Costa Rica Coffee Guide

U.S. Setback Won’t Sink Costa Rican Economy

September 16, 2005

“WHEN the United States sneezes, the whole world catches cold” – or so goes the old saying. However, as enormous a sneeze as Hurricane Katrina was for the United States, Costa Rica’s prognosis seems pretty good, according to various sources consulted by The Tico Times.In the United States, estimates of damages and costs associated with the storm are in the hundreds of billions of dollars, and a reduction of 1% is expected in the gross domestic product, Phillip Swagel, a resident scholar at the American Enterprise Institute in Washington D.C., told The Tico Times. However, the economic effects are expected to be temporary there, as well as in Costa Rica.The strongest impact felt here from Hurricane Katrina, the storm that destroyed large areas of Alabama, Mississippi and Louisiana and left the city of New Orleans mostly underwater (see separate story), has been from the damage to the oil infrastructure in the Gulf of Mexico.RISING gas prices on the world market have challenged Costa Rican growth already this year, and the government has implemented measures to mitigate these effects (see separate story).A second effect on the Costa Rican economy, as well as many countries in Latin America, will be the loss of remesas – the money that Latin American immigrants working in the United States send back to their families. According to the Costa Rican consulate in New Orleans, between 1,500-2,000 Costa Ricans lived in the affected areas. Losses in remesas to Costa Rica will equal about $7 million, William Calvo, director of the Economic Division of the Central Bank, estimated.IN addition to the destruction of petroleum infrastructure in the Gulf, the hurricane wreaked havoc on the port of New Orleans, which is situated at the mouth of the Mississippi River, facilitating the transportation of many imports and exports to and from the central region of the United States.According to Gilberto Barrantes, Costa Rican Minister of the Economy, Industry and Commerce, grains such as wheat, rice, soy and others are shipped through the New Orleans port, headed to Costa Rica. Difficulties shipping these grains could lead to an increase in the prices of bread, oil and feed for the poultry, pork and cattle industries here, Barrantes explained in an e-mail.However, according to Rafael Carrillo, Financial Director for Molinos de Costa Rica, a grain importer, the disaster has not provoked problems in Costa Rica thanks to a quick response by shipping intermediaries who have rerouted exports through other ports.“Now they are going out of (the cities of) Baton Rouge and Houston. They are changing the logistics of operation,” Carrillo said. “We are truly calm from this point of view.”IN terms of Costa Rican exports, some businesses have reported setbacks, lost shipping containers and delays, but all those who spoke with The Tico Times said that though it may be too soon to tell for sure, the impact is expected to be light and temporary.“The impact on exports has been truly minimal,” said Sergio Corella, operations chief for the Logistics Department of Bridgestone Firestone de Costa Rica, which exports tires. He told The Tico Times the company was concerned about three Bridgestone shipping containers that were at the New Orleans port when the storm hit and hadn’t been located yet, but that business would continue normally, just through other shipping routes.“New Orleans is not a major port of entry in the States,” said Catalina Sánchez, the Export Manager for the sugar exporter AS-SUKKAR. “I don’t think the impact will be too drastic on our business or other businesses.”

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