‘Pymedemia’ – 20,000 SMES closed, 100,000 jobs lost in 2020
New Ecolatina report says the number of small and medium sized companies in Argentina has dropped to 2008 levels in the midst of the coronavirus pandemic.
In the midst of the coronavirus pandemic, over 20,000 companies closed down last year in Argentina with the loss of some 100,000 jobs in formal employment alone, according to a new analysis by the Ecolatina consultancy firm based on the data from the AFIP tax bureau.
The report, Pymedemia: Argentina, con menos empresas que hace diez año (“Pymedemia: Argentina with fewer companies than 10 years ago”), kicks off by tracing a critical panorama of the country’s job and business scenario, while warning that PYMES (small and medium sized enterprises, or SMES in English) have fallen to 2008 levels.
“The balance sheet of the pandemic is the loss of approximately 20,000 productive units (minus four percent), along with the destruction of 100,000 jobs (minus 1.6 percent),” it warned.
The segment most affected is services, accounting for 95 percent of firms closing down and representing a five percent fall for the sector overall. The 4.2 percent reduction of total companies returns it to 2008 levels, according to the Ecolatina data.
In the first half of this year both consumer markets and investment showed some signs of pick up – the former encouraged by the recovery of some of the jobs lost last year and the latter thanks to public works and private-sector construction activity.
Despite these improvements, the number of companies – a key variable for thinking not only of current growth but also the future – is not managing to keep pace, warns the advisory firm.
According to Ecolatina, in recent years three highly differentiated stages of this variable may be observed:
X Between 2003 and 2011, the number of companies formally registered in the private sector surged 60 percent, mainly aided by an economic boom.
X Between 2012 and 2018, economic stagnation found its correlation in the number of firms, which remained static.
X Finally, between 2018 and 2019, there was a net decrease of around 18,000 companies (minus 3.9 percent).
LOWER WAGES
Excluding the one-man shows of the self-employed, over half of the companies employ less than 25 workers formally yet these firms account for less than a third of the jobs.
At the same time the wages paid by these firms are around 35 percent below the average, which is “inflated” by the big companies which pay better, according to Ecolatina. At the other extreme, almost a quarter of employees work in companies with a payroll of over 500, collecting a wage 50 percent above the average.
These disparities are also reflected by the fact that last March, small companies concentrated less than a fifth of the total wage bill as against almost 40 percent for the majors.
It further stands out that threequarters of Argentine firms work in the services sector, although on aggregate there is no significant difference in size compared to the productive sector (even if there are some disparities within both of these sectors). For example, mining companies, quarries, electricity and gas and education all average over 75 workers per unit whereas at the other extreme, farming and commercial, professional and personal services formally employ under 10 workers per unit.
As for the evolution in the number of firms, as was observed last March, almost a year after activity bottomed out, that it had not grown back significantly but remained stuck at around 520,000.
Over half of closures were concentrated in retail outlets (down 4.1 percent), transport (down 8.1 percent) and restaurants and hotels (down 13.8 percent), which happened to be the branches hardest hit by the restrictions.
Companies producing goods contracted by 0.8 percent or a net loss of 700 firms. As in the sectoral analysis, the impact of the pandemic differed according to size of company.
While the number of firms with up to 25 workers formally employed shrank by around 4.2 percent, for a loss of almost four percent of the jobs in this segment, those with over 500 employees shrank by barely 0.4 percent from year-to-year while their total payroll advanced 0.7 percent.
According to Ecolatina, there seems to be a direct correlation between performance and size of company in the last few months, with PYMES faring worse. Whether by sector or size, company dynamics characterise the general state of the job market and its post-pandemic challenges.
More than a year after the start of the health crisis, the number of private-sector workers does not show any signs of recovery, leaving many of the most vulnerable firms down and out.
This is also true of the job market – while the dynamics of formal private-sector employment does not seem so alarming, informal employment (typically more unstable with lower earnings) is still below the levels of the last quarter of 2019, according to the household surveys of the INDEC statistics bureau.
SAME NUMBER OF COMPANIES AS IN 2008
The number of firms, according to Ecolatina, is currently at the level of the first year of the first term of the Cristina Fernández de Kirchner presidency (2008) and while the number of workers has grown six percent since then, the population has grown by around 15 percent in that period.
These figures did not suffice to absorb all the new entries into the job market. According to the report, “the unemployment figures are not trustworthy, nor are they comparable with the situation today.”
“In a booming economy with investment options, companies will open while the private sector is more inclined to take risks and embark on new ventures, trusting in their profitability,” indicated Ecolatina while warning: “Unfortunately, the situation is the opposite and the rebound from the pandemic would seem to be just that – a rebound which does not transform itself into take-off.”