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Hurricane Maria Has Made Puerto Rico's Already Dire Economic Situation Even Worse

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hurricane maria
A woman tries to walks out from her house after the area was hit by Hurricane Maria in Salinas, Puerto Rico, September 21, 2017.
REUTERS/Carlos Garcia Rawlins
Puerto Rico is America's drug factory. Most major pharmaceutical companies have facilities there. This includes Bristol Myers Squibb, Eli Lilly, GlaxoSmithKline, Johnson & Johnson, Pfizer, Procter & Gamble, and Wyeth. Hurricane Maria has nearly shut it down.

FDA chief Dr. Scott Gottlieb has said that his agency is working to prevent shortages of 40 crucial drugs produced on the island. They include stroke-prevention and childhood leukemia drugs. The FDA has taken the unprecedented step of helping drug companies get fuel for emergency generators.

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Power outages aren't the only problem that could affect production for months. Many employees can't make it back to work. Transportation needed for raw materials and product shipping is crippled.

Infrastructure is key to survival

After hurricanes hit, our efforts tend to focus on emergency aid. This is understandable. But the most effective help for those who live in storm-prone areas is preparation.

I'm not talking about hurricane "prep" like storing non-perishable food and bottled water. I'm talking about planning and investment in infrastructures hardened for natural disaster. But for that you need a fairly competent government.

Puerto Rico, like pre-Katrina New Orleans, wasn't prepared. Instead, politicians spent money on programs that would get them reelected. They put resources into lavish pensions for the politically powerful public employee unions.

Even before Maria, the island was more than $70 billion in debt. Almost $50 billion of that debt is the unfunded portion of pension obligations to the growing retired population.

The biggest bill payer in Puerto Rico is pharma. It accounts for more than half the territory's manufacturing and 25% of its GDP. The New York Times reports that the industry employs about 100,000 people. These workers make nearly three-quarters of the territory's exports.

Drug companies wanted improved infrastructure. Blackouts are a danger to an industry that needs low temperatures to produce goods. This was an issue even before Maria. Though the industry pays much of the island's taxes, it lacked the political clout needed to get those changes.

The demographic disaster

The real clout belongs to the 200,000 government employees and many more retirees living on government pensions. Puerto Rico's largest public pension, Employee Retirement System (ERS), supports almost 100,000 retirees.

ERS runs out of cash next year. It also owes more than $3 billion to bondholders who bought debt that was supposed to bail out the failing fund.

The other side of this demographic disaster is the shrinking population of young workers. As services and infrastructure deteriorated to pay for government retirees, the economy slowed.


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Source : http://www.businessinsider.com/hurricane-maria-made-puerto-ricos-dire-economic-situation-even-worse-2017-10

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