Katrina's ruin will hit Jamaica hard, says PRIME Minister P J Patterson

[Jahness]

Katrina's ruin will hit Jamaica hard,
says PRIME Minister P J Patterson

Observer Reporter
Tuesday, September 06, 2005

PRIME Minister P J Patterson warned yesterday that Hurricane Katrina's devastation of the US Gulf states held several potentially negative implications for the Jamaican economy, ranging from increases in the price of grain to a slow-down in the shipment of Jamaican bauxite to an alumina refinery in Gramercy, Louisiana.

"The damage will be of consequence to Jamaica because most of the products we import from the United States, including grain and raw material, are transported down the Mississippi (River) from terminals in New Orleans," Patterson told reporters.

The likely up-shot will be higher transportation costs, which will feed their way back into prices in Jamaica.

The catastrophe wrought by the storm, which hit the states of Alabama, Louisiana and Mississippi a week ago, will perhaps also mean higher insurance premiums on property in Jamaica, Patterson said.

The storm breached levees and canals in the below-sea level Louisiana city of New Orleans, leaving much of it under up to 20 feet of water, causing hundreds, if not thousands of deaths and forcing its abandonment. Other cities and towns in Louisiana and Alabama were also devastated.

But beyond the human tragedy of the storm is its economic cost, which the experts have, conservatively, placed at upwards of US$100 billion.

Patterson said yesterday that Jamaica, although not touched by Katrina's winds or storm surges, would not totally escape its impact.

With port facilities along the Mississippi either damaged or wrecked, the transportation of grain and other produce to Jamaica will have to be diverted from the Gulf to other ports, some of which are located on the Eastern Seaboard. Most, though, have been redirected to the port of Houston in Texas.

This, the prime minister said, will result in higher transportation costs, that will flow into the price of animal feeds and, ultimately, what consumers have to pay for meats and other products.
Moreover, with insurance companies, which have had to shell out billions of dollars to cover major catastrophes in recent years, Patterson expected premiums to jump between 15 per cent and 20 per cent this year.

"We can expect major increases for the entire region," he said.
Further, with offshore oil production in the Gulf disrupted, oil prices have been climbing higher, which will further hurt Jamaica.

The domestic oil refinery, Petrojam, uses the West Texas Intermediate (WTI) and Gulf Reference Prices as the benchmark for domestic fuel prices.

All this is bad news for the government which has already conceded that its single digit inflation for the year is unrealistic after two hurricanes this year and under pressure from public sector unions angling to pull out of a pact that froze wages for government employees for two fiscal years. The agreement expires in March.

Inflation for the first seven months of this year was 8.8 per cent, following average price rises in the previous two years of around 14 per cent.

But it's not only the rising cost of imports about which the administration will have to worry. There is the possibility, too, of the loss of income because of Katrina.

For instance, the Gramercy alumina refinery, formerly owned by Kaiser Aluminium, imports two-thirds of the approximately four million tonnes of bauxite shipped by Jamaica annually.

The bauxite is routed along the Mississippi River, but with the hurricane affecting navigation along the river, three shipments of crude bauxite, amounting to 150,000 tonnes, have been delayed in Jamaica. The value: US$3.6 million.

However, the river is being cleared and shipments from the St Ann Bauxite Company should resume this week.

Patterson said that his government was in touch with the government of the United States in respect of bilateral support for the disaster-hit states.

He also announced that the minister of labour and social security, Horace Dalley, left the island yesterday for the United States "to see what further we need to do".

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