Venezuela Goes Bust. How is this different than Puerto Rico running out of money, long before the hurricanes hit PR?

You should read the comments at the end as well.

Venezuela Goes Bust

Another lesson in the price of lending to a socialist regime.

Venezuela's President Nicolás Maduro in Caracas, Venezuela, Nov. 12.
Venezuela’s President Nicolás Maduro in Caracas, Venezuela, Nov. 12. Photo: Miraflores Palace/Handout via REUTERS

Milton Friedman once joked that if you put the government in charge of the Sahara Desert in five years there would be a shortage of sand. He could have been talking about Venezuela and its oil wealth. But it is no joke.

On Monday Caracas missed interest payments due on two government bonds and one bond issued by the state-owned oil monopoly known by its Spanish initials PdVSA. Venezuela owed creditors $280 million, which it couldn’t manage even after a 30-day grace period.

Venezuela is broke, which takes some doing. For much of the second half of the 20th century, a gusher of oil exports made dollars abundant in Venezuela and the country imported the finest of everything. There were rough patches in the 1980s and 1990s, but by 2001 Venezuela was the richest country in South America.

Then in 2005 the socialist Hugo Chávez declared that the central bank had “excessive reserves.” He mandated that the executive take the excess from the bank without compensation. Today the central bank has at best $1 billion in reserves.

Falling oil prices are partly to blame, but the main problem is that chavismo has strangled entrepreneurship. Faced with expropriation, hyperinflation, price controls and rampant corruption, human and monetary capital has fled Venezuela.

As of Tuesday evening, the Investment Swaps and Derivatives Association still had not declared Venezuela in default. That matters because this will trigger the insurance obligations inherent in the credit default swaps. But S&P Global Ratings declared the country in default Monday. On Tuesday morning the Luxembourg Stock Exchange issued a suspension notice for the bonds with missed payments.

President Nicolás Maduro has formed a commission to restructure up to $150 billion of the debt and put Vice President Tareck El Aissami —who is under U.S. sanctions for drug trafficking—in charge. Mr. El Aissami called a meeting of creditors on Monday in Caracas, which most bondholders did not attend. Press reports said Mr. El Aissami delivered a monologue on Venezuela’s intention to pay and took no questions. He argued that Trump Administration sanctions make it difficult for the dictatorship to arrange refinancing.

The real problem is that restructuring assumes the country can grow again. That’s nearly impossible without a change in policy that will free the economy.

If Caracas doesn’t find a way to settle with bondholders, they will soon ask authorities to seize Venezuelan assets such as oil shipments at sea and Citgo facilities in the U.S. Such are the wages socialism.

Appeared in the November 15, 2017, print edition.


From the comments:

Frank Dickof
It is a disgrace that in 2017 a country so blessed as Venezuela in oil and mineral wealth is in this state. Yet somehow we now have young people in the USA who believe Socialism and Communism are good options to take as a government model. It is amazing that brainwashing on such a massive scale can occur. Scary stuff.

Rafael Fernandez
This is Exhibit One on why socialism does not work, or why socialism is great until you run out of other people’s money.

Henry Newbold
What a perfect opportunity for the Clinton Foundation to go in there and feed the Venezueleans!

Just like they saved Haiti!
Oh wait…..

John Campbell
It sounds like a great idea as long as all of it is on U.S. or Canadian soil, or both. Venezuela communists have a nasty habit of seizing anything on their soil and throwing out the legitimate owners. Thus the reason why no one will deal with them.

@james Isaacs @William Wahl Now now we all know TRUE socialism has never been tried- any campus Marxist can tell you that. I’m sure only a few hundred million more people need to die and they’ll eventually get it right.

Richard Krauland
Any high school, college, or university that isn’t examining the Venezuelan collapse, in its economic classes, is practicing malfeasance. This has happened everywhere that socialism has gained sway. I’d like to hear Bernie Sanders’ explanation for these developments.

james Isaacs
@Richard Krauland Richard — dead on correct. The natural place where Socialism ends is coercion, force, absence of freedom and complete societal breakdown.

Scott Horsburgh
The typical liberal response is that they didn’t practice socialism properly. The correct retort is they did!

Patrick McGoldrick
@Richard Krauland I don’t want to hear Bernie’s take on anything.

Ernest Miller
Too bad our intrepid news media can’t find the word socialism in their lexicon when speaking about Venezuela.
There is no excuse whatsoever, except for willful ignorance on the part of our mainstream media for their continued support for socialism.

Richard Krauland
And let’s not forget our high schools, colleges, and universities; which ignore the realities of socialism in all of their economic classes.

The media and our public education system are the two greatest failures in our society.

Patrick McGoldrick
@Richard Krauland Do not be naive. They are not failures. They are frighteningly effective at doing what those who have subverted them want to do.

Gary Parsons
“The trouble with liberalism is that eventually, you run out of other people’s money.”
Unfortunately, Venezuela is learning that the hard way…

Octavio Lima
What is so sad is that just before the Bolivarian revolution, Venezuela was one of the richest countries in South America. Now it is one of the poorest, just two decades removed from that fateful date.

Henry Newbold
Fine analysis, as far as it goes, but it leaves out something very important. The editorial manages to say NOTHING about the widespread misery that Chavez’s socialism has caused to ordinary Venezuelans. Surely that is at least as relevant for US foreign policy, and for Journal readers as human beings. The financial big picture is crucial, but so are the actual conditions on the ground. Drudge has covered the Venezuelan crisis by linking to news reports of formerly middle-class families eating their pets to stay alive. The Journal focuses on the impending bond default, without sparing even a single word for the ordinary folk affected by it.
Just one more example of how and why Donald Trump defeated the conservative establishment last year.

regina margot
“The Journal focuses on the impending bond default, without sparing even a single word for the ordinary folk affected by it.”
That’s not fair – the Journal has tirelessly reported on the misery of everyday people in Venezuela. Over the past two years there have been numerous in-depth articles, including the one today about “the class of 1994” – fleeing the country as fast as they can to feed their children


While the human suffering in Venezuela is not mentioned in this editorial, it has been covered in some depth in many other articles and editorials published by the WSJ.

And I’m not sure how not mentioning conditions in Venezuela in this particular editorial is an “example of how and why Donald Trump defeated the conservative establishment”. Would you care to help me see the logic behind this statement?


Yes, the Journal has done great Venezuela reporting on its news pages, as it usually does. But the editorial board should see it as their highest responsibility to draw explicit connections between macroeconomic issues and everyday life. That’s what’s missing here.


Because… Venezuelans themselves ARE NOT INNOCENT… Like Russel Crow tells DiCaprio on the movie Body of Lies: “there is no body innocent on this sh… hole”

@ADAM PRUZAN — Argument from “whataboutary”? Does the Journal also have to talk about environmental destruction of the forests there? How about endangered species? There is nothing better as a predictor of human misery than the general economy. If the economy goes down the hole, there will be incredible suffering. This is obvious to all. Trying to “humanize” an article on the economy – you will neither get those gut wrenching stories you desire so badly, nor will you get the root cause of their suffering. Useless-useless.

Bob Russell
These liberal do-gooders like Bill Gates and Warren Buffett who give billions of dollars to African socialist nations is like pouring water down a rat hole. The result is that more people live to have more babies who also can’t take care of themselves. The best thing we can do for poor people or anyone else is make them free and self sufficient.

Didn’t I see a sign in State and National parks asking that we please not feed the bears because it will make them dependent on handouts? It’s the same for humans.

William Cnossen
Socialism is always wishful thinking on the part of those who consider themselves the elite. Capitalism is the reality that works.

Bob Russell
It would be nice if the Socialist college professors would be forced to explain to the students why Socialism doesn’t work. It doesn’t work because there is no incentive to produce when everyone ends up with the same slice of the pie.

@Bob Russell — Also no incentive to work when the state grabs the fruits of your labor. Also no incentive to work when “from each according to their abilities – to each according to their needs”.

William Cnossen
And here we see the problems with the socialist/dictatorship/strong central government model. The few are often wrong about what needs to happen and what should be spent to help the many. The truth is that the many can take care of themselves if government (the few) gets out of the way.

To have a free people requires a responsible people. If you cannot expect people to take care of themselves you do not have a free society, you have a top down model.

Government help always results in more people dependent, more people in poverty, than when government leaves them alone.

Michael Gretchen
I hope Sean Penn and Jimmy Carter bought some of those bonds. If so, maybe they’ll come around to see that the worker’s paradise they’ve touted for so many years now wasn’t all they thought it would be.

John Segal
The problem is not socialism; it is total incompetence so bad not only are they running out of other people’s money, they are running out of their own money.

@John Segal
“The problem is not socialism”

Socialism is always a problem.

John Segal
@JAY WRIGHT @John Segal yes, Socialism is always a problem. However, even a capitalist economy run as corruptly as Venezuela would be in tatters

@John Segal @JAY WRIGHT
“…even a capitalist economy run as corruptly as Venezuela would be in tatters”

A true capitalist economy (which doesn’t exist) would not have a big, powerful government structure that could be corrupted. Socialism, by definition, always has a big, powerful government.

Stephen Martin
@John Segal Missing the key learning from history. Corruption at the top is always bad, but under socialism the leaders have the actual ability to take any property, capital or person and do with them as they will. Without regard for economic feasibility, morality or the law, as they are the law.
Corrupt capitalists in a free market society can disrupt a section of the economy for a while, but it rarely causes long term catastrophe.
A corrupt government with few and very limited powers is unable to create the havoc that is always associated with Socialism. By definition.
The moment you put the government in charge of what markets prosper and which do not you hurl yourself into the abyss.

Mark Dobbins
@John Segal ” The problem is not socialism; it is total incompetence…”

Socialism seems to be a synonym for incompetence.

Kevin Kilty
@Mark Dobbins @John Segal Socialism is incompetence by design.

Pat Kinghorn
What dumba$$ would lend money to this place? It’s been almost 20 years now. I can’t wait to learn my government somehow lent my money to them, in my name, and my debt will jump from 20 trillion to whatever this adds. And people are fighting for the swamp to stay the same.

Aki Korhonen

Development banks, bond funds, your 401k, etc etc. Some of it may be insured or otherwise guaranteed by the feds, but I’d expect most of it to be private or non-US.


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Puerto Rico needs an IMF-style economic plan

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In Florida, all eyes on Puerto Rican voters after Maria

Read also, this opinion article, why Democrats want Puerto Rico to fail, to encourage more Puerto Ricans to move to the states, and to vote for Democrats.


In Florida, all eyes on Puerto Rican voters after Maria

Associated Press
1 / 2
In this photo taken Wednesday, Nov. 8 2017, Javier Gonzalez talks to a reporter in Hialeah, Fla. Gonzalez has joined the tens of thousands of Puerto Ricans moving to Florida after Hurricane Maria, grateful for a place to start over but not without resentment over how his island was treated in the disaster. (AP Photo/Alan Diaz)

MIAMI (AP) — Javier Gonzalez has joined a human tide of more than 130,000 U.S. citizens arriving in Florida since Hurricane Maria wrecked Puerto Rico, grateful for a place to start over but resenting how their island has been treated since the disaster.

More than a million Puerto Ricans — about 5 percent of Florida’s population — already call the state home, and given the outrage many feel over President Donald Trump’s handling of the storm, political observers say this voting bloc could loosen the Republican Party’s hold on this battleground state.

Gonzalez, 38, saw the storm destroy the restaurant he opened with his father five years ago. Without power or reliable water, he became violently ill from food poisoning for three weeks. Finally, he packed his bags, determined to make his future in Miami instead.

“There is resentment, and we feel abandoned compared to Texas and Florida,” Gonzalez said. “We were desperate for help.”

Like any Puerto Rican, Gonzalez can vote in all elections now that he’s moved to the mainland. He doesn’t plan to register for any party, but he follows the news and understands their platforms. He’s aware of Trump’s tweets.

“It’s not right that we’ve fought from World War I, to Vietnam and Afghanistan and that the first thing the president says is: ‘You have a large debt, big problems and have cost us millions,'” Gonzalez added.

Puerto Ricans are not the gift to the Republican Party that the anti-Castro Cuban diaspora has been historically. They’ve tended to favor Democrats, given their support for public education and social services. Around 70 percent of Florida’s non-Cuban Latinos voted for Hillary Clinton.

Both parties are courting the new arrivals to Florida, which Trump won last year by just 112,000 votes out of 9.6 million cast.

There is an intent to grab those who are coming,” said Rep. Robert Asencio, a Democrat of Puerto Rican descent who represents Miami in the Florida House and leads the Miami-Dade Committee for Hurricane Maria Relief.

“A lot of my colleagues say they are not politicizing this, but there is an effort to bring people either to the Democratic or the Republican side,” Asencio said.

Newcomers must register by next July 30 to vote in 2018 for a new governor to replace term-limited Republican Gov. Rick Scott and choose Florida’s congressional delegation, now 11 Democrats and 16 Republicans. Democratic U.S. Senator Bill Nelson also defends his seat next year, and Scott, who has been applauded for helping evacuees, is expected to challenge him in what could be a close race.

Scott set up three disaster relief centers to help arrivals with driver’s licenses, job searches, and disaster aid applications. Scott also asked education officials to waive public school enrollment rules for evacuated islanders, and to give college-bound evacuees the same tuition breaks state residents get.

Asencio calls Scott’s actions “damage control,” given the multimillionaire governor’s close relationship with Trump, who offended Puerto Ricans by tweeting they wanted “everything to be done for them” rather than taking responsibility for their own recovery. They also resent Trump’s rating of his own disaster response as a “10 out of 10,” blaming his administration for delays that exposed their families to illness and misery.

The island still faces a lengthy and painful recovery after the storm took down the entire electrical grid, leaving hospitals in the dark and closing schools for several weeks. Initial projections that 95 percent of the people will have power restored by year’s end now look optimistic.

Maria’s evacuees are following waves of people frustrated by Puerto Rico’s unemployment and debt crisis who settled in Central Florida, shifting from New York, the favored destination of previous generations. Of the more than 140,000 islanders estimated to have left since the storm, more than 130,000 went to Florida, where Puerto Ricans may soon displace Cubans as the largest Latino group.

State Rep. Rene Plasencia, a Republican from Orlando, predicts that Scott’s warm welcome will leave a bigger impression on the newcomers than any Trump tweets.

“For whatever people think of the president, you have to take into consideration the actions of Governor Scott,” said Plasencia, whose mother and wife are from Puerto Rico. “People aren’t making decisions out of a sequence of tweets … It makes good news, but it doesn’t make political shifts.”

Billionaires Charles and David Koch also are involved, funding the Libre Initiative, which welcomed hundreds of evacuees on the first cruise ship to arrive from San Juan.

Cesar Grajales, who lobbies for Libre, says they’re helping evacuees learn English and connect with community and business leaders.

Democrats hope Colombian-American Annette Taddeo’s recent underdog state Senate victory against a well-funded Republican in South Florida shows her anti-Trump message will keep resonating.

“It is a strong indication that voters are paying attention, and they are angry,” said Cristobal Alex, president of the Latino Victory Project. “We wouldn’t have the devastation and abandonment of Puerto Rico without Donald Trump. People will look at that.”

On the island, Puerto Rico’s lack of statehood means they can’t vote in general presidential elections, and can only send a non-voting representative to Congress. On the mainland, they’ll have more power.

“I know for a fact that we are well educated and we are going to come here to work,” Gonzalez said. “And yes, we are going to make a voice. We are going to make a bigger voice than before.”

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Puerto Rico’s leaders don’t know who has power. Most Puerto Ricans STILL don’t have power, 50 days after Hurricane Maria!

42% power generation in PR as of 11-8-17 does little good when less than 5% of Puerto Ricans have electricity, even 50 days after Hurricane Maria. Upper right box shows the government-owned monopoly’s power generation at Status.PR.

The discrepancy is that just because power plants have restored their facilities to generate power, the overhead lines also need to be repaired so that the electricity can reach homes and businesses.

San Juan's unlit skyline, a month after Hurricane Maria.


Puerto Rico’s leaders don’t know who has power. We tried to find out

By Leyla Santiago, Khushbu Shah and Rachel Clarke, CNN

Updated 7:06 AM ET, Mon November 6, 2017

San Juan, Puerto Rico (CNN) — Towns and communities across Puerto Rico are entirely without power, more than six weeks after Hurricane Maria.

The island’s leadership is touting restoration figures that show nearly 40% of electricity generation has resumed — but it doesn’t say how much of that power is actually reaching homes, schools and hospitals.

Officials from the government and the Puerto Rico Electric Power Authority (PREPA) don’t even know how many people have power for lights, air conditioners, refrigerators and other basic necessities.

So, while some power plants can generate power, the ability to transmit it to homes may not be possible in some areas.

One of the union leaders for PREPA employees, Evans Castro Aponte, was hearing things were so bad he estimated just 5% of customers have electricity. That would leave 95% of the 3.4 million Americans on the island without any power unless they can run costly and loud generators that have become difficult to find on the island.

With no reliable government information, CNN tried to contact each of the 78 municipalities in Puerto Rico, which are coordinating their own recoveries.

Most calls simply did not go through. Along with so much here, communication is intermittent at best.

Some 42 of the municipalities could not be contacted.

Of the 36 towns we did reach, 10 said they had 0% power restoration. Others estimated 1, 2, 10, perhaps 20% of homes, businesses and amenities had electricity. Just four regions reported that they were more than half back on line — Ponce and Guayanilla with 60% of residents with power; San Germán, where 75% of buildings have electricity; and Culebra — an island off Puerto Rico that’s home to just fewer than 2,000 people, where the mayor said 90% had power.

Humacao, an area where almost 54,000 live, has no power. Las Piedras, home to nearly 40,000, has no power. The same story for Loiza, where 30,000 live. And the list goes on and on, six weeks after the blackout.

Fernando Padilla, director of the project management office for PREPA, insisted to CNN they were on target with work, having exceeded the goal of 33% power generation by the end of October.

“The amount of generation restored is not directly coordinated to amount of clients, but what I can say is that the main metropolitan cities have all or most of their critical loads on,” he said.

He agreed that focusing on generation, not customers with power, could be confusing, but said it was currently the most accurate measurement of progress.

Pressed on whether PREPA knows how many people on the island have electricity, he said: “At this moment, we wouldn’t have a reliable amount.”

He did not dispute that some communities would have “very close to zero” power, but said he remained optimistic of meeting Gov. Ricardo Rosselló’s goal of 95% with power by December 15 on the way to 100% restoration.

“It’s been an extreme challenge based on the devastation that Hurricane Maria brought.”

San Juan’s unlit skyline, a month after Hurricane Maria.

San Juan’s unlit skyline, a month after Hurricane Maria.

The massive, long-term outages are affecting every part of life. In the capital, San Juan, many apartment blocks are still black at night apart from candles flickering in windows. Generators hum constantly, but sometimes they fail, even at fancy hotels. Restaurants and businesses remain closed.

A barber in the Condado neighborhood cuts hair outside, as he has no light or power in his shop. Even this week, CNN was unable to reach officials in this city to get their estimate on how many people have power.

Out of the city, in San Germán in the southwest, the mayor said the irony was that they’d been able to reopen some schools, but that the schools did not have power.

Orlando Cintron, spokesman in the Humacao mayor’s office, said the municipality was using about 15 generators for essential services.

In Juncos, east of Puerto Rico, Mayor Alfredo Carrión said he was desperate because two major companies — Amgen, a pharmaceutical company, and Medtronic, a medical device company — that employ 4,000 local people don’t have power.

Medtronic spokesman Fernando Vivanco said his company had been using generators at its five facilities on the island for several weeks as it worked to resume pre-hurricane operations.

Ediel Rivera, right, with his cousin and grandmother, says sometimes there is nothing to do but stare at each other.

Ediel Rivera, right, with his cousin and grandmother, says sometimes there is nothing to do but stare at each other.

For ordinary people, the lack of power — especially for those without a generator or the ability to run one — is one long, relentless grind.

“I had no idea it would last this long,” said Luis Rivera, at home in Manati, west of San Juan.

He is surviving with what looks like a light from a Christmas tree, powered by a car battery.

“It’s not easy to live like this,” said Rivera, who also doesn’t have running water at home.

He and his wife have moved their bed to an open window to catch nighttime breezes. “I can’t run a fan. It’s really hot.”

How a month of hurricane nightmares changed Puerto Rico — and me

His nephew, Ediel Rivera, 11, said their evenings were simple, and boring.

“We stare at each others’ faces or play on our cell phones if they’re charged.”

For some, the outage is now heading towards its third month. Hurricane Irma skirted Puerto Rico on September 6 but still knocked out some power that did not come back before Hurricane Maria smashed the island on September 20.

And there just seems to be no end in sight, no light at the end of a very long tunnel.

The power grid was old and dilapidated and in desperate need of repair even before this September’s hurricanes shut it down completely.

Hurricame Maria smashed Puerto Rico’s transmission network, including this power tower near Guayama.

Hurricame Maria smashed Puerto Rico’s transmission network, including this power tower near Guayama.

Help took time to arrive.

Unlike when storms are heading for Florida or the Gulf or anywhere in the mainland United States, power crews were not able to wait just out of the path of the storm, to swoop in and start repairing downed lines as soon as possible.

Workers are dangling from helicopters to fix Puerto Rico’s power lines

Related Article: Workers are dangling from helicopters to fix Puerto Rico’s power lines

And then some of the first crews that were brought in to fix things were linked to multimillion-dollar contracts that caused political and financial controversy. But earlier this week, Puerto Rico’s governor announced that the deal would be voided.

Rosselló has now called on his counterparts in New York and Florida to send power workers. And FEMA has tasked the US Army Corps of Engineers to rebuild Puerto Rico’s infrastructure.

By now, many people just want to have light at the flick of a switch, and a place to keep food cool, whichever teams of workers makes it happen.

And perhaps watch a movie, a video game or a soap opera on TV to take their minds off their problems for a while.

This story has been updated with information from Medtronic.

CNN’s Leyla Santiago and Khushbu Shah reported from San Juan, Puerto Rico, and Rachel Clarke wrote in Atlanta. CNN’s Flora Charner and Natalie Gallón, and journalist Karisa Cruz, contributed to this report.


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The heightened risk that Puerto Rico will become a new base for Mexican cartels

The heightened risk that Puerto Rico will become a new base for Mexican cartels

The heightened risk that Puerto Rico will become a new base for Mexican cartels
© Getty Images

Puerto Rico’s wrecked infrastructure and dysfunctional finances and politics make it a target for Mexico’s drug trafficking organizations (“narcotraficantes” or “narcos”) looking to diversify their transport channels to North America.

And if the narcos succeed, they will put the RICO into Puerto Rico.

Hurricane Maria hit Puerto Rico on Sept. 20, 2017. Its 100 mile-per-hour winds and heavy rainfall and flooding destroyed the island’s power grid, leaving all 3.4 million residents without electricity, and wiped out 80 percent of the territory’s crop value. Communications were cut off as most of the cellphone, landline, and Internet service was lost. Highways and bridges suffered extensive damage, hampering the distribution of relief supplies. The territory’s Governor estimates storm damage at $90 billion.

Some members of the island’s political class didn’t respond with distinction. The mayor of San Juan spent her time in front of news cameras instead of at disaster recovery meetings, and other mayors hoarded relief supplies for their political supporters. One engineering firm providing pro bono assistance refuses to work with local officials.


An isolated location with low-grade infrastructure, high unemployment (10 percent before Hurricane Maria), a long coastline and venal public officials are attractive to the narcos as the situation resembles the ungoverned spaces in familiar places such as the Mexican province of Sinaloa.

In August 2107, “Junior Cápsula,” the most powerful narco in Puerto Rico and the Dominican Republic was sentenced to 30 years in prison. With Junior off the board, and the region’s trafficking volume surging (it tripled between 2009 and 2014), and the economy prostrate, the region faces a leadership vacuum when its public institutions are vulnerable to corruption. Into it may step organizations with cash and experienced people to compete or cooperate with the local traffickers.

The Caribbean was the prime drugs pathway to North America when Colombia’s Medellin and Cali cartels controlled the cocaine trade, but is not now favored by the Mexican cartels which prefer to go through, under, and over the Southwest border of the U.S. Now, the combination of local economic necessity and good transport facilities may earn the territory a second look from the cartels.

The government-owned Puerto Rico Ports Authority is responsible for developing, operating, and overseeing nine seaports and 10 airports (there are 16 airports total). Most of the seaports are located near airports, a feature that appeals to any transporter, licit or illicit. The airports range from small private fields to the international airport servicing the capital city, San Juan, the main entrepot for flights to North America. Passengers and cargo arriving in the U.S. are proven vector for smuggling, and cargo ships and containers to the U.S. get less screening. The port of San Juan has eight passenger piers, with accommodation for twelve ships, and eight cargo piers which handle containers and bulk cargo.

Before Hurricane Maria, Puerto Rico was best known for its $73 billion debt, an unfunded pension liability of $49 billion, and a dismal bond rating. How did that happen?

There’s a lot of blame to go around: weak local governance, corrupt politicians, the phasing out of federal tax credits that helped channel investment to the island, the inability of Puerto Rico to restructure its debt in bankruptcy court, and the island’s tax-exempt bond status, for starters.

The Puerto Rico Ports Authority earns revenue and lease income, but auditors have found numerous weaknesses in its financial management system putting funds and property at risk for theft or diversion. A sharp drop in revenue from airports and seaports as commerce and tourism slow may lead to layoffs, forcing redundant staff into the arms of the narcos, who will offer plata o plomo. If some facilities are forced to close, that’s no problem for the narcos: a closed airport that meets Federal Aviation Administration standards is better than any of the thousands of clandestine airfields used to launch their wares to North America.

Puerto Rico’s banks are part of the U.S. banking system and will be vulnerable to exploitation for money laundering as money spent on reconstruction provides cover for narcotics proceeds. Once the money is in the U.S. system it can be exported with minimal interference.

The narcos have options. They can build or bolster a relationship with the existing Puerto Rican traffickers, and cement it with their own “reconstruction assistance.” Ships and aircraft that deliver reconstruction material to the island can return large drug shipments to the mainland. Corrupt airport employees have been useful since the late 1990s and may be again despite recent arrests. Accommodating politicos can provide early warning of criminal investigations and impede efforts to make the system less opaque, and transport employees under financial pressure may cooperate with traffickers.

The 10 percent of Americans who regularly use illicit drugs probably won’t stop, so neither will the narcos.

James D. Durso (@James_Durso) is the managing director at consultancy firm Corsair LLC. He was a professional staff member at the 2005 Defense Base Closure and Realignment Commission and the Commission on Wartime Contracting in Iraq and Afghanistan, and served as a U.S. Navy officer for 20 years specializing in logistics and security assistance. His overseas military postings were in Kuwait and Saudi Arabia, and he served in Iraq as a civilian transport advisor with the Coalition Provisional Authority. He served afloat as supply officer of the submarine USS SKATE (SSN 578).

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Marriage, having children, planning for the future, especially in Puerto Rico, is not taken as seriously as it needs to be

See also

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Report: Puerto Rico Exodus to Increase in the Next 2 Years

Report: Puerto Rico Exodus to Increase in the Next 2 Years

By on October 30, 2017

SAN JUAN – A report by Hunter College’s Center for Puerto Rican Studies projects that outmigration from the island as a result of Hurricane Maria could be as high as 14% of the local population in the next two years, leading to a further “downward spiral” for the local economy.

This drastic depopulation in such a short span of time is considered “one of the most significant hurdles” for the island’s future economic recovery.

“From 2017 to 2019, we estimate that Puerto Rico may lose up to 470,335 residents or 14% of the population. In other words, Puerto Rico will lose the same population in a span of a couple of years after Hurricane Maria as the island lost during a prior decade of economic stagnation,” states the report. No significant return migration is expected for the year.

At the same time, Maria’s impact on the local economy has been devastating. “[T]he prospects for total employment to drop significantly in the months following Hurricane Maria are expected, given the collapse of the electrical system and the prognosis that it will take months to restore electricity to urban areas where jobs are concentrated,” the report reads. “The damage to the transportation and communications infrastructure will also take months to restore, directly affecting local commerce and the service sector.”

The report also cited grim projections from the Climate Impact Lab, which has analyzed the economic costs of storms over the past 60 years: “Maria could lower incomes by 21% over the next 15 years – a cumulative $180 billion in lost economic output.”

The findings are outlined in “Estimates of Post-Hurricane Maria Exodus from Puerto Rico,” by researchers Edwin Meléndez and Jennifer Hinojosa. The basis for the analysis was data from the U.S. Labor Department’s American Community Survey, spanning several years.

Based on the pattern of Puerto Rico outmigration to the U.S. mainland, the researchers project that the majority of local residents will move to Florida, followed by Pennsylvania, Texas, New York and New Jersey. Florida alone could face an influx of as many as 164,000 new residents from Puerto Rico in the next two years.

The migrant profile should be similar to the exodus that has occurred in recent years due to the island’s more than 10 years of zero or stagnant economic growth: working-age adults, defined as those between 25 to 64 years old, along with their children.

“The main consideration for this group [of working-age adults] in terms of local support services will be access to employment and housing, and relocation assistance, especially if they have families and children,” states the report.

In addition, thousands of college-age students are also expected to move stateside to continue their education, as some local universities already have campuses in Florida and other states. Meanwhile, various stateside universities are coordinating efforts to help these students with alternative programs of courses and/or exchanges.

Maria devastated the island on Sept. 20 and more than five weeks later an estimated 75% of the population is still without electricity service. While businesses with generators are able to operate, many companies of all sizes are still closed for lack of power, resulting in thousands of people effectively laid off.



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