Hurricane Irma isn't the welcome mat Puerto Rico needs right now
Hurricane Irma, currently a Category 5 storm with winds reaching 185 miles per hour, is predicted to pass over the north-eastern Caribbean by mid-week, including Puerto Rico.
Governor Ricardo Rosselló has declared a state of emergency, preparing the island for an impending storm. But while the region faces the threat of natural disasters, it tends to come at a time when Puerto Rico is grappling with a major economic downturn.
The island has been experiencing an economic decline for years. Government overspending, a heavy debt burden, and an inefficient and expensive energy system all contribute to the problem. The fiscal crisis became so severe that the U.S. federal government had to declare the largest municipal bankruptcy in U.S. history in May. Puerto Rico owes $74 billion in debt and has pension liabilities totalling $50 billion.
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Despite claiming to have funds for emergency situations, Rosselló stated on Monday that Puerto Rico's budget includes $15 million in emergency funds, approved as part of a press release. However, government officials in Puerto Rico did not respond to CNNMoney's queries about how disaster relief funds would be financed.
Given the catastrophic costs of repair, the federal government may have to provide significant aid. As of now, the Federal Emergency Management Agency (FEMA) has around 400 personnel stationed in Puerto Rico and the U.S., with regional director John Rabin stating they'll assist the islands in getting ready for and reacting to hurricanes.
"Right now, Puerto Rico hasn't developed a cost plan," Rabin said, indicating that the declaration of a disaster may not be issued for days, or even weeks, after Irma hits the region, opening the way for federal aid.
Rabin also mentioned that FEMA is working with Congress to increase funds in its disaster relief fund, enabling the agency to provide the necessary aid.
Ted Hampton, a Moody's analyst who tracks Puerto Rico's debt, said he sees no reason to doubt the aid.
"I don't believe the well-known economic and fiscal challenges of the commonwealth will affect its ability to secure the aid it deserves after a severe storm," Hampton said.
Connection: Hurricane Irma poses a "potentially catastrophic" threat
However, a powerful hurricane like Irma could impact Puerto Rico in other ways. Hampton suggested that severe disasters could exacerbate some of the negative economic trends impacting the commonwealth, including emigration to the mainland U.S.
Puerto Rico's population has dropped by 10% since 2007, partly due to employment opportunities. Many skilled workers have left for the U.S.
"Puerto Rico is fighting, and this storm could make its economic challenges more severe," Hampton said. "Even with federal aid, there could be lasting economic consequences."
The loss of skilled workers could contribute to other problems as Irma approaches. Residents have expressed fears that the storm could cause prolonged power outages.
Ricardo Ramos Rodríguez, head of Puerto Rico's power supplier, recently highlighted several challenges that make the island's power system "fragile and vulnerable." These include personnel shortages. Rodriguez said that many employees retired or left for better opportunities in the U.S.
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While the island claims to have resources for emergency situations, financing for disaster relief remains unclear.
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Funding for Puerto Rico's disaster relief efforts is a combination of federal aid and local resources, according to reports. The Federal Emergency Management Agency (FEMA) has awarded Puerto Rico around $34.7 billion in total obligated funds for various projects, including disaster recovery and hazard mitigation work. Other agencies, like the U.S. Department of Housing and Urban Development (HUD), have also provided significant funding to support recovery efforts.
