Cries In The Dark

Puerto Rico was in financial trouble before Hurricane Maria. Now its crisis is almost existential

- Michelle Kaske

“This is, without a doubt, the biggest catastrophe in modern history for Puerto Rico,” Governor Ricardo Rosselló said after Hurricane Maria pummelled the US territory with floodwaters and 155 mph winds. He declared that his priorities were “not a fiscal consideration. It’s restoring people’s security and restoring normalcy.”

Normalcy, however, is something Puerto Rico hasn’t experienced in a while. That’s because the government is essentially bankrupt. Years of runaway borrowing to plug budget shortfalls, a decade-long recession, and the exodus of residents seeking work in the mainland US pushed the commonwealth in May to seek creditor relief from nearly $74 billion of debt, the nation’s biggest municipal bankruptcy. The island’s budget and spending now have to be approved by an oversight board appointed by the federal government. That board says that Puerto Rico can use only $1 billion from its budget to deal with hurricane damage. The tab for Maria’s destruction could reach $30 billion.

There are dire and immediate consequences. For now, officials are rightly focused on people’s safety and bringing back power and running water, rather than calculating when and how much Puerto Rico can repay its bondholders, about a third of which are hedge funds. The government-owned electric utility, the largest US public power provider, has had its aging system ripped apart by the hurricane. US Department of Energy officials and American Public Power Association staffare working with the Puerto Rico Electric Power Authority, the island’s main electricity provider, to repair transmission lines and restore power.