Mexico's Monterrey on the brink of bankruptcy
Juan Perez Montalvo shines shoes and has a newsstand here. Hector Lopez Reynosa runs a factory on the edge of Monterrey that makes bricks for industrial use.Skip to next paragraph
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They do not know each other, probably would not recognize each other, and certainly would have little reason to associate.
Yet they have come up with identical solutions for the deepening recession now gripping this northern industrial hub that, with its surrounding region in the state of Nuevo Leon, contributes one-fourth of Mexico's gross domestic product.
Their solution? Nuevo Leon should appeal to the United States to become the 51st state in the North American union.
They offered this idea a bit tongue-in-cheek, and, if they had to vote on the idea, would probably reject it. But the mere fact that they would suggest it says something of the business and economic climate here: The situation is bad - and getting worse.
Although it is hard to come up with solid statistics, factory layoffs in Monterrey are every bit as severe as elsewhere in the nation. They may be worse. Some factories here, with 500 employees at the start of 1982, are down to 200. Many machine plants are operating at half production. An unofficial estimate for last week suggests that as many as 10,000 workers will be laid off.
The reasons for the economic downturn are many. But a chief problem is the inability of local businessmen to get the dollars they need to import raw materials. Without those imports, businesses either have to reduce their activity sharply or close down.
A plastics manufacturer here, for example, needs about $20,000 worth of material imports a week to keep production humming. But he notes this is substantially offset by the sale of his plastic products abroad, which for the past year have been netting more than $50,000 a week - a net gain of at least $ 30,000.
''It is like this everywhere. We import to help our business stay afloat,'' he said, ''but we contribute a great deal to the Mexican economy.''
The situation is causing a deep retrenchment in business here that some local specialists say means a 40 percent drop in industrial activity within the past two months.
Businessmen tend to blame the government of President Jose Lopez Portillo, and he is regarded as fair game for criticism.
Spokesmen for both Groupo Industrial Alfa, S. A., and Valores Industriales, S. A. (better known as Visa), the two largest industrial complexes in Mexico, clearly blame the government for many of their problems. Both are headquartered here and both are on the edge of bankruptcy. There is little doubt in business circles here that government bureaucracy and corruption have hampered business.
Even labor leaders in the powerful Confederacion de Trabajadores Mexicanos agree.
''Government is not always an ally of labor for they cause grievance and monetary loss to business, which it can then throw back at us when we ask for legitimate wage increases,'' a labor leader says.
But not everyone puts all the blame for current economic problems on the Lopez Portillo government. After pressing businessmen on the point, many will admit that business, along with government, overextended itself in the past two or three years, took out too many loans, and banked that their affluence would continue.
These businessmen will also admit to having done what President Lopez Portillo complains about: taking dollars out of the country for US skiing vacations, visits to Disneyland and Disney World, and purchases of consumer goods for use in their homes here.
''We are guilty of the sacadolares syndrome about which the President speaks, '' admits a businessman who recently purchased a refrigerator and freezer in Laredo, Texas, for his home here. Sacadolares is a term the President uses for those who have taken dollars out of the country.
But most businessmen here say it is not people in Monterrey who have taken dollars out for real estate and stock and bond purchases.
Most expect layoffs here and that they will produce an increase in crime here. Police spokesmen say robberies alone were up 13 percent in the first 25 days of September over all of August.
Another problem facing Mexico is a persistent drought, which is causing economic havoc not only here but also with the nation's farm production. There are food shortages and a need for increased food imports.
''I expect prices to rise on basic commodities, vegetables, fruit, and meat before the year is over,'' says supermarket manager Valentin Jimenez Robles. ''Maybe 25 percent,'' he adds.
Such a situation can have only a major impact on a region already in recession.
For a city that has grown from 200,000 in 1940 to more than 2.5 million people today - with a living standard that is perhaps second only to that of Mexico City - the situation means a period of undetermined length in which there is no economic growth and probably a good deal of backsliding.
''I do not see it improving, and I guess I would have to say that our economy in Monterrey is going into a tailspin from which it will take years to recover, '' said a vice-president of one big industry here.