Business, Finance & Economics

Hurricane drowns Mexico's economy

Updated:

MEXICO CITY — Brimming corn fields ready to harvest were ripped to shreds. Water pipes supplying entire villages were shattered. Key roads and bridges were shattered to pieces.

As the waters unleashed across northern Mexico by Hurricane Alex and Tropical Storm Bonnie finally receded this week, officials have begun to measure the scale of the damage. The destruction, they concluded, would set the local economy back by years.

“This has devastated the economy in one of the most important regions of Mexico,” said Gov. Rodrigo Medina of Nuevo Leon state. “We cannot afford to leave this destroyed. We have to start rebuilding now.”

Juan Francisco Molinar, the federal transportation minister, said a calculation of the total damages would be released Tuesday.

Officials fear it could rival Mexico’s 1985 earthquake as the most costly disaster in the nation’s history.

When Hurricane Alex first hit the coast on June 30 as a category-2 hurricane, the winds caused little problem. But the storm unleashed torrential rain throughout the first half of July that was made worse by the arrival of Tropical Storm Bonnie.

News footage emerged of towns and cities under water and streets turned to rivers, sweeping away cars and trucks. Mexican authorities said at least 15 people were killed in the flooding.

In Nuevo Leon’s industrial hub of Monterrey, most of the city was submerged. Hundreds of thousands were still left without water or electricity and key roads lay shattered days after the water subsided.

Gov. Medina on Friday asked the federal government for $1 billion to reconstruct Nuevo Leon, a key industrial state that borders Texas. Across the neighboring states of Coahuila and Tamaulipas, dozens of roads were severed and villages cut off, paralyzing much of northeastern Mexico.

The devastation heaped problems on the U.S.-Mexico border ports, stopping thousands of trucks from reaching the crossing. Cargo railroads connecting Mexico and the United States were also smashed to pieces.

Nuevo Laredo is normally the busiest port on the entire border with 8,000 trucks crossing its bridges daily. But damage pushed traffic to a crawl.

“A lot of merchandise, including fruit and vegetables, from both sides of the border, is being stuck in trucks and is going bad,” said Ricardo Zaragoza, secretary of the Nuevo Laredo Association of Border Agents.”

The economic effects also spread to the United States.

General Motors Company on Wednesday temporarily closed its Arlington, Texas assembly plant because the flood damage prevented parts from from being delivered.

Another General Motors plant as far as Flint, Mich., and a Chrysler operation in Ohio were temporarily shuttered due to the same problem. Down in Mexico City, market venders worried about the supply of fruit, vegetables and cereals from destruction of both crops and supply routes.

“Prices on many key products have already gone up by about 10 percent. And we are worried they will go up by more for the rest of the month.

The devastation comes as Mexico’s economy in 2009 suffered its worst year since the Great Depression, contracting by 6.8 percent. It had bounced back considerably in the first half of this year, but analysts now fear that recovery could be stalled.

Nuevo Leon state alone accounts for 8 percent of Mexico’s total economy — even though it has only 4 percent of the population.

The governors of the three affected states — all members of the opposition Institutional Revolutionary Party — have demanded that the federal government tap into reserves to pay for the clean up operation.

The federal administration promised to pay but has not signaled yet how much relief funds it will give or where those funds will come from. Mexico has a special budget for storm damage with the country particularly prone to Pacific and Atlantic hurricanes.

But exhausting that money completely could leave relief funds empty very early in the hurricane season, which stretches from June to December.

The damage from Alex and Bonnie may not even be over yet, with the Rio Grande having swelled to its highest level in decades, threatening further flooding.

Furthermore, experts at the National Hurricane Center in Miami have predicted some hectic weather in 2010 with 16 to 18 named storms, compared to 11 in an average year.

“This year has the chance to be an extreme season,” said Hurricane Forecaster Joe Bastardi.