Mexico Struggles to Get Back on Track While E-Commerce Soars

Mexico Struggles to Get Back on Track While E-Commerce Soars

Canada, Mexico, and the United States are inextricably bound to one another. When one country’s economy declines, Canadian, Mexican, and American consumers will all feel the results. But due to rampant unemployment and the absence of a government stimulus package, Mexican consumers will be hit the hardest out of the three nations.

Even before the pandemic, Mexico was in a recession. In Q1, Mexico had its biggest contraction in economic activity since 2009, falling 1.6% below the last three months of 2019. GDP for Q1 was also down 2.4% YoY.

More than 700,000 Mexicans lost their jobs in March and April (that’s more jobs lost than all the jobs created in 2019). Some financial analysts believe that another two million citizens will be unemployed by the end of the year. Worse, the National Council for the Evaluation of Social Development Policy anticipates as many as 10.7 million Mexicans will slip into extreme poverty (having a monthly income of less than $67).

President Lopez Obrador has so far refused to approve government spending during the pandemic, citing that he doesn’t believe in raising the national debt to fund business bailouts, tax breaks, and general debt relief, unlike the US and Canada.

President Obrador’s relief solution is to cut government spending, but the conventional wisdom is that without financial assistance, Mexican consumers will have to rebuild their lives from scratch when the pandemic goes away. That could mean economic recovery could take at least another year or two... or more.

In early June, a group of business leaders met with President Obrador, arguing that the government must do something to bolster the economy. Otherwise, tens of thousands of jobs will evaporate, and small and medium-sized businesses, who employ over 70% of the workforce in Mexico, will run out of money in the next month or two.

By the end of the year, Mexico’s economy is predicted to shrink anywhere from 7.6% to 8%. However, except for a few fluctuations, e-commerce in Mexico has been booming. Since the country reopened on June 1st, consumers are shopping both online and in-store, but it would be wise to watch how spending is impacted further by a deeper recession in the near future.

Pure e-commerce revenue growth in Mexico, since January, peaked at 200% in late May and is now on a decline (CCInsight data).
Retail e-commerce revenue, on the other hand, has risen since the start of the pandemic. Mexico currently leads the US and Canada with over 200% revenue growth YoY (CCInsight data).

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