his policies, and we believe the president needs to reconsider his strategy.” 

Mexico’s tourism sector accounts for 8.5 percent of all the goods and services produced in the country, and 5.8 percent of its jobs [File: Bloomberg] 

Key sectors could be hurt

Rivera says local authorities told tour guides like himself that archaeological sites may reopen in May, but he does not believe tourists will quickly flock back. 

“You think Europeans will just say ‘Hey, let’s take a vacation to Mexico!’? I don’t think so. They’re also going to be dealing with their own economic crisis for the upcoming months,” he says.

Mexico’s tourism sector accounts for 8.5 percent of all the goods and services produced in the country, and 5.8 percent of its jobs. The sector has already taken a measurable hit: during the last three weeks, businesses laid off 57,406 people in the vacation destinations of Cancun, Playa del Carmen and Chetumal alone.

Mexico’s automobile and beverage industries are also being hit hard. The Latin American nation is one of the world’s leading car producers. Many foreign firms manufacture cars or auto parts in Mexico, making the sector responsible for 3.6 million jobs, according to the local automobile business association. Yet because of the pandemic, US automakers such as Ford, General Motors, and Chrysler have stopped production in Mexico.

The Latin American country’s beer producers are also feeling the sting. In Mexico, beer accounts for 55,000 direct jobs and more than 600,000 indirect jobs. It, too, has also stopped production – including the company that produces Corona beer.

Economic plan falls short

Jose Medina Mora, general secretary at Mexico’s business group COPARMEX, told Al Jazeera that the president’s plan to keep up with subsidies and process tax returns sooner is a good start. However, “[AMLO] said he would create two million jobs, but you can’t create them just by decreeing it,” said Medina Mora. “This programme falls short in addressing the severity of the crisis.”

Last week, Lopez Obrador said he would take out around $16.6bn from public trusts and a budget stabilisation fund to address the economic crisis that analysts expect may reduce Mexico’s GDP by four to 12 percent.

“While [his plan] might seem promising, it also means we will deplete funds that were saved for emergencies and move them to regular expenditure with little or no accountability,” said Molano.

In the meantime, back in Tulum, Rivera says he’s putting his background in soil management and crop production to good use. Along with his friends, he is growing corn, beans, carrots, tomatoes and other produce in his garden and expects to have something to harvest in three months so they can all secure their own food.

“This is gonna hit us hard, real hard,” he says. “I hope I’m wrong, though.”

Source : Al Jazeera

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