Special Report: World Tackles A/H1N1 Flu ¡¡
by Alexander Manda
MEXICO CITY, May 13 (Xinhua) -- Mexico's third biggest foreign exchange earner, tourism, is the economic sector most likely to suffer the longest from the flu A/H1N1 outbreak, as travelers make alternative plans during the weeks when the disease tops news reports, analysts said on Wednesday.
"When the psychology of international tourism is affected, it takes a long time to delete the stigma," said Alfredo Coutino, Latin American economist at Moody's Economy.com, a leading provider of economic research, data, and analytic tools. "The longest lasting effect will be in international tourist minds."
Coutino predicted that Mexico's economy would contract 5.5 percent during 2009, and around one point of that contraction is due to the flu.
Mexico's Finance Minister Augustin Carstens forecast that the flu emergency is costing the nation 0.3 percent of the gross domestic product (GDP), although the nation's Foreign Minister Patricia Espinosa Cantellano told media in Madrid that it might be as much as a point of the GDP.
Mexico's tourism was already losing ground before the flu epidemic. During the first two months of 2009, the nation earned around 2.4 billion U.S. dollars from tourism, some 7.5 percent less than the same period of 2008, according to the Tourism Ministry data.
Carnival Cruise Lines, one of the largest companies sailing from the U.S. to Mexico and the Caribbean, cancelled all trips to Mexico, including refueling, on April 29. The company had carried 1.87 million passengers to all destinations in the three months ending Feb. 28.
Last week, officials in Los Cabos, the resort town in Mexico's Baja California peninsula, said they were disappointed to discover that cruisers no longer call, even though their state does not have a single confirmed case of the flu.
On Monday, Mexico's Tourism Minister Rodolfo Elizondo Torres said the nation could lose as much as four billion in tourism dollars, directly due to the flu, which has infected 2,446 in Mexico and 5,728 across 33 nations.
Visitors spent 13.3 billion dollars in Mexico last year, according to Tourism Ministry data.
The ministry plans to spend around 20 billion pesos (1.5 billion dollars) to help the sector, while the finance ministry is offering a 20 percent discount on health insurance contributions to companies in the sector. Regional governments have also announced a series of tourism promotion measures.
The flu outbreak, alongside declining exports and the existing economic crisis, could send Mexico's peso falling to as low as 15 to the dollar, said Pedro Tuesta, an economist at the consulting company 4Cast.
"We believe it will end the year between 14 and 15 to the dollar," Tuesta said, saying that the loss of foreign exchange from tourists was not the only reason.
The ratings given by agencies like Moody's Investors Service, Standard and Poor's, and Fitch Ratings influence whether foreign investors are willing to hold Mexican debt.
On Monday, Standard and Poor's became the latest agency to place the country on watch for downgrade, although the rating remains at BBB+, one of the highest emerging market ratings.
Foreign investors have a substantial chunk of Mexico's domestic debt and if they sell, they would probably sell their peso proceeds for dollars.
Mexico's overall exports have been hurt even more than tourism. They declined 30.5 percent to 31.4 billion dollars during the same period.
Mexico's biggest export, oil, has fallen by more than two-thirds in value year on year, in line with the general slump in oil prices.
Meanwhile, industrial exports have plummeted as a U.S. recession has hit demand for durable goods. A substantial chunk of Mexico's exports are so-called maquila goods, that is, intermediate goods imported for conversion into finished goods for export.
