Experts: Mounting debt crisis in Puerto Rico could threaten Jacksonville shipping trade

Ricardo Arduengo/Associated Press U.S. and Puerto Rican flags fly in front of Puerto Rico's Capitol as in San Juan, Puerto Rico. On April 11, Puerto Rico released a new proposal to restructure part of its $70 billion debt to buy time to implement a fiscal growth plan as multimillion-dollar payments loom for a U.S. territory facing dwindling cash reserves.

Ricardo Arduengo/Associated Press
U.S. and Puerto Rican flags fly in front of Puerto Rico’s Capitol as in San Juan, Puerto Rico. On April 11, Puerto Rico released a new proposal to restructure part of its $70 billion debt to buy time to implement a fiscal growth plan as multimillion-dollar payments loom for a U.S. territory facing dwindling cash reserves.

AP – Jacksonville’s shipping industry has a long history of trade with Puerto Rico but the U.S. territory is facing serious debt issues, and experts say if a solution isn’t found in a reasonable time, that could have negative implications for the First Coast.
The Puerto Rican government has been grappling with a $422 million governmental debt payment that is due May 1. Efforts in Congress to provide debt restructuring have stalled and it now appears the May 1 deadline will not be met.

The association between Jacksonville and Puerto Rico is so strong that former Jacksonville Mayor John Peyton declared San Juan a sister city in October 2009. At that time, Puerto Rico was Jacksonville’s largest trading partner with about 75 percent of the goods going to and coming from Puerto Rico moving through Jacksonville, creating an estimated economic impact of $1 billion, a JaxPort report said.

JaxPort has seen an increase in shipping trade with Puerto Rico just in the past year. From October through March, according to figures provided by JaxPort officials, there was:

■ A 32 percent increase in cargo tonnage.

■ A 10 percent increase in cargo containers.

■ There was a 15 percent decrease in automobiles shipped.

A blown May 1 deadline could push Puerto Rico and its 3.5 million American citizens further into crisis, exacerbating a growing fiscal and humanitarian disaster. Groups such as Jubilee USA, a faith-based debt relief advocacy organization, are arguing for a compassionate resolution that ends the suffering being caused in Puerto Rico by its massive financial obligations.

“For Jacksonville, there are two very specific outcomes: One is which you’re seeing all around you, which is more and more people, American citizens, are leaving Puerto Rico for the mainland,” said Eric LeCompte, executive director of Jubilee USA. “Across Florida, it’s one of the primary places that Puerto Ricans are settling. …”

In addition, LeCompte said, the long-term impact could be the end of the current federal stipulation that commercial shipping to Puerto Rico be conducted by U.S. companies.

“That’s an issue that’s going to be debated and confronted as this economic crisis continues,” LeCompte said in a phone interview with the Times-Union Tuesday.

LeCompte said his organization is trying to educate lawmakers on the impact on the people of Puerto Rico if the U.S. government doesn’t provide some leniency for the U.S. territory.

The Republican-led House Natural Resources Committee abruptly canceled a vote on a Puerto Rico debt restructuring bill when it was short on votes this month. The bill is still being rewritten, but as of yet, the vote has not been rescheduled.

Beyond the May 1 deadline for the $422 million debt payment, Puerto Rico also faces another deadline on July 1 for a payment amounting to $780 million in general obligation bonds. And all that is only part of a $70 billion debt that has been amassed by Puerto Rico in the past decade.

Douglas Johansen, associate professor and chairman of the department of marketing and international business at the Jacksonville University Davis College of Business, said Puerto Rico’s crisis could lead to a drop in spending there, which would result in a decrease in demand for imports from the mainland and hubs such as the Jacksonville Port.

“The implications for Jacksonville are really bad. If the bulk of the government’s expenditures are going toward debt service, that really crowds out the opportunity for Jacksonville’s exporters,” Johansen said. “What that really means is that all government spending toward debt service means there will be less money available for things like purchases for the types of products that are shipped to the port.”

In other words, basic necessities like food and other food-related commodities that the Puerto Rican government would pay for would be sacrificed for paying the debt, Johansen said.

“I think it’s safe to say that if Congress is mulling some sort of financial remedy with respect to Puerto Rico, the situation must be pretty bad,” Johansen said Wednesday. “When you can’t service your debt, as is the case with Puerto Rico, you’re really not able to see any other types of government projects going forward.

“I’m sure that the government and the citizens of Puerto Rico have already started to feel the pinch,” Johansen said.

On Thursday, Johansen’s conjecture was already being validated.

According to an Associated Press report, Puerto Rico’s Highways and Transportation Authority agreed to take a revenue cut amid the financial crisis to reach a $115 million deal with the company that manages the island’s toll roads.

Spanish-based Abertis said in a statement Thursday that its subsidiary Metropistas will manage the island’s busiest toll road and others for 10 more years. In exchange, the government’s transportation agency will reduce its percentage of revenue collections from 50 percent to 25 percent.

Roy Schleicher, executive vice president and chief commercial officer, said beyond JaxPort, the commercial trade between Puerto Rico and the mainland is so essential, it’s doubtful an equitable resolution won’t be reached.

“We’re confident that something will happen on a positive note,” Schleicher said. “I believe that people will come to the aid and help.

“We are really the hub for the Puerto Rican trade in the United States. The vast majority of all the cargo that goes to Puerto Rico goes through our port,” Schleicher said. “It’s important for jobs in this area, it’s important for the people of Puerto Rico. We want to make sure that they get what they need and go from there.”

U.S. Rep. Rob Bishop, R-Utah, chairman of the House Natural Resources Committee, said the deadline for Puerto Rico may pass, but the U.S. will have to deal with the issue.

“I’m not sure that on May 2 Armageddon takes place, but clearly I think it will illustrate that there is a significant problem,” Bishop said. “There are still some people out there saying there’s not a problem. … No, there is a problem.”

Bishop said in an election year, with the public’s attention diverted, many members of Congress — regardless of party affiliation — simply aren’t putting the Puerto Rican crisis on the radar.

“It’s an issue that a lot of our members just haven’t had front and center,” Bishop said.

Associated Press contributed to this report.

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