María, Irma and Debt: what effect will the hurricanes have on Puerto Rico’s debt crisis?
Hurricanes Irma and Maria have swept through Puerto Rico leaving a trail of desolation in their path. An already struggling populace is now facing devastating scenes of destruction and loss, as well as a future much more uncertain than it was before the hurricanes landed. Puerto Rico has been struggling under crushing debt for years, and under the governorship of Ricardo Rosselló, has run into issues with PROMESA, as well as with debt restructuring, but had been looking into a brighter future with high hopes. Now, however, many people are facing the reality that a grim fight may be ahead instead. With the already burdensome debt staring the people in the face, the islands are facing a $10 billion recovery bill.
Many municipalities were already in a fragile state when hurricane Irma brushed up against the Island. With the old and decrepit Puerto Rico Electric Power Authority being non-functional, many of the municipalities were knocked out entirely, leaving many Puerto Ricans without power and other necessary services. Following the wreckage of Hurricane Maria, one hundred percent of Puerto Rico was left without electrical power, or any other services. An especially harrowing development was the damage to the Guajataca Dam. This is in the midst of the ongoing battle over debt restructuring occurring in Washington under the Puerto Rican Oversight, Management, and Economic Stability Act, which determines how to address Puerto Rico’s ever amassing debt, since US bankruptcy laws do not apply to Puerto Rico. The Hurricanes add a new level of doubt and complications to an already deteriorating situation.
There is help on the way. The help that the Governor and the people of Puerto Rico have comes in three forms, the first is a very publicized move by President Donald Trump, Governor Rossello, and Representative González-Colón, which granted Puerto Rico federal funds for immediate relief. In a tweet Governor Rosselló thanked President Trump for his declaration of two municipalities as disaster zones, entitling them to receive help from the United States.
— Ricardo Rossello (@ricardorossello) September 10, 2017
Additional disaster aid is scheduled to be released and administered the first week of October.
Senior Hill aide says WH expected to send disaster aid request to Congress in 1st/2nd week of Oct for Puerto Rico. That gets ball rolling.
— Jennifer Bendery (@jbendery) September 25, 2017
The second helping hand comes from an article in PROMESA (Title V) which allows the board to “accelerate the deployment of grants and loans following a disaster.”
And following Hurricane Maria many private charity have double or tripled their efforts to provide assistance. Support is also coming from celebrities like Jennifer Lopez or in the form of aid organizations, like that of the First Lady Beatriz Rosselló.
— Jennifer Lopez (@JLo) September 25, 2017
— La Fortaleza (@fortalezapr) September 15, 2017
Celebrities are calling for Puerto Rico aid following the devastation of Hurricane Maria: pic.twitter.com/ovmdLyVxse
— Mic (@mic) September 25, 2017
However even after these assistance measures are deployed, going forward into the future and into recovery there may be deeper consequences and further complications. With government municipalities down, bondholders may be able to launch further lawsuits against the Puerto Rican government. The plants and other agencies that will remain non-functional could be seen as a reneging on formerly agreed to conditions, not to mention that with the companies lying idle there will be no revenue for the bondholders who are already feeling scalped by certain dealings with the government.
This could also open the door for a new discussion on the privatization of utilities on the islands. Though the Governor and the Oversight Board are on board with the idea, many union members are derisive of the idea, and believe that it could create an even leaner workforce than they have now. Hurricane Irma may have been the final push for Rosselló to move the enterprise into a more capitalist model in order to create a stronger and faster system, and keep the bondholders happy. Others have suggested that following Maria, the rebuilding of the electric system could lead to a net benefit system where the federal government may offer stimulus to not only rebuild the electric system, but improve it at the same time. The idea would offer renewable energy and energy stores through more green methods, which many may see as a long term benefit.
For the people of Puerto Rico who have nowhere to go and nowhere to live, the federal funds will be used to help them out immediately. Rescuing, rebuilding, and restoring functionality will be the first priority for the islands now that the storms have moved on.