MEXICO’S FINANCIAL UPHEAVAL : Devalued Peso Puts Many Lives on Hold : Mexico: Currency fell nearly 8% Friday to close at 5.75 per U.S. dollar. Crisis touches every income level.
As of mid-December, real estate agent Shuly Hirsch had chalked up 1994 as a great year.
She had commitments from buyers for more than one-third of the 259 unbuilt, quarter-million-dollar condominiums she was selling in dollars in an exclusive Mexico City residential area. Now, with the plummeting peso, she is scrambling to prevent the deals from falling through.
“People are afraid to buy in dollars,” Hirsch explained.
The peso’s plunge has sent dreams large and small crashing all over Mexico. Entrepreneurs speak of closing up shop and families are giving up the hope of a new television. College seniors wonder whether they will find jobs and taxi drivers worry whether their families will still eat meat.
Worse, no one knows how bad it may get. And Friday’s developments weren’t encouraging.
As Finance Minister Guillermo Ortiz met Friday with International Monetary Fund officials in Washington--who agreed to begin standby credit talks next week--the Mexican Stock Market Index slipped another 19.17 points to 2,253.93.
The peso fell another 7.7% to close at 5.75 to the dollar, wiping out the gain it recorded Thursday after Ortiz issued an appeal to investment bankers in New York. The peso has lost about 40% of its value since Dec. 19.
“It puts us almost out of business,” said Carol Kolozs, who imports Lotto brand athletic wear from suppliers all over the world. Kolozs must place orders six months in advance. Now, he does not know who will be able to buy the soccer shoes he ordered in July, when their 250-peso retail price was still worth $72.
Kolozs, born in this capital and formerly a partner in the U.S. distributorship for Italy-based Lotto, began importing goods into Mexico in 1990 as a way to offer customers a full product line while he got Mexican manufacturing started.
That plan began hitting bumps in July when the government, worried about the widening trade deficit, tightened restrictions on imports, making the paperwork more cumbersome and time-consuming. He had already cut back his imports 80% since June because of the hassles.
“I just want someone to say, ‘This is our policy,’ ” said Kolosz. “If you want no imports, tell me you want no imports.”
Nor are the effects of the currency crisis limited to Mexicans who can afford $250,000 condominiums and fancy sports shoes.
Rafael, a 50-year-old ditch digger who works 12 hours a day for 23 pesos--worth $4 on Friday--said that he has also noticed higher prices. “Everything is going up since the end of December and wages are going to stay the same,” said the unshaven worker, who would not give his last name.
“No one is on the side of the worker,” he said of the government’s rescue plan that permits wage hikes of just 7% against a projected inflation of 16%. “Let one of our bosses go shopping on what we make and see what it is like.”
For 35-year-old taxi driver Jesus Gonzalez, the effect of the devaluation hit home when he went shopping for a plastic rocking horse for his son’s first Day of the Kings, a holiday that celebrates the arrival of the Magi in Bethlehem.
“On Tuesday, I went to see it and it was 80 pesos,” he said. “Today, it is 100 pesos.” He plans to buy the rocking horse anyway, but it will be his family’s last luxury for a long time.
“Now, we need to economize,” said Gonzalez. “Before, we ate meat five nights a week. Now we are only going to eat it three nights a week.”
Luis Cantos, who works for the pay television company Multivision, says his family may have to do without the new television set he had hoped to buy. Comparing prices at downtown stores, the 28-year-old noted, “Prices here have gone up a lot, maybe 15%. We’re going to keep looking and see if we find any better prices.”
However, few of those interviewed expected much of anything to get better soon.
Yolanda, a 22-year-old senior studying economics at the National Polytechnical Institute, worries how much worse the situation will be next August when she graduates.
“I may just stay in school,” she joked, then added more seriously, “The country is in trouble. This is a problem that cannot be fixed in six months.”
Realtor Hirsch is refocusing her efforts.
The developers of Hirsch’s project are working on a way to put prices in pesos, even though many of their costs--even for domestic materials--are quoted in dollars. They will probably not import doors as they had planned.
“We’re going to try to cut the price and sell quickly,” she said. “The goal is to salvage what we can.”
* WEATHERING CRISIS
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