Much has transpired since Hurricanes Irma and Maria swept through Puerto Rico 18 months ago resulting in over $80 billion in damages and more than $25 billion in lost output, decimating the Island's vulnerable electric grid and other critical infrastructure systems, disrupting normal economic and social life, and inducing tens of thousands of Puerto Ricans to flee the Island. While the progress made should not be understated, given the noble, and at times heroic, work of those individuals and organizations (public and private) committed to the Island's recovery and reconstruction, the pace of the process has been painstakingly slow and the impact of the incoming Federal funds on the local economy has been limited. Many saw the billions of dollars in post-disaster relief funds flowing into the Island as a silver lining and as a source of a much-needed boost in economic activity. However, the pace of disbursements has been slow and, consequently, the impact on the local economy has been limited thus far. Furthermore, as commonly occurs in post-disaster efforts, nonlocal entities, mostly US mainland contractors, have greatly benefited from the inflow of billions of dollars for disaster recovery and reconstruction, while local contractors have been awarded a small fraction of contracts.
2018 was an excellent year for the profitability of banks in Puerto Rico. At the industry level, Pre-Tax ROE reached 14%, aligned with the US banking industry profitability levels for the first time in ten years. We expect this trend to continue in 2019 since most of the profitability levers seem to be moving in the right direction.
From emerging to mainstream: internet platforms Airbnb and HomeAway are transforming the Puerto Rico lodging infrastructure
The various impacts of the sharing economy are being felt worldwide, and Puerto Rico is no exception. The Island's hospitality sector is being transformed by the short-term rental business, with rental platforms like Airbnb and HomeAway generating new vacation-related business and spreading tourist dollars beyond the typical hotel and tourism districts.
Hurricane María was particularly harmful for one of the key economic sectors of Puerto Rico, tourism. After one year and three months, the tourist sector is showing positive signs of growth and encouraging new dynamics. The traditional hotel sector is rapidly moving towards pre-hurricane business levels, the cruise ship industry is booming, and tourists seem to be increasingly relying on short-term rentals to visit Puerto Rico.
Employment is finally growing again in Puerto Rico driven by the efforts to rebuild the infrastructure damaged by hurricane María. Most economic sectors will benefit, not only from the improved infrastructure, but by ripping the benefits of more consumption from a larger labor force. Employment growth has spread unevenly with some municipalities struggling to recover while others already experiencing higher employment than before María.
Scotiabank se afianza como el tercer banco múltiple privado con la adquisición del Banco Dominicano del Progreso
El 16 de agosto Scotiabank (SB) anunció el acuerdo de compraventa del Banco Dominicano del Progreso (BDP) por el 97.44% de las acciones, por una cifra estimada de USD $330 MM. Con esta compra Scotiabank se consolida como el tercer banco privado del país, con un 9% de los depósitos totales, el 10% de la cartera crediticia, y el 14% de las sucursales a nivel nacional.
A wave of foreclosed properties is coming sooner or later: how is the real estate market going to react?
On August 16th, the Federal Housing Administration (FHA) announced, among other things, a 30-day foreclosure moratorium extension for certain FHA-insured mortgages secured by properties located in Presidentially-Declared Major Disaster Areas (PDMDAs) in Puerto Rico and the U.S. Virgin Islands. This is the 4th moratorium extension since Hurricane Maria.
Popular becomes the indisputable leader of the auto financing industry with the acquisition of Reliable
On August 1st, Banco Popular announced the acquisition of Reliable, the Wells Fargo auto finance business in Puerto Rico. The agreement involves the purchase of ~$1.6B in retail auto loans and ~$360M in primarily auto related commercial loans. With this acquisition Popular becomes the leader of the Auto financing sector with a 49% auto loan market share and a 69% share in auto leasing.
More than eight months have transpired since Hurricanes Irma and Maria made landfall in Puerto Rico on September 6 and September 20 of 2017, respectively, and while some progress has been made despite myriad constraints, logistical challenges, diverse collective action problems, and a beleaguered pre-hurricane context, much remains to be done. Many local residents and organizations are still reeling from the catastrophic shock and ensuing adverse cascading effects caused by the superstorms, particularly those in more remote areas. Shortly following the hurricanes, in November 2017, V2A published the first of a series of special post-hurricane issues providing a brief overview of the pre-disaster context, lessons learned from past disaster events, expected macro and sectoral impacts of the 2017 hurricane season, and an analysis on what Puerto Rico could expect with respect to the inflow of post-disaster relief funds.1 In this critical juncture, eight months after impact, we deem it imperative to take stock of the progress made, explore the short-, medium-, and long-term outlook for the local economy and continue to survey emerging opportunities.
In the aftermath of a catastrophic natural disaster like the one experienced in Puerto Rico during September 2017, an acute sense of uncertainty often takes hold of the affected people and organizations. Households, business firms, nonprofit entities, and the public sector need timely, objective, accurate and reliable information and insights to better inform their strategic planning and other decision-making processes. This special V2A issue, the first of a series of issues, seeks to narrow this information gap by providing a preliminary assessment and outlook under this new Post-Hurricane María reality. It also serves as a succinct, yet comprehensive one-stop read containing up-to-date and relevant information from a variety of sources.