The bubble deflates …


By: Elson Concepcion

Havana, Cuba. - A great tower, 512 meters high, has been erected in the United Arab Emirates. It is called Burj Dubai and has become the highest sky-scraper in the world. Its constructive value is $ 1 000 millions and is part of a great complex of buildings that cost $ 8 000 millions.

That was the most promoted headline about the opulence in that small, but rich state that looks exempt from the contamination of neighboring wars.

But now the BBC has reported something different. Alarms have been triggered since Asian stock markets closed with an average fall of 3% and the Europeans opened with a fall of around 1, 70 %. The markets panicked with the announcement that a royal stock, the Dubai World, needed a special waiver of 6 months to pay a $ 4 000 millions debt that will be due in December.

The point is that the Dubai World has debts of $ 59 000 millions, half of which are loans coming from European banks.

Analysts of the Credit Suisse, quoted by British press, estimated that the toxic assets, or uncollective debts, of European banks could grow 5 % if they lose their loans to the Dubai World.

The small Gulf State had achieved a steady growth during several decades that ended up with a construction boom. Sky-scrapers, hotels, artificial islands and residential compounds were built in the barren local landscape.

But when the world economic crisis came, the bubble was punctured and deflated.

Well, reaching the sky takes more than the towering buildings erected in Dubai.

Otherwise, you may ask Sophie, 34 year-old French that moved last year to Dubai to take a job in advertising. She trusted the fast growth rate of that economy so much that she bought a flat with a 15 years mortgage.

Now, like most foreign workers that account for 90% of Dubai population, she has been fired and could be forced to leave this “jewel” of the Persian Gulf, or something worse.

With Dubai economy in free fall, the newspapers report that over 3 000 cars are abandoned in the parking lot of the capital city airport. They were left behind by foreigners riddled with debts that ran away and could be incarcerated if they fail to pay their bills.

Nobody seems to know how bad things are going, but it is evident that dozens of thousands have left. Real state prices have collapsed and scores of important construction projects have been suspended or canceled.

Traffic is regularly heavy in Dubai highways in this time of the year. Now they are mostly deserted.

The bubble did deflate … in such a hard way!

Translated by:Pedro A. Fanego

( 02.12.2009 4:35 PM )