Economic activity has skidded to a near halt in significant parts of Puerto Rico, leaving the hurricane-smashed island on a knife’s edge between slow recovery and partial collapse. Thousands of small businesses are teetering toward insolvency, unable to operate.
Heading into the fourth week since Hurricane Maria slammed into the island, barely one out of six clients of the island-wide electric utility has power. The rest remain in darkness.
The hum of generators has become the new soundtrack of island life.
The large pharmaceutical manufacturing plants that comprise the backbone of the island’s export economy report major losses, but are slowly returning to operations, powered by diesel. The Bacardí rum empire reported “no major losses” and its rum inventories are safe.
Not so lucky are mom-and-pop shops, law firms, family-run farms, real estate offices, some hotels, large shopping malls and advertising businesses.
“For advertising, it’s all dead,” said Jaime Díaz Cabán, a 41-year-old graphic designer. “Most agencies that weren’t destroyed by the hurricane itself have seen their billings go to zero.”
Gov. Ricardo Rosselló wrote a letter to four key leaders on Capitol Hill last weekend pleading for rapid disbursement of $4.6 billion to “meet the immediate emergency needs of Puerto Rico” beyond relief provided through the Federal Emergency Management Agency.
“In addition to the physical destruction, Puerto Rico’s economy has ground to a near standstill,” Rosselló wrote. “Very few businesses are operating.”
All the stores on a once-busy commercial street in the city of Caguas were shuttered earlier this week — except for two.
“I’ve got a generator, and they’ve got a generator,” said Antonio López Martínez, owner of the Personal Defense gun shop, signaling to another store across the street. “But all the others don’t.” Using generators adds considerably to operating expenses, he said.
“You’re using 12 to 15 gallons of diesel a day. If you’re working six days a week, you’re talking about 90 gallons a week at $4 a gallon,” López Martínez said.
Some business owners said commercial generators are not built to endure the months of power outages that Puerto Rico is likely to sustain.
“I’ve bought two generators and the two generators have both broken down. I have to buy a third one,” said Julio Soto Quijano, a jeweler. “They aren’t meant to be used this hard.”
It’s not just the lack of power. Without running water, few businesses could allow employees on their premises because bathrooms and toilets do not function.
Workers fret on social media whether they even have jobs anymore. Employees at Saks Fifth Avenue, one of two anchors at the posh Mall of San Juan, say they’ve been offered jobs off the island. A spokeswoman, Meghan Biango, said the retailer has not yet been able “to fully assess the impact the hurricane has had on our store.” The entire mall remains shut down.
A major 543-room resort, the Melia Coco Beach, also told employees in an Oct. 4 letter that it was closing permanently.
The tourism and hotel sector, which provides around 80,000 jobs and represents up to nine percent of the island’s economy, has endured a mixed fate. Some hotels, powered by generators, have been at capacity dealing with 12,000 U.S. soldiers and the influx of federal workers arriving in Puerto Rico. Others remain shut to deal with damage and lack of water.
The massive El Conquistador, a Waldorf-Astoria resort and spa located on a peninsula near Fajardo, may not reopen until Jan. 1, its managers say. The facility has 984 rooms and villas, and normally employs 1,200 full- and part-time staff.
“We got severe damage but we will definitely prevail and come back as fast as we can,” said Dermot Connolly, the property’s managing director. Even getting replacement carpeting is a challenge, he added.
The island’s unemployment rate, already at 10.1 percent before the hurricane, has leapt.
“It will rise considerably,” Ramón Rosario, the island’s secretary of public policy, said Tuesday. “We see every day how businesses are making [payroll] decisions about personnel after the event.”
Agriculture, a pillar of the economy, was devastated by the storm. The island has 13,000 small farms that produce sugar cane, rice, tobacco, citrus, meat and dairy and other products.
Agriculture Secretary Carlos Flores told the newspaper El Vocero that losses could top $2 billion in that sector alone because of damage at meat-packing plants, chicken farms and other facilities, only a third of them insured.
“We have a lot of retailers, warehouses, manufacturers that are down right now,” said William Villafañe, chief of staff to the governor. He lauded the banking sector, which he said is “improving in huge steps. … We hope that in a few weeks, they’ll be back to normal.”
Some citizens see things differently. Charles de Jesus Cruz, an architect, blamed banks for keeping many small businesses from rebounding.
“You look at the banks, they are open only four hours a day. It’s strangling the economy,” he said, adding that he believes managers are frightened of crime. “Everyone is in survival mode right now.”
A few sectors are seeing a huge rebound as work teams repair damage to installations and the island’s roads, electrical grid and telephone systems.
“They’ll be plenty of jobs in the construction area, technology, telecommunications and the power industry,” Villafañe said.
Another pillar of the economy is pharmaceutical manufacturing, which blossomed for decades with favored-tax status. Dozens of facilities on the island produce 16 of the top 20 selling drugs in the United States, and seven of the top 10 selling drugs globally.
FDA Commissioner Scott Gottlieb warned late last month of potential shortages of such products as cancer drugs, immunosuppressants and devices for diabetics.
One supplier, Medtronic, which has headquarters in Dublin, Ireland, already has stated that earnings in the current quarter would take a $250 million hit because of Hurricane Maria.
Another, Baxter International, said “limited production activities have resumed” at its three facilities on the island. In an unsigned statement, the company said it has put products made in Puerto Rico “on allocation,” implying some rationing. It said the move was designed “to responsibly manage and optimize inventory levels in order to serve our existing customers.”
Baxter, of Deerfield, Illinois. did not immediately say which products were affected.
For all the trauma that the island has suffered, citizens can at least take solace in the territory’s most famous export — rum. The Bacardí distillery is back at work.
“Obviously with a storm of this magnitude, our facility experienced some damage,” spokeswoman Amy Federman said. “Our aged inventory is safe and we are confident that there will be no disruption to the supply of Bacardí rum to all of our markets.”
Tim Johnson, 202-288-9536, @timjohnson4