| | |  Business News | January 2009 
Amid Crisis, Mexico Pledges to Fight Layoffs
 Alexandra Olson - Associated Press
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| | Mexico's President Felipe Calderon announces a new economic stimulus package in Mexico City, Wednesday, Jan. 7, 2009. In an attempt to head off layoffs at companies vulnerable to the economic crisis, Calderon announced the government will invest 2 billion pesos into the country's troubled industries. (AP/Gregory Bull) | |
Mexico City - Mexican President Felipe Calderon pledged last week to pump 2 billion pesos ($150 million) into troubled industries to prevent layoffs at companies vulnerable to the economic crisis.
The money will go to companies that have had to temporarily freeze production because of the crisis, Calderon said. He did not name who would benefit, but the country's automotive industry has been hit especially hard. The president estimated that the money would protect 500,000 jobs, especially in the export industry.
The measure was part of a 25-point economic plan, which also included freezing gasoline prices for a year, reducing household gas prices by 10 percent, expanding unemployment benefits and starting public works projects that create temporary jobs.
"We are and will be going through a period of great difficulty in terms of economic growth, investment and employment in our country," Calderon said.
Mexico's dependence on the U.S. economy has made it especially vulnerable to the global downturn. The United States buys 80 percent of Mexican exports, while remittances from migrants abroad are Mexico's second-largest source of foreign revenue after oil exports.
Because oil production and remittances are falling, the government is forecasting 1.8 percent growth in 2009 and a projected 2 percent in 2008. But Private bank Banamex predicts that Mexico's economy will contract 0.2 percent in a 2009 recession.
Economists expect Mexico's inflation to end 2008 at 6.5 percent or higher, nearly double what it was in 2007. Electricity, food and gasoline prices especially have risen.
Gustavo Hernandez, an economist with Mexico's IXE Grupo Financiero, said the new energy price cuts could significantly curb inflation, which IXE had forecast would reach 4 percent in 2009.
"We think the most important impact of the plan announced today will have to do with inflation," Hernandez said.
Calderon said some of the money for vulnerable companies would go directly to workers, many of whom have had to take wage cuts or unpaid vacations during temporary plant shutdowns.
Hernandez said the money would not be enough to avoid sizable job losses in manufacturing. IXE estimates the sector shed between 50,000 and 80,000 jobs in the second half of 2008 as U.S. demand for Mexican exports fell.
"We don't feel that 2 billion pesos can make an important difference between dismissing or not dismissing people," he said. "It's more a signal of future measures to support Mexico's economic activity."
Mexico's auto industry association is lobbying for a much bigger government aid package of $3 billion to loosen credit for dealers and customers in an effort to boost sinking domestic demand. Vehicle sales in Mexico plunged almost 20 percent in November, while auto exports fell nearly 8 percent. |
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