The devastation brought about by this hurricane season creates a new set of headaches for President Donald Trump and an already overwhelmed Congress — and underscores the urgent need to resolve the financial crisis that had battered Puerto Rico and the US Virgin Islands before the recent storms and floods arrived.
The President and Congress can no longer ignore their duty to rescue millions of Americans living in our tropical territories. The standard range of the Federal Emergency Management Agency and other disaster recovery programs will cover a good chunk of the storm damage, but the need for financial rebuilding is every bit as necessary as the new homes, roads and power grid the islands need.
It’s hard to overstate the depths of the pre-hurricane human and financial crises that had already embroiled Puerto Rico.
This month’s storms came roughly four months after the island filed for bankruptcy protection — no longer able to pay its $123 billion in pension obligations and bond debt. That roughly comes out to $34,000 owed for each of the island’s 3.4 million citizens.
The island’s economy isn’t likely to generate the tax revenue needed to pay these massive bills. Puerto Rico’s 44% poverty rate is more than double that of Mississippi, the poorest state in the union.
The knockout blow landed when 1 million customers initially lost power in Puerto Rico after Hurricane Irma — and Maria virtually knocked all electricity out of the island when it made landfall Wednesday. It’s troubling because the government’s power authority, Prepa, owes $9 billion in debt backed by money it makes from electricity bills, according to The New York Times.
Officials have discussed recapitalizing Prepa and then selling it off to a private utility. Even that drastic action will likely require financial support from the federal government.
Tourism, a key building block of Puerto Rico’s economy, also needs a hand. The industry was the first to come out of a recession that’s bogged down the US commonwealth for the last five years. Roughly 10 million people were estimated to have traveled to the island last year, a state-run tourism group said in December, up 1.6% from a year earlier. That poured almost $4 billion into the economy,
Gov. Ricardo Rosselló told CNBC earlier this month that Irma failed to cripple Puerto Rico’s tourism infrastructure. But that was before the devastation of Maria, one of the worst storms ever to hit the island’s shores.
Any storm-related dent could have ripple effects through the economy.
The deck was already stacked against the US Virgin Islands, too, which was going through a similar but less-noticed debt crisis. The protectorate’s bonds were recently downgraded to “junk” status. Investors are concerned the government can’t pay down its $2 billion in debt, especially since the Virgin Islands’ biggest private employer closed three years ago.
Reuters reported in August that conditions on the group of islands were dreadful months before the storm hit. The public health system suffers from crumbling infrastructure, while doctors have stopped performing essential services.
The outpouring of emotional and short-term support for Puerto Rico and the Virgin Islands has been steady. But we should all settle in for the long, difficult task of supporting millions of our fellow Americans who have lost their homes, their jobs and their hope.