Daniel Berehulak for The New York Times
MEXICO CITY — There is an old saying here: “When the United States gets flu, Mexico gets pneumonia.” This year, it got a new punchline: “So what happens when the United States gets coronavirus?”
There are few countries so connected economically. The United States buys more than three-quarters of Mexico’s exports, $358 billion worth in 2019; and it’s home to 11 million Mexican citizens, who sent home a record $36 billion last year — cash that especially helps the rural poor here. As the U.S. economy crashes over the cliff, it pulls Mexico along . Except Mexico falls harder.
The double whammy of exports and remittances dropping is compounded by the collapse of beach tourism and oil prices. Adding to this, President Trump last week suspended much immigration . And then there’s the losses from the partial lockdown that has shut shops, bars and restaurants across much of Mexico.
The Swiss bank UBS predicted Mexico’s economy will contract by 7.6 percent this year . Bank of America said the country’s economy will shrink by 8 percent , while the Spanish bank BBVA predicted a stunning contraction of up to 12 percent.
It’s painful to envision what those cold numbers could mean in human terms. Besides the loss of jobs and savings, personal frustration and depression, could it translate to more malnutrition? And will this in turn lead to crime and unrest? The big task for President Andrés Manuel López Obrador will be to avoid the worst consequences.
Already, many of the country’s working poor are struggling to get through the day, let alone the year. Juan Antonio Olivares, 38, sells orange juice at a stand in my neighborhood in Mexico City. He is still allowed to work, but if the government halts the informal economy, it could push people like him over the edge. While he used to make up to 2,500 pesos, or about $104 a week, his earnings have plummeted to less than 600 pesos, or $25, per week.
Now he is barely able to feed his wife and three children back in his village outside the capital. “We are enduring with little, what is necessary to eat: rice, beans and tortillas,” he said. At least he has some income, unlike a lot of workers — including many valets, waiters, bellboys, shop assistants — who have been furloughed without any compensation.
Before too long, some could turn to extreme measures to get by, Mr. Olivares says. “If people are desperate then they are going to have to look for a way to eat, in a bad way, going robbing,” he said. “This could get out of hand.”
A rise in antisocial crime is a big fear of the middle class here. Last month, criminals set up groups on Facebook and WhatsApp to organize “Covid-19 looting” in the poorer suburbs of the capital . People accused of being the ringleaders were arrested and Facebook took down the pages. But if looting occurs, it could threaten the food supply for all of us here.
Mexico City residents have painful memories of a spike in mugging and kidnapping after the recession of 1995, when the economy contracted 6 percent, which is sometimes called the Tequila Crisis. Today’s Corona Crisis is projected to cut even deeper. And while back then President Bill Clinton secured a bailout for Mexico, few here can imagine that Mr. Trump will act similarly (though he did back away from plans to suspend not just the issuing of green cards, but also guest worker programs). Perhaps the best hope for Mexico to try to limit the number of citizens being deported from the United States.
President López Obrador is under fire for his handling of the economic crisis. He has at least promised to give out millions of loans to small businesses and keep up his social programs, including those for students and pensioners. But he aims to fund these through cuts rather than debt. He ordered big businesses to not fire workers, while the country’s biggest employers’ lobby has repeated calls for the government to help pay wages and come to a national agreement to confront the crisis .
Mr. López Obrador sees debt as putting Mexico at the mercy of foreign powers, and is against bailouts, noting that tycoons have historically exploited rescue packages for their own benefit. And so while right-wing governments in Washington and London are taking on huge debts to pump money into the economy, a self-declared leftist in Mexico is preaching fiscal responsibility and telling people to tighten their belts.
Another surreal spectacle is that while the Mexican government falters, drug cartels are giving out relief packages across the country. In the state of Tamaulipas, gunmen handed out boxes marked “Gulf Cartel” with goodies like cans of tuna fish, rice and toilet paper. In Guadalajara, the daughter of the imprisoned drug lord Joaquín Guzmán , better known as El Chapo, provided packages with the image of her father.
At a recent news conference, President López Obrador criticized these handouts, pointing out that cartels are driving murders to record levels. “Help would be not doing harm to anybody,” he said. “We are attending to coronavirus, but disgracefully we go on having problems with homicides.”
Mr. López Obrador is right in castigating the cartel killings, as he is right to fear foreign debt and bail outs being pilfered. But in the face of such a critical situation, he needs to take critical measures. While debt is bad, the damage of a deeper recession could prove even more expensive. While businessmen have gotten away with sweetheart deals in the past, business needs to be healthy enough to keep the country afloat. And national agreements and unity could help lift morale amid calamity.
The president could keep true to his promise to put the poor first and channel the relief to those at the bottom. But he needs to channel real relief. What John Maynard Keynes prescribed in the Great Depression holds true today: that you have to inject money into a contracting […]