By Catherine Bremer

MEXICO CITY (Reuters) - Mexico began shutting down parts of its economy on Thursday to slow the spread of a new flu strain as officials urged increased worldwide precautions against an imminent pandemic.

The World Health Organization said it would remain for now at its current alert level -- one step below full pandemic -- and that it would no longer refer to the H1N1 virus as "swine flu" to appease beleaguered meat producers.

New confirmed flu cases were reported in the United States, Canada and Europe, although a case in Peru, which would have been the first confirmed case in Latin America outside of Mexico, was later discounted.

Almost all cases outside of Mexico have been mild, only a handful of patients have required hospital treatment, and most global markets have shrugged off concerns.

But the case count continues to rise, and officials say there are many unanswered questions about the outbreak.

U.S. officials said new infections were occurring and at least 298 U.S. schools closed around the country because of possible infections. Canada recorded its first case of person-to person transmission of the virus.

In Mexico, the worst hit country with up to 176 deaths, President Felipe Calderon told government offices and private businesses not crucial to the economy to stop work beginning on Friday to avoid further spreading a virus that is striking across age and class lines.

"There is no safer place than your own home to avoid being infected with the flu virus," Calderon said in his first televised address since the outbreak started.

In Mexico City, where the virus has already brought public life to a standstill, some were skeptical while others vowed not to take part in the shutdown.

"Closing businesses is not right and not fair. What are we going to live on? Air?" said Andres Garcia, who works in a tailor shop in the old colonial center of the capital.

CURE WORSE THAN DISEASE?

Mexico's assembly for export factories known as maquiladoras, a pillar of the economy, said it would defy the shutdown call while some of the country's mines also vowed to stay in operation.

"We have commitments that we have to meet, and if we don't meet them, the cure will end up being worse than the disease," council head Cesar Castro told reporters.

With its tourism industry savaged, shoppers staying home and exports to the United States in steep decline, Mexico could find itself in the longest, deepest recession it has seen in years, according to analysts.

Mexico's peso was hammered by flu fears on Thursday and its stock market slid. But most global markets were taking the flu news in stride as traders focused on hopes that a deep U.S. recession may be nearing its end.

"The information that we have at this stage is it is a relatively minor (economic) event," International Monetary Fund chief economist Olivier Blanchard said, although he added that some countries and sectors could see "quite dramatic" fallout from the outbreak.

Previous studies at the World Bank have said a severe flu pandemic which triggers a clampdown on trade could cost the global economy trillions of dollars.

The WHO and flu experts say they do not yet know enough about this new strain to say how deadly it actually is, how far it might spread and how long any potential pandemic may last.

Flu epidemics generally last a few weeks or months in any single community, and can pass around the world in one or two waves over 18 months to two years before fading out.

U.S. officials have reported 109 confirmed swine flu infections in at least 11 states and the only death recorded outside of Mexico -- a Mexican toddler visiting Texas.

The White House said on Thursday that a member of the advance team that went with Obama to Mexico had also come down with flu-like symptoms and passed them to his family, although all of them had recovered.

OPEN QUESTIONS

U.S. Health and Human Services Secretary Kathleen Sebelius told a public webcast there were still many unanswered questions. "We know what happens year in, year out with seasonal flu. What we don't know is if this is going to be more virulent or milder," she said.

Normal seasonal flu kills between 250,000 and 500,000 people around the globe in an average year, including about 36,000 in the United States.

Worldwide, 11 countries have reported confirmed cases of the H1N1 strain, with the Netherlands the latest to join the list. It said a 3-year-old who had recently returned from Mexico had contracted the virus.

Switzerland also confirmed its first case on Thursday in a man returning from Mexico. Peru's health minister Oscar Ugarte told Reuters that further tests on a suspected case there had determined it was not the new flu strain.

Flu preparations were intensified after the WHO raised its alert level to phase 5, the last step before a pandemic.

The WHO recommended all countries track any suspect cases and ensure medical workers dealing with them wear protective masks and gloves. But it stopped short of recommending travel restrictions, border closures or any limitation on the movement of people, goods or services.

Keiji Fukuda, acting WHO assistant director-general, told reporters there was no new evidence to prompt the agency to move to its top alert level which would signal a global pandemic was under way.

Fukuda said Swiss drugmaker Roche was stepping up production of Tamiflu to deal with the infection at that the WHO had released some of its own stockpiles of the drug -- known generically as oseltamivir and proven effective against the new strain -- to developing countries deemed most at need, including Mexico.

The World Bank also announced it was beginning to transfer flu emergency funds to Mexico and Argentina.

(Additional reporting by Maggie Fox, Steve Holland and Lesley Wroughton in Washington, Julie Steenhuysen in Chicago; Jason Lange, Alistair Bell and Helen Popper in Mexico City; Laura MacInnis and Stephanie Nebehay in Geneva, Robin Emmot in Brownsville, Cynthia Johnson in Cairo, Phil Stewart in Rome and Yoko Nishikawa in Tokyo; writing by Andrew Quinn; editing by Mohammad Zargham)

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