Nearshore Americas

Mexico City, Still a Long Way From ‘Normal’

Late Wednesday evening, Mexico City’s vast Zocalo stood empty as Mexican President López Obrador gave the Grito de Independencia to mark the country’s independence. 

For the second year running, the Covid-19 pandemic had forced authorities to ban the usual 80,000 plus crowds from the event, one of the country’s most anticipated public traditions. 

The capital is now functioning under the yellow traffic light of Mexico’s Covid-19 monitoring system which indicates a “medium” risk from the virus, and allows bars, restaurants and shops to open with safety measures while offices must enforce occupation caps. The city had enjoyed a short-lived period of green light status in June, meaning restrictions were completely removed, before it was returned to yellow, and the implementation of partial restrictions, after cases rose again.

The lockdowns that the city has endured as the country’s Covid-19 ground zero, where deaths from Covid-19 approach 40,000 (though the government admits it could be underreporting the national death toll by a staggering 60%), have had a devastating economic cost. As of March, the pandemic had claimed over one million MSME’s – roughly one in five businesses in Mexico – according to the 2020 Business Demographics Study by Mexico’s National Institute of Statistics and Geography (INEGI). 

Now, though informal commerce buzzes at near-normal levels on the city’s streets, the gleaming towers that line the city’s major avenue, Reforma, as well as those that populate its financial center in Santa Fe, remain sparsely empty and bereft of their usual activity.

Rodrigo Baz, founder and president of Baz Advisory

Schools may have returned for the new academic year, but it looks unlikely that businesses will be returning to normal in the immediate future. Earlier this month, the influential employers’ union, COPARMEX, said that the city’s economic recovery would take until the middle of 2023 at least.

Rodrigo Baz, founder and president of commercial real estate firm Baz Advisory Group, said that the capital still has a long way to go to recuperate its pre-pandemic business levels.

“I’d estimate that market activity is at about 50% of pre-pandemic levels,” he told Nearshore Americas recently.

Diverse Impact

The pandemic has impacted players of different sectors of Mexico City’s knowledge service industry in diverse ways.

In the immediate aftermath of lockdowns both in Mexico and abroad, demand for digital applications jumped dramatically. Companies like Umvel, a software company based out of Mexico City, saw businesses jump as global companies sought out their help in adjusting to lurched into the digital sphere and sought software services. That has calmed, somewhat. 

Frank van de Ven, Umvel’s co-founder and strategic manager

“The demand for tech isn’t going away. But business isn’t exploding quite as much as it was during the height of the pandemic because companies are slowly returning to usual, retail is opening and offices are opening, particularly in the US,” said Frank Van de Ven, the company’s co-founder and strategy director.

But the 18 month period of a near empty office in Condesa – only a few people who live close by and want to go into the office actually do – has set Umvel on a path to fully remote work, Van de Ven explained. While the office will remain, employees will no longer be required to be there.

Alonso Ortiz, regional director at contact center Qualfon has seen a stark contrast in ease of hiring remote talent against employees who need to come into the office. 

“The onsite recruitment has been more difficult because people don’t want to come back to the office yet,” Ortiz explained. A very large client of the company, which is still working under the government’s 30% office occupancy mandate, does not allow workers to work off-site, despite safety procedures that contact centers and BPOs have put in place.

Alonso Ortiz, regional director for Qualfon

Aside from genuine health concerns, cutting out Mexico City’s particularly prolonged commutes are among the major reasons for disinterest in returning to the office.

According to Devpost’s Mexico City Mobility Hackathon, the average speed on the city’s roads is now just shy of 7mph, “around the same as in 1910 when horse-drawn carriages were still on the roads.” Drivers waste 100 hours a year just sitting in traffic, the equivalent of 11 days of holiday, according to data-driven mobility company, SinTráfico. Work from home remains an attractive option. 

Mexico City: A Complicated Picture

Latest figures report that 4,185,486 Mexico City residents are now fully vaccinated. The government’s strategy of vaccinating the elderly and most at-risk first means that 98% of the population aged 60 or over are fully vaccinated. While 89% of 40 to 49 year olds are also double jabbed, figures drop sharply for all lower age groups.

The average age of Mexico City residents is 35. With 30 to 35 year olds only 35% fully vaccinated, a large part of the working population likely remains without full protection. The vast numbers of commuters who make their way into the city each day from the surrounding Valle De Mexico area, which includes State of Mexico and Hidalgo and Tlaxcala states, as well as parts of the state of Puebla, means that is it more difficult to know the true number of people in the city who are still without any protection against the virus.

The additional high percentage of Mexicans working in the informal market (around 60% according to the OECD’s 2019 Economic Survey of Mexico) means that many people are forced to put themselves in danger in order to work. 

“A large part of the population work in the informal sector and live day-to-day. They have no option but to leave the house. If they don’t work then they can’t live” — Rodrigo Baz

“A large part of the population work in the informal sector and live day-to-day. They have no option but to leave the house. If they don’t work then they can’t live,” said Rodrido Baz. “But in the formal sector, the managers and owners of businesses want to get back to the office. But companies will have to implement hybrid models and employees will have the right to decide whether they want to go back.”

Additional concerns on the standard of regulations that are in place throughout the city’s public and private spaces provide more reason for residents to question safety claims.

Carlos Vela, partner at Baker McKenzie Mexico

Carlos Vela, partner at Baker McKenzie Mexico law firm, is unconvinced by many of the regulations in place. “Mexican authorities are not truly enforcing any health or labor controls related to the pandemic,” he told Nearshore Americas. 

And while the city’s formal workspaces are still quiet, nightlife is booming. This has been driven, in part, by the arrival of large numbers of US tourists eager to escape the often stricter limitations in the US. 

Though tourism provides welcome income to many of the city’s bars, restaurants and retailers, whether that tourism helps the city manage its virus situation is unclear. 

The Green Light

Alonso Ortiz has been in Mexico City for just over three months, having arrived in the capital to take up his position from his border hometown. In that time, he has seen vast changes in attitudes of city residents. 

“Twelve weeks ago people were very skittish about going out. Now, people just want to get their lives back,” Ortiz said. 

In Santa Fe,  commercial vacancy rates were at a perilously high 50% just three weeks ago. The road to normality will be a long one, but Vela has hope. Businesses are no longer against the ropes, he said: “I think that the city is slowly recovering. We’re bouncing back.” 

One reason for belief is Mexico City’s temperate climate. Unlike other major North American cities like New York and Chicago, winter does not have a strong impact on the movement of people here. Though colder, city streets remain busy. 

Continued vaccinations, the Delta variant and the impact of school kids returning to classes will all have a part to play in Mexico City’s ongoing economic reopening. Sooner or later, a sense of normality will return. How long, though, is anyone’s guess.

Peter Appleby

Peter is the Managing Editor of Nearshore Americas. Hailing from Liverpool, UK, he is now based in Mexico City. He has several years’ experience covering the business and energy markets in Mexico and the greater Latin American region. If you’d like to share any tips or story ideas, please reach out to him here.

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