| | |  Business News | November 2008 
Slowing Global Economy Impacting Mexico
 PVNN
In a televised address aired in October, Calderon assured Mexicans the nation's banks are solid, despite a global credit crunch that has sent stocks here tumbling and seen the peso weaken to a record low against the dollar.
But with the rising cost of living expenses, falling oil prices and a slowdown in tourism, Mexican citizens and business owners are seeing the first strong sign that Mexico is in for a bumpy economic future, as evidenced in a recent article in The Guadalajara Reporter:
 | It doesn’t matter whether you’re a corporate executive or a modest housewife, increased prices are starting to play havoc with your budget.
Although the Mexican government claims to be in control of the economic slowdown, there are breaking points, as established businesses and the self-employed are finding out
Guisela Martinez takes in foreign students from Spanish-language schools around Guadalajara. The idea is that the student is provided with a safe, family atmosphere while they become acquainted with Mexican customs and culture. The schools pay her a fixed amount a month (around $5,000 pesos) to feed and provide rooms for the students, despite the fact that the schools are usually paid in (now more valuable) U.S. dollars.
But all is not well in the Martinez household.
"My income is the same and prices are going up," she says. "Prices for a lot of basic products have increased 150-200 percent in the last two months."
"At the moment I am cutting back wherever I can. I used to cook dinner using only meat but now I use 50 percent meat and 50 percent soy. It’s cheaper. I also don’t give students desserts and I buy less expensive cereals for breakfast."
By Martinez’s calculations, in the last two or three months a loaf of bread has gone up from $15 to $24 pesos, a carton of milk from $6 to $11 pesos and vegetable oil from $15 to $24 pesos.
"Other people doing what I do are considering stopping. The job now is only financially viable if the house is full of students. With one or two it wouldn’t be worth it."
Carpenter Antonio Rodriguez is in a similar boat. The cost of oak and maple, imported from the United States and Canada, has gone up 15 percent, he says. Accessories such as screws and hooks have gone up 20 percent. The raw materials required to make finished products are increasingly expensive. However, Rodriguez is reluctant to raise the price of his service for fear of losing clients.
While all imported products sold in Mexico have shot up in cost since the peso revalued to around 13 to the dollar, the full impact of the economic turmoil may not be seen until later in the year.
The owner of a lavanderia near the Minerva glorieta said she hadn’t yet noticed a decrease in business but was aware that the higher cost of households supplies might affect her business in the long run.
Staff at the Hotel Carlton in Guadalajara said bookings were holding at their usual level but that the real test would come during the high season.
Oscar Rivero, the president of the Puerto Vallarta Hotel and Motel Association, was more blunt about the challenges ahead. "We forecast a 12-percent decrease in tourism this year," he told local daily Mural.
That would represent a 600-million-dollar drop in income for Vallarta, where two planned hotels are now on hold and building work on two other developments has been suspended. |  |
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