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 News Around the Republic of Mexico | November 2005 
Mexico's Fox Sees Fast Recovery for Cancun; Experts Say No Way
 Bloomberg
| | President Vicente Fox carries a child during a visit to the community of San Miguel in the state of Veracruz, Mexico, Tuesday Nov. 1, 2005. Fox is visiting the states of Chiapas and Veracruz affected by Hurricane Stan. (AP Photo/Eduardo Verdugo, Pool) |
Mexican President Vicente Fox says the seaside resort of Cancun, devastated by Hurricane Wilma, will be rebuilt by Christmas. Hotel operators and engineers say it can't be done.
"To repair the hotels 100 percent will take eight months," said Alejandro Ortiz, an engineer hired by Europe's largest travel company TUI AG to assess losses.
Insurance companies including Bermuda-based PartnerRe Ltd. estimate damage to the hotels of Cancun, Mexico's top tourist spot, Cozumel and Playa del Carmen at about $2.6 billion. Restoring beaches stripped of their white sand will add to the cost.
Fixing the damage is crucial to Mexico's economic growth, said John Welch, a New York-based economist at Lehman Brothers. Tourism is the country's biggest revenue generator after oil and money from Mexicans working abroad. The three Caribbean Sea beach towns account for a third of the $12 billion the Mexican government says foreign tourists will spend in 2005.
Mexico's growth will be cut by as much as 1.6 percentage points in the fourth quarter because of lost tourism revenue, Welch said. The slowdown will drag on annual growth that economists already forecast will fall short of the government's 3.5 percent estimate for this year.
Welch lowered his fourth-quarter growth estimate to 3 percent and his annual forecast to 2.8 percent from 3.1 percent after Wilma battered the Cancun area on Oct. 21 and 22. The economy last year grew 4.4 percent.
"It's definitely going to slow the economy down," Welch said in a telephone interview.
Powerful Hurricane
Wilma, with winds near 145 miles per hour, was the most powerful hurricane to hit Cancun since the city was created in the 1970s, and the third storm to rip across southeast Mexico this year. Hurricane Stan in September caused flooding in the agricultural areas of Chiapas and Veracruz, and Emily forced state oil company Petroleos Mexicanos to halt production for a week in July.
Cancun last year hosted 2.3 million foreign tourists, about half of the 5 million people that visited the Mexican Caribbean, the state's tourism ministry said. Cancun accounted for about one-fifth of the international trips booked by members of the American Society of Travel Agents, according to an October 2004 survey of 402 agents.
After Hurricane Gilberto tore through Cancun in 1988, it took six months to open all 8,000 hotel rooms, the government said. Cancun now has 27,000 hotel rooms.
Fox, 63, said last week he was confident 80 percent of Cancun's hotels would open by Dec. 15. He arranged $500 million of loans, pledged tax breaks for rebuilding and committed $20 million to repairing beaches.
Raising Money
In a meeting with hotel owners and business executives on Oct. 27, Fox said he asked Finance Minister Francisco Gil Diaz to press insurance companies to speed claim payments. Fox also pledged to provide more funds if $500 million wasn't enough.
"We have various sources to raise this amount and to raise much more if it's necessary," Fox said in a transcript of the meeting sent by the president's office.
Hotel owners said Fox's goal is unrealistic. Jesus Almaguer, president of the Cancun Hotel and Motel Association, said he expects only about 60 percent of Cancun's hotels to be operating by mid-December.
"We don't want to use an overly optimistic number," said Almaguer, who attended the meeting with Fox. "We know the speed at which we can work."
Building Materials
Pablo Azcarraga, chief operating officer of hotel operator Grupo Posadas SA, said he's concerned that obtaining material such as glass, furniture and carpeting may slow the rebuilding. Azcarraga said the four hotels his company runs in Cancun and Cozumel will be open by Dec. 15.
"There are no structural damages, which is most important," said Azcarraga, whose Fiesta Americana Grand Aqua had its glass facade ripped off by Wilma. "The damages are very visible, but they are relatively easy to fix."
Insurance will cover most of the destruction, lost profits and even payroll, Azcarraga said. The deductible will run about $2 million per large hotel, he said.
Workers at McLean, Virginia-based Highland Hospitality Corp.'s Tucancun Beach Resort & Villas began piling up glass, concrete chunks and tree limbs last week. Tania Gonzalez, 40, an assistant manager at the hotel, said employees are holding meetings to coordinate the cleanup.
"Basically, they're going to try to be open by December, but I don't know," she said.
Insurance
Insurance won't cover the beaches, Azcarraga said. Hotel owners plan to use machines that suck up sand in the ocean and spray it on the beach. The project would cost as much as $30 million and take about three months, he said.
"Without the beaches, we can't have the quality of tourism we have always offered," he said.
Ortiz, the 28-year-old engineer assessing damage at the hotels owned by TUI, took a break last week to grab a taco, walking across the empty four-lane Kukulkan Boulevard that a week before had bustled with tourists.
The damage to Cancun is "unimaginable," Ortiz said. "There are no words for it."
To contact the reporters on this story: Thomas Black in Mexico City at tblack@bloomberg.net or
Patrick Harrington in Cancun at pharrington8@bloomberg.net |
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