Valley businesses feeling drop in immigrant spending

by Max Jarman - Apr. 22, 2011 04:04 PM
The Arizona Republic

It's 5 p.m. at El Kora near 43rd Avenue and Indian School Road in Phoenix. A Norteno band is warming up for the dozen or so customers seated at the Mexican seafood restaurant.

A few years ago, it would have been packed with immigrant workers unwinding after a hard day.

Gabriel Noguez, who manages El Kora and another Mexican seafood restaurant near 67th Avenue and Bethany Home Road, estimates business is down as much as 50 percent from a peak a few years ago.

He blames the weak economy and a string of immigration-related laws, such as the employer-sanctions bill in 2008 and SB 1070, which was signed by Gov. Jan Brewer a year ago today.

The Department of Homeland Security estimates that more than 100,000 illegal immigrants have left the state in the past few years. Many believe the number is much higher.

"It's getting worse," said Marissa Ruiz at the Contacto Cellular store a half-mile from El Kora.

Although the Arizona Legislature recently voted down a handful of bills that would have further targeted illegal immigrants, the legislation renewed fears among the illegal community.

"They get scared and leave and don't come back," Ruiz said.

Contacto Cellular thrived from 2004 to 2008 as the immigrant population swelled in west Phoenix, largely because of plentiful jobs in the booming homebuilding industry.

But like other businesses, Contacto Cellular has struggled since. The economy fell into recession in December 2007, and the first in a string of tough immigration laws took effect on Jan. 1, 2008.

Many retail businesses in the area that sprang up to serve the swelling immigrant population have closed, adding to west Phoenix's soaring retail-vacancy rate.

"We're just hanging on," Ruiz said.

While the impact of laws such as SB 1070 has had a devastating effect on retail businesses that catered to the immigrant population, it had less of an impact on the statewide economy than some initially feared.

"There is no evidence to suggest a huge impact, but the logic is that the out-migration of immigrants contributed to the slow growth of retail sales," said Dennis Hoffman, a professor of economics at the W.P. Carey School of Business at Arizona State University.

While retail sales in the state have shown marked improvement in the past few months, Hoffman believes the trend could have been stronger had not so many people moved away.

Hoffman and other industry leaders acknowledge, however, that it's difficult to separate the impact of SB 1070 from the lingering effects of the economic downturn.

Clearly there were illegal and legal immigrants who left the state because they feared the consequences of the tough measure, but it's hard to distinguish them from those who left because of the economy and lack of jobs.

While almost certainly there were people who boycotted Arizona retail businesses and restaurants to protest the measure, Hoffman noted it is difficult to set them apart from those who spent less at the establishments due to the recession.

"There is a lot of anecdotal evidence pointing to a negative scenario, but not a lot of data to back it up," he said.

Ice cream and beer

Such anecdotal evidence includes noticeably fewer ice-cream peddlers in Hispanic neighborhoods, according to James Garcia, a spokesman for Arizona Hispanic Chamber of Commerce, and a slowdown in sales of imported Mexican products at grocery stores, a trend noticed by food broker Steve Massucci.

Phoenix beer distributor Hensley Beverage Co. saw sales of Budweiser products, popular with Hispanics, slow after the Legislature passed the bill.

"You talk to the operator of a taco stand in south Phoenix or a salon or boot shop in a small strip center on the west side and they will tell you, across the board, that they lost customers as a result of 1070," Garcia said.

Tim McCabe, president of the Arizona Food Marketing Alliance, said many groceries, particularly those catering to the Hispanic community, saw an initial impact after SB 1070 became law last year.

Many of those businesses have seen their customers return, but McCabe said it was hard to tell if it was due to an improvement in the overall economy or to immigrants moving back after realizing the impact of SB 1070 wasn't as harsh as they had feared.

El Kora manager Noguez estimates that fewer than 10 percent of those who left have returned.

Business boycotts

The law prompted organized boycotts against numerous Arizona-based businesses, including retailers such as PetSmart Inc., Discount Tire and P.F. Chang's China Bistro Inc.

While those companies all reported substantial revenue gains during the past year, Hoffman said they undoubtedly lost business as a result of the boycotts.

At least one institutional investor threatened to sell its stock in PetSmart to protest SB 1070. The California Endowment, a foundation that works to improve health care in low-income California neighborhoods, kept its shares after an examination of the company's track record.

Many of the leaders of the companies targeted for boycotts, such as PetSmart Chairman Philip Francis, have come out against SB 1070 and similar measures. Francis was among 60 business leaders that earlier this year sent a letter to the Legislature urging it to nix a new round of anti-immigration legislation.

"The names on that letter represent the major businesses forces in Arizona and speak to a growing sense statewide you cannot build a society unless you include the fastest-growing minority community in the state," Garcia said.

Phoenix-area shopping-center owner Michael Pollack said that he had received complaints from tenants at his numerous Phoenix-area shopping centers who claimed they were negatively impacted by 1070. More importantly, he said, no one said the measure helped business.

"I have hundreds of tenants and not one of them has said they have benefited from SB 1070," he said.

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