‘Shrinking, shrinking, shrinking’: Puerto Rico faces demographic disaster as it struggles to rebuild

Long before the winds of Hurricane Maria reached Puerto Rico, another disaster had been wrenching and scattering the lives of island residents.

During the decade before Maria, economic decline and depopulation, a slower-moving catastrophe, had been taking a staggering toll: The number of residents had plunged by 11 percent, the economy had shrunk by 15 percent, and the government had become unable to pay its bills.

It already ranked among the worst cycles of economic decline and depopulation in postwar American history, and projections indicated that the island’s slide could continue for years.

Then came Maria.

Now, even as officials in Washington and Puerto Rico undertake the recovery, residents are expected to leave en masse, fueling more economic decline and potentially accelerating a vicious cycle.

“We are watching a real live demographic and population collapse on a monumental scale,” according to Lyman Stone, an independent migration researcher and economist at the Agriculture Department. The hurricane hit “might just be the kick in the pants Puerto Rico needs to really fall off this demographic cliff into total epochal-level demographic disaster.”

Whatever happens with Puerto Rico, moreover, will have far-reaching effects, because while the disaster is felt most keenly on the island, the accelerated exodus is already being felt on the mainland.

Cities popular with Puerto Ricans, such as Orlando, Florida, Hartford, Connecticut, and Springfield Massachusetts, are bracing for more students, many of whom come from families living below the poverty level.

Politicians, meanwhile, are weighing the potentially significant electoral consequences of a wave of migrants expected to lean Democratic – especially in Florida. The swing state already boasts half a million Puerto Rican-born residents, and more are expected in Maria’s aftermath.

Indeed, at a news conference last week, Puerto Rico Gov. Ricardo Rosselló warned that without significant help, “millions” could leave for the U.S. mainland.

“You’re not going to get hundreds of thousands of Puerto Ricans moving to the States – you’re going to get millions,” Rosselló said. “You’re going to get millions, creating a devastating demographic shift for us here in Puerto Rico.”

Puerto Rico Treasury Secretary Raúl Maldonado has warned, meanwhile, that without more aid, the government could suffer a shutdown by the end of the month.

Prolonged bouts of economic decline and depopulation have afflicted parts of the United States before. During seven years in the 1950s, the number of people living in West Virginia dropped by 8 percent. New York lost 4 percent of its population in the 1970s. And during one stretch in the 1950s, Arkansas shed a whopping 11 percent of its people.

But in depth, the cycle of economic decline and depopulation on the island of 3.4 million people may prove the most punishing.

“Even before Maria, you had what looked like a death spiral going on,” said Gregory Makoff, a bond researcher who worked on the Treasury Department’s Puerto Rico team and now is a senior fellow at the Center for International Governance Innovation. “Now it’s no longer theoretical. In a week’s time, they’ve lost another huge chunk of the population.”

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For years before the economic slide, companies such as Merck, Johnson & Johnson and PepsiCo had saved tens of millions or more annually under a key tax break that gave U.S. companies an incentive to set up operations on the island.

But in 2006, the tax break was eliminated, taking away a key incentive for companies to operate there. It was one of many factors blamed for the island’s decline.

Among the others: The island’s electrical power system is outdated and saddles islanders with bills roughly double what they are on the mainland; an exodus of doctors has opened holes in the health-care system; and the economy’s most critical sector, manufacturing, has been shrinking even more rapidly than the rest of the economy, affected not just by the lost tax break but also by global competition.

Only about 40 percent of people in Puerto Rico are employed or seeking work. By contrast, the U.S. figure for what economists call “labor force participation” is about 63 percent.

Finally, the government’s inability to pay off more than $70 billion in debt has provoked a congressionally mandated oversight board and a new fiscal plan that calls for efforts to raise taxes and significant cuts to the government. Even with optimistic assumptions, that plan predicted continuing shrinkage of the economy.

As a result, for Washington and Puerto Rican officials planning a recovery, the ongoing exodus poses a multifaceted dilemma

“They’ve got to start from the ground up,” Makoff said of any new plan for the island.

In the short term, at least, the island is likely to see an economic boost; rebuilding after a hurricane often injects a jolt of spending into local economies.

But according to recent research of 90 years of natural disasters in the United States, published as a National Bureau of Economic Research working paper, major natural disasters also have unfavorable effects: They increase out-migration, lower home prices and raise poverty rates.

Like many on the island, Sergio Marxuach, policy director for the Center for a New Economy, a San Juan-based think tank, said a massive federal investment is necessary.

“We’re going to need some significant government intervention – essentially a big rescue package, not only to rebuild the economy but get it growing,” he said. “People are saying, ‘I don’t want my children to grow up in a place where the economy is going to be devastated for the next 10 years.’ If enough people think that way, it’s going to be a self-reinforcing downward spiral.”

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In addressing complaints about ongoing struggles on the island, President Donald Trump noted this week that the disaster in Puerto Rico in many ways had begun years ago.

Puerto Rico “was in very poor shape before the hurricanes ever hit. Their electrical grid was destroyed before the hurricanes got there. It was in very bad shape, was not working, was in bankruptcy.”

Indeed, interviews with Puerto Rican businesspeople indicated that even if the obstacles left by Maria can be overcome – most notably the widespread lack of electricity – a return to economic life as it was before the storm is untenable.

Take Frank Joseph Sugden, 51, the owner of an established family tuxedo and gown business in Bayamon. His company, Top Hat, once had three stores but now has just one. With the reductions over the years, he’s had to lay off 10 employees.

Now, after Maria, weddings and other formal parties have been largely canceled through December, so his store is closed. Two of his remaining eight employees are considering leaving for good. His wife wants him to leave, too. To make up for the lost business, he’s started to do insurance work on the side.

He worries whether Puerto Rico is in a death spiral.

“I think so, yes, and I’m not too sure we’re going to come out of it,” Sugden said. “We’ve just been kind of shrinking, shrinking, shrinking, and this is kind of a lethal blow.”

Leo Aldridge, a lawyer with offices in San Juan and New York, described the post-Maria migration from the island as the “Jet Blue revolution. People are buying a ticket and getting the hell out.”

But the trouble began long before the storm. After a law class he teaches at the University of Puerto Rico, he said, his students frequently ask how they can arrange a bar exam and job on the mainland.

“All the time, kids come up to me to say, ‘What do I have to do to get off the island? What bar review do I have to take?’ ” Aldridge said. “This was all before the hurricane. . . . People are leaving and leaving and leaving.”

Even those who evince optimism acknowledge that more difficult times lie ahead.

“We will move forward better than we were before,” said Joaquín Fernández Quintero, the president of Telemedik, a telehealth company that employs about 400 people.

But he said that about 10 percent of the employees in his Mayaguez office will move to the States in the coming weeks, several of them “high-level” employees. And he’s not sure when they will be coming back.

“People are getting frustrated and depressed,” Fernández Quintero said. “A lot of small and medium companies will be closing because they cannot maintain their operations. It will be a complicated process.”

Steven Mufson contributed to this report.