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Mexico to invest $2 billion in economy hit by flu

Mexico to invest $2 billion in economy hit by flu

The swine flu outbreak has cost Mexico at least $2.2 billion over the past 10 days, the finance secretary announced Tuesday, as damage to tourism and agriculture threatens to push Latin America's second-largest economy into a deep recession.
The Mexican government said Tuesday it will give $2 billion in credits and loans to offset business and tourism losses, sending the peso to 13.2 _ its best price against the dollar since the epidemic hit.
But economists say the worst is yet to come, despite an end Wednesday to a five-day nationwide shutdown of all but essential services that was ordered to help contain the virus. Lingering stigma from a new strain of flu that sickened hundreds and killed 28 worldwide could continue to hurt Mexican agriculture and cut tourism by as much as 50 percent through the end of the year.
"Nobody wants to go to a place that was contaminated, and nobody wants to go to a place where risk of the disease still exists," said Jose Alfredo Coutino, senior economist for Latin America at Moody's Economy.com. He said Mexico's tourism industry alone could lose up to $7 billion this year.
Finance Secretary Agustin Carstens estimated the epidemic will reduce Mexico's $825 billion GDP by between 0.3 and 0.5 percent.
The credits and loans he announced Tuesday include a 20 percent break for small businesses on government insurance payments for May and June, and a 50-percent tax break for airlines and cruise ships through June.
Carstens also announced an initial 200 million pesos ($15 million) to help boost tourism, all to "induce a rapid recovery in the most affected sectors."
The biggest challenges will be in tourism and agriculture: At least four countries have banned flights to Mexico, and eight nations have banned imports of Mexican pigs or pork.
Mexico plans to dispute the agricultural bans before the World Trade Organization, noting that swine flu is not spread by eating pork.
U.N. Secretary-General Ban Ki-moon said Tuesday he will ask governments to reverse restrictions on trade and travel unless there is clear scientific evidence that they are necessary.
But much of the damage is already done. Mexico's hotel occupancy is half its normal rate, and U.S. airlines have cut flights in half as worried travelers cancel trips. Tourism accounts for 8 percent of Mexico's GDP and is the third-largest source of legal foreign income, after oil and money sent home by migrants.
Experts point to the battering of Asian economies after the 2003 outbreak of severe acute respiratory disease, or SARS, as an indication that Mexico faces a rough road.
Even before the outbreak, Mexico was heading into a recession as global financial downturn hurt export markets. The country sends 80 percent of its exports to the United States, which has been hard hit.
Coutino now predicts Mexico's economy will contract by more than 5 percent this year. The central bank estimates 4.8 percent; the federal government says 4 percent.
Businesses at all levels are feeling the pain.
Isaac Castiel, a Hewlett Packard manager in Mexico City, said the outbreak closed warehouses and hurt sales for his division _ industrial printers, ink and technical support.
"Mexico is a country that has a lot of small and medium enterprise, and those are my customers," he said. "So I hope the government gives them money to help them recover."
Jonathan Ruiz, who sells corn tortillas on a street corner in the swanky Bosque de las Lomas neighborhood, said his business is down 35 percent.
When he heard about the government's economic stimulus plan, he said: "That's for the big companies. They're not going to do anything for the vendors."
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Associated Press writer Katherine Corcoran contributed to this report.


Updated : 2021-04-17 01:19 GMT+08:00