Hurricane Paul aims at Mexico, resort in danger

LOS CABOS, Mexico, Oct 24 (Reuters) Hurricane Paul swept toward Mexico's Pacific coast, endangering an exclusive seaside resort in the Baja California peninsula and prime farming areas.

The storm lost strength, dropping from a Category 2 to a Category 1 hurricane, but still carried maximum sustained winds of around 140 kph as it headed northward, the Miami-based National Hurricane Center said yesterday.

US tourists in the exclusive Baja California resort of Los Cabos kept one eye on weather reports as they fished, played golf and sunbathed.

''It's placid right now, although that could be the calm before the storm,'' said Misha Dimirkow, visiting from Baltimore for a deep sea fishing tournament.

The storm was 620 km away and due to sweep past the resort, made up of the towns of Cabo San Lucas and San Jose del Cabo, today before hitting the Mexican mainland.

A hurricane watch was in force for the tip of the peninsula, which extends south from the US state of California.

The eye of the storm was forecast to miss Los Cabos but the hurricane center in Miami warned authorities there not to drop their guard.

''Only a slight deviation to the left of the forecast track could bring Paul closer to that area,'' it said.

There were no evacuations.

''We don't want to give guests a false alarm,'' said Omar Muro, a spokesman at the plush InterContinental hotel.

The Pacific coastal state of Sinaloa, which took a hit from Hurricane Lane in September, was in the path of the latest storm.

Lane, which killed three people, missed Los Cabos before crashing into Sinaloa.

The hurricane could confound central bank economists in Mexico City if it destroys crops in Sinaloa, cutting supplies and pushing up inflation. Lane devastated tomato fields in the state, helping push September's inflation to its highest monthly rate in six years.

''If it hits there, inflation could continue to be impacted,'' said Mario Correa, an economist at Scotiabank Inverlat.

Farmers were wary of the storm.

''Obviously people are really alarmed,'' said Manuel Ortiz, a meteorologist at the Confederation of Agricultural Associations of Sinaloa state.

REUTERS SY SSC1028