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A day after President Andrés Manuel López Obrador closed the door for a rescue plan for Mexican companies to overcome the effects of the COVID-19 crisis, many Mexicans fear that the president's response will significantly affect the small businesses in the country. Small businesses make up the second-largest economy in the entire Latin American region, says an article.

Not Following Other Nations' Strategies 

AMLO stated that he would be prioritizing social spending.

The President of Mexico did follow the strategies of other large nations such as tax breaks and other stimulus packages. These nations aim to assist businesses in the private sector who were greatly affected by the widespread stay-at-home orders and other measures being implemented by their governments to prevent the spread of COVID-19.

Plans of the Mexican Government

The government plans to provide more than 2 million loans to people, households, and small businesses in the amount of $1 billion.

Also, the government will be supporting the construction of houses, programs for public work, and flagship projects on trains, an airport, and refinery infrastructures. This measure will provide 2 million jobs to unemployed Mexicans. The funds will come from salary cuts for senior officials and stricter government policies rather than through a new liability.

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The Effect of the Lack of Major Stimulus

Business leaders expressed their fears of having employees lose 1.2 million jobs, as the country postpones essential activities to prevent the spread of COVID-19.

Small and micro-enterprises provide 7 to 10 formal jobs to people. This is more than half of the gross domestic product of Mexico. If these businesses are left with no support, more Mexican will be at risk of suffering from poverty.

How are the People Reacting to Prioritizing Social Spending amid the COVID-19 Crisis in the Country

According to Cuauhtémoc Barrios, an entrepreneur in Monterrey, he is disappointed to know that the policies implemented in the country will most likely be retained even after the COVID-19 crisis.

According to the National Chamber of Commerce in Mexico City's leader Nathan Poplawsky, it is estimated that consumption declined by 2 billion pesos per day in Mexico before the COVID-19 pandemic.

According to Banco Base's research manager Gabriela Siller, the Mexican economy can contract by up 10% for 2020 in worst-case scenarios. It will be one of its worst performance since 1932, where the Mexican economy had contracted by 14%.

As markets abandon the plan of the president, the Mexican peso had declined to a new historic low overnight at 25.8 pesos per dollar. According to the country's top businessmen, the later the president reacts to the issue, the more it will cost. A liquidity crisis in the current period will shift to a solvency issue in the future, and it will take years for the country to recover, they added.