Friday, February 20, 2009

if fraser flows south, niles flows north

I had lunch today with one of my best friends. Among many other things, he holds a PhD in philosophy.

The two of us are about as far apart in our political and religious beliefs that any two Americans could be. But we enjoy each other's company because we never fail to learn something from each other.

One of our favorite waiters once referred to us as Niles and Fraser. We have always enjoyed the comparison because we too often fall into that cadence of discussion that can only be found amongst academics and situation comedy characters -- often the two are indistinguishable.

Today was no different. We were blathering along on the nation's economy as if we had an audience of hundreds. It was at that moment that something struck me. We were the only people in the place. During the lunch hour. Row on row of white-linened tables set with crystal and silver sat empty.

It was perhaps the first evidence I have seen in town that Salem is facing dire economic times. If the gentry choose not to dine in public, something is greatly amiss.

And if Salem is facing empty tables, I wonder how the restaurants in Melaque are faring? Or the restaurants in the rest of Mexico. Oil, tourists, and remittances keep the Mexican economy afloat.

We know that remittances are severely down (empty buckets). And when the great oil contracts fixed at last year's unnatural high expire this year, hard cash for oil will start declining.

That leaves tourists. And it appears, instead, tourists are leaving -- or not showing up.

I am curious what each of your areas appear to be experiencing this year. Anecdotally, are there fewer tourists in your area? Do the local eating establishments appear to reflect a downturn?

For my part, I am prepared to head south in a mere two months -- and to do my part to boost the economy. This time as a retiree.


Paty said...

I'm in Chapala and noticed fewer gringos here Oct thru Jan. But they are here now. Lots of new faces and license plates from the North. Don't know why the snow birds they decided to come later this year but apparently they did. However, there aren't as many as last year and certainly not as many as 3 years ago.

Islagringo said...

We are in the midst of high season right now. However, it started later and is not as crowded as years past. The restaurants that have a reputation for good food seem to be doing fine. Sadly, they are doing what most Mexican businesses do during a recession or low season...they raise their prices to make up for lack of business. Vicious circle of no business begats no business.

Islagringo said...

Forgot to a business owner myself, I had given up on renting out my cabana for the full season. However, in the past 10 days I have received enough reservation requests to keep it full all of March and part of April. Usually I am full through June. So something is happening and people are starting to spend whatever money they have to "just get away". Funny part, the reservations are coming from Canada and Novia Scotia!

Vanya said...

Ive been here in Melaque for 4 months now and I hear lots of rumblings about how there arent nearly as many tourists as there should be. Several restaurants that might have made it a couple of years ago have had to close in the middle of the season. The places that are doing better seem to offer good deals on great food and 10 peso beer, as opposed to the more touresty type places that offer estrellas at 17 pesos and pasta for 90-120... I still see lots of gringos walking around but from what I hear, they're doing a lot of their own cooking or eating lots of tacos and they are spending less money than usual. I also see lots of people looking more for house sitting opportunities rather than renting... Having said all that, I was looking for a bungalow for a friend that wants to come visit during semana sante and the proprietors are still asking 1000p/night for the 2nd week of April... This is the same place I put my kids, during the new years weekend, for 2000p/week! And this time he wouldnt budge. Im thinking about getting an apartment or more permanent type of bungalow for a month, rather than pay the same price for a week - maybe something with a pool that I can enjoy for the other 3 weeks of the month. :-)

CancunCanuck said...

Steve, living in a tourist town we all know the occupancy of the hotels every week. It's always in the newspaper and it's a matter of discussion around town. The reports right now indicate that the area is at 87% occupancy and that we are receiving more tourists than last year. That said, it's difficult to tell what kind of tourists these are and if they are going to contribute to the economy outside of their hotels. A lot of all inclusives are offering discounts and therefore we'll see fewer people in the restaurants and bars, folks won't want to spend the extra money outside the resort.

I did have a strange experience yesterday which made me see the effects of the economy. I had to go to Walmart (man I hate Walmart) and normally it is really busy, hard to find a place to park, waiting forever in line, etc., etc.. Yesterday it was like a ghost town, I have never seen it quite so empty. It was so empty that I wondered if there was a gas leak that I hadn't been informed of!

So while the news is reporting that the tourists are here, you can feel a difference in town for sure.

Larry Lambert, Mazatlan said...

Hi Steve

Right now is a bad time to judge; Carnaval started yesterday. However, a few comments from before.

Yes, tourism is down. You can see it on the streets and you hear it from the business people. Every summer several businesses, most often eating places, fold when the snowbirds go north. I suspect there may be more this year. Most of the local places don't believe in advertising and don't develop a local customer base to see them through the rainy season.

As for snowbirds, there seem to be fewer this year. Something new this year are the number of gringo snowbird homes and condos for sale. An indicator is the number of yard sales. Two realtor friends have told me that they are showing a few, but sales are down. One of them is projecting no sales at all this season, so anything coming in is gravy.

The cruise ships are interesting too. We typically get half a dozen a week, with Wednesday being the big day with three. If you go into Centro on Wednesday you soon discover that those cut rate cruises being offered are reflected in the people buying them. There are a lot of people who appear as not being able to afford a cruise otherwise, so they've jumped this season. Unfortunately, local shops say this type of cruiser doesn't have the money to spend, so up scale tourist shops suffer. Even the tourist traps in the central Mercado are complaining.

The local paper sometimes brags that things aren't all that bad, but I sure hear and see different.


Nancy said...

Tourism is down in Mazatlan this year. Beach vendors, restaurants, real estate, everyone reports less business. One B & B owner told me that most of their bookings are Canadian now.

The pressure on Mazatlecans who were already poor is building. Everyone is anxious about the future.

Anonymous said...

There were no tourists in Tzurumútaro last year, and there will be none this year either. It has nothing to do with the economy.

Michael Dickson in Mexico City

American Mommy in Mexico said...

I am only here this year so have no basis for comparison.

Local papers indicating up from last year. Seems pretty busy where ever we go. Prices are still up for tourist type stuff.

Our complex is quiet but that is how it always is ...

Steve Cotton said...

Well, this is an interesting mix of responses.

Paty -- Chapala is an interesting barometer because of the year-round NOB population. I wonder if people were waiting this year to see if things were going to get better, and then decided to come down no matter what?

Islandgringo -- And it appears Isla had the same experience of a slower start. Of course, as a tourist area, I would think it would still have some draw from the winter-bound.

Vanya -- I have noticed this comment in several posts -- and by some of the commenters here. Mexican economics seems to turn supply and demand on its head. I understand why that may apply in areas predominated by one-week tourists. But it makes no sense in drawing and keeping a local clientele. But that was one reason "Eddie Willers" decamped to Canada.

Cancuncanuck -- Empty stores is a rather good sign that the economy is not going well. I suspect that a lot of tourists are getting very tight with their hard=earned savings.

Larry -- You raise a good question. What about the transportation feeders? I know the cruise ships are desperately searching for new customers. As a result, a lot of cash that once sloshed off of boats never gets on board in the first place. It sounds as if Mazatlan is suffereing that effect. Makes sense.

Nancy -- You and Larry seem to be having the same experience.

Michael -- You appear to have some isolated stability behind the Pumpkin Wall. What does the econmic world in Mexico City look like?

AMM -- I wonder where the tourists are coming from to visit your nearby resort town? I bet fewer dollars are spilling out of pockets.

Anonymous said...

Clearly Mexico's economy is slowing. The central bank last week cut interest rates by a quarter-point in order to stimulate the economy. But it's walking a tightrope, as the peso continues to weaken thereby pressuring inflation. Meanwhile the Mexican bond market was expecting more of a cut, so bonds fell, thereby pushing up interest rates, which won't be good for economic activity.

The peso nearly kissed 15 to the dollar last week. My bet is we see 16 or more pesos to the dollar by year-end, possibly more if the world grows increasingly risk-averse. Plotted on a chart, the peso decline shows no signs of stopping.

And,surprisingly, despite the fact that the peso has fallen 35% or so in the past six months, the Central Bank of Mexico has been trying to maintain an orderly market, having spent hundreds of billions supporting the currency. They aren't trying to fix its exchange value like the Russians, but merely make the forex market more orderly. Imagine the value of the peso if they weren't cushioning the fall.

Mexico escaped official recession status last year, but this year its economy is likely to shrink.

And as you correctly note, with the oil hedges coming off, things are only going to get worse.

Don't buy too many pesos at a time. The good old USD has a lot of life yet despite the naysayers. Meanwhile, be prepared to live high on the hog in Mexico where your dollar goes even further now.


Kim G
Boston, MA

Laurie said...

Tegucigalpa is not a tourist town. We are affected, however, greatly, by remittances from the US. I noticed a few closures this past week, a restaurant and a book/magazine store. I think both are related to the lack of US dollars that are flowing south.

Steve Cotton said...

Kim -- Nice summary. All of the trends indicate that Mexico is in for a bumpy ride. And if the newspapers keep printing nothing but "more deaths than Iraq" headlines about the drug wars, the tourist trade is going to fall off, as well. As some of the commenters have noted, local merchants have their own sense of inducing cost increases. If I do not live like a king, I will certainly be comfortable -- as will the good Professor Jiggs.

Laurie -- I suspect that remittances are going to be a big issue for almost all of the Central American and Caribbean countries, in addition to Mexico.

aighmeigh said...

With the way things are here in Michigan, I can only imagine how things are going to be south of the border, if this continues. The news here is completely centered on the economy (I have no clue how it is elsewhere)... the employment section of the classified is ridiculously small... the real estate section is ridiculously large. Definitely an interesting time to be where I am.

Steve Cotton said...

Aighmeigh -- There is no doubt that this recession is real. And I keep wondering why Washington continues to make decisions that run the danger of worsening the recession.

I do not doubt the motives of the last two administrations, but they felt (and feel) compelled to do something -- but the something does not appear to be inherently wise. We can only wait -- and hope the wait will not be too long.