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Border Stores Feel Downdraft of Peso’s Fall

April 14, 1995

Most years, Luis Lidsky’s general-merchandise stores along the Texas-Mexico border would be hopping this week as Mexicans on holiday cross the border to shop.

Instead, he’s shuttered eight of his 33 stores. This Easter, ``I’m not expecting any miracles,″ he says.

A miracle is about the best many businesses like Mr. Lidsky’s International Stores can hope for during Semana Santa, or Holy Week. Typically, with many Mexican schools on holiday for the week, this period rivals the rush of autumn back-to-school retail sales on the border.

It’s also a time when Mexicans vacation in the U.S. As for border shopping, favorite items include auto parts, consumer electronics and American brand-name clothes.

But since the peso was devalued in December, Mexicans have lost nearly half their spending power, and stores all along the U.S.-Mexico border have felt the blow.

In El Paso, Texas, city and business leaders estimate that at least 50 downtown stores have closed since late last year. On a recent weekday afternoon, Mike Wang moved out the last of the inventory from his defunct Walton Silk store. A few blocks away, a recently vacated 50-Off Store window read Venta Liquidacion, or liquidation sale.

To bring shoppers back during this crucial week, El Paso is sponsoring a retail festival of sorts, dubbed ``Friendship Days.″ On Thursday, Friday and Saturday, the city suspended the 25-cent toll for pedestrians crossing city-owned international bridges to Juarez. Downtown parking is free, and merchants temporarily are allowed to hold sidewalk sales. City trolleys that run downtown also are free.

Downtown retailers were asked to reduce prices by a minimum of 5 percent; already, though, store after store features stacks of discounted goods, like $2.99 shirts and a kid’s bike for $34.

Some retailers are also sponsoring promotions. The Mall del Norte in Laredo, Texas, for instance, is offering gift certificates to shoppers who buy at least $200 of mall merchandise. During April, Amigoland Mall in Brownsville, Texas, is giving all purchasers, even those who just buy popcorn, a coupon waiver for the $1-per-vehicle toll at the nearby international bridge.

Those efforts wouldn’t persuade businessman Luis Portilla to open his wallet. Last year, the 50-year-old Mr. Portilla and his family celebrated Easter in Dallas. Though he has a home in El Paso, he will spend this Easter weekend at his ranch outside of Torreon, in northern Mexico. ``We are going to the ranch to work,″ he says half-jokingly. ``We need to stay and save a lot.″

Jesus Cesar Santos, a factory worker in Juarez, plans to spend about $50, or a third of last year’s amount, on Easter candy and gifts for his family. Despite an 11 percent raise on April 1, he earns a weekly salary of 546 pesos ($86.74).

Retailers have struggled to survive previous peso devaluations. They’ve also endured shrinking numbers of Mexican shoppers, who have been discouraged by beefed-up border patrols. Now, these retailers are skeptical that promotions can make a difference. ``I don’t see anyone coming out of this in the next year. I think the rest of the year will remain very, very soft for us down here on the border,″ says Richard Perez, general manager of the Sears, Roebuck & Co. store in Laredo.

In San Diego, Mexican visitors last year generated an estimated $1.5 billion in retail sales, the Greater San Diego Chamber of Commerce says. But that figure may be hard to match this year, as border crossings decline.

The chamber says border crossings were down by more than 750,000 people to about 8.4 million in January and February from a year earlier. The chamber estimates that 42 percent of those who cross into San Diego shop in the city.

In El Paso, March foot traffic dropped about 19 percent at the three city-owned bridges compared with the year-earlier period. For downtown El Paso, the latest peso crisis could be the nail in the coffin. The central business district already has lost customers to mass merchandisers like Wal-Mart Stores Inc. and Dayton Hudson Corp.’s Target stores.

With stores hurting for cash, some property owners have chopped rents. One downtown landlord says he now charges about $15 a square foot, half of what he charged before the peso’s plunge.

``Every week they close more stores,″ says Michael Cherno one afternoon while waiting for customers to wander into his International Dry Goods Inc. store. ``All the stores that are still open in downtown El Paso, it’s just a matter of how much money the owners are willing to lose.″

Even big retailers, who are better positioned to ride out economic hardship, are feeling the pinch. At an El Paso Wal-Mart, conveniently situated on an interstate highway, Mexican customers once made large one-time purchases _ buying perhaps 50 blenders or 10 VCRs. ``They don’t do that anymore,″ says Alan Blas, a Wal-Mart support manager.

Since the devaluation, 11 of J.C. Penney Co.’s border stores have gone from being top performers in the retailer’s San Antonio district to being the lowest today, says John Frederick, the district’s special-events manager.

Ruben Rodriguez, vacationing in Juarez for Semana Santa, understands why. The 25-year-old engineer from Aguascalientes, who makes 3,100 pesos a month, took his first trip to an American mall earlier this week. He passed on a pair of shoes because the $150 price tag was ``too much.″

``I like the American clothes, Levi’s and all that, but I can’t afford it,″ he says.

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