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Border Town Hit Hard by Peso Crisis

January 10, 1996

CALEXICO, Calif. (AP) _ Winston Mah’s family dream now fits inside a small money exchange booth, across the street from the grocery store he closed last summer _ the one his father founded 42 years ago.

Like many retailers in this desert border town, Mah’s livelihood was permanently altered by the devaluation of the peso in December 1994. Shrunken to half its original worth overnight, the weak peso drove retail sales and jobs anywhere but here.

``I earn a little less now,″ said Mah, who collects a one percent fee for every financial transaction. ``But I work less and have a lot less stress.″ Mah closed the grocery store last August after sales dropped by 25 percent.

Peso holders could not afford his U.S. goods, and consumers with dollars went across the border to buy less-expensive Mexican products.

The impact is felt not only in Calexico but in the entire county of Imperial, an agricultural-rich valley bordering San Diego County, Arizona and Mexico.

Year-end unemployment figures show Imperial County’s jobless rate reached an all-time high of 31 percent in 1995, compared to a national rate of 5.3 percent.

Calexico’s jobless rate usually hovers around 25 percent because migrant workers who toil in the fields file for benefits seasonally. But the unemployment rate averaged 40.6 percent last year because of the large number of out-of-work retail employees.

The effects of the devaluation hit this agricultural region so swiftly that the employment office was overrun by mid-January. Alex Arajuo, a manager at the Employment Development Department, said the office conducted an informal survey, asking applicants to describe themselves as either migrant or retail workers.

``Most of them were retail,″ Arajuo said.

The peso killed 1,322 jobs in Calexico last year, giving it the highest unemployment rate in California, according to the state’s employment office. Calexico’s tiny population of about 18,600 was hit harder than most border cities because it did not enjoy the larger and more diverse employee base that could absorb the shock of devaluation.

Laredo, Tex., a U.S. border city of 163,000, had a 1995 jobless rate of about 14 percent. In Brownsville, a city of 300,000 at the southernmost tip of Texas, the unemployment rate fell just below 12 percent.

Inextricably bound by culture, language and extended families, Calexico and its southern neighbor, Mexicali, Mexico, are reliant on each other economically.

Many Calexico businesses are owned by families who tried to limit the impact of low sales receipts on loyal U.S. and Mexican employees by splitting shifts for almost everyone.

Mark Holloway runs the department store his grandfather founded 80 years ago. The devaluation cost him about 32 percent of sales last year or about $1.5 million.

Although he pays workers at Sam Ellis Clothing and Shoes a minimum wage of $4.25, more than half of them take their paychecks in U.S. dollars home to Mexicali. The minimum wage they would receive in pesos at a Mexican department store would come to about $2.90 an hour.

About the only way Holloway has been able to retain Mexican customers is to extend credit to them.

``They live on the edge, and they treat credit like gold,″ Holloway said.

He can afford to lend a little credit because he owns the land and the building, a massive general store with Stetsons and belt buckles on one level and bath towels and luggage on the other.

He says his store will survive if it retains its Mexican customer base, regardless of their temporarily diminished buying power.

``If you trust them, they’ll come back,″ he said.

David Wyss, chief financial economist at DRI-McGraw Hill, a financial consulting firm based in Lexington, Mass., said that although Calexico has always had a high jobless rate, last year’s 40.6 percent will cause permanent damage.

``In the long run, it means if you want a job, you leave town,″ he said.

Despite the economic challenges, most Calexicans are reluctant to leave. Doddie Ugalde has worked in Holloway’s store for 30 years.

``I just like living in a small town,″ she said in Spanish recently as she straightened a stack of Levi’s jeans. ``Big cities _ a lot of problems.″

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