After completing her master’s degree in advertising in 2018, Camila Del Pilar thought that getting a job in her field would be easy. It wasn’t. A year has passed, and Del Pilar is working as an administrative assistant in a non-profit organization, since she hasn’t been able to find any other opportunity in Puerto Rico.
Del Pilar is making the same decision as thousands of other young, educated Puerto Ricans: She is leaving the island and relocating to Florida. “I feel that over there it’s going to be better”, said Del Pilar.
It has been almost two years, since Hurricane María impacted the U.S. territory, and the island’s economy hasn’t been able to rebound like other states in the country. When Florida was hit by Hurricane Irma, the state managed to stay with an unemployment rate of 4.0% for four consecutive months. Meanwhile, after the category 4 hurricane landed in Puerto Rico, two weeks after Irma, it threw the unemployment rate up 0.7% taking it to 11.3%. After that, the unemployment rate has been decreasing slowly, but this is partly because people like Del Pilar are leaving the workforce.
Although the delay in the reimbursement of hurricane relief funds, is one of the reasons why Puerto Rico hasn’t been able to make a rebound, there is more to the story. The pre-hurricane financial struggles of the U.S. territory is the main reason why it’s been difficult for the island to get back on track.
“We’ve had a fiscal crisis since before the hurricane”, said economist Carlos Soto Santori.
Even before María, Puerto Rico’s economy was declining due to numerous factors. Since 2010, the island has been experiencing an exodus of young educated people. The decrepit electric grid has caused economic losses for the commercial sector, since every time there is a blackout, business have to turn on the their generators or close their doors for the day. Last but not least, in 2016, the island’s local government lost all control of the finances, right after Puerto Rico went into default, due to the $72 billion debt.
Like many other Puerto Ricans, Del Pilar lost her job after the hurricane. The company where she worked decided it wasn’t cost effective to start again because of the unstable economy the island had been experiencing even before the storm.
Fortunately, Del Pilar was able to find another job, but not in her field, nor with a good salary. Earning the island’s minimum wage of $7.25 and hour, with no benefits, and having to work after hours without pay wasn’t the scenario the 27-year-old though she would be living after making an investment in her graduate studies.
Cases like these ones are the reason why more than 100,000 people have fled the island after the hurricane. “If Florida and Texas keep creating good employment our island will continue to get empty,” said economist Heriberto Martínez. Since 2010, almost half a million Puerto Ricans have left the island, due to the financial crisis.
“It only takes a job and an airplane ticket for Puerto Ricans to disconnect from the debt,” said Martínez. Since Puerto Rico is an open market, citizens find it easier to leave the island and start fresh in a new state where they might find better employments.
If people continue to leave the island, it will be harder for Puerto Rico to pay off its debts. “There would be less money load from taxes,” said economist Iyari Ríos, “making it difficult for the government to repay bondholders and balance the island’s budget.” Ríos also added that this could lead to higher taxes, representing a worst scenario for Puerto Ricans.
For business owner it’s been hard to maintain employees, especially after the hurricane, due to the uncertainty that island was experiencing. The small bakery Delights by Yare lost three employees to the U.S. after the storm. “They had better offers over there,” said Carlos Montañez, one of the owners of the bakery.
This bakery, run by Montañez and his wife Yarelis Maldonados, not only took orders for cakes, pastries and sweets, but they also had a restaurant located in Guaynabo, Puerto Rico, where they served breakfast and lunch. After the storm hit, they were able to open up a month later, but just like other business, they had to pay for damages caused by the hurricane. “We had to buy new air conditioners,” said Montañez, while adding that this expense wasn’t the only one, since they had to buy a transfer switch for the generator. The couple had to pay more than $1,500 to start operating again in the restaurant.
After a year, Montañez and Maldonados, decided to close their location because they weren’t earning what they expected. “We can sell more by focusing on our baking production,” said Montañez. Closing the restaurant meant that the couple would be making more than $50,000 per year, since they wouldn’t have to incur on restaurant expenses such as a waitress, chefs and rent.
The burden of extra expenses was something that many business owners had to incur after the hurricane, because if they wanted to work ‘business as usual’ they needed a generator. The unstable electric grid of the island was partly responsible for the long months where businesses had to pay large money to open their doors.
For Rosa Torres, one of the two owners of the restaurant Tía, diesel was something she didn’t think would be a key factor for her location. Since there was a huge demand of diesel after the storm Torres had to pay high prices to keep her restaurant running, although there were days this wasn’t achieved. “There were two days that I had to close the restaurant,” said Torres, “we didn’t had enough diesel and the truck never came to make the dispatch”.
As of today, the electric grid is still and issue on the island. The unstable system ran by the public corporation, Puerto Rico Electric Power Authority (PREPA), is still affecting residents and business owners.
In March, two main blackouts were registered within two days. Both power outages were caused by external factors. The first one was produced by a cat, who was found dead in one of the generation plants, and the other one was caused by an iguana also found in one of PREPA’s plant.
PREPA, which is responsible for $9 billion of the $72 billion dollar debt, just made deal with bondholders regarding their payment. But that will drive up electric bills for residents and businesses.
“It’s a challenge,” said Torres “that’s when we have to look for other alternatives to maintain the formula”. For the co-owner of Tía, cutting employees is not her go-to solution. She prefers to sit down with her sister, who’s also an owner, and look for ways to sell more, by maximizing their production. Torres also tries no to increase prices in the menu that much, because she feels it could drive consumers away.
For residents, the increase in the electricity is also a burden, because their paychecks haven’t changed, while the cost of living keeps increasing.
These increases are due to bad scenario on the island’s finance. Puerto Rico’s budget is administered by a fiscal board that was named on August 2016 by former president Barack Obama. The Financial Oversight Management Board (FOMB), made up of seven people, who are named by the President of the United States, overhauls all finances of the U.S. territory. FOMB’s purpose of taking Puerto Rico’s fiscal autonomy in their hands is to repay bondholders who own the debt, and take the U.S. territory back to the bond market.
The only issue is that, to get Puerto Rico’s finances in place, the board has to cut money from industries like education and health, creating a scenario of uncertainty, which leads to more Puerto Ricans leaving the island. “At this rate I don’t see a stable growth in the next 10 years,” said Martínez after he saw the the budget that was approved last week by FOMB.
