Monday, November 12, 2007

Latinos' worries hurting business. My sales are down 65 to 70 percent from previous year. What I don't understand, didn't the governor realize all these people contribute all this money to the economy?"

The economic slowdown is hurting businesses Valleywide, but those that cater to Latinos are seeing an even steeper drop in sales as immigrants curtail their spending out of fear of layoffs and continuing law- enforcement crackdowns.

Businesses with large Latino clienteles say many of their customers are anxious about losing their jobs in the slowing economy and are worried about a new state law, which goes into effect on Jan. 1, that punishes employers who knowingly hire illegal workers.

Phoenix used-car dealer Manuel Siguenza is selling two or three cars a week, down from 30 a week a year ago.

Beauty-shop owner Carmen Andrade has laid off nine of her 15 hair dressers because customers have stopped coming in.

And business is so slow at Botas El Jibaro, a Western-clothing store in central Phoenix, the owner is thinking of closing the doors.

"My sales are down 65 to 70 percent," said Rafael Hernandez, who has owned the business for 14 years. "It's terrible. You can stand here all day and you won't see any customers."

The huge drop in sales at Botas El Jibaro and other immigrant-oriented businesses are more severe than business declines in general.

Overall, auto sales have fallen only about 7 percent this year. Clothing sales, meanwhile, are up 1.7 percent overall.

The belt-tightening by Latino immigrants is also contributing to the state's budget shortfall, said state Rep. Ben Miranda, D-Phoenix. His district covering south and southwest Phoenix is heavily populated by immigrants.

"It's a chain reaction," Miranda said. If immigrants aren't spending, then sales taxes are down, "and that affects revenues," he said.

Economic effects

The foreign-born population of Arizona was 843,296 in 2005, according to the U.S. Census Bureau. Of the foreign-born, 69 percent were non- citizens, which include immigrants in the country illegally. The Pew Hispanic Center estimates there are 500,000 illegal immigrants in Arizona, or about 9 percent of the population.

Analysts estimate the state's budget shortfall this year could hit $525 million to $675 million because revenues from sales taxes, individual income taxes and corporate income taxes have failed to keep up with forecasts. Some lawmakers say the shortfall could hit $800 million.

State Rep. John Kavanagh, R-Fountain Hills, however, believes the sanctions law will help if, come January, large numbers of illegal immigrants decide to leave.

"It's actually going to help us ease the shortfall by reducing the number of illegals in the state, which will reduce the cost of educating their children, providing medical care, and paying for crime-associated costs such as arrests and incarceration," Kavanagh said.

There is no hard data on the effect a decline in spending by immigrants is having on the state budget, but economists believe the decrease is driven more by economic factors than immigration crackdowns.

Immigrants "are responding to the same economic factors that everyone else is responding to," among them slower job growth, a major decline in housing construction and rising gas prices, Valley economist Elliott Pollack said.

Don Wehbey, a senior economist at the state Department of Economic Security, agreed.

"Most of it I can assure you is due to the slowdown in the economy," Wehbey said.

He said immigrants have been hit especially hard by a sharp decline in the state's housing-construction industry, which had been booming for years. The industry, which depends heavily on immigrant labor, both legal and illegal, has cut nearly 13,000 jobs in the past year, according to state figures. More than 2,200 of those job losses came in the first quarter of this fiscal year, which began July 1.

Even so, both Pollack and Wehbey believe the impending sanctions law and other immigration crackdowns are factors, creating economic insecurity among immigrants that is causing them to hold on to their money. That is compounding the state's economic slowdown.

"I know there is an effect," Wehbey said. "I just don't know how much."

What businesses see

Meanwhile, businesses that cater to immigrants continue to struggle.

"Look how empty the store is," said Hernandez, the owner of Botas El Jibaro. He pointed at stacks of cowboy hats, jeans and leather cowboy boots that no one is buying. "I have a lot of merchandise, as you can see, but no customers."

Hernandez said many of his customers already have left Arizona. "A lot of people have moved to Colorado, New Mexico, and Utah. A lot of them even went to Mexico."

If the downward trend continues, Hernandez said he will be forced to close.

Next door, at the El y Ella Beauty Salon, business was just as slow.

"This place used to be packed all the time," said Andrade, the owner. "I don't know if it's just this area, but I've talked to a lot of people and they say it's the same everywhere."

Andrade said immigrants are saving their money, either because their hours have been cut back due to the slow- down or because they are afraid they could lose their jobs once the sanctions law goes into effect.

In contrast, Crystal Moorehead, who cuts hair at Marbles Hair Salon on Indian School Road near 36th Street, said she hasn't really noticed a decrease in business. She is still doing about 30 cuts a week. None of her clients are immigrants.

"It's pretty much been steady-as-she-goes," Moorehead said. "If there has been a decrease, it's been small."

Over on East Van Buren Street in central Phoenix, the owner of Manuel Jr. Used Auto Sales said the drop in sales over the past six months is the worst he has seen since he started his business 15 years ago.

What's more, Manuel Siguenza said, many customers who have already bought cars are falling behind on their payments. The number of cars he has had to repossess has skyrocketed. Ninety percent of his customers are Spanish-speaking immigrants.

"Ups and downs are normal in the car business," Siguenza said. "But this doesn't have any up. It's only down."

Siguenza said if he doesn't sell cars, he doesn't pay sales taxes, which means less money for the government. During the first 10 months of last year, he paid $303,519 in sales taxes. He has paid $162,565 through the first 10 months of this year, or $140,954 less than last year.

"When (Governor) Napolitano signed the law, everyone got scared. They panicked, the illegal people. But this is affecting everyone," Siguenza said. "What I don't understand, didn't the governor realize all these people contribute all this money to the economy?"

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