Puerto Rico has evidenced an unexpected improvement in the island’s economy and budding hopes for a settlement with creditors to resolve its bankruptcy.
Hopeful Signs of Progress
In January of this year, Puerto Rico’s government disclosed economic data showing previous estimates of the financial impact of Hurricane Maria were overly pessimistic. The result has been that some of the island’s municipal bonds have become more attractive in the marketplace.
Puerto Rico and the Oversight Board supervising it that Congress established held mediation talks with creditors in New York in March with formal restructuring negotiations to begin this month. There are many difficult hurdles to overcome such as the litigation regarding which of the island’s bonds have a priority in payment. The Oversight Board hopes to reach a restructuring plan within a year.
Some however remain pessimistic about the likelihood of a rapid negotiated resolution in part because of the many different types of bonds Puerto Rico must reach deals on, ranging from highway and electric utility-related debt to the sales-tax and general obligation bonds.
Living Conditions Have Improved but Much More Needs to Be Done
As previously reported, living conditions remain very difficult in Puerto Rico. Even before two hurricanes struck the island last year, the territory was contending with economic decay, government mismanagement and excessive debt. About 60 percent of the children lived below the poverty line in 2015 according to data from the Pew Research Center.
Six months after Hurricane Maria, electric power woes persist and business struggles.
Approximately 91 percent of power generation has been restored but the grid is prone to sudden outages.
Insurance money has arrived very slowly, with $1.7 billion paid in residential and business claims as of January 31, 2018 – about 40 percent of the expected total according to the island’s Office of the Commissioner of Insurance.
As previously reported, the market is shrinking resulting from the accelerating exodus of Puerto Ricans fleeing conditions on the island who have relocated to the U.S. mainland.
Of the roughly 45,000 small businesses in Puerto Rico, an estimated 5,000 to 7,000 remain closed.
After seven months and close to $2.5 billion in repairs, almost everyone in hurricane-ravaged Puerto Rico had their lights back on – until a freakish accident on April 18, 2018 plunged the entire island once again into darkness. An excavator working near a fallen 140-foot transmission tower got too close to a high-voltage line. Repairs could take several days.
The Return to Puerto Rico
Of the thousands that had fled the island for the U.S. mainland, many had plans to return. For them, the leap north was a respite from the immediate chaos after the hurricanes. Many others, though, permanently changed addresses and enrolled their children in schools in Florida, Texas and New York.
It is too early to determine how many may return but there is little doubt that Puerto Ricans have begun trickling back to the island. For them it is a joyous return to the motherland after months in exile. But the homecoming is bittersweet. They must come to terms with an island that is still crippled, where power outages are frequent, businesses remain shuttered and hillsides are pocked with blue roof tarps.
More than 23 percent of the population in Puerto Rico is over 60, higher than anywhere else in Latin America. And that number is growing as young people abandon the island and leave elders to fend for themselves. They leave, however, with the very heavy burden and concern for the health and safety of their parents and relatives.
Amateur Baseball in Puerto Rico
Puerto Rico’s amateur baseball league presses on after the Hurricanes Irma and Maria, helping residents do the same.
The players are students, salesmen, barbers, teachers and cooks. The league’s teams have provided a semblance of normalcy by pressing on with their games, even among harsh conditions. The players’ determination reflects baseball’s special relationship with the island and its residents. There are little towns everywhere on the island where people’s lives revolve around following their home team.
This is one example of how residents on the island gain strength to continue.
Oversight Board Approves Fiscal Plan
The Oversight Board on April 19, 2018 approved a multi-year fiscal plan that aims to pull the island out of a decade-long recession by cutting spending, improving tax collections and taking steps to encourage businesses to expand.
However, Governor Ricardo Rosselló said he opposed the proposed cuts to retirees’ pensions and said the Board has no authority to impose them over his objections. The Board said it is willing to challenge Puerto Rico in court if the fiscal plan is not implemented by the legislature and the governor.
The plan projects that the recommendations would result in a $6.7 billion surplus over the next six years, before debt service payments.
- Wirz, Matt, “Puerto Rico Bonds Bounce Back,” The Wall Street Journal, March 16, 2018.
- Endnote 1.
- Campo-Flores, Arian, “Storm Fails to Pass in Puerto Rico,” The Wall Street Journal, March 20, 2018.
- Wagner, James and Frances Robles, “Puerto Rico, Entire Island, Loses Power,” The New York Times, April 19, 2018, and Campo-Flores, Arian, “New Blackout in Puerto Rico As Outages Hit Entire Island,” The Wall Street Journal, April 19, 2018.
- Ferre-Sadurni, Luis, “After Hurricane’s Ruin, the Return to Puerto Rico,” The New York Times, March 31, 2018.
- Wagner, James, “An Indestructible Spirit,” The New York Times, April 17, 2018.
- Kaske, Michelle, Yalixa Rivera and Jonathan Levin, “Puerto Rico Board Backs Fiscal Plan Amid Clash With Governor,” www.bloomberg.com, April 19, 2018.