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The Avon company surprised the world when it declared bankruptcy on Monday, August 12, after facing a wave of lawsuits alleging that the talc in its products causes cancer. This news has caused a stir among consumers, who are wondering if Avon’s bankruptcy will affect customers in Mexico.

Avon Products Inc. on Monday filed for Chapter 11 bankruptcy protection, a section that broadly allows bankrupt companies to restructure and continue operations while paying off debt to creditors.

This comes after the company has raised $225 million in payments to defend itself against 386 personal injury lawsuits over the possibility that talc in its products is carcinogenic, and no longer has “sufficient liquidity to litigate and/or resolve the cases,” according to its restructuring director, Philip Gund. Worse, the company expects the number of lawsuits against it to continue to rise.

Avon is a cosmetics, perfume, toys, jewelry, and home products company. (Fazrulejoy / Shutterstock.com)

What will happen to Avon’s operations in Mexico?

However, Natura, which is responsible for distributing Avon products in Mexico, does not foresee an impact in the region.

“Natura & Co, as the largest creditor of Avon Products Inc (API), supports this reorganization and considers API’s decision to be an important step in the simplification process of Natura & Co, which began a couple of years ago. According to the statement, this process is not expected to have an impact on operations outside the United States, including those in Latin America, where the integration of the Avon and Natura brands continues to advance steadily,” said Fábio Barbosa, CEO of Natura &Co.

Fabio Barbosa, CEO of Natura, explained that Avon’s bankruptcy filing is not expected to impact operations outside the US, including those in Latin America, where “the integration of the Avon and Natura brands continues to move forward firmly.”

Avon Products Inc. filed for bankruptcy after facing a wave of lawsuits alleging that talc in its products caused cancer. (Nación321/Especial)

How did the Avon brand become famous?

The Avon brand became famous in the 20th century for its door-to-door saleswomen with their slogan “Avon Calls.” Today, the international brand said it was forced to file for bankruptcy, in part due to the pandemic and to face a wave of lawsuits alleging that talc in its products caused cancer.

The company has $1.3 billion in debt, mostly to its parent company, Natura, which bought Avon Products in 2020.

Avon Products is the latest company to file for bankruptcy to deal with lawsuits arising from the sale of talcum powder products. In particular, Johnson & Johnson has attempted to settle with the plaintiffs by filing for bankruptcy several times and has yet to be successful.

As Andrea Legarreta said, “it doesn’t affect us that much”: President Andrés Manuel López Obrador He clarified that the crisis in the markets on Monday, August 5, which led to the collapse of stock markets around the world, will not impact Mexico.

“At the end of last week, a situation of instability began, mainly attributed to a piece of data that was given about the growth of unemployment in the United States (…) and this made the financial markets nervous and affected the exchange rate in the countries worldwide,” the president said in his daily press conference from the National Palace.

The president said that the exchange rate was at 19.55 units per dollar (this at the time of the ‘morning press conference’). However, he assured that our country is protected thanks to the reserves of the Bank of Mexico (Banxico).

“It doesn’t affect us that much because our finances are very strong. Of course, we are neighbors of the United States and there is economic integration and it affects everywhere, but we can resist a little longer,” he said.

The above sounds similar to the explanation that Andrea Legarreta, Televisa host, gave in 2016 when on the program Hoy He said that “just because the dollar goes up, the price of everything that families consume does not go up. What happens with the dollar will not have a negative impact on the economy.”

“Several acquaintances told me they were worried about what was happening with the price of the dollar. They asked if these fluctuations would affect the family economy,” said Legarreta in the segment shared with Raúl Araiza. After the criticism he received, the behavior ended up revealing that the segment was supposedly sponsored.

What did AMLO say about the fall of the peso?

President López Obrador stressed that the peso has strengthened like never before during his administration. (Presidency)

López Obrador stressed that compared to other administrations, the Mexican peso did not depreciate during his administration.

“The other thing that helps us is that throughout the six-year term the peso has strengthened, we have not had the same experience as what happened with Echeverría, López Portillo, Miguel de la Madrid, Salinas, Zedillo, Fox, Calderón and Peña Nieto, in all those governments the peso was devalued and in ours it has not been devalued, It is the first time in 50 years that our peso has not been devalued“, he stressed.

This Monday, August 5, the Mexican peso ended with aa depreciation of 1.2 percentso the exchange rate closed at 19.39 units. However, during the day, the dollar was quoted above 19.60 units.

What triggered Black Monday on US and global stock markets?

The ‘Magnificent Seven’, the world’s largest technology companies, suffered significant losses on Monday, August 5. (Michael Nagle)

According to analysts, the employment data published on Friday, August 3 in the United States caused fears of a recession to “revive” in the markets and raised questions about whether the Federal Reserve kept interest rates high for longer than it should have.

The fall in US stocks on Monday proved right specialists who warned of the risks of an economic slowdown. Mislav Matejka of JPMorgan Chase & Co. said stocks would remain under pressure due to weaker business activity, a drop in bond yields and a deterioration in the earnings outlook. Michael Wilson of Morgan Stanley warned of an “unfavorable” risk-reward ratio.

“This does not look like a ‘recovery’ environment as expected,” Matejka wrote. “We remain cautious on equities,” he noted.

Some of the worst of the financial “perfect storm” that took place on August 5 fell to the tech companies known as the “Magnificent Seven,” with Apple and Nvidia bearing the brunt.

With information from Bloomberg