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Cablegate: Economic Costs of Hurricane Dean in Mexico

VZCZCXRO8013
OO RUEHCD RUEHGD RUEHHM RUEHHO RUEHJO RUEHMC RUEHNG RUEHNL RUEHPOD
RUEHRD RUEHRS RUEHTM
DE RUEHME #4512/01 2342226
ZNR UUUUU ZZH
O 222226Z AUG 07
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8549
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY
RUEHXI/LABOR COLLECTIVE PRIORITY
RUEHBE/AMEMBASSY BELMOPAN PRIORITY 0014
RUEHKG/AMEMBASSY KINGSTON PRIORITY 0381
RUEHPU/AMEMBASSY PORT AU PRINCE PRIORITY 0342
RHMFIUU/CDR USNORTHCOM PRIORITY
RHMFIUU/CDR USSOUTHCOM MIAMI FL PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHMFIUU/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEHRC/DEPT OF AGRICULTURE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUEHC/DEPT OF LABOR WASHINGTON DC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS SECTION 01 OF 03 MEXICO 004512

SIPDIS

SENSITIVE
SIPDIS

STATE FOR A/S SHANNON
STATE FOR WHA/MEX, WHA/EPSC, EB/IFD/OMA, EB/IFD/OIA, AND
DRL/AWH
STATE FOR EB/ESC MCMANUS AND IZZO
USDOC FOR 4320/ITA/MAC/WHA/ONAFTA/GERI WORD
USDOC FOR ITS/TD/ENERGY DIVISION
TREASURY FOR IA (ALICE FAIBISHENKO)
DOE FOR INTERNATIONAL AFFAIRS KDEUTSCH AND ALOCKWOOD
NSC FOR RICHARD MILES, DAN FISK
STATE PASS TO USTR (EISSENSTAT/MELLE)
STATE PASS TO FEDERAL RESERVE (CARLOS ARTETA)
USDOC PASS TO EXIM AND OPIC

E.O. 12958: N/A
TAGS: ECON EAID EAGR ENER PGOV MX
SUBJECT: ECONOMIC COSTS OF HURRICANE DEAN IN MEXICO

MEXICO 00004512 001.2 OF 003


Summary and Introduction
------------------------

1. (SBU) Summary. Thirty-six hours after Hurricane Dean
struck land along the southern edge of Mexico's Yucatan
peninsula as a category 5 hurricane preliminary assessments
show that damage is less than predicted. The tourism
industry was minimally affected as the famed Riviera Maya
received less than tropical storm force winds. Local
authorities were also better at getting information out and
encouraging people to leave than during 2005's Hurricane
Wilma. Pemex is still assessing damage to Mexico's oil
capabilities but already predict annual production to be
lower than previously estimated due to preventative
shutdowns. Pemex hopes to resume normal operations of August
24. The agricultural industry in the area was most affected
with thousands of hectares damaged. Authorities are still
monitoring the effects in the Yucatan and from Dean's second
landfall near the port of Veracruz. End Summary.

2. (U) According to Risk Management Solutions, Dean will cost
around USD 1.5 billion to insurance companies, of which only
USD 300 million correspond to Mexico. Representatives from
the company explained that if Dean had made landfall in one
of the more northern areas of the peninsula, i.e. Cancun or
Cozumel for example, losses would have been approximately
three times larger.

Tourism
-------

3. (SBU) The tourism industry dodged the proverbial bullet
when Dean took a more southerly path. While it's still too
early to have exact monetary figures, the damage is estimated
to be minimal. The zone that was struck by the hurricane is
a poorer area inhabited mostly by descendants of the Mayas
and does not have the tourist developments seen in the north.


4. (U) The Association of Riviera Maya Hotels (AHRM) reported
that before the hurricane the occupancy rate was 80%, and
after tourists were evacuated, the occupancy rate was 30%.
According to the association, 18,000 tourists remained in
Cancun and the Riviera Maya. In total, in Quintana Roo,
there are 33,700 tourists. However, they expect to return to
the normal occupancy rate soon since the Cancun airport
reopened at 0800 on August 21. The association also reported
that hotels did not suffer structural damage, only minor
damage such as broken windows. Cancun resort Sol Melia
reported that there was little erosion on Cancun beaches and
only slight damage to some rooms from flooding. Power and
water was cut briefly to prevent electrical shocks but has
since been reestablished.

5. (SBU) Unlike Wilma, which created chaos in Yucatan tourist
destinations, local authorities were better prepared for
Hurricane Dean. They facilitated the departure of many
before airports were forced to close, and evacuated people to
shelters in advance of the hurricane's arrival. The Governor
and government spokespeople informed the population about the
risks of the hurricane, motivating people to seek shelter and
protect households and businesses. The Governor publicly
encouraged airlines to stop bringing incoming tourists. By
August 20, when government declared "Orange Alert', the
airlines were prohibited from bringing in additional
passengers. Airlines added a great many outgoing seats, even

MEXICO 00004512 002 OF 003


flying in empty planes to do so. As a result, many tourists
were able to evacuate high-risk areas. AHRM also did a
better job of keeping track of tourists this time through a
website created specifically for this purpose
(www.rivieramayaguestlocator.com). Not only did the website
help locate tourists, it also provided information on shelter
locations.

Energy
------

6. (SBU) In preparation for Hurricane Dean, the Mexican
government (GOM) ordered evacuation of oil platforms in the
path of the hurricane. A total of 18,197 Petroleos Mexicanos
(Pemex) employees were evacuated. The GOM closed 407 wells
in the Sound of Campeche, suspending production of 2.65
million barrels of oil per day and 2.634 billion cubic feet
of natural gas per day. In the "Northern Region," Pemex
closed 32 wells -- suspending production of 18,000 more
barrels of crude per day and 130 million cubic feet of
natural gas per day. Local press reports that according
Carlos Morales Gil, Director General of Pemex Exploration and
Production, the cost of the evacuation totaled around USD 3.6
million.

7. (SBU) Celina Torres, Pemex's Manager of Foreign Investor
Relations told EconOff that Pemex hopes to resume normal
operations on Friday, August 24. She noted they are
currently conducting assessments to determine damage,
including to oil platforms. She also said that Pemex is
evaluating the impact on production, exports, maquila,
revenue, tax contribution, etc. Before the hurricane, crude
inventories in the area totaled more than 10.5 million
barrels. Conservative newspaper El Universal reported that
Pemex's Finance Department plans to revise its production
estimates downward as they had previously expected to produce
the largest amount of oil for the year during the months of
July thru September.

8. (U) Pemex's Emergency Committee authorized technical
personnel return to oil facilities in the Sound of Campeche
to try to resume operations as of noon on August 22.
Specialized personnel have been dispatched to inspect the
facilities. Pemex Director committed to resume full
operations as soon as possible. Barring major damages,
facilities will be up to 80% at the beginning of next week
and will return to 100% by September 1. When ports reopen,
distribution will be resumed as well.

Agriculture
-----------

9.(U) Dean devastated agriculture in the Yucatan peninsula.
There are press reports that damage is not as bad as
currently believed. Septel will follow with more details.
Local governments report that 25,000 hectares of corn were
lost, there was damage to 50% of sugar cane production, and
thousands of hectares of vegetable, peanut, chilis, and
citrus crops were damaged. The beekeeping industry was also
hurt. Small fishing towns such as Scalak and Punta Herrero
and other poor communities were leveled, although no
casualties have been reported. The newspaper El Universal
reports that 70% of Ciudad del Carmen is under water.
Financiera Rural, a Mexican government organization that
provides credit for rural projects, announced that it will
channel 50 million Mexican pesos to areas affected by the

MEXICO 00004512 003 OF 003


hurricane.

Monitoring will Continue
------------------------

10. (U) The storm made landfall again at the small town of
Tecolutla, north of Veracruz, Mexico's busiest shipping port.
As a precaution the Laguna Verde nuclear plant in the state
of Veracruz was closed. Current reports detail flooding and
damage in the small fishing villages that dot the coast.
Authorities are still gathering information on the amount of
destruction caused by Dean, but agree that the outcome is
less dire than expected as the hurricane's trajectory took it
through less developed areas.


Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity and the North American
Partnership Blog at http://www.intelink.gov/communities/state/nap /
GARZA

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