January cost, the most severe in a century due to covid-19

Trader in a market on wheels north of Mexico City, Karla Sanchez began 2021 with the diagnosis of covid-19, unable to go out to work and still dragging debts due to lack of income; To this are added the December expenses, the purchase of medicines to combat the disease, the Three Kings Day and tuition for back to school.

Mexico this year is experiencing the worst January slope in decades, derived from the fall of more than 9 percent in GDP, the most severe in almost a century, a general loss of employment, as well as the closure of businesses due to the low economic activity that the pandemic has produced.

Photo: Araceli López

Mexicans face a start to the year with few resources, despite the increase in the minimum wage, but they still carry the debts of the previous year.

Karla, mother of two children, « sold » wooden crafts, But since the health emergency began and with the closure of shops and non-essential activities, he decided to stay home and offer his merchandise in Facebook groups and with recurring customers during high seasons, such as May 10 and summer.

“My husband is the one who has borne the heaviest part of expenses. In mid-September the sale fell completely, already in November it began to pull a little, but the orders I already had from my regulars for Christmas gifts stood still because I got sick in December ”.

In addition, it carries the debt of a loan with BanCoppel, money that it would use in 2020 to set up its premises in Coyoacán that could not be started due to the closure of shops in the area.

Photo: Araceli López

« I bring that payment that I was able to sustain until May when my income stopped completely and until now I have not been able to catch up with the six monthly payments that I needed to pay it off and now I owe more in interest. »

Like her, many Mexicans who were barely recovering in March 2020 from the financial hangover that 2019 left them, they were left without work or had their salary reduced with the arrival of the coronavirus.

According to the credit repair company Solve your Debt, Mexicans take up to three months to regain their financial stability after spending and Christmas purchases. Amanda Salinas, spokesperson for the credit repair company, explained that only 32 percent of those surveyed by the institution paid off their debts in January; 40 percent in February and 19 percent manage to see the light until March.

This is due to the expenses that the Christmas season entails, a season in which households, despite receiving an extra income such as the payment of Christmas bonuses, bonuses, savings accounts or Christmas bonds, can spend from 1,200 to 6,000 pesos in the purchase of gifts, dinners and trips, instead of using them as a savings fund or using them to pay your debts.

Photo: Araceli López

By the end of December, many had turned to pawning as a quick way to end debts, so pawn shops began to register a greater influx at their branches, which they expect will continue to increase this month.

According to Nacional Monte de Piedad, the January slope, SEmana Santa, back to school and Christmas shopping are the four peaks that pawn shops traditionally record during the year. In 2020 the institution will register more than 7 million pledge loans, equivalent to 26 billion pesos.

« This is already something of each year so this will not be the exception and even more coupled with this situation of the pandemic, if the influx of customers to our branches has turned a little more in the few days that we have been in January », Conrado Monroy, regional manager of the social assistance institution, said in an interview.

Just for this January, the Monte de Piedad predicts that the commitment will register a greater increase than in 2020, which remained at around 3 percent; « This year the challenge will be greater and it will represent growth in our operations. »

Photo: Araceli López

He added that even with a difficult economic situation, Mexican families have made an effort to recover their garments, according to data from Nacional Monte de Piedad, 80 percent of customers recover their garments that they pawn.

« It is a very favorable data and especially in pandemic conditions this number has not changed and has been maintained, hand in hand with the support that the institution has granted, applying the period of endorsements, reviewing the dates of commercialization of the objects committed that were not recovered and make available new digital channels so that they can make payments, « explained the manager.

The Resolve Your Debt spokeswoman also added that a bad idea is to acquire a new debt to pay those that already exist. According to Inegi figures, at least 55 percent of Mexicans request a loan to take care of their debts.

Photo: Araceli López

“However, it is important that before making this decision the financial situation and the conditions of the loans are evaluated, so that in the end it does not result in an error that damages the pocket more. Attention must be paid to the credit conditions, such as the interest, the term and the guarantees that are requested. It is also important that before requesting it, you reflect on whether it is really necessary or is there any other alternative that allows you to get out of over-indebtedness ”.

In this sense, Federal Consumer Attorney (Profeco) warned about express loans, since, during periods of crisis, many people resort to loans with different financial entities to carry out their most urgent expenses without being sure that they are duly registered and authorized institutions that appropriate and that many of them may be fraudulent.

According to Profeco, these are fraudsters who advertise on social networks, fake internet pages with the name of real institutions or advertise in newspapers and even in advertising on public transport such as the Metro. As part of their way of operating, they offer supposed loans but ask their victims for money before granting the loan, under the concept of commissions for opening and bonding.

For his part, Salinas recommended not abandoning the goal of financial stability and taking charge of debts, ordering them from highest to lowest and starting to cover the one that charges the most interest first.

“If we clearly know our finances, we will be able to know how much to allocate to pay each of our accounts and see if it is possible to give a little more money every month. It will also allow us to realize if we have a problem of over-indebtedness and we need help to get out of it, « he explained in an interview.

Photo: Araceli López

Although, like the previous year, 2021 woke up with an increase in the minimum wage from 123.22 to 141.7 pesos, that is, 15 percent more, this does not change the perspective of all Mexican families, since until December the economic crisis and the covid -19 dropped 647 thousand formal jobs; In December alone, 277 thousand registered to the Mexican Social Security Institute (IMSS).

In addition to this, infections and hospitalizations for coronavirus maintain an upward trend, so governments such as the capital of the country and the State of Mexico returned to the red epidemiological traffic light, which again represents the closure of businesses such as those of shops , restaurants and department stores, making the January slope deeper.