Mexican Retailers, Maquilas Face Losses Amid Shutdowns, Lootings
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MEXICO CITY — Mexico’s fashion retailers and apparel factories are facing steep losses as the government orders the country to shut down for more than a month to contain the coronavirus and store lootings spike.
“We are seeing many global retailers close and forced closures in some regions including Mexico State, where we had to shut our Townsquare mall in Metepec,” said Jaime Fasja, founder and co-chief executive officer of Thor Urbana Capital, who said its plans to build a string of malls, hotels and entertainment centers are so far proceeding on schedule despite the disruptions.
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Fasja said Townsquare’s international fashion labels — including Inditex’s chains Zara, Bershka and Massimo Dutti as well as Forever 21, Old Navy and Sephora — have shuttered as the state pursues its “healthy distancing” containment campaign to stem the virus. So far, the fast-spreading pandemic has killed six people and infected 475 in the country, which is facing a deep recession as consumption declines in its main trading partner, the U.S.
Thor Urbana’s 14 Mexican malls have monthly revenues of about 1.5 billion pesos, or $64.4 million, meaning the shutdowns could trigger losses of that much, Fasja conceded. Other banners are also facing loss from a growing spate of store lootings since the curfews began this week They include department stores and supermarkets in Mexico City as well as stores operated by department-store Coppel and Walmart in other states. Retail lobby Antad has called for a “hard hand” and “zero impunity” against the looters.
Thor Urbana is helping its store tenants cope with the crisis through “tailor-made” solutions that will enable them to delay rent payments or face liquidity problems, according to Fasja.
He said retailers and other industries, including manufacturing, will soon meet with the government to request an aid package but that it was too early to provide details as the virus is in its infancy in Mexico. The wheels of commerce have not fully stopped in the whole country, however, as some supermarkets and retailers remain partially open in Jalisco (home to Guadalajara city) and other states, Fasja said, although schools, churches and many gathering places are closed.
Whatever rescue package is approved, it should include large sums for Mexico’s pymes, or mom-and-pop shops, facing bankruptcy amid the health crisis, said Arturo Rodriguez, who owns apparel factory Confecciones Vivanco.
“Mexico is a net of thousands of pymes. We are talking to the government so that any package includes help for these small textile shops,” he noted.
He expressed concern that rising unemployment in Mexico will lead to a spike in crime and migration to the U.S. as its vast numbers of impoverished citizens seek jobs elsewhere.
Many apparel factories have closed around Mexico while others are rejigging their operations to make medical staff equipment such as masks, gowns or overalls, observers said.
“We are reducing our operations as our U.S. customers are either canceling orders or delaying them,” Vivanco said, adding that Mexico could see exports decline by at least 10 percent as textile mills, including those ran by textile and denim giant Kaltex, cut capacity.
Gustavo Bojalil, who owns Proveedora Bosa de Mexico, which helps supply Target, said he has shut the bulk of his factories and only left one running to meet last-minute orders. He said the Puebla region, where maquilas produce denim for the likes of Levi’s and Wrangler, has cut capacity by more than 50 percent as U.S. and European customers curtail orders. Some, including Bosa, are making protective overalls for medical staffing firms, Bojalil said. He said he has furloughed 176 workers with 50 percent pay.
Bojalil said most fashion stores and gathering places such as malls and gyms will be shut in Puebla through Easter and until April 19.
Meanwhile In Central America, the bulk of the region’s apparel plants producing for U.S. labels have also shuttered.
Hugo Noe Pino, a Honduran economist, said the country’s maquila industry — home to T-shirt factories ran by Gildan, Tegra and Elcatex — has temporarily folded amid efforts to contain the illness. The plants closed 11 days ago and will likely remain idle through Easter as the government is set to extend a total curfew beyond March 29 for another two weeks.
So far, the impoverished nation has earmarked $30 million to help laid-off workers survive the crisis, a sum Pino said is insufficient to provide a living wage until factories restart when demand picks up again in the U.S.
Fredy Carrasco, head of labor syndicate at Tegra, which has been forced to delay plans to build a new Nike sourcing factory alongside partner Grupo Kattan, said the country’s 97,000 workers are worried and unsure how much pay they will receive. Between Tegra and another affiliated site called New Holland Apparel alone, 7,700 workers have been sent home, exacerbating a critical unemployment rate in Honduras responsible for fueling U.S.-bound migrant caravans.
Economists and human rights activists are demanding that Honduras and other Central American countries redirect their budgets to stem the virus’ economic impact in Latin America’s poorest region.
“The help so far is insufficient,” said Abelardo Medina, a leading economist with regional economic think tank Icefi, referring to the Honduras package as well as a $200 million one in El Salvador and others by Guatemala, Honduras or Panama, which run under $50 million each. “The health and social aid systems are so poor that if this crisis continues we are going to have a huge mortality,” Medina added.
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