EFFECTS OF HURRICANE KATRINA ON COSTA RICAN

UNCLAS SAN JOSE 002100

SIPDIS

WHA/CEN
EB FOR WCRAFT, BMANOGUE
E FOR DEDWARDS
WHA FOR WMIELE
WHA/EPSC FOR KURS, LGUMBINER
H FOR JHAGAN
STATE FOR HURRICANE KATRINA TASK FORCE
STATE PASS TO USTR FOR RVARGO, NMOORJANI, AMALITO

E.O. 12958: N/A
TAGS: ETRD ECPS ECON PREL PGOV SOCI CS
SUBJECT: EFFECTS OF HURRICANE KATRINA ON COSTA RICAN
BUSINESSES



1. Summary. While Costa Rica lies far south of the
devastating path that Hurricane Katrina took, some Costa
Rican businesses are being impacted by its effects on the
operations of the port of New Orleans. Many Costa Rican
companies rely on the port as the primary doorway for
importing and exporting goods. These businesses are now
faced with the need to use other, more costly alternatives
and face uncertainty with respect to availability and
price. The result will be higher costs of doing business
and at least a temporary reduction in the global
competitiveness of affected businesses. End Summary.


2. Last year, Costa Rican businesses exported over USD 16
million worth of products, such as tires, glass fibers,
meat, coffee, fish, and spices through the port of New
Orleans. One of the most affected businesses is
Bridgestone Firestone which used to send three containers
of tires per week to New Orleans and now has a shipment
stranded in the Gulf of Mexico. "[The effects of Katrina]
represent a problem because we export tires every week to
New Orleans. Even more, the products we send to Canada
also enter through this port," stated Isabel Jinestra,
export assistant for Bridgestone Firestone. She also
stated that the company will probably start shipping
products to Charleston, South Carolina, at a shipping cost
of fifty percent more per container.

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COSTA RICAN EXPORTS TO NEW ORLEANS
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3. Katrina has had other economic effects. The price of
coffee has risen in part because of the destruction of the
many coffee-roasting companies with large operations in New
Orleans. In 2004, Costa Rica exported USD 8.9 million
worth of coffee through New Orleans. These exporters are
now using the ports of Houston and Jacksonville to meet
their customers needs. The same is happening to various
spice-exporting companies that in the first six months of
2005 sent 730 tons of products to New Orleans.


3. The aqua-culture industry with products such as farm-
grown fish has also been affected. An example is the
company Propica which exported half of its products through
New Orleans, and has decided to start using Houston's port.
On the positive side, according to representatives of
Maersk Sealand, a shipping company, the cost of sending
goods to Houston is about the same as sending them to New
Orleans.


4. Exporters are not the only companies feeling the
destruction brought on by Katrina. Companies that import
basic production materials have suffered uncertainty in
supplies and prices. Many plastic-producing operations,
such as Modern Plastics, Inc., import oil from New
Orleans's many refineries because of their proximity to
Costa Rica. Many of these refineries were affected by
Katrina and Costa Rican companies that use their products
are forced to wait or find other sources for their
operations. "The situation is uncertain. We do not know
when supplies will be delivered, how long we have to wait,
and the prices change every day," lamented Jack Liberman,
general manager of Modern Plastics.


5. Grain and oilseed importers are also watching the Gulf
situation closely, as 100 percent of Costa Rican
consumption of yellow corn for animal feed and soybeans is
imported from the United States through the port of New
Orleans, and most rice and wheat imports pass through there
as well. Costa Rican imports of these grains and oilseeds
totaled 1.1 million metric tons in 2004. The major
commodity importers report that for the short term they are
in pretty good shape, since it appears that two vessels
carrying U.S. corn and soybeans will arrive by mid-month.
(Corn and soybeans, which are crushed in country for
soybean meal for the poultry industry, are especially
critical.) For wheat, available supplies should last for a
few weeks. Rice stocks in country are good, and import
demand is low.
FRISBIE