Washington Watch – Spotlight on Puerto Rico: Governor Announces Plans to Privatize PREPA

By Jennice Fuentes / Fuentes Strategies

Governor Ricardo Rosselló announced his intention to sell the Electric Power Authority’s generation assets and enter into public private partnerships (PPPs) for the distribution and transmission of electricity in Puerto Rico, a process anticipated to take 18 months.

The Governor’s decision opens the door to a potential legal dispute with PREPA’s creditors. Creditors are already sounding the alarm, with one telling a local newspaper that the sale will happen “over his dead body.” Union representatives and opposition political party leaders also criticized the move. The PREPA Ad Hoc creditor group has proposed privatizing management of the public corporation, but that petition is pending before federal judge Laura Taylor Swain, who oversees the Island’s Title III bankruptcy proceedings. The bondholder mediation process she prescribed has yet to yield concrete agreements on the resolution of PREPA’s $9 billion debt.

Four months after Hurricane María, close to 40% of Puerto Ricans remain without power, even as the federal government continues to invest millions of dollars in lifting posts, cables, and other equipment to electrify the Island. In a 10-minute televised speech, Rosselló indicated that selling PREPA assets is necessary to transform Puerto Rico’s economy, protect prices for “the most vulnerable,” and achieve 30% generation from renewable sources.

Shutdown Spending Deal Omits Funding for Puerto Rico Medicaid

The funding “patch” signed into law by the President did not include promised funding for Puerto Rico’s Medicaid Program. Without the additional funds the program could shut down as early as March, when the federal subsidy expires, leaving more than 900,000 U.S. citizens without health insurance in Puerto Rico.

Interamerican Human Rights Commission Denounces Slow Federal Response to Hurricane

The Inter-American Commission on Human Rights (IACHR), which is a part of the Organization of American States (OAS), said it is concerned with the U.S. government’s response to Hurricane Maria’s devastation in Puerto Rico. The Commission said that Puerto Ricans are living in “sub-human conditions.” The IACHR further denounced that the federal response in Puerto Rico has been «less rapid and efficient» in comparison to the U.S. response to natural disasters in other jurisdictions.

«Information has been received on the shortage of materials for the reconstruction of the island, as well as complaints about the lack of access, in practice, to the humanitarian aid offered by FEMA,» the IACHR indicated in its statement. «More than three months after the devastating passage of hurricanes through Puerto Rico, we are deeply disturbed by the lack of response from the State of the United States to effectively guarantee the human rights of the Puerto Rican people,» said the IACHR rapporteur for the United States, commissioner Margarette May Macaulay. This statement follows hearings the Commission held on the subject in December.

Economic developments:

Municipalities Create New Jobs, but Unemployment Ticks Up

The vast majority of municipalities (76 out of 78) created jobs in November, according to the Department of Labor and Human Resources. The two exceptions were Arecibo, which lost 200 jobs, and Guayama, where employment numbers stayed the same. San Juan created the most jobs, with 1,700 new jobs since November 2016 and 8,400 new jobs since October 2017. Even though more jobs were created, the unemployment rate in many municipalities also rose as more people entered the labor force.

Southwest Increases Flight Traffic in Puerto Rico

Southwest Airlines announced that it will increase the frequency of its flights to and from Puerto Rico, Chicago, and Houston. The increased flight frequency is expected to bring 2,300 more tourists to the Island, and have an economic impact of $2.2 million, according to Interim Tourism Company Director Carla Campos.

Island’s Economy to Contract Further

The Economist Intelligence Unit anticipates that Puerto Rico’s economy will shrink by 8% in 2018. A decrease of this size would be worse than anywhere else in the world, with the exception of Venezuela.