The Recovery Crisis in Puerto Rico

These types of major disasters lead to new beginnings.

Adobe Stock/auntspray

Adobe Stock/auntspray

In my last column, I wrote about the long road ahead for Texas, Florida, and parts of the Southeast that were impacted by Hurricanes Harvey and Irma.

Now, with a couple of weeks behind us and the local hurricane news dropping off the front pages, a real humanitarian crisis in unfolding in Puerto Rico on the heels of a devastating blow from Hurricane Maria. Maria was the worst of the three storms, and 3.4 million of our fellow U.S. citizens are stranded in Puerto Rico without sufficient supplies of food or water. The entire electrical system was knocked out and the major airport in San Juan is without radar, communications equipment, and essentially all other basic services required to run an airport.

Only about 2,000 passengers are flying out every day despite standby lists that are in the tens of thousands. That is down from an average of 15,000 passengers departing daily before Maria, as only about 10 commercial flights are leaving to the U.S. mainland a day, down from 176 daily flights normally.

This was the last thing the beleaguered U.S. territory needed; Puerto Rico is contending with a decade-long recession, declining population, and $73 billion in debt. A federal board is overseeing its finances, and in May, the island declared what amounts to the largest-ever U.S. municipal bankruptcy. Two months later, the federal board voted to place the government-owned electric utility, which has $9 billion of debt, in bankruptcy as well. The move was aimed at helping advance plans to modernize the utility and turn it from a government-owned monopoly into a regulated private utility.

When the island sank into recession, the utility’s finances suffered even more, as business and residential demand for power declined. The exodus of Puerto Ricans to the continental U.S. is shrinking the island’s population, depleting the utility’s customer base. And now, austerity measures the utility implemented as it headed toward bankruptcy resulted in cuts to the workforce it now needs to make repairs.

The recovery of the power system will take not days, but months. The utility will need resources such as power poles and lines that typically aren’t stored on the island; U.S. officials say that Puerto Rico faces a longer road to recovery than any other part of the U.S. hit by a hurricane, partly because the island nation needs to ship and fly in equipment and personnel that can simply be trucked into states like Florida and Texas. But restoring power is key to kickstarting the rest of the reconstruction.

 

No Infrastructure Investment

Our firm had clients in Puerto Rico, and we got to know San Juan and the surrounding towns well. Back then, we were bullish that the local construction economy had a big future, given their aging infrastructure, and that much concrete would be sold to help rebuild roads, bridges, water and sewer systems, and all the other aspects of infrastructure that drive concrete volumes. But the recession took hold, and the much-needed infrastructure investment never happened.

But these types of major disasters lead to new beginnings, as I experienced in the months and years after Hurricane Katrina. We know major industry players like Cemex, who has a big presence on the island, will help lead the local concrete industry in rallying behind our fellow U.S. citizens in Puerto Rico, and drive the vast amount of new construction that will be necessary for the recovery.

Pierre Villere Pierre Villere

Pierre G. Villere has been a contributing editor for The Concrete Producer for over a decade, and serves as the President and Senior Managing Partner of Allen-Villere Partners, an investment banking firm with a national practice in the construction materials industry. He has a career spanning more than four decades, and volunteers his time to educating the industry through his regular articles and presentations. Contact Pierre via email.

By | 2017-10-03T09:30:05+00:00 September 26th, 2017|