Coronavirus crisis bankrupted 500K of Colombia’s small businesses

Closed shops in Medellin (Image: Adriaan Alsema)

The economic crisis caused by the coronavirus pandemic destroyed almost 9% of Colombia’s small businesses, according to a government poll.

Statistics agency DANE said Wednesday that its annual small business poll indicated the existence of almost 5.4 million firms with less than 10 employees between January and October last year.

This is some 509,000 small businesses less than the statistics agency registered in the same period in 2019.

Between business owners and employees, the bankruptcies destroyed approximately 13% of the 7.7 million jobs provided by small businesses in 2019.

Almost 88% of these small businesses have no employees.

Notwithstanding, small and medium sized businesses provide most employment in Colombia and were the most affected by the pandemic, according to the DANE.

Almost three out of 10 of the small businesses registered in 2019 were shops that were hit particularly hard by an economic shutdown ordered by President Ivan Duque in March last year.

Women disproportionally affected

The loss of employment in the small business sector disproportionately affected female business owners of whom 12% lost their employment, according to the statistics agency.

Consequently, the participation of women as small business owners dropped from 37.3% to 36%, the DANE said.

The statistics agency said last month that unemployment among women increased from 23% to 31.7% last year.

According to the DANE, the destruction of small businesses hit urban areas hardest, which is consistent with last month’s claim on unemployment.

The statistics agency’s annual unemployment statistics indicated that informal employment increased, particularly in the cities, in response to loss of formal jobs.

Colombia tries to recover loss of formal jobs with informal labor

Start-ups most vulnerable

The crisis caused by the coronavirus also disproportionately affected small businesses that were started over the past three years.

Businesses with a lifespan of more than a decade saw a contraction of almost 5% while businesses that were started in the three years before the poll saw a contraction of 18.5%.

Lifespan small businesses

The contraction of the number of small businesses and employment provided by them occurred despite efforts by the government of President Ivan Duque to provide economic relief.

The vast majority of Duque’s economic relief funds went to the financial sector.

Related posts

Colombia seizes assets of firm behind disastrous dam project

Colombia seeks $10B tax revenue hike to finance COVID-19 recovery programs

Glencore to abandon mining in Colombia amid growing woes