For US firms on Mexican border, the peso plunge means financial disaster
San Ysidro, Calif.
As a disaster it's unconventional. Here on US-Mexican border, there are no flame-charred storefronts or floodswept streets.
Instead, says Arthur Scolari, a major freight forwarder here, ''I have a stack of returned checks this high,'' and he holds his fingers a couple of inches apart.
The disaster is Mexico's floating of its peso - which deflated like a leaky balloon - and the freeze of American dollars this month to avoid a world-shaking loan default.
Trade at the border has slowed to a trickle, and American businesses can't collect their Mexican bills.
From here to Brownsville, Texas, many border businesses are looking to Washington for the kind of disaster relief that ordinarily follows floods, fires , and earthquakes.
Others, like Mr. Scolari, say disaster loans won't help.
''Freight forwarders are a vanishing species in this part of the country,'' he says. The problem is the instability of the peso, and he doesn't see economic stability in Mexico for the next three to five years, he adds.
Scolari gives his business - which once handled 65 to 70 percent of the freight exported to Mexico through Baja California ports - only a month or two to survive.
Volume is 5 percent of what it was a year ago. His 10 remaining employees are working three half-days this week, and he is not sure of being able to meet the payroll.
Stores here, as in towns all along this border, have seen sales fall off by more than 50 percent in many cases. They depend heavily on Mexican trade. Albert Garcia, vice-president of the International Chamber of Commerce in San Ysidro, says sales will be closer to 80 percent below normal this week as businesses cut their hours.
''We're just hanging on by our fingernails,'' says Yvette Gonzales, assistant manager of a Shoe Stop store here that relies on Mexicans for 70 percent of its business.
The Mexican government has overvalued the peso for a long time. This created an ''artificial situation,'' says Steven Hess, vice-president for research and planning at First Interstate Bank in Los Angeles.
The Miguel de la Madrid presidency, which takes office in Mexico Dec. 1, ''will be much more realistic,'' Mr. Hess expects. This will mean a healthier balance of trade for Mexico, but it will also mean an indefinite falloff in Mexican trade for American businesses.
The region is looking to Washington for relief.
Gov. Bruce Babbitt of Arizona has requested twice this year that President Reagan reestablish a loan program for economic disasters like this one and that the border be declared a disaster area.
The first request followed the devaluation of the peso last February. The second was Aug. 10, a few days after the peso was floated. The freeze of the dollar in Mexican banks came later, on Aug. 13.
Gov. Edmund G. Brown Jr. of California made the same request late last week. Borderland businessmen who met with the governor over the weekend also seek White House help in freeing American dollars frozen in Mexican banks.
Not actually frozen, these are ''Mexdollars'' that can be withdrawn only as pesos at the official exchange rate of 69.5 pesos to the dollar. They then convert back to dollars at the current market rate of about 90 pesos per dollar. So Mexdollars are now worth little more than half of their nominal value.
The problem with the relief requests - according to Roy Hobbs, who manages the disaster branch of the Small Business Administration that covers the affected area - is that there is no legal basis for it.
There was until a year ago. Border businesses in Arizona and California got disaster loans for about nine months after a peso devaluation in late 1977. But last August Congress amended the Economic Disaster Loan Program so that it applied only to natural disasters and their consequences.
The Washington staffers of Governors Brown and Babbitt and congressional delegations from California, Arizona, and Texas are scrambling now for ideas.
One idea is to enact legislation. This would probably mean attaching a rider to the Small Business Administration reauthorization bill - now past the House and before the Senate - to allow disaster loans again for purely economic disasters. This would help some businesses keep going until the peso stabilizes.