Puerto Rico pitches for investment after hurricane

Governor pitches for business as one in five islanders remains without power

[dropcap]F[/dropcap]ive months after Hurricane Maria, Puerto Rico’s government is shifting from disaster recovery to pitching for business, telling multinational companies that the island that has defaulted on its debt obligations and is still struggling to restore power is on the brink of “an economic transformation”.

One in five Puerto Ricans is still without electricity and an estimated 200,000-300,000 of its 3.4m population have left since hurricanes Irma and Maria hit, but Governor Ricardo Rosselló told a Financial Times conference in New York last week that the US territory was pushing “trailblazing” economic reforms to attract business.

“Even before the storms we saw opportunities but now we have a blank canvas,” he told an audience of financial and corporate investors. “We are at least reaching levels of normalcy which allow us to look a little bit further ahead.”

Mr Rosselló announced plans in January to privatise the generation business of Puerto Rico Electric Power Authority, the electric utility known as Prepa, and to seek bidders to operate its transmission and distribution operations on a concession model.

The potential for a new operator to reduce power costs for businesses and individuals was central to turning the island, a US jurisdiction with no federal taxes and lower labour costs than the mainland, into “a very competitive jurisdiction”, he told the conference.

At present the utility “spends over 60 per cent of its budget on buying expensive fuel for inefficient machinery that is 50, 60 years old,” he said, but a more efficient operator could make a profit while investing in renewable energy and driving down costs for customers. Tesla was among 19 companies that had submitted proposals for energy projects, he added.

Gerardo Portela, executive director of Puerto Rico’s fiscal agency, said the island’s economy would shrink 9.2 per cent in the 2018 fiscal year, but estimated that about $70.5bn of disaster relief funding would help to restore growth from 2019.

Federal funding has fallen far short of the sums San Juan asked for, but Mr Portela said its forecast includes an expected $35.3bn in public assistance from the Federal Emergency Management Agency and $13.2bn in supplemental appropriations from Washington, on top of $21bn in private insurance payments.

Mr Rosselló said he expected the draft fiscal plan, which foresees a $3.4bn budget surplus over the next five years, to be certified by an oversight board within days.

The price on a benchmark $3.5bn bond Puerto Rico issued in 2014 that matures in 2035, and is believed to be largely held by hedge funds, rallied about 30 per cent last week. The bonds traded at 32 cents on the dollar on Friday, up from 24 cents on the dollar at the end of last year but far below levels seen before Maria made landfall, according to data from the Municipal Securities Rulemaking Board.

Puerto Rico’s lack of political representation in Washington had hindered it since Maria hit; Mr Rosselló said: “It was always harder for us. Nothing was given, nothing was assumed, everything had to be sort of battled through and it’s because we don’t have political power.” But he said that 90 per cent of people on the mainland now know that Puerto Ricans were US citizens, up from as little as 20 per cent before the hurricane. “That gets the needle moving.”