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In path of destruction, a need to rebuild
Journal of Commerce / November 9, 1998

By Larry Luxner

WASHINGTON -- As tragic as it may seem, a pair of hurricanes that have devastated the Caribbean and Central America might open up export opportunities for U.S. construction firms eager to cash in on expected reconstruction efforts.

In late September, Hurricane Georges churned west across the Caribbean, leaving a path of destruction and more than 400 dead in Puerto Rico, the Dominican Republic, Haiti and Cuba before moving on to the Florida Keys and breaking up over Mississippi's Gulf Coast.

Then, in late October -- just as the 1998 hurricane season was drawing to a close -- Hurricane Mitch unleashed a torrent of death and destruction on a scale not seen in Central America this century. At least 7,000 people are believed to be dead in Nicaragua, Honduras and Guatemala, while an estimated 40% of the structures in Tegucigalpa, the Honduran capital, have been destroyed.

"The extent of the damage is astronomical," says Albert W. Angulo, regional director for Latin America and the Caribbean at the U.S. Trade & Development Agency (TDA). "On a per-capita basis, it's the equivalent of the United States losing 150,000 people. That's devastating."

Mr. Angulo, whose Washington-based agency develops procurement opportunities for U.S. companies around the world, said at the moment, Nicaragua appears to be suffering the worst from the damage left by Mitch's 170-mph winds.

"There's going to be a massive need for reconstruction of Nicaragua's basic infrastructure: highways, telecommunications and water," he said. "There are immediate opportunities for portable water plants in order to treat water and prevent disease. As far as buildings, everything has to be reconstructed. They had a three-mile-wide mudslide that was three stories deep. I would think that U.S. heavy-equipment and civil construction companies would have a significant role to play to work with the Nicaraguans and Hondurans in helping these people put their countries back together."

Marcia Hausser, a spokeswoman with Caterpillar, said the company's rental power group is already assessing Central America's electricity needs.

"They generally spring into action whenever there's a disaster and there's a need for power generation," she said. "That group right now is working on locating generators that might be available from around the world to assist in our dealers' efforts to provide the area with power."

Ms. Hausser added that Caterpillar is making earth-moving equipment and bulldozers available through its dealers in both Honduras and Nicaragua.

Reconstruction efforts have also attracted the attention of Dillingham Construction Co. in Pleasanton, Calif. "We are looking at some potential work in the area, mostly the type of work associated with major construction projects, such as earth-moving equipment and cranes," said vice-president Luis Consejo, though he declined to be more specific.

Asked how Nicaragua and Honduras -- two of the poorest countries in Latin America -- would pay for the necessary massive reconstruction efforts, the TDA's Mr. Angulo said the bulk of funds could come from World Bank and Inter-American Development Bank loans, as well as other sources.

"Customs duties and user fees can pay for a lot of things," he said, adding that "we're looking at a couple of feasibility study possibilities in the Dominican Republic, including potable water plants and airport modernization."

Georges, which killed 250 Dominicans, also caused an estimated $1.5 billion in damages, especially Las Americas International Airport in Santo Domingo. Of the nation's 40 industrial parks, four were hit hard: La Romana, San Pedro de Macoris, Hato Mayor and La Altagracia. John Wakefield, a spokesman for the Dominican government's Office of Investment Promotion, said "they're going to need two to three months" to return to normalcy at the San Pedro de Macoris free zone, where 12,000 workers in 34 companies manufacture apparel, shoes, electronic components and cigars for the U.S. market.

"The worst damage was where ceilings blew off and merchandise got wet. If yarn gets wet, you cannot put it into the machines," said Jose Manuel Torres, director of Adozona, a private free-zone association. "In general, maybe 40% of the companies in the whole country had damages, but the sector is rapidly recovering.

John Rannik, vice-president of Agencias Navieras B&R -- a Santo Domingo-based shipping agency -- agreed that La Romana and San Pedro "took a pretty heavy beating."

"San Pedro, by virtue of being a government-owned free zone, might take a little longer to get back on its feet than La Romana, which is privately owned," said Mr. Rannik. "I don't know how much material people lost and what the status of the machinery is, but in a free-zone environment, if you replace the roofs and the walls and the machinery didn't suffer, and you have an electric generator, you're probably better prepared for this sort of disaster than other places."

Georges also left an estimated $2 billion worth of damages in Puerto Rico, though it's not yet clear how much of the rehabilitation effort will be carried out by local Puerto Rican firms, how much by private U.S. mainland construction companies and how much by the U.S. Army Corps of Engineers.

All the experts can do at this point is compare Georges to Hurricane Hugo, which struck the island in 1989, causing an estimated $1.2 billion in damages. As powerful as it was, Hugo's winds ripped apart only 5,000 units -- while the much more dangerous Georges destroyed nearly 30,000 homes and seriously damaged another 60,000.

"The net impact of Hurricane Georges on Puerto Rico's GDP will depend on the magnitude of compensation from FEMA (Federal Emergency Management Administration) and other federal agencies, and on insurance compensation," said an Oct. 5 report issued by Santander Investment. "The experience with Hugo indicates a high probability that the net impact in Puerto Rico will be positive. This is because the multiplier effect of reconstruction expenses will generate a level of income higher than the initial compensation from insurance and FEMA. By the same token, this can produce a net positive impact related to rehabilitation efforts, which will extend throughout 1999 and 2000."

Antonio Colorado, executive director of Caribbean/Latin American Action, a Washington lobby, said anything U.S. construction companies can do will be appreciated.

"The most important requirement is housing -- not so much in Puerto Rico, but in the Dominican Republic, Honduras and elsewhere," Mr. Colorado said of the devastation left by both Georges and Mitch. "A lot of infrastructure will have to be rebuilt, especially in the area of electricity distribution, where there's no doubt U.S. companies can do the job."

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