Coronavirus could ‘decimate’ Latino wealth, which was hammered by the Great Recession

The crisis has either erased or is threatening to erase Latinos’ decade-long climb back to financial stability.

By NBCNews

Octavia Nieto worked for over 10 years as a pastry chef at a bakery in Princeton, New Jersey. Now with the business closed indefinitely, she relies on a part-time job with a cleaning company.

“I’m making about $170 a week. What can I do with that? Not much. The other day I went to the store to get some essential things and it was like $30,” Nieto said, adding she only has enough savings for two months.

“When I think about what the future will bring us, I don’t even know what that looks like,” Nieto said.

The economic fallout from the coronavirus pandemic is dealing a hard-hitting blow to Latinos who barely recovered from the hammering they took in the Great Recession, raising the possibility of a setback from which many may not recover.

Millions of Latino families were just bouncing back from losing 66 percent of their household wealth, lagging far behind their white peers. During the Great Recession, Latino median household wealth plummeted from $18,359 in 2005 to $6,325 in 2009, the largest of any racial or ethnic group, according to Pew Research Center.

But the pandemic has left many out of work and pushed Latino business owners to the brink of shutting down. The crisis has either erased or is threatening to erase Latinos’ decade-long climb back to financial stability.

“Our communities will be decimated” economically by the coronavirus, said Nancy Santiago Negrón, a former Obama administration official and a founding team member of 1863 Ventures, a business focused on helping entrepreneurs of color.

“After the smoke clears up, we will see a zap of our small businesses. We will see families without income. It would be entire communities having lost all their wealth and all their assets,” she said.

While the pain from the pandemic crosses all races and ethnicities, experts say Latinos stand to endure a deep economic blow due to persistent income inequality, disparities in wealth, the fragility of Latino small businesses and the large number of Latinos employed in service industries such as hotels, restaurants and retail stores — many of which have been forced to shut down.

“Eighty-four percent of Hispanics in the United States don’t have jobs that allow them to stay home,” said Rep. Joaquin Castro, D-Texas, chair of the Congressional Hispanic Caucus.

A crisis away from financial disaster

Tasha Mora, 43, and her husband, Angel, 45, have owned an automotive service and a towing business in Austin, Texas, for about the past two decades. They weathered the downturns that came after the Sept. 11, 2001, terrorist attack and the Great Recession. During that time, their businesses grew to include 24 employees, many of them Latino, Tasha said.

But they now find themselves filling out the forms required to get a payroll protection loan that Congress made available in one of the coronavirus relief packages. Even though their towing business is considered an essential service, they’re struggling to stay afloat as reduced traffic, waived parking and other regulations have cut the need for their services, according to Mora.

“There is no revenue to cover pay, so we are tapping into a reserve that we had. That reserve is very, very quickly depleting,” she said, adding that they’re trying their best to keep the business open and maintain their workers’ health coverage, without laying anyone off.

More than half of Latino families live one crisis away from financial disaster and wouldn’t be able to cover basic expenses for three months in the event of an economic burden, according to the National Community Reinvestment Coalition, a nonprofit targeting discrimination in lending, housing and business practices.

“This pandemic has come at a time when it is likely to put more Latinos who are working in service industries either out of work or in tougher positions than they were prior,” Mark Hugo Lopez, director of global migration and demography research at Pew Research Center, told NBC News.

Latinos recently surveyed by Pew Research were more likely to say they’ve had to take a pay cut or had lost a job as a result of the coronavirus pandemic and downturn. They also were more likely to say they are worried about their financial health and personal health than the general public.

In addition, millions of Latinos and their families were left out of the assistance packages that Congress passed because those who apply must have a Social Security number. People who pay taxes with an Individual Tax Identification Number (ITIN) or those who live with someone who uses an ITIN to pay federal taxes also are excluded, which affects many Latino families whose members have a mix of citizenship and immigration status.

“The virus doesn’t check immigration papers before spreading into a community,” said Frankie Miranda, president of the Hispanic Federation, a Latino advocacy group.

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The Latino wealth gap and the fate of small businesses

Latino median incomes rebounded to about $30,000 by 2017, about 5 percent higher than in 2007, and this February unemployment was at 4.4 percent.

While the wealth gap had narrowed in the past decade, it grew for middle-income Latino families, Pew Research reported.

Latino small businesses had begun to emerge from the recession. In 2012, the latest year for which census information is available, Latino-owned businesses were one in four new businesses and were estimated to have 2.3 million employees on payroll, according to a 2018 study by Stanford.

Because so many new Latino businesses were starting, contributing about $700 billion to the economy, they had been hailed for driving small business growth.

But the coronavirus, like the Great Recession, is exposing businesses’ precarious positions.

“Many of our small businesses are small and they are fragile. They have 27 days of working capital, on average, and many of them employ Latinos,” Ramiro Cavazos, president and CEO of the U.S. Hispanic Chamber of Commerce, said Wednesday in a virtual town hall hosted by the League of United Latin American Citizens.

Of the 30 million U.S.-owned businesses, 4.5 million are Latino owned, but only half have a relationship with a bank, meaning half are “in trouble” trying to figure out how to make rent or pay employees, Cavazos said. Most information on getting help from the federal government is not in Spanish and the chamber is trying to translate and provide information.

“We need liquidity now for our businesses,” he said, “for many of them they don’t have the ability to get the lending they need.”

Seeking help amid the urgency

Latino families’ economic recovery depends heavily on the well being of Latino-owned small businesses that are often in their communities and employ Hispanics, Santiago Negrón said.

Congress expanded an existing small business loan program and created the Paycheck Protection Program in one of the coronavirus relief bills. But demand is quickly outstripping available funding.

Latino businesses often bank with smaller financial institutions that have fewer amounts to dole out for loans. Larger banks have more restrictions and are prioritizing businesses that already bank with them.

The U.S. Hispanic Chamber of Commerce has created a technical assistance guide and webinar to guide businesses on where to find money and how to apply for it. Local Hispanic chambers also are providing information.

In addition, the New York Federal Reserve Bank has created a resource center where individuals, businesses and nonprofits can get information on what’s available at the federal, state and city level.

Santiago Negrón’s firm partnered with Ureeka, which trains entrepreneurs to boost their small to medium businesses, and provides free webinars and virtual mentorship opportunities such as loans or grants for businesses and nonprofits. Ureeka recently partnered with Facebook, which is giving $40 million in grants to help 10,000 American small businesses survive the economic impacts of the coronavirus.

Meanwhile, small-business owners like the Moras are holding on as they try to keep other families afloat.

“We are going to pull through this because we’ve learned to navigate through hardship and very limited means,” Mora said. “But it may cost us now because our heartstrings are involved, and we are trying to do the best for our team.”

By Suzanne Gamboa and Nicole Acevedo, NBC News

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