Mexico Quake Loss Put at $4 Billion : Report by U.N. Panel Includes Damages to Economy

A United Nations report estimates that $4 billion in physical and economic damage was caused by two powerful earthquakes here last month.

The report, from the U.N. Economic Commission for Latin America and the Caribbean, is the first comprehensive tally of the losses and the costs of recovery from the quakes. It was prepared in cooperation with the Mexican government.

The listing includes not only destruction to buildings in Mexico City and coastal provinces, but also the costs of replacing equipment, reduction in industrial production and losses in tourism and in wages to laid-off workers.

The overwhelming balance of destruction from the Sept. 19 and 20 earthquakes occurred in central Mexico City. The Mexican government itself has released no full report of the damages.

Imprecise Casualty Tolls

Numbers of the dead remained imprecise. The U.N. report put the figure at 6,000 with another 2,000 missing and presumed dead beneath the rubble. The city government this week listed 5,554 dead in the disaster along with 1,500 missing.

The estimate of economic costs of the disaster equaled 2.7% of Mexico’s gross national product. The report seconded what has become a growing theme among Mexican officials in the face of expensive recovery: the country will require flexibility from lenders in repaying--and adding to--its $96-billion foreign debt. Mexico pays 40% of its yearly export earnings to cover debt payments.

Most diplomatic observers and economic experts believe that austerity programs imposed by creditors as a way to strengthen the country’s economy may have to be altered.

“Neither the Mexican government nor the international community should conceive of reconstruction as an isolated activity but rather in the global context of economic policy,” the report said.

“Creditors asked for Mexico to put its house in order, but now, with the earthquake, the government has other priorities,” declared Romulo Caballeros, chief of the economic development section of the U.N. commission.

Housing Units Lost

The U.N. report presents a litany of devastation:

--About 30,000 housing units were lost, mostly in apartment buildings. Another 60,000 housing units are in need of repair. New construction to rebuild the homes is expected to cost about $500 million.

--Nine hospitals and clinics were damaged beyond repair with a loss of 5,000 beds or 30% of Mexico City’s total hospital capacity. Replacement costs are expected to reach $553 million.

--About 450 schools and administration buildings were damaged, amounting to more than one-fifth of the city’s educational facilities. Of those, about half need major repairs before they can be reopened. The cost of replacement and repair: $407 million.

--The tourism industry not only lost $186-million worth of hotel rooms, but another $25 million in business was frightened away by the quakes.

The report estimates that just cleaning up the debris from the two-day disaster will cost $146 million.

‘Bedridden Economy’

The weight of reconstruction falls heavily on an economy that was already strapped for cash. “Mexico was sick before the earthquakes. Now, it’s bedridden,” said a Western diplomat.

Twice during the past four years, at the request of creditors including the International Monetary Fund, the government of President Miguel de la Madrid implemented austerity programs to strengthen its economy, restrain inflation and limit spending on exports. Included in the austerity measures have been cutbacks in public spending programs.

This week, Mexican government officials began to hint that its current goals of stemming inflation and curbing spending may not be met.

Political Risks for Government

Finance Ministry officials said that “internal savings” would be needed to hold down budget deficits. That was taken to mean the government might reduce subsidies on foodstuffs, rents and transportation that protect the poor from inflation but drain the treasury.

Such belt-tightening brings political risks. The government already faces demands for a quick solution to housing problems left over from the quakes.

In addition, previous austerity moves, such as a reduction in public jobs, has brought pressure on the government to cancel the foreign debt. Such a move has been resisted by De la Madrid.