The Board estimated the damage caused by Hurricane Maria in $ 80 billion. (horizontal-x3)
The Board estimated the damage caused by Hurricane Maria in $ 80 billion. (GFR Media)

Washington - The federal government has approved about a third of the aid that the elected authorities of Puerto Rico believe is needed for the island´s recovery and reconstruction. But, almost nine months after Hurricane Maria, only a small part of those funds have been released.

While the government of Puerto Rico has estimated that $ 94.4 billion is required to rebuild the island, the promised federal allocations total about $ 31.6 billion, according to an analysis by El Nuevo Día.

However, earlier this month, those disbursements with direct impact on the economy of the island were about $ 3,2 million.

The total amount released is currently less than the projections of the Oversight Board in charge of the island´s public finances, that in its revised fiscal plan estimated that this fiscal year - which concludes in 16 days -, $ 5.965 billion in federal assistance funds would enter the economy of Puerto Rico.

Unlike the estimate of the Puerto Rican government, the Board estimated the damage caused by Hurricane Maria in $ 80 billion, and that the federal government will invest $ 60 billion in the recovery and reconstruction of the island.

The Board's own fiscal plan projects that, on average, only 12.5 percent of the funds directed to mitigate the damage caused by the hurricane "will directly impact the local economy".

Moody's credit-rating agency agreed this week with the Board. "We expect that federal assistance has a smaller multiplying effect than when deployed in the mainland and to more vibrant economies. This is because a large part of the federal aid money will not stay in the island, given labor and materials constraints. Significant manpower and equipment will need to be imported, with profit captured by mainland-based firms," added a Moody's report, which forecasts an economic decline between 6 percent and 7 percent this year .

Even so, the Board has projected a 6.5 percent economic growth for the next fiscal year; an optimism that is being questioned.

For economist Gustavo Velez, the impact that the federal aid has on the island and infrastructure projects will also be linked to "how many of those (US) companies" that will obtain the main contracts, as happened with the restoration of the power grid, will “locally” subcontract.

"I think there is going to be dynamism, but they are overestimating the economic effect that it (federal assistance) is going to have," Vélez said, comparing the projections related to post-María assistance to what happened with the $ 7 billion received under the ARRA economic stimulus package, which impacted the economy positively only for a year.

Under the Board´s revised fiscal plan, $ 62 billion is projected to be distributed in federal and private funds for efforts directly focused on reconstruction.

While the Board estimated that $ 5.965 billion would enter the economy this fiscal year, it considered that $ 7.392 billion and $ 7.215 billion in federal hurricane related assistance funds related would come in fiscal years 2019 and 2020, respectively.

 The nearly $ 3.2 million released directly to Puerto Rico includes funds from the Federal Emergency Management Agency (FEMA) for families and local governments, the first Medicaid allocations and $ 1,27 billion in nutrition assistance programs approved last October.

In the case of emergency nutrition assistance funds - which last 12 months - the Department of Family Affairs had distributed $ 413.8 million until Monday and incorporated 149,928 people to the Nutrition Assistance Program (NAP).

Separately, until the beginning of June, FEMA had paid another $ 1.554 billion to the US companies contracted by the Corps of Engineers for the restoration of the power grid.

"The estimate of the fiscal plan is very optimistic," said José Alameda, professor of Economics at the Mayagüez University Campus (UPRM), indicating that the projections on the growth of the economy should not start from the premise that they will receive all the money that can be obtained.

Alameda, for example, mentioned the restrictions that Congress imposed on the access to emergency funds and that the impact of private insurance payments relies on estimates based on Hurricane Katrina experience, which particularly affected the state of Louisiana in 2005.

Last week, El Nuevo Día reported that only 32 percent of the claims have been paid and were settled for less than half of the estimated damage.

Most of the federal emergency assistance - $ 20 billion - has been allocated under the Community Development Block Grant program for Disaster Recovery (CDBG-DR) of the federal Department of Housing and Urban Development (HUD).

But the use of the first $ 1.5 billion, which will include a portion to repair homes, will not be defined until August and, it will not be until probably the end of the year that the use of the remaining $ 18.5 billion will be known. One way or the other, CDBG funds will, to a large extent, enter the economy of Puerto Rico as of 2019.

 Approved federal allocations include $ 4.8 billion in Medicaid funds, which means a direct relief in the Puerto Rican government's budget over the next 18 months. Until last week, the Department of Health had claimed from these new Medicaid funds, retroactive to January, $ 377 million in premium payments to insurers and $ 7.2 million to finance the administrative expenses of the Health Services Administration (ASES, Spanish acronym) and Medicaid .

On the other hand, FEMA confirmed that it has distributed $ 1.31 million for families whose houses suffered damage or losses. Until May 31, it had reimbursed $ 144.47 million to municipalities under the public assistance program. Among the municipalities, Bayamón, with $ 10.3 million, Toa Alta, with $ 8.5 million, and San Juan, $ 7.7 million, were the ones that received most of the funds for preparation or collection of debris.

Investment in PREPA

The sector with most of the disbursements -about $ 1.554 billion- is the one related to the restoration of the power grid, financed by FEMA.

The restoration of the power grid confirms the fear that many of the contracts are in the hands of US companies. For example, the US Army Corps of Engineers signed agreements with US companies. which totaled $ 1.456 billion, out of which FEMA has reimbursed $ 625.9 million.

To Fluor Corporation -based in Irving, Texas-, the Corps of Engineers extended contracts that totaled $ 755 million for re-establishing transmission and distribution lines.

Until last week, FEMA had paid Fluor $ 324.6 million. Contracts to PowerSecure, from North Carolina, totaled $ 523 million. FEMA indicated that it has processed payments of up to $ 171.3 million.

 The Corps of Engineers also agreed to a $ 57.4 million contract with Aptim Federal Services, from Alexandria, Virginia, to temporarily provide power to the PREPA Yabucoa plant. And FEMA paid $ 38 million to Aptim. A similar contract with Weston Solutions, to provide 50 megawatts capacity to the Palo Seco plant, totaled $ 121.4 million with Weston Solutions, Pennsylvania. Weston has received $ 92 million.

The contracts granted by PREPA to restore the electricity service have been around $ 1.544 million. FEMA has disbursed the $ 945.4 million agreed by PREPA with Cobra and $ 36.9 million to Whitefish, amid the contract scandal during the emergency.

PREPA also signed contracts for $ 425 million with US public companies and $ 4.2 million with "local contractors".

Last October, Congress opened a $ 4.9 million credit line to help Puerto Rico and the Virgin Islands to mitigate the loss of income due to the hurricane.

But, while 19 Puerto Rican municipalities had access to $ 92.8 million and the US Virgin Islands to at least $ 371 million, the Puerto Rican central government has not been able to prove to the Federal Treasury that it needed the money urgently.

However, in theory, the Treasury said that the Puerto Rican central government will be able to claim, if needed, up to $ 2.065 billion, and that the line of credit may be available until March 2020.

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