Reinventing Puerto Rico after Hurricane María won’t be a quick fix. Puerto Rico is flattened – no water, electricity and communications with the outside world. It faces billions of dollars in uninsured damages from two hurricanes. The people are exhausted, possibly depressed, by the lack of resources.
The governor and his administration warn that the island may be without power up to four months, difficult for an already battered population to swallow – coming on top of a very long economic decline, loss of sovereignty, bankruptcy and now two hurricanes to top off the destruction.
After Hurricane María
Puerto Rico has not taken care of business for decades and things now are decidedly worse, especially for its economy and power grid. Consider this: Hurricanes Harvey and Irma reportedly shaved a half-percentage point off the U.S.’s economic forecast this year, based on the storms’ effects on two large states – Texas and Florida, which together account for 15 percent of the U.S. economy.
What economic havoc will Irma and María wreak on Puerto Rico, whose economy has been in negative territory for a decade? The island’s gross product reportedly declined another 1.1 percent in fiscal year 2016 in pre-inflation dollars, making for over nine years of decline.
The Fiscal Oversight and Management Board that rules over Puerto Rico since the beginning of 2017 has a dire mess on its hands. Not only must it steer Puerto Rico through renegotiation of $70 billion in debt (excluding another $40 billion-plus in pension liabilities), it also must find a way to reconstruct the island of 3.4 million people.
Before Hurricanes Irma and María hit, the fiscal board had been pushing layoffs affecting over 130,000 government workers, seeking to enforce via federal court. Will it proceed as planned? Very likely, Puerto Rico will need to reassign many workers to rebuild the island.
Without electricity, businesses cannot return to normal, striking a major blow to economic activity (down 20 points between 2005 and 2016), low labor participation rate (40 percent) and low incomes (median household income of $18,626 as of 2015).
In case you missed it, Puerto Rico Electric Authority (PREPA) bondholders, concerned about their investment, asked to place the utility into receivership before Hurricane María. A federal court denied the petition, stating that decision was up to the fiscal board.
In the states, insurance payouts for hurricane damages and losses help kickstart recovery, but that is unlikely to happen in Puerto Rico. Many island homes are uninsured (only 50 percent have policies against wind damage), to say nothing of flood insurance (less than 1 percent), reports the Journal.
In addition, Puerto Ricans frown upon mortgage debt, which means people own their uninsured homes, many passed down through generations. These homeowners won’t be able to rebuild without substantial financial assistance. Home foreclosures, last reported at a “stubbornly high” 7 percent, may soar.
It’s too soon to say whether the twin hurricane disasters will push more peo
ple off the island toward the upper 48, including Florida. Face it, historically migration has been Puerto Rico’s relief valve. However, people currently are broke and lack resources for such a move. But they are not broken, demonstrating resolve in the face of catastrophe. Many indicate they plan to stay, according to news reports.
But if the island is not minimally up and running soon, desperation may change that.
Reinventing Puerto Rico
Paradise is not lost. As insensitive as it may sound, this island of stunning beauty has the opportunity to rethink wasteful policies and reinvent itself for a 21st century Puerto Rico, one that is responsive to, and works for, its population and not just the kleptocracy at the top.
Grasp it – hard – with both hands.
˜˜Maria Padilla, Editor