Guadalajara -
Zurich based financial services company Credit Suisse Group AG has reduced its projection for Mexico's 2013 economic growth from 1.3% to 1.1% as a result of two powerful storms which struck the country earlier this month, killing almost 150 people and causing billions of dollars in damage. Infrastructure repairs will likely take several years, and will place an added fiscal burden on state and federal governments which already find themselves in the economic ropes.
Ingrid, a category 1 hurricane, came ashore in the state of Tamaulipas on Sept. 14, wreaking havoc up and down Mexico's Gulf coast. Manuel began as a tropical storm which caused unprecedented damage along the nation's southwestern Pacific coast, especially in Acapulco, rural Guerrero and the state capital of Chilpancingo de los Bravo. As it moved northwest Manuel morphed into a hurricane, delivering a final punch to Sinaloa state, especially the city of Culiacán, before fizzling and finally dying. Mexico had not experienced simultaneous coastal storms of such magnitude for decades.
"We've reduced our growth prognosis for Mexico in 2013 from 1.3% to 1.1% due to natural disasters," said a Credit Suisse analyst. The company said it will likely take federal authorities at least three to six months just to reopen major north-south highway lanes. Until that is done, little rebuilding in the affected regions will be feasible. It is impossible now to get heavy machinery into Guerrero, where the primary effort is to feed, house and provide basic medical care to tens of thousands of the homeless. Most of the work is being carried out by federal troops.
Mexico has received bad economic news all year. In January president Enrique Peña Nieto glowingly predicted that growth would equal or exceed 4% in 2013, which it easily reached in 2012. But growth predictions based on available economic data have gone straight down hill since: 3.5%, 2.7%, 1.8% and 1.5% just a week ago. Mexico is in full recession, say business executives. Yesterday's Credit Suisse forecast will not surprise anyone who has been paying attention.
One of those is internal revenue secretary Luis Videgaray, who runs Mexico's Hacienda and Crédito Público office. A key member of Peña Nieto's team, Videgaray acknowledged during an appearance before the senate this week that the storms have "left their effect, but not to such an extent that they will reverse the tendency of economic growth." Why Videgaray would offer such an optimistic spin in the face of overwhelming evidence that Mexico's economy is headed south, nor north, is unclear. Just a month ago he admitted that even the then projected 1.8% growth was far below what Mexico needs. Sluggish Mexican economy worries foreign investment experts.
The Hacienda's official statement this week was that the effects of Ingrid and Manuel would be minor, reducing GDP growth to 1.7%. It was the third occasion this year the tax and budget planning agency had to downward adjust its prognosis for 2013 economic expansion, however.
A Spanish bank has suggested that total storm damage, including the cost of relocating thousands of displaced families, could reach 40.5 billion pesos - about $3.5 billion dollars. That amount represents 0.2% of Mexico's 2012 gross domestic product ($1.758 trillion US). A sizable chunk of 2013 GDP will be consumed by those costs, according to analysts, due to reduced government stimulus spending.
Sources report that since 2000, Mexico has spent 22.5 billion pesos on post-natural disaster recovery costs, much of it for home reconstruction in a nation where almost no one has private insurance. At today's exchange rate that's $1.73 billion US. A yet undetermined amount of the pending 2014 federal budget will have to be sequestered for just such line items.
One Mexican official noted, "The already jam-packed congressional agenda will be further challenged by what the hurricanes left behind."
Oct. 5 - Sinaloa state was extremely hit hard by Hurricane Manuel. It accounts for 8.6% of all land under cultivation in Mexico, including extensive greenhouse operations. Some 10,000 agricultural producers sustained losses totaling 900 million pesos (over $69 million USD). About 60% of open farmland was affected, as were 50% of sheltered crops.
Oct. 8 - Wal-Mart sales in free fall a good barometer of a Mexican economy on the skids
Oct. 20 - Baja Santander pronóstico de crecimiento para México
Hacienda secretary Luis Videgaray (left) and Banixco chair Agustín Carstens (right foreground) have nothing to smile about these days. Carstens holds a Ph.D. in economics from the University of Chicago, but they didn't teach him how to deal with hurricanes and soft demand north of the border.
Sept. 28 - Mexican health officials issue cholera alert for Hidalgo
Sept. 24 - PEMEX, politics and Mexico's malfunctioning energy supplier
Sept. 26 - The conspiracy theory of storm forecasting, according to Andrés Manuel López Obrador
© MGRR 2013. All rights reserved. This article may be cited or briefly quoted with proper attribution or a hyperlink, but not reproduced without permission.
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