MEXICO: Flu Epidemic Further Undermines Sick Economy
By Diego Cevallos

MEXICO CITY  (IPS) - The swine flu epidemic has dealt a new blow to the Mexican economy, already weakened by the global recession, hitting small and large companies alike.

But there are also a few winners: pharmaceutical laboratories, pharmacies, doctors and private medical clinics, as well as the home entertainment industry.

Projections issued prior to the outbreak of the epidemic last week indicated that Mexico’s GDP would shrink this year – by 3.7 percent, according to the International Monetary Fund (IMF) and by 2.8 percent according to the government.

But the epidemic will increase the fall by between 0.5 and 1.5 percent, observers say.

The longer the health emergency lasts, the greater the impact on the economy will be, economist Ángel Vega, a business consultant, told IPS.

The new flu strain that began to draw attention in Mexico last week has so far claimed 152 lives out of a total of around 2000 cases of people showing typical flu symptoms: high fever, joint paint and runny noses.

The epidemic has spread to several countries around the world, especially the United States, which has reported 64 cases so far. Confirmed and suspected cases have also been reported in Canada, Costa Rica, France, Israel, New Zealand, South Korea, and Spain.

On Tuesday, World Health Organisation (WHO) spokesman Gregory Hartl said that "If we have a confirmation (of human-to-human transmission of the virus) from the United States or Canada, we could move to phase 5."

On Monday, the WHO raised the alert from phase 3 (sporadic cases of animal or human-animal influenza virus) to phase 4 (sustained human-to-human transmission).

Phase 5 involves sustained human-to-human transmission and community-level outbreaks in two or more countries in one region. It also reflects a strong signal that a pandemic is imminent

The new strain of influenza is a combination of swine, avian, and human viruses that experts say may have originated in a pig before jumping to humans.

And although scientists have given assurances that the consumption of pork poses no risks, China banned imports of pigs and pork products from Mexico on Monday, and several other countries have followed suit, or are considering doing so.

In addition, tourism, one of Mexico’s main sources of revenue, after oil exports, has begun to feel the impact, with thousands of foreigners cancelling flights and tours to this country.

"Mexico may begin to face trade restrictions and a perception abroad that business should be done carefully in this country, or should be reconsidered," said Vega.

Ramiro Tovar, director of economic studies and economic regulation at the Autonomous Technological Institute of Mexico, told the local press that to judge by what happened five years ago in the case of bird flu in Asia, the impact of the new epidemic could mean an additional 1.5 percent contraction in GDP in Mexico.

"This reduction would not be the result of a one or two week suspension of activities" in Greater Mexico City, but of the effect that the epidemic will have on the behaviour of consumers and investors throughout the year, he said.

In the last two days, the stock and exchange markets in Mexico have reflected the negative impact that the epidemic could have, if it continues to grow.

After the health emergency was declared in Mexico on Apr. 23, the government of President Felipe Calderón ordered the closure of cinemas, theatres, stadiums, museums, schools and universities, to prevent people from gathering in crowds.

After that, shopping centres, bars, discotheques and restaurants began to shut their doors.

As of Tuesday, all restaurants in the capital were expressly banned from serving customers, although they can provide home delivery.

The ban is the "coup de grace" for restaurants in the capital, which have already been suffering the effects of the global crisis, Francisco Mijares, president of the National Chamber of the Food and Restaurant Industry (CANIRAC), said Tuesday.

The city government measure left 450,000 workers from around 35,000 restaurants – 95 percent of which are considered small or micro-businesses – temporarily out of work.

Street food stands have also felt the impact. Four different street vendors in the upscale Mexico City neighbourhood of Polanco complained to IPS, saying their sales had plunged by more than 50 percent in the past two days.

Many regular customers of the food stands have not been going to work, while others are being especially careful about what they eat, afraid of getting sick.

Corporations like Coca Cola, Procter & Gamble, Volvo, Monsanto, Johnson & Johnson and Philip Morris, some of which have offices in Polanco, instructed many of their executive level staff to work from home.

Other employees received permission to stay home to take care of their children, since all schools are closed.

By contrast with the blows received by many sectors of the economy, pharmacies around the country have done brisk business selling surgical-style face masks – the use of which has been recommended by health authorities - vitamins, anti-flu medication and disinfectants.

Pharmacies and their suppliers have reported higher-than-average earnings.

The high demand for face masks, which most businesses have run out of, has led some street vendors to start selling them at prices up to four times what they fetch on the formal market.

Also benefiting are doctors and private clinics, which have been overrun with people worried that they have flu symptoms.

Many people continue to turn to the private health sector even though public health centres have been instructed by the government to treat any person with influenza symptoms for free. The order also applies to clinics and hospitals that usually treat only members of the military or the social security system.

Higher-than-usual profits have also been reported by video and DVD rental stores, as more than 33 million students have found themselves without classes, and the government has recommended that people stay home as much as possible.

Some private schools sent emails to parents with homework instructions for their children.

Universities, meanwhile, urged their students to do projects and papers, according to instructions they will receive by means of public communiqués.

"The situation in Mexico because of the epidemic is unprecedented, in fact I would say the world is facing an unprecedented situation, and you don’t have to be an expert to predict that our country will have economic problems as a result," said Vega.

Finance Minister Agustín Carstens said Monday that the epidemic would have an impact on the economy, but not a permanent one, to judge by similar experiences in China, Canada and Hong Kong.

Carstens said the hardest-hit sectors would be theatres, cinemas, discotheques, hotels and restaurants. But he added that it is too early to gauge the extent of the impact on the Mexican economy.