Hurricane Maria putting more pressure on struggling Puerto Rico, U.S. Virgin Islands
After one of the strongest hurricanes in United States history hit Puerto Rico and the U.S. Virgin Islands Tuesday and Wednesday, concerns were raised about how fast the islands could recover.
Moody’s Investors Service vice president Ted Hampton said, “Damage caused by Hurricane Maria will sap Puerto Rico's already weak economy, depending on the duration of utility outages, receipt of aid funds, and could accelerate already negative outmigration from the commonwealth. Even before this month's hurricanes, Puerto Rico's economy (based on nominal GNP) was expected to shrink each year through 2021, based on the fiscal plan certified by the federal oversight board.”
Evercore director of municipal research Howard Cure said, “Taken together, this could expedite the downward spiral of the economy and could cause even more of the workforce to leave.”
On Wednesday afternoon, El Nuevo Día reported that all of Puerto Rico was without electricity, attributing the information to Abner Gómez, director of the State Agency to Manage Emergencies and Disaster Administration.
On Thursday morning CNN posted and tweeted a story quoting Puerto Rico Gov. Ricardo Rosselló saying that it might take months before electricity was restored to everyone. Rosselló retweeted the story and then apparently deleted his retweet later on Thursday.
Around noon on Thursday the Puerto Rico Electric Power Authority tweeted, “The recovery process will be extensive, but not impossible; Let us keep calm.”
A bond analyst said Hurricane Maria could push Puerto Rico’s path to economic growth back by a year or two.
Maria’s eyewall lashed St. Croix, at the southern side of the Virgin Islands, on Tuesday night. On Wednesday, the hurricane's eye went from Puerto Rico’s southeast corner to its northwest edge. Maria’s winds reached 155 miles per hour in Puerto Rico, according to the Associated Press, and 175 miles per hour in St. Croix, according to the VI Consortium news web site. The last storms with comparable strength winds to affect Puerto Rico were in 1928 and 1932, the Associated Press reported.
With Hurricane Irma, sustained winds generally peaked at 75 miles per hour in the most affected north coast of Puerto Rico, though winds were much higher in the northern islands of the U.S.V.I.
The El Vocero news website reported there had already been 20 inches of rain in Puerto Rico as of Wednesday afternoon.
President Trump declared Puerto Rico and the U.S. Virgin Islands to be disaster areas, according to a Trump staff person, opening the door to federal aid.
Hampton said, “Federal relief funding after Hurricanes Irma and Maria should offset Puerto Rico's challenges and may even help spur renewed economic growth over time. We expect Puerto Rico to benefit from substantial federal aid under the Stafford Act, including funds from the Federal Emergency Management Agency (FEMA).
“After Hurricane Georges hit Puerto Rico in 1998, the commonwealth and its subdivisions received $611 million in FEMA funds,” Hampton continued. “Together with other aid and insurance funds, recovery and rebuilding after Hurricane Georges stimulated economic growth in Puerto Rico.”
“We are all waiting to see a new reckoning of damages and to what extent the federal government will help in both the cleanup and funding restoration of the basic infrastructure and if federal monies would be willing to finance upgrades to the systems,” Cure said.
Markit reported that trading of Puerto Rico's 2014 general obligation bonds slipped to 57 cents on the dollar Wednesday from 59 cents on Sept. 13.
The administration of Puerto Rico Gov. Ricardo Rosselló estimated that Irma left $1 billion in damages to the island.
Recovery from Maria in Puerto Rico may be hurt by homeowners’ relative lack of insurance. According to The Wall Street Journal about 50% of the homes have wind-damage insurance, “far less” than in the continental U.S.
Irma incurred much more damage on the Virgin Islands’ northern islands of St. Thomas and St. John than it did to either the islands’ southern island of St. Croix or to Puerto Rico. Maria had greater impact on St. Croix than in the other two islands.
“Any hope that lingered about electricity quickly being restored after the storm was dashed,” on Thursday according to the VI Consortium. “Nearly every utility pole in St. Croix “was either completely mangled or badly damaged.”
On Wednesday afternoon, Ken Kurtz, Moody’s senior vice president, said, “Hurricane Maria will further aggravate the U.S. Virgin Islands’ liquidity crisis, and any damage on St. Croix could result in disruption of production at the two rum distilleries.”
In the aftermath of Irma, on Sept. 14 Kurtz said “The territory’s important tourism industry will also suffer and not recover soon.” Regarding the islands’ matching funds bonds he said, “pledged matching fund revenues are paid to the territory’s government in advance, subject to a ‘true up’ adjustment two years later. As a result, any decrease in rum production now would not impact the amount of pledged revenues for two years.”
On Sept. 11, Moody’s Investors Service vice president Richard Donner said that Hurricane Irma’s damage to many of the Puerto Rico Electric Power Authority’s transmission lines was a credit negative to the authority. Not only would the authority be forced to use its little remaining cash on repairs, it would also suffer reduced income from the electrical outages.