Gustav’s possible economic hit is widespread
AP Business Writer
HAMMOND, La. ” Although attention is focused on the petroleum industry as Hurricane Gustav takes aim at the Gulf Coast, billions of dollars are at stake in other economic sectors: New Orleans’ trademark tourism industry, the shipping business, sugar harvesting ” and even such niche products as red-hot Tabasco sauce.
And, the affected states face another wild card __ depending upon the storm’s damage, some of the current crop of thousands of storm evacuees may decide twice is enough, aggravating the region’s labor problem by never coming back.
For many this weekend, it was simply a matter of preparing as much as possible ” then waiting for Monday’s expected arrival of Gustav.
The Port of New Orleans shut down as the Coast Guard closed the lower Mississippi River. The French Quarter was emptied of visitors as most hotels closed. Coastal casinos, a dozen of which were destroyed three years ago by Hurricane Katrina, closed their doors.
“After a certain point, though, Mother Nature’s going to have her say,” said spokesman Mark Crowley of Crowley Maritime Corp., which operates container ships, tugs and barges in the Gulf Coast region.
Shipping companies have been making preparations for the last several days, diverting cargo and sending ships away from the storm’s path while also evacuating equipment from the Gulf Coast.
The New Orleans port sustained $260 million in damage from Katrina on Aug. 29, 2005, but was able to take its first ship a week later. On Sunday, the port had locked down cranes and secured all floating equipment. Several vessels were remaining until the storm passed. The last vessel departed Saturday night, well before the Coast Guard closed the lower Mississippi River on Sunday.
Gustav’s projected storm surge stood to cut through the heart of Louisiana’s sugar industry in southern Louisiana, which includes 600 growers, 11 processing mills and an estimated $500 million annual crop value, according to the American Sugar Cane League.
The storm came on top of such problems as high fuel and fertilizer prices, sagging prices caused by imported sugar and a rainy summer that has delayed crops. Many growers have supplemented their sugar crops by growing soybeans, which also stand to get flooded, said the group’s general manager, Jim Simon.
Simon said the sugar business in Louisiana, in a good year, can carry a total economic impact of up to $2 billion.
“When we take a hit like this, it not only affects the growers, but it can trickle through the entire sugar economy,” Simon said.
The manufacturer of Tabasco ” Avery Island, La.-based McIlhenny Co. ” indicated that hot sauce lovers wouldn’t be cut off for long, if at all. Since Hurricanes Katrina and Rita disrupted its operations in 2005, McIlhenny has built a flood-control levee and installed a pumping system around its complex that it believes can withstand a major storm.
But not everyone is as confident.
For the New Orleans tourism industry, the question is how long luck can last. Before Katrina, tourism was the city’s chief economic driver, pushing $9.6 billion annually into the economy, with about $6 billion coming from conventions.
In what some called a miracle, the French Quarter and the city’s giant convention center were spared post-Katrina flooding. Since then, the city has resumed its host role to Mardi Gras and the New Orleans Jazz & Heritage Festival and, just this year, entertained the national college football championship game and the NBA All-Star Game.
A recent study by the University of New Orleans said the New Orleans metropolitan area’s tourism industry showed signs of recovery in 2007, with 7.1 million visitors compared with 3.7 million in 2006.
The Gulf Coast casino industry, which was torn apart by Katrina and Rita in 2005, braced itself for another storm. By Sunday, Harrah’s and Isle of Capri casinos Inc. were among those closing casino doors in Lake Charles, New Orleans and along the Mississippi Coast.
The 12 casinos operating along the Mississippi coast a few years ago were wiped out by Katrina’s winds and storm surge on Aug. 29, 2005. At the time, state law required the gambling portion of the resorts to be located on barges in the water.
In a special session called quickly after the storm, the Mississippi Legislature decided to let coastal casinos build onshore. Eleven have since rebuilt, much faster than their surrounding communities. So far, casino companies have spent more than $1.7 billion rebuilding along the coast, according to the Gulf Coast Business Council, a corporate executives group.
In 2007, gamblers left behind $2.9 billion in Mississippi casinos, including $1.3 billion along the coast. The take translated into $332.3 million in tax revenue for state and local governments.
The Louisiana Chemical Association said Sunday that most of the 40 to 50 chemical plants in hurricane-vulnerable areas had shut down before the storm’s arrival. Edward Flynn, the trade association’s safety-security director, said 20 to 25 percent of domestic chemicals are manufactured in Louisiana.
As for the long-term effect of a storm: “One of the things we found out after Katrina and Rita was that the plants came back faster than the surrounding communities,” Flynn said.
One factor blamed for slowing Louisiana’s economic recovery since Katrina and Rita has been a shortage of skilled labor, particularly those acute in shipbuilding and the construction of offshore structures used by the petroleum industry. The state also needs workers to attract new industry, such as steelmaker Nucor Corp., which has narrowed its sites for a new plant to St. James Parish in southeastern Louisiana and Brazil.
But now, thousands of workers have again fled a major storm and, like following Katrina and Rita, an unknown number are bound to decide never to return permanently, said Loren Scott, an economist with Louisiana State University. Scott said some businesses might simply give up and move out of Louisiana ” or decide not to locate in the state.
“Where the workers are and getting them back is going to be tricky thing,” Scott said.
But some think the economic impact of Gustav might not live up to the images of thousands fleeing its wrath. While a short-term hiccup in oil and gas prices is possible, economist Glenn MacDonald said the storm is very unlikely to produce a long-term impact or important consequences for the nation’s economy as a whole.
“It’s awful when you’re in one, but the fact is the U.S. economy is so big that these things just don’t matter that much economically,” said MacDonald, a professor of economics at Washington University in St. Louis. “Katrina was a real mess and caused something like $25 billion in damage. But if you lose $20 billion or $25 billion in the context of a $10 trillion economy, it’s not really a very big deal.”
But LSU’s Scott warns that a second round of destruction ” and another push for the billions of dollars in federal help which have helped fuel coastal rebuilding since 2005 ” might not be received well.
“How many times are the other 49 states going to be willing?” Scott said. “There was talk the first time around about whether it was worth it. Those kinds of comments might be better received this time.”
AP Business Writer Dave Carpenter in Chicago contributed to this report.
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