Puerto Rico Economists See Bleak Picture of Island's Future

(Bloomberg) -- Puerto Rican economists are predicting a bleak future for the storm-ravaged island.

At a panel discussion in San Juan convened Thursday by the territory’s federal oversight board, economist Jose Villamil said the population could decline to less than 3 million by 2026, a drop of more than 400,000 from the most recent count. Another, Juan Lara, said the economy could contract by as much as 15 percent in the fiscal year that ends in June, depending on how long it takes to restore power throughout the island. A third said a conservative estimate of the storm damage is $115 billion -- a sum equal to more than a year’s economic output.

"The board, Congress and local government authorities need to address a more realistic estimate of damages," said economist Heidie Calero, the president of a local consulting firm, who presented the damage number. "Business as usual will not, I repeat will not, come back quickly."

The projections underscore the long and difficult recovery faced by Puerto Rico, whose government was already bankrupt from years of borrowing to stay afloat as the economy and population shrank. One oversight board member said her sense of optimism was rattled by a presenter who said it can take a decade or more for economies to recover from a major typhoon or hurricane.

"I had to wait on the questions because I was recovering from processing your presentation where I find myself both intellectually very focused and engaged, and at other levels, finding my optimism as a matter of faith a bit challenged," Ana Matosantos said. 

Major Aid Sought

Governor Ricardo Rossello is asking for about $94 billion in federal aid, and the island’s oversight board is working with the government to revise fiscal recovery plans to take into account the new reality. 

In the first fiscal plan approved by the board in March, Puerto Rico said it could allocate $8 billion for debt payments through 2026, far less than what’s owed. But Wednesday the board’s lawyer told a U.S. court that it may need to skip bond payments for five years. That pushed the price of Puerto Rico’s most active bonds down to as little as 24 cents on the dollar, the lowest since they were issued in 2014 and less than half their value before the storm.
One of the biggest threats to Puerto Rico’s economy -- and its ability to pay creditors even a fraction of what they’re owed -- is how many people choose to leave. 

Hundreds of thousands did so in the years before the hurricane, in pursuit of jobs on the U.S. mainland. Villamil told the panel that he expects the storm to exacerbate that trend. The executive director of the oversight board told Congress last week that an estimated 100,000 have already left.

"Everybody’s leaving, from the neurosurgeon to the janitor," said Vicente Feliciano of Advantage Business Consulting. "What is constant is the age group, they tend to be younger."

The board is hosting three sessions, including Thursday’s, to get advice from experts, local officials, and people in the private sector of how to redraft their plan.

To contact the reporter on this story: Rebecca Spalding in New York at rspalding@bloomberg.net.

To contact the editors responsible for this story: Christopher Maloney at cmaloney16@bloomberg.net, William Selway

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