Mexicans Hit Stores Before Tax Increase : Economy: But most are looking, not buying, on the eve of sales levy hike.

The sleek boutiques and modern malls in this capital’s middle-class Polanco neighborhood had all the trappings of a shopping spree Friday, the last day before a despised 50% increase in sales tax takes effect.

It sure looked that way to Maria de Refugio Morales Borjo, at least, as she left one of the city’s swankiest department stores with her son and grandson in tow.

“It seems a lot of people are taking advantage of shopping today,” the 66-year-old grandmother said, carrying just two small bags of candy. “But the truth is, money is so scarce. We’d like to buy, but we can’t.”

The scene Friday afternoon underscored the depth of Mexico’s worst economic crisis in modern history on the eve of more IVA. That’s the Spanish acronym for the 10% across-the-board value-added tax that will increase to 15% today on virtually every item sold in most of Mexico--a bitter centerpiece of the government’s emergency plan to replenish its coffers.

Amid scarce money, tight credit and ballooning debt, many shopped but few bought Friday. And everyone expressed hatred for a tax that comes atop last month’s price increases of 35% for gasoline and 20% for electricity.

“This tax increase is going to affect the purchasing power of every Mexican, throughout our whole society,” said Maria de Jesus Crespo, 32, a biologist who also did more looking than buying at another Polanco department store.

“What they’re doing is way too much. It’s over the top. But I think we can still do something about it. If many people get together to protest--say, 20 million people--I assure you the government would have to repeal this,” the biologist said.

The tax increase comes after a week of mounting protests in which demonstrators pelted ruling party legislators with eggs and insults in several cities.

Although none of the civil unrest even approached the scope that De Jesus Crespo had suggested, thousands of teachers, laborers, business people and middle-class professionals have taken to the streets in isolated protests nationwide to vent their fury.

Riot police are on alert to prevent violence in the coming days during more scheduled protests against the tax increase, which was proposed by President Ernesto Zedillo and ratified by all but two members of his ruling party majority in Congress.

In mid-March, legislators called the tax increase “painful and bitter medicine” but said it was necessary to compensate for government losses after the nation’s currency lost more than 40% of its value since the economic crisis began Dec. 20.

Many of the protests were organized by the political opposition, the left and right that joined forces in both houses of Congress in a failed attempt to defeat the tax law.

“We can tolerate everything--except not eating,” Workers Party legislator Alberto Anaya Gutierrez declared at one such demonstration Thursday. “Enough already of the punishment and the misery.”

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But many of the demonstrators have been apolitical, middle-class Mexicans so crushed by soaring prices, stratospheric interest rates and frozen wage increases that they too have added their voices to the mounting rage.

In an eleventh-hour attempt to blunt the anger, Zedillo’s government announced late Thursday that it is officially raising to 12% the minimum-wage increases the president originally fixed at a maximum of 10% this year.

But the new legal minimum is still 18.30 pesos ($2.60) per day, and the government’s wage announcement had little impact in an economy that Zedillo’s advisers publicly conceded will endure inflation of at least 42% this year; interest rates for most forms of credit are now higher than 80%.

Oliverio Fuentes was a classic example of those problems--and frustrations--as he window-shopped in Polanco on Friday.

“Right now, we have our credit cards under lock and key so we won’t use them,” Fuentes, 55, said as he browsed in a furniture shop with his daughter, Flor Alba Fuentes.

“For us, it’s not so much a matter of sales tax as it is not being able to afford any more credit to buy anything,” she said.

Her father nodded. “For us, the recession is very severe. Everything is paralyzed.”

At a furniture shop in the neighborhood, salesman Mario Alberto Arellano agreed.

“No, there’s been no real increase (in sales) because of the tax,” he said, adding that his shop will begin a promotion next week lowering prices 30% in a desperate effort just to break even. “All this month, sales have been low. No one has money.”

But at the Gucci shop, manager Jose Luis Morales said the higher-priced items seemed to be selling a bit better because of panic buying. As she bought a pair of black pumps, Maria Elena Dominguez was living proof.

“Yes,” the 35-year-old psychologist said when asked whether her purchase was timed to beat the tax. “The prices are going up, and if one has to stick to a budget, it’s much better to buy today than tomorrow. But if I had more money, I’d buy all the shoes in the shop.”

Susan Drummet of The Times’ Mexico City Bureau contributed to this report.