But the virus crisis, which is far from over in Mexico, could end up exacting an even greater toll. The economy had already stopped growing before Covid arrived. Then last year it suffered its worst slump since the 1930s, shrinking by 8.5%. That’s worse than the worst year of the Tequila Crisis when the economy contracted by 6.3%. It’s also worse than the worst year of the Global Financial Crisis, 2009, when the economy shrank by 5.1%. The virus crisis has also laid waste to domestic consumption which suffered its worst annual decline on record (-11%) — almost twice as large as in 2009 (-6%).
Mexico’s government does not have the fiscal or monetary capacity to provide the sort of financial support programs that have been rolled out in more advanced economies. The government has resisted calls to splash out to prop up the economy, arguing (quite rightly) that bailouts tend to line the pockets of the rich. Instead it has targeted most of the fiscal support programs at the most vulnerable segments of society. As a result, public debt has not soared as much as in other economies.
My nephew who works in the construction industry in Puebla says that roughly one out of every three street-level properties in the city are currently vacant. Both rents and the value of the properties are falling sharply, he says. In Mexico City, 50% of the office space and 70% of the retail space at the 50-floor World Trade Center are empty.“390 Days with my Son-in-Law!” My Side of the Lockdown Story | Wolf Street