Puerto Rico: The Forgotten Island
Puerto Rico has a bigger economy than some states, but how big — and how badly it was undercut by Hurricane Maria — is not clear because the island is the only U.S. territory whose economic data is not fully measured by the U.S. Commerce Department.
That’s about to change.
Later this year, the federal government will for the first time release economic data on consumption, business investment and trade in Puerto Rico, something it already does for all other U.S. states and territories.
The change was announced Monday by the Bureau of Economic Analysis, part of the Commerce Department.
The three estimates amount to a first step in developing a reliable estimate for the commonwealth’s gross domestic product, the broadest measure of trade in goods and services.
Puerto Rico is the most populous U.S. territory, but had been conducting its own economic analysis and estimates.
Puerto Rico and a presidential task force asked the Commerce Department in 2011 for help in improving the commonwealth’s economic measurement and the Bureau of Economic Analysis began passively helping on an as-needed basis.
But a new governor of Puerto Rico in 2013 de-emphasized the effort and a year later a decades-long debt crisis dramatically worsened. Puerto Rico’s bonds were downgraded to junk status in 2014, and the U.S. Congress put in place a Financial Oversight and Management Board with control over Puerto Rico’s budget.
The events spotlighted the need for improved measurement of economic activity there, even more so after the devastating Hurricane Maria crushed Puerto Rico in September 2017. The island is still struggling mightily to recover from Maria.
“It is fair to say that the need for information to try to guide the recovery for Maria may have highlighted information gaps or deficits that maybe would not be true absent the storm,” said Lucas Hitt, a bureau spokesman and member of the technical team trying to develop a GDP measurement program for Puerto Rico.
A year before Maria, the Congressional Task Force on Economic Growth in Puerto Rico called for the federal government to take the reins of economic measurement of the island’s economy.
“The Task Force further recommends that, in the same way that the U.S. Department of Interior is funding BEA’s efforts to estimate GDP for each of the smaller territories, the federal government should fund BEA’s efforts to calculate GDP for Puerto Rico,” the bipartisan task force said in its report issued on Dec. 20, 2016.
That was a reference to an interesting historical wrinkle. Other U.S. territories fall under the administrative arc of the Department of Interior, which has an Office of Insular Affairs to fund the federal compilation of economic statistics among other things.
There is no such single point of administration within the federal government for Puerto Rico.
On the U.S. mainland, calculation of GDP is fed by surveys from the Census Bureau and the Labor Department, which don’t fit as neatly in Puerto Rico.
“It’s not like we can take the same process we use for states and just apply it,” said Hitt, cautioning that “it’s going to be a work in progress for a while.”
Measuring the effects of international trade is also likely to prove complicated for Puerto Rico, whose relationship with Caribbean neighbors and Latin America is quite different than most U.S. states, except Florida.
Since 2010, the bureau has provided GDP estimates for American Samoa, Guam, the U.S. Virgin Islands and the commonwealth of the Northern Mariana Islands.
Using pre-existing Puerto Rican data and locally collected data from a variety of sources, backward-looking estimates for consumption, business investment and trade will be calculated for 2012 to 2017. These will create a baseline from which measurements going forward will be based.
“It is a matter of getting the quality of the data and collection up to par, and that is not currently true,” Hitt said.
The agency will not produce a GDP estimate for Puerto Rico this year, instead laying the groundwork. Funding for future years is not guaranteed and must be renewed by Congress to continue.