Government steps in as business nosedives
Written by Guadalajara Reporter Intern
Friday, 08 May 2009
Running a business in Mexico has gotten a whole lot tougher in the past few weeks.
Luis Gerardo Estrada, who makes his living from the Hospedarte hostel in the Zona Rosa of Guadalajara, says dwindling bookings, a 50-percent drop in occupancy and a rash of cancellations from abroad have forced him to reassess his business strategy.
“We need to sit down and think of ways to overcome such crises,” he said. “We are going to open a bar/café next week so that we get local customers and not just visitors from other parts of the world.”
Estrada isn’t alone in feeling the consequences of the influenza outbreak.
“You could say it wasn’t the best time to open a new business,” said Mari Ochoa, the manager of San Francisco Salads on Avenida Chapultepec, which began service on Monday. “People just aren’t eating out, almost no one has showed up. And our other restaurant in Providencia has seen takings decrease by about 70 percent.”
The lack of visitors to downtown Guadalajara has seen bus ticket sales at Tapatio Tours fall by 50 percent, while drivers of calandrias (horse-drawn carriages) said they were scarcely averaging one ride a day.
Mexico’s Finance Minister Agustin Carstens announced Wednesday that aid from the government would be coming to the hardest hit sectors and that from July the country would see a “rapid recuperation.” Twenty-seven billion pesos are to be used for the most affected sectors, namely hotels, restaurants, pork-producers and public spaces such as the Expo Guadalajara trade show center.
Carstens also announced that all businesses in Mexico will be eligible for a 20-percent discount in their benefit payments to the Mexican Social Security Institute (IMSS) for May and June, up to a limit of 35,000 pesos. And state governments are being asked to provide 1.4 billion pesos in tax benefits.
Estrada isn’t convinced that the stimulus plan will filter down to the small and micro-business sector.
“The government hasn’t helped us so far. They just sent out some leaflets about the dangers of swine flu and instructed us to give them out to our guests.
“We’ll have to look and see how tourists react come June, July and August and see whether the student groups that usually come actually do,” said the young businessman.
Margarita Ortiz, head of the Employers’ Association (Coparmex) in Puerto Vallarta, said many hotels in the resort are contemplating closing for the rest of the summer. Other businesses have also lost million of pesos because of the government’s “exaggerated” shutdown of bars and entertainment centers in Vallarta, he said.
Cancellations of vacations in Cancun were running at 70 percent last weekend, while other resorts reported figures as high as 90 percent.
Tourism has been worst hit in areas where the highest number of flu cases have been reported. Hotel occupancy in Mexico City and Aguascalientes fell to eight and ten percent respectively.
Meanwhile, Continental Airlines slashed flights to Mexico by half on May 4. The airline operates 450 flights a week between the United States and Mexico. American Airlines has cut its flights to Mexico by 25 percent.
Planes are arriving empty from Europe, Canada and United States but returning full with holiday makers anxious to get home.
Canada suspended all charter flights but has maintained its regular services to and from Mexico.
Even Mexican airlines, including Click, Aeromexico and Mexicana, have cut flights on many domestic routes, in particular to beach resorts.
Carstens said airlines will get a 50-percent reduction in air space fees and three billion pesos in loans and loan guarantees.
The finance minister said he was optimistic about the Mexican economy and that in comparison to events like natural disasters, the vital manufacturing sector has continued through the swine flu hysteria and that should mean a smoother ride out of the crisis.