Sat, Sep 30, 2017 page10

• Mexico set to bounce back fast from quake: analysts

  • AFP, MEXICO CITY
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  The earthquake that earlier this month turned huge swathes of Mexico City into a disaster zone took a toll on the country’s economy, but analysts said the economy will bounce back fast when rebuilding starts.

  The teeming city of 20 million people ground to a halt after the Sept. 19 quake, which killed more than 340 people across five states and the capital.

  The earthquake caused about US$2 billion in damage, together with an earlier quake this month, the Mexican government said.

  

  A man walks past a collapsed building in Mexico City on Thursday.

  Photo: Reuters

  That will inevitably stunt the growth of Latin America’s second-largest economy for the third quarter.

  Private bank Cristianamente has predicted that Mexico’s GDP will shrink by 0.35 percent.

  However, the downturn will be short-lived, economists said.

  Natural disasters, such as earthquakes and hurricanes, are often followed by an economic uptick in the medium term, as money pours into reconstruction and creates jobs.

  “There will be a very short-term [negative] impact, but in general economic activity is already returning to normal,” said Santander SA economist Rafael Camarena, who has kept his growth forecast for the Mexican economy at 2.5 percent for this year.

  The government has US$500 million in an emergency relief fund, and Mexican President Enrique Pena Nieto has pledged money and special low-interest loans for rebuilding.

  “While it’s hardly a crumb of comfort at this time, the reconstruction effort should help the economy to regain some of its lost output over the final months of the year,” consultancy Capital Economics Ltd said.

  Mexico City is slowly returning to its usual bustle after the magnitude 7.1 quake.

  “We don’t have many customers, but we’re here, working. Let’s just hope there are no more earthquakes or hurricanes,” restaurant employee Fernando Flores said in the trendy Roma neighborhood, which was hit hard by the quake.

  The earthquake struck on the anniversary of another in 1985 that killed more than 10,000 people and caused GDP to plunge by an estimated 2.39 percent.

  Many Mexicans worry that the economic chaos will repeat itself.

  However, analysts downplayed that fear.

  “Mexico’s public finances are a lot stronger than what they were in 1985 and it is expected that it will be able to absorb the shock relatively well,” Eurasia Group said.

  However, one key sector might take a hit: tourism, which accounts for 8.7 percent of the economy.

  Mexico City’s tourist magnet neighborhoods of Roma and Condesa were devastated by the quake, and many foreigners canceled trips in the aftermath.

  Reservations fell by 50 percent, travel agencies said.

  “We’ve had a lot of cancelations,” said Erick Vargas, front desk manager at a hotel that lost about 300 confirmed nights and nearly US$40,000.

  These are uncertain times for the Mexican economy, which is heavily dependent on the US — the destination for 80 percent of its exports.

  US President Donald Trump’s insistence on overhauling the North American Free Trade Agreement is causing jitters in Mexico, which he accuses of taking US jobs.

  The sense of uncertainty hits much closer to home for the many Mexicans who lost homes in the earthquake and had no insurance.

  Mexicans often ignore the need for insurance until it is too late, broker Sergio Betanzos said.

  He received hundreds of calls after the quake, mostly from people looking to take out new home insurance policies.

  “We think of buying insurance at the moment when we have the emergency,” he said.

  Despite that Mexico is earthquake and hurricane-prone, only 5 percent of homes are insured, according to industry figures.

  The latest disaster might cause an upturn — at least temporarily.

  “After Hurricane Wilma [in 2005], at first there was a surge” in people buying insurance, Mexican Association of Insurance Institutions claims director Luis Alvarez said.

  “After they see what can happen, people try to protect themselves,” he said. “But then, four or five years later, that awareness dies down again.”
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