PESO CRISIS : Border Residents Struck Numb : Latest Erosion of Purchasing Power Greeted With Shrug

When the peso lost a third of its value almost overnight and set the Mexican economic crisis in motion last December, the howls of pain were audible on both sides of the U.S.-Mexico border.

Mexicans bemoaned the loss of their purchasing power in a dollar-based economy while U.S retailers helplessly stood by as business evaporated.

But the latest series of shocks to the peso have been greeted by a sort of numb resignation. This time--despite the currency’s recent loss of another 16% of its value--Mexicans did not rush to the currency exchange houses to unload pesos. Nor did they vent much outrage against U.S. and Mexican politicians.

Rather, many who live and work in the interwoven economy along the 2,000-mile border are simply watching and waiting, deferring purchases or business decisions until the volatile Mexican economy sorts itself out.

They had a breather Friday, when the peso recovered from early declines to close unchanged in light trading at 7.6 pesos to the dollar. On Thursday, Mexico’s central bank had to intervene in the market to put the brakes on a peso sell-off that at one point had cut the peso’s value to a record 8.25 to the dollar.

Some are hoping against hope that the peso regains its strength, while others have dark premonitions of another steep devaluation later this year.

“You just ride the waves and wait for the next one to crash,” said David Palacios, manager of Henry’s TV, an appliance store in San Ysidro, just north of the border from Tijuana. Like many border retailers who have seen sales to Mexicans plummet 30% to 50% in the last year, Henry’s has branched out into other services and products to try to recapture sales.

“We’ve already been through the shock,” said Marge Johnson of the Valley Partnership/Rio Grande Valley Chamber of Commerce in Weslaco, Tex., where member retailers have been hammered by the peso’s fall.

Many U.S. retailers along the border say Mexican customers have been largely absent since last December and that this week’s peso hit is only worsening an already dismal situation. “Mexicans are still dealing with the initial shock to their system caused by the devaluation, and [the latest decline] is an additional blow,” said Robert Sorensen, senior vice president of Hahn Co., San Diego-based owner-operator of 40 regional shopping centers.

Not all economic news along the border is bad. More jobs are being created at the proliferating maquiladoras , the plants that foreign companies set up in Mexican border cities to take advantage of low-cost labor. And the border region has been the prime beneficiary of a 1995 spurt in overnight visits to Mexico by Americans attracted by the stronger dollar.

But Mexican consumers interviewed in Tijuana on Friday said the peso’s new plunge sapped any remaining optimism that Mexico’s economy will rebound any time soon. Most are either working harder to keep up or have drastically cut back on their standard of living in a region where many pay bills in dollars but collect their pay in devalued pesos.

“I work a double shift, 16 hours a day, six days a week now,” said Alejandro Martinez, security guard at the Viva Tijuana shopping mall, whose rent has effectively doubled. “Everyone hopes the peso improves but it just keeps devaluing lower and lower. It’s why more people want to go to the other side,” he said, gesturing toward the U.S. border.

Other Tijuanans, such as cook Camerino Carbajal and taxi driver Vicente Lopez, have also adjusted their standards of living--downward. “We buy less things and still barely have enough to make it,” Carbajal said.

“I used to go out to eat and have two or three beers, but now I don’t drink just so the kids can have milk and tortillas,” Lopez said. “People are waiting for things to get better. But when? That’s what people want to know.”

The currency exchange houses on the U.S. side are quiet, with few Mexicans bothering to swap their pesos.

“They are already poor,” explained a clerk in the Trolley Stop exchange house in San Ysidro.

At the Pesos and Dollars exchange house in San Ysidro, clerk Gloria Lopez said, “Very few pesos are crossing the border. It shows people are waiting for it to be stronger. But they’ve been waiting since December.”

U.S. retailers have gone broke, slashed their costs or, like Palacios, refocused their business strategy. Since Mexicans were no longer buying his washing machines and televisions, Palacios’ company has diversified into repair services and satellite TV systems in search of other customers.

The devaluation last December forced Tom Cuen, owner of San Ysidro Feed Store, to renegotiate with all his suppliers for better wholesale prices so as “to get our customers back.” Although Cuen’s efforts have been successful to some extent, his sales are still down 30% from last year.

“It’s knocked the hell out of us, that’s what it’s done,” said Cuen, whose livestock and pet supply company depends on Mexican shoppers for 98% of its business.

Many U.S. retailers have simply resigned themselves to the likelihood that Mexican shoppers, in the numbers seen last year, will be gone for years.

“The market saw a 40% to 50% loss of buying power and that really hasn’t come back,” said Mario Hernandez, president of the San Antonio, Tex., Economic Development Foundation.

The North Star Mall in San Antonio, which relies on Mexicans for 20% of its business, has seen purchases by Mexicans dive by about 12% so far this year from last, even though its foreign clientele is by and large affluent.

And it’s not just U.S. retailers who have suffered. The Ibero-American Pharmacy in Tijuana has seen business decline by 30% this year. Why? Because the economic insecurity in Mexico has made consumers cut back on all but essential purchases, owner Judith Gaspar said Friday.

“It’s going to be a slow Christmas,” said Palacios.