Poor Puerto Rico. About two dozen people died on the island during Hurricane Maria, the devastation is immense and worse than first feared. The island will be without electricity for months. Potable water is scarce. It is scarcely any surprise then that many Puerto Ricans will seriously consider moving to the mainland USA. And further depleting the island’s population.
Currently at about 3.4 million people, the population of the island peaked at about the turn of the millennium at about 3.8 million. There are another 1.5 million Puerto Ricans born on the island who live in the mainland USA, chiefly in New York and Florida. These two states are expecting to see new arrivals in the coming weeks and months as some decide that facing a rebuild with no power and clean water is too much to bear. CNBC reports:
“The Miami-Dade school district, for instance, has said it is prepared to take in students from Puerto Rico and expects to see an influx once flights return to normal from the island.
‘We have already over 2,000 Puerto Rican-born children, who are students in our school system. The family connections between Miami Dade and the island are very strong,’ said Alberto Carvalho, Superintendent of Schools for Miami Dade. ‘We are obviously expecting to receive a significant number, in the hundreds, to at least a couple thousand.’”
Since Puerto Ricans are US citizens, they can freely leave the island and enter the mainland. However, although this might be the best thing for individuals facing an uncertain future, an exodus from the island is likely to further exacerbate its financial woes. In short, the island is bankrupt with a total debt of about USD 74 billion and most of its obligations are in default. Projections for future revenue streams to cover these debts are now looking less certain. According to Curtis Erickson, head of capital markets at Preston Hollow Capital:
“‘[The Puerto Rican oversight board is] going to make a decision that they have to allow for more variability in the budget and ultimately be more conservative, and more conservative might lead to shrinking the top line and ultimately asking bond holders for more reduction in debt,’ he said.
‘As difficult as it was three months or four months ago to predict what future revenues were across the Commonwealth, it's even more difficult now,’ said Dennis Pidherny, managing director, U.S. Public Finance at Fitch Ratings. ‘We saw it after Katrina. There was a permanent decrease in population throughout the New Orleans area. We expect you very well could see that same type of fundamental shift in population, and it's quite honestly anyone's guess what the new normal will be from an economic stand point for Puerto Rico.’”
Fewer people on the island means fewer taxpayers to pay off the debt. Furthermore, those who move are more likely to have transferrable employment skills who can find jobs elsewhere, as opposed to those at or nearing retirement age. The current fiscal plan forecasts a population decline of 0.2 per cent per year. By 2025, the island is expected to have a population of 3.16 million residents.
“Pidherny said the factors that were considered cornerstones in a debt restructuring before the storm were the territory's ability to stem or reverse migration; its ability to build and restore sustainable economic growth, and its corporations building more resilient and efficient infrastructure. But those assumptions are all thrown into doubt.”
Poor Puerto Rico.