Coronavirus Effect: Failing US Consumer Demand Hurts Mexico
One of the many impending crises in Mexico right now would be the rapid decline in its economy. A recent report stated that the IMF expects a 6.6 percent recession in the country's economy this year.
In Mexico, where there are more than 6,200 verified coronavirus cases, a health emergency was proclaimed on March 30 to deter disease transmission, discourage people from going outside, and discontinue all non-essential businesses. For the following weeks, the country is expected to be mindful of the changes in the number of COVID-19 cases.
Per the Ministry of Labor, more than 346,000 organized private-sector employments have been lost in Mexico throughout March 13 and April 6.
International crude oil rates and Mexican employees' remittances overseas, which last year totaled an approximate of $36 billion, are declining. Moreover, Mexico's reliance on tourism as well as exports implies that decreased US consumption on everything from vehicles to beach vacations would only further pressure the second-biggest economy in Latin America.
After signs of recession from World War II were emerging, an economic recession analyst warned that it would be worse than any recession, as the number of reported infections of coronavirus in Mexico increases.
Alberto Ramos, the chief Latin American economist at Goldman Sachs, has this to say: "It's going to be a period of a severe recession and a lot of social pain."
Check these out!
-
Furloughs and Recruitment: Medical Personnel Understaffed in Mexico
-
Latino Deaths in Meat Factories Raise Concern Regarding Quality of US Food Supply
A bruised tourist industry
To make things worse, aside from manufactured exports, remittances, and oil sales, tourism is one of Mexico's most important sources of foreign exchange profits.
Numerous hotel establishments have shut down. From March 13 to April 6, roughly 64,000 jobs have been lost in Quintana Roo. According to the Minister of State Tourism Vanegas, hotel occupation is already below 4 percent.
The impact on the economy of the pandemic is as evident in a few areas as the vacation cities like Cancun and Tulum. Local closure initiatives and a sharp decline in visitors, mostly from the United States, have given tourism a heavy blow. The industry comprises 8.5 percent of Mexico's GDP.
As the economic meltdown in the USA intensifies, the tourism industry in Mexico may experience an extended decline. More than 32 million US residents traveled to Mexico by land and air the year before, rendering it the top international holiday destination for people who reside in the United States.
Auto sector grinds to a halt
Multiple car manufacturers, like Toyota and Honda, have prolonged closures at factories throughout North American countries due to the global pandemic and subsequent rapid decline in demand.
The automotive industry is felting the impact in Mexico, which typically profits from convergence with the US and Canadian distribution networks. Car manufacturing plummeted by 24.6 percent in March relative to the same month a year ago, whereas exports declined by 11.9 percent, as shown by INEGI, Mexico's national statistics institute.
"The transmission or spillover to Mexico happens within days," Alberto Ramos stated.
Most production firms work with small inventories in Mexico, the biggest trading partner in the US-based on the most recent data from the Census Board. Economists state that their comparatively low stock renders them particularly vulnerable to fluctuations in distribution networks in the US and elsewhere.