Why is the economic recovery not reflected in the number of businesses in Mexico? In May 2019, Mexico had 4 million 857,007 establishments. In July 2021 there were 4 million 460,247. In those 27 months there is a negative balance of 396,760 businesses.
Asking about the economic recovery makes sense when we see that between May 2019 and July 2021 1 million 187,000 businesses were born and 1 million 583,000 died. The data from the Inegi Business Demography study are more than interesting. On average each month, from the fifth of 2019 to the seventh of 2021, 43,960 businesses were born and 58,630 died. These numbers are worth a look through the microscope. Above all, if we take into account that these two years and a fraction correspond to one of the most complicated moments in the economic history of Mexico.
Why did businesses close … what expectations do those who open a business have? By day, 1,954 lowered the curtain and 1,465 opened. Statistics tell a lot, but it doesn’t tell the whole story. All happy families are alike, each unhappy family is unhappy in its own way, says Leo Tolstoy in the beginning of Anna Karenina. Every business is a happy and unhappy story in its own way; it implies a unique story, in a sense unrepeatable, when it opens and when it closes.
Are we facing the vision of the defeated … are they the stories of the survivors? Both. The hardest moment was 2020. On the macro account it was a drop in GDP of 8.5%, the biggest setback in 90 years. In April of that year, 12 million jobs were lost. In the next seven months, just over 9 million were recovered. The “war” to regain those jobs occurred in micro and small businesses. The study on the demographics of the Inegi businesses confirms the harshness of 2020 in terms of the “intensity” of the business closure. The record of the first semester of 2021 offers us an interesting picture: there is a reactivation expressed in the numbers of business births, the persistence of the crisis is also noted, if we consider the numbers of business deaths.
It is the pandemic and other factors that we must consider. The pandemic has caused more than 300,000 deaths and a statistical excess of mortality that includes more than 600,000 people, a total of 900,000 Mexicans who have died; there are also the disruptions brought about by the covid in activities such as retail trade, business intensive in personal contact and tourism; We also have the epidemic of violence, which has crimes that affect businesses, such as robbery, extortion and fraud, at historic levels. Somewhere you have to place the changes in economic policy and the restructuring of many areas of the government, including development banking and the closure of INADEM, which resulted in the almost total absence of government support to save businesses.
Inegi’s work has May 2019 as a reference, because it is the date on which the economic censuses were made. Between that time and July 2021, 32.61% of the businesses settled in Mexico “died”. Almost one in three, the figure is high, but there were two states that passed 40%, Quintana Roo and Colima. In Nuevo León it was 39.8 percent. At the other extreme, we have that the lowest proportion of mortality corresponded to three of the poorest states in Mexico, Chiapas, Oaxaca and Guerrero, with 26.3, 26.6% and 27.0%, respectively. What do statistics tell us? We can venture a hypothesis in the case of Nuevo León: its proximity to the United States has produced a business culture where there is more speed to make the decision to close a business. More “coldness” and more social “acceptance” of the failure of a company.
Why did the businesses close? How long will businesses be open? The question is in the air. Inegi’s work is necessary to find answers. They are a necessary condition, but not a sufficient one. We need to dedicate more neurons to understand the birth and death rates of businesses.
Editorial Director General of El Economista
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Degree in Economics from the University of Guadalajara. He studied the Master of Journalism in El País, at the Autonomous University of Madrid in 1994, and a specialization in economic journalism at Columbia University in New York. He has been a reporter, business editor and editorial director of the PÚBLICO de Guadalajara newspaper, and has worked for the newspapers Siglo 21 and Milenio.
He has specialized in economic journalism and investigative journalism, and has made professional stays at Cinco Días in Madrid and San Antonio Express News, in San Antonio, Texas.
Reference-www.eleconomista.com.mx