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This story originally appeared on Alto Nivel
In Mexico, business mortality is a constant phenomenon that has a previous history. Year after year fewer companies are born than die, this has long-term effects on the statistics related to employment and on the growth and consolidation of events that historically are a drag on the Mexican economy, such as informality, which in itself is a direct consequence of the constant corporate mortality.
But the pandemic accelerated business deaths. The National Institute of Statistics and Geography (INEGI), published the Study on Business Demography 2020 (EDN), in which there is no doubt about the “catastrophic scenario” that generated the phenomenon in Mexico during the fateful 2020, when the pandemic hit all global economic structures.
The study in question is relevant because in Mexico something similar had not been carried out since 2012, exactly 37 months after the 2009 Economic Censuses were carried out; Today, it was essential to know what had happened to business life in an environment of crisis like the one we live in. On this occasion, the analysis is carried out 17 months after the last Economic Censuses, those of 2019, but the occasion deserves it.
Pandemic deepened business mortality
It is a fact, the pandemic hit the business climate in Mexico and forced the closure of companies. The data provided by INEGI indicate that in 2019 4 million 857 thousand 7 establishments had been registered, while for the first two months of this year the figure is 4 million 465 thousand 593 establishments , that represents a contraction of 391 thousand 414 economic units, equal to 8.06 percent.
In what has been practically the period of the crisis, 619 thousand 443 establishments were born in Mexico, but 1 million 10 thousand 857 units died in that same period of time , that is, 1.63 businesses die for each one that is born.
Something that is worrying is the size of the units that close because although micro-enterprises have a large participation in the labor market, the so-called SMEs (Small and Medium Enterprises) are not far behind.
According to official figures, during the study period of the total of microenterprises established 13.11 percent saw the light, but in return 20.80 percent had to close . However, in the SME sector, the figures are more dramatic since of the total number of companies, only 2.81 percent were born in the study period and, on the other hand, a mortality rate of 21.17 percent was registered.
If we analyze the performance of the sectors of economic activity, we also find some that have been most affected. In the manufacturing sector, 8.78 percent of the total companies were born during the period studied, but 15 percent died . In the commercial sector, the relationship was 13.75 percent of births against 18.98 percent of deaths, and in the non-financial private services sector there were 12.85 percent of births against 24.92 percent of closings.
The national average of the birth rate of business units in Mexico was 12.75 percent with respect to total establishments; Tlaxcala, one of the smallest and poorest states in the country, had the highest growth rate with 19.31 percent, while Quintana Roo had the lowest rate with only 7.67 percent.
The average death rate for business units in the country was 20.81 percent; Quintana Roo was the entity with the highest rate, registering 31.88 percent of the total , which is clearly explained by the effects of the confinement, which caused the closure of thousands of businesses related to the tourism sector. Oaxaca was the state where the least business mortality was registered with a rate of 13.70 percent of the total.
We mentioned above that business mortality has direct effects on indicators such as employment, it is in fact this item that most reflects the positive or negative situation.
In the case of Mexico, unfortunately the figures are not good. In fact, they fully reflect the effect of the constant closure of business units, predominantly micro, small and medium-sized companies.
According to INEGI figures, at the close of the 2019 Economic Censuses these business units had 14 million 660 thousand 209 workers registered , while for the January-April period of this year the figure stood at 11 million 775 thousand 47 people, this is a reduction of 2 million 885 thousand 162 sources of employment, equal to 19.68 percent.
As expected and given the almost massive closure of establishments in Quintana Roo, in recent months, this entity leads the loss of employed personnel with 39.77 percent of the total , which is 20 points higher than the national average. it located in 19.68 percent; Chiapas is the entity in which the least loss of employment has been reported in establishments, with 8.97 percent of the total.
At the end of its report, Inegi leaves a figure that seems less or not very relevant but that has a profound impact on current business conditions and will have greater effects, especially on employment, if economic conditions do not improve in the coming months. .
Thus, according to official figures, only 1 in 10 establishments received financing or economic support during this period of crisis , something like 10 percent of the total universe. Literally, micro, small and medium-sized companies have had to “scratch with their own nails” and everything indicates that they should continue that way.