The cost of rebuilding Puerto Rico after Hurricane Maria

Desdemona Despair

25 September 2018 (Desdemona Despair) – The first anniversary of the destruction of modern Puerto Rico and other Caribbean islands by Hurricanes Irma and Maria brought numerous retrospectives in the media. Not many focused on the actual cost to rebuild PR. Although there are stories of recovery, a picture of widespread infrastructure failure and poverty emerged. Puerto Rico is in dire straits, and it will take immense quantities of money to make PR habitable again for 3.5 million people.

With its critical infrastructure wiped out, Puerto Rico essentially must be rebuilt from scratch. In the immediate aftermath of Hurricane Maria, it was clear that this would be an enormously expensive undertaking, on the scale of tens of billions of dollars. The final report on reconstructing Puerto Rico, Transformation and Innovation in the Wake of Devastation: An Economic and Disaster Recovery Plan for Puerto Rico [pdf], was released on 8 August 2018, and it calls for $139 billion. This is on top of the $120 billion of debt owed by the government of PR before the disaster.

The official plan strikes an optimistic tone and portrays the reconstruction effort as a huge opportunity. It reads a bit like a pitch to investors: “opportunity” appears 69 times in the 531-page report, and there’s an entire chapter titled “Puerto Rico’s Opportunity”.

Governor Ricardo Rosselló Nevares writes:

As bad as the situation has been, there is reason for real hope. The complete and widespread devastation gives us an opportunity to view our island as a blank canvas, upon which we can implement innovative solutions that can make Puerto Rico a showcase for the world with a modern and more resilient infrastructure, a newer and stronger housing stock, and a more vibrant and competitive economy.

Realistically, there’s no other way to position this overwhelming project. Investors need to see an upside but may be discouraged by the unavoidable fact that another Hurricane Maria is inevitable. The report focuses on resilience, so that the island will be ready for the next global-warming amplified hurricane, but the list of immediate needs doesn’t include much about surviving the next hurricane. The report lists these priorities to guide the near-term reconstruction effort:

• Reestablish lifeline systems to provide affordable and reliable energy, telecommunications, water, and transportation.
• Repair or rebuild the approximately 166,000 residential structures  damaged or destroyed during the hurricanes.
• Improve emergency preparedness infrastructure and develop the government workforce so that all residents and businesses are better protected in advance of a future disaster.
• Clarify ownership and responsibility for various infrastructure, assets, and services so that repairs can be completed efficiently and rebuilding reduces risk.
• Stem the flow of residents away from the Island and encourage economic growth by lowering the costs of doing business, incentivizing formal labor force participation, broadening the tax base, and increasing fiscal discipline.
• Revitalize urban centers  to focus economic recovery efforts.
• Scale social services, health, education, and infrastructure systems to meet the health, social, and economic needs of the current and future population.
• Rebuild infrastructure to meet modern codes and standards, and enforce the laws and regulations governing construction, water supply connections, and electricity metering.
• Establish modern methods for providing both the public and private sectors with timely, accurate, and
  comprehensive information to make effective decisions about recovery and day-to-day operations.

This list applies to the next three years and won’t do much to help people if another hurricane hits within that time. In the words of 70-year-old Ramon Cantero, a longtime resident of Naguabo, “The next one will wipe Puerto Rico off the map.”

From this list, stemming the flow of people out of PR may be the highest priority – PR’s population was already falling before the hurricanes. After the disastrous 2017 hurricane season, the mass emigration accelerated, with more than 200,000 people fleeing the devastation to the mainland, mostly Florida.

If the island’s population falls by another million people, PR may never recover. Brad Setser, an economist at the Council on Foreign Relations in New York, says, “If Puerto Rico doesn’t experience strong growth in fiscal 2019, it never will.” He adds, “I am not hugely optimistic.”

The economic forecast for Puerto Rico remains grim. Immediately after Hurricane Maria, PR’s economic activity plummeted to a level not seen since 1980. This is on top of the already declining economic state of the island – the hurricanes hit after nearly 20 years of recession. Puerto Rico was $120 billion in the hole, burdened with $70 billion of bond debt and $50 billion of unfunded pensions. The government has been trying to restructure its debt since May 2017 through bankruptcy in U.S. court and other deals with creditors, and in September 2018, creditors approved a plan to restructure bonds issued by Puerto Rico’s insolvent Government Development Bank. But restructuring the debt burden just kicks the can down the road for awhile. With a continuously decreasing population, the goal of digging out of the debt hole continuously recedes.

Looming over the reconstruction effort is the ever-present threat of another powerful hurricane strike. The official plan places a great deal of emphasis on resilience, but it’s hard to imagine how to build an island society that’s resilient against both inexorable sea-level rise and increasingly powerful hurricanes. In the face of global warming, it’s possible that tropical islands around the world will have to be abandoned.

Hurricane Maria was the first true climate catastrophe to strike North America and generate a wave of climate refugees, but it surely won’t be the last. At what point do we acknowledge that some places will become uninhabitable, and society should stop throwing money and resources into the vortex?