18,000 businesses in city at risk of closing - Mexico - The News

18,000 businesses in city at risk of closing - Mexico - The News

BY MAGNOLIA VELÁZQUEZ
MEXICO CITY Close to 18,000 businesses in Mexico City are at risk of closing due to the health and financial crises this year, according to the Chamber of Small Commerce, Services and Tourism Businesses (Canacope).
The shockwaves this year have caused consumption to sink by as much as 50 percent, Canacope said Thursday. About 12,000 businesses have already closed this year, and 36,000 jobs have been lost due to the H1N1 outbreak and the global economic crisis. Nationwide, unemployment will total more than 5 percent this year.
In a Canacope survey of 300 businesses, 37 percent said they might close this year, citing sales losses of more than 50 percent.
Canacope President José Caudillo Herrera said that the businesses which have been most likely to close are those that sell construction materials, cooked food, appliances, cell phone airtime, clothing and footwear.
Even repair shops, small miscellaneous stores, corner stores and hotels have been hit, Caudillo said. Speaking at a press conference, Caudillo lamented that during the holiday season, sales won't recover like in previous years.
According to Canacope's estimates, sales in December will be around 11 billion pesos. Sales at the city's legal 200,000 businesses totaled 55 billion pesos, a 15 percent fall from last year's 73.2 billion pesos. This doesn't take into account the black market and informal economy, which Caudillo said is worth the same or more in terms of sales.
In fact, the Center for Economic Studies on the Private Sector (CEESP) estimates that the informal economy accounts for 12.4 percent of the gross domestic product and employs 28 percent of the country.
“This is not a good omen,” Caudillo said.
To add insult to injury, vendors and business owners will be hit by federal sales and income tax increases, which take effect in January.
With the tax hikes, all products and services are expected to cost more during the first quarter of 2010, Caudillo said.
To counter further losses, Caudillo urged lawmakers to approve tax, energy, labor, political and even educational reforms.
“We have to begin to give legal certainty to investors and not change the rules of the game halfway through,” he said.
He also called on capital residents to “properly learn” to use credit cards and spend only when necessary, in order to avoid finance charges and late fees.