Puerto Rico is focusing much of its recovery efforts on the development of tourism infrastructure and housing in hopes of putting both Hurricane Maria and COVID-19 behind it. Maria hit more than 786,000 homes on the island in September 2017, killing nearly 3,000 people and causing close to $100 billion in damage. COVID-19 caused a shut-down of much of the island economy, including tourism, which contributes billions of dollars per year to the economy of the U.S. territory.

Economic Recovery Slow, But Steady

The Financial Oversight and Management Board for Puerto Rico projects that the economy will contract by four percent in 2020, but stage a mild 0.5 percent recovery in 2021, supported by federal funds related to COVID-19, and funding for hurricanes and earthquakes. The gross domestic product for the island last year was estimated at $105 billion. The island has a relatively high per capita GDP relative to other Latin American economies, at nearly $33,000 per year.

The largest financier of redevelopment in Puerto Rico is the Federal Emergency Management Agency, which recently announced the approval of more than $108 million for 182 reconstruction projects across the island. Within this appropriation, for example, are plans for the refurbishment of 13 town squares around the island. To date, over $7 billion has been awarded by the U.S. Congress to Puerto Rico as part of FEMA’s Public Assistance program, though only a portion of the funds has been disbursed. Almost all of the buildings in Puerto Rico were damaged by Hurricane Maria, FEMA determined.

Among new projects, In June, FEMA announced plans for over $500,000 “for repairs to the Peñuelas’ Convention Center, including the striping and repainting of the exterior of the building and replacing interior doors, among other repairs, that support economic local activity given the center accounts for over 300 indirect jobs for the south region and the municipality,” the agency reported.

FEMA coordinates its assistance through Puerto Rico’s Central Office for Recovery, Reconstruction and Resilience, or COR3. “Puerto Rico’s recovery is comprehensive and represents unprecedented challenges, such as recovering with great effort part of the historic and cultural heritage affected by Hurricane Maria,” said Ottmar Chavez, executive director of COR3 in a late May statement.

One government-owned entity that is focused on rebuilding small and medium-sized business is the Puerto Rico Industrial Development Company (PRIDCO), which owns and manages a large number of industrial properties, including 1,513 building locations and 648 undeveloped lots located throughout Puerto Rico. The agency is focused on rebuilding damaged properties and making new leases available for new tenants. One plan under consideration would be the divestment of about 1.4 million square feet of real estate.

The huge market for residential reconstruction in Puerto Rico after hurricane and earthquake damage has barely been dented. Over 100,000 homes on the island of 3.6 million inhabitants have been rebuilt, while close to 30,000 additional homeowners have also applied for government funds to rebuild their homes.

Tourism Positioned for Recovery

Tourism has much ground to recover, but recent investments bode well. 2019 was a record year for tourism, with 5.2 million visitor arrivals and nearly $1 billion spent on accommodations, according to the island tourism board, Discover Puerto Rico. Those figures were still a drop from the 2016 peak that saw 8.1 million visitors, according to the agency. Overall, tourism contributes close to 10 percent of the island’s GDP.

Hotel construction was already booming in Puerto Rico before the COVID-19 crisis, with Marriott’s Aloft Hotel opening in February, and a Ritz-Carlton Reserve hotel reopened July 1. Similarly, a Waldorf Astoria resort and a Four Seasons resort are set to reopen this Fall after refurbishment. Among new properties under construction is the $200 million LoopLand Hotel that will open in 2022. The island now has close to 160 hotels with an estimated 16,000 rooms.

Infrastructure under development that will help boost tourism is work on several airports, including Ponce, Ceiba, Vieques, Mayagüez, Culebra and Arecibo, with assistance from the U.S. Federal Aviation Administration. Similarly, work on roads, ports and other infrastructure will indirectly boost tourism.

Apart from personal tourism, Puerto Rico also has been focusing on meetings, incentives, conferences and exhibitions tourism (MICE) for the last two years. MICE revenues have a potential economic impact on the island of more than $320 million over the midterm, according to the island tourism board.

COVID-19, however, has delayed the opening of the island tourism industry to international travelers, with a July 15 partial opening reversed by Puerto Rico Governor Wanda Vázquez until at least Aug. 15, following a spike in active cases. Puerto Rico is expected to receive $13 billion in COVID-19-related U.S. federal funds, according to the Financial Oversight and Management Board, as cited by the New York Times. The island has had close to 12,000 COVID-19 cases, and nearly 200 COVID-19 deaths.

Arriving tourists and other passengers must complete a travel declaration form for the Puerto Rico Health Department and are required to demonstrate a negative COVID-19 test that was completed with 72 hours before arrival. Puerto Rico has 200 flights by 24 airlines arriving per day.

Paint Vendors Serve Puerto Rico

Among paint companies that are well-positioned to benefit for increased demand in Puerto Rico is Lanco Paints, which manufactures on the island at San Lorenzo, among other regional locations.

Regionally, Lanco has 10 manufacturing facilities and six distribution centers with over 2,000 employees, providing materials to the U.S., Caribbean, Central and South America. The company reported sales of $270 million last year.

Other players in the Puerto Rico market include Harris Paints, which in Bayamón produces over 3,000,000 gallons and 6,000,000 aerosol cans to meet regional demand, according to the company website. Harris has seven stores on the island and a network of distributors.

Multinational players on the island include PPG and Master Paints & Chemical Corp. Home Depot has 10 locations on the island; in January, The Home Depot Foundation announced a commitment of up to $250,000 in response to the continued earthquake activity in Puerto Rico.

There may now be a shortage of paint and coatings on the island, which could affect pricing, one construction association warns. “It remains to be seen whether there will be demand and a shortage of construction supplies. It should raise the cost somewhat, but you have to wait for everything to normalize. Under the new reality, it is necessary to be aware of the urgent factors for the reconstruction of the southern part of the island that needs safe houses,” said Alfredo Martínez-Álvarez, Jr., president of the Puerto Rico Builders Association, as quoted in The Weekly.