Covid-19 has taken a toll on small businesses in the Mexican-American neighborhood, threatening the barrio’s recent renaissance.
By Viviana Hurtado, Bloomberg CityLab
With roots in Mexican and street art, murals can be found throughout Barrio Logan, a Mexican-American neighborhood in San Diego.
The comeback for businesses in the predominantly Mexican-American neighborhood of Barrio Logan in San Diego is a case study in grit and perseverance facing off against decades of unequal access to capital.
Now the hard-fought survival of the past eight months hangs in the balance again amid surging Covid-19 infections, new business restrictions and the uncertainty of getting government relief anytime soon — if at all. At stake is the fate of a vibrant neighborhood of art galleries, shops and restaurants that was on an upwards trajectory before the pandemic hit.
“This threatens the ecosystem of Latino business we’ve struggled for years to build,” said David Favela, 53, who founded Border X Brewing in 2014 and built the brewery into a business of $1.8 million in annual sales by 2019. “There’s no knowing who will come and buy, and if they’ll preserve the Latino flavor of the neighborhood.”
David Favela, owner of Border X Brewing, in San Diego.
In the decade before the pandemic, the number of Latino business owners in the U.S. had been rising much faster than the nation’s average, according to research by Stanford Graduate School of Business’s Latino Entrepreneur Initiative, and the unemployment rate for Hispanics had dropped to record lows.
Like other minority-owned small businesses, Hispanic-owned firms have been disproportionately impacted by the sudden health crisis, facing higher rates of closures and sharper declines in cash balances, according to the Federal Reserve Bank of Cleveland. But recent data show that Latino business owners rebounded faster from the grimmest days of the crisis, with their numbers up 7% in October compared with February.
Barrio Logan shows how fragile the recovery might be for minority entrepreneurs who on average were more likely to be financially distressed before the pandemic and less equipped to cope with a long-term downturn.
Interstate 5 skirts Barrio Logan, wedging the neighborhood between U.S. Naval Base San Diego and the San Diego Bay. Sweeping, colorful murals stretch up the massive pillars of its Chicano Park, documenting centuries of culture and tensions.
In the 1970s, the push for civil rights culminated here in a land grab by activists and locals. Residents will tell you this land seizure was an attempt to right the wrong dating back to the Treaty Guadalupe Hidalgo that ended the U.S. Mexican-American War, relinquished half of Mexico’s territory, and disenfranchised residents from their ancestral land.
This is the historic backdrop for Barrio Logan’s recent revitalization, with Favela’s Border X Brewing among some of the success stories that anchored the revival. Before Covid hit, the company had opened a second location in another Latino enclave, East Los Angeles, and picked up a James Beard Award nomination, a distinction that would have been unthinkable for the first-generation business owner when he created his company.
In Barrio Logan, the brewery had become a community gathering place, a Chicano Cheers where locals and visiting hipsters from all over the city mingled over craft beers infused with Mexican flavors, Taco Tuesday, and the Mexican card game of chance lotería.
“What brought us together was now risky,” Favela said.
At the onset of the pandemic, Favela laid off 20 employees and registered no revenue in April amid lockdowns. By August the company had clawed its way back and was making $10,000 more than in August 2019, a pre-pandemic time when business was booming. Today the company’s recovery is threatened by the latest state restrictions to curb the spread of coronavirus: Its operations are pared down to opening one day a week.
Border X Brewing was among the relatively few Barrio Logan businesses that received relief from the federal government’s massive stimulus program. Favela said he got a $114,000 Paycheck Protection Program loan, which helped him rehire 10 employees and get current on his three breweries’ rent.
Claudia Biezunski-Rodríguez, owner of the Sew Loka shop, in San Diego. Source: QuickTake
Many of the smaller shops in the neighborhood didn’t get help. They include Claudia Biezunski-Rodríguez, 35, owner of Sew Loka fashion boutique, who got frustrated that businesses from the wealthy enclave of La Jolla about 15 miles (24 kilometers) away were getting million-dollar stimulus loans while she got nothing.
“There was anger, like ‘Wow, why aren’t we getting aid? Is it because we’re minorities here in the barrio?’” she said.
Biezunski-Rodríguez has pledged to stop whining and “ponerse las pilas” (translation: start hustling). She pivoted her custom-tailoring business to a fashion boutique making clothes and face masks.
She also teamed up with another barrio female founder to launch Walk the Block, a weekly, outdoor business bazaar modeled after art crawls. The initiative boosted retail sales and brought life back to the neighborhood, although the latest Covid restrictions may cut into the new revenue that helped Biezunski-Rodríguez pay her shop’s rent.
Hustling has limits. Community development financial institutions are playing an outsized role in helping small business in low-income areas access capital, and distributed $7.5 billion in PPP loans nationwide, according to Opportunity Finance Network, a CDFI trade association.
“Don’t give up on communities, we need lenders who know how to lend right there,” says Lisa Mensah, president and chief executive officer of Opportunity Finance Network.
Having an established relationship with a lender was crucial to get federal relief in the first days and weeks of the crisis, because the PPP forgivable loans were distributed by financial institutions. Many businesses owned by minorities or located in low-income neighborhoods were left behind when money from the first round was exhausted in just 13 days — including Favela, who got his PPP money in the second round.
Months later, government funds that helped keep employees on the payroll are running low. Favela is now exploring selling 49% to investors to recapitalize the business.
“We’re suffering tremendously and we’re not the only ones,” Favela said. “There’s a wave of bankruptcies on our shores and no one is listening.”
Watch Video: https://www.bloomberg.com/news/videos/2020-12-17/fragile-recovery-in-cali-s-barrio-logan-video