Puerto Rico’s star is rising, thanks in large part to the relief recovery funding approved by President Joe Biden, which should bring $10 billion to the island for housing and infrastructure reconstruction, among other social programs.

The wave of recovery funding began with $8 billion approved during the administration of former President Donald Trump, and the additional funds from Biden could finish the job of restarting the local economy.

“These funds are temporary and will have a limited long-term impact on Puerto Rico’s economy, but are clearly positive for the territory’s finances in the near term,” Moody’s Assistant VP Pisei Chea, told Bond Buyer.

The economy has been sliding for the past two years, suffering a double-whammy from natural disasters and the COVID-19 pandemic. Hurricane 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.

Since the start of the pandemic, at least 94,336 COVID-19 cases have been confirmed in Puerto Rico, an island of 3.2 million, NBC News reported in March. The virus has killed at least 2,073 people on the island so far, NBC reported.

Planning for a double recovery that will be challenging, the Puerto Rico government’s March draft of the 2021 Fiscal Plan projects that the economy is expected to drop 3.6% in 2021, following a decline of 1.4% during 2020, the Weekly Journal reported.

The GDP for the island was estimated at $105 billion in 2019, near its peak. The island has a relatively high per capita GDP relative to other Latin American economies, at nearly $33,000 per year. Consumer spending, however, has slowed.

Retail Losses Reflect Slow Consumer Demand

The retail sector has been hard hit, with 2020 sales losses estimated at $2 billion, and an associated layoff of over half the segment workforce. But signs of recovery are emerging. The Department of Economic Development and Commerce (DDEC) reported that in December 2020 retail sales amounted to $3.1 billion, up 5.1% compared to the year-earlier month in 2019. Within this increase, hardware stores and household materials sales were up 42%, the agency reported.

Among multinational DIY retailers that have assisted Puerto Rico is Home Depot, which a year ago pledged $250,000 in response to the natural disasters that have rocked the island. In 2019, The Homer Fund granted more than $1 million to store associates in need.

“Our hearts go out to our associates, customers and communities affected by the ongoing earthquake activity in Puerto Rico,” said Shannon Gerber, executive director of The Home Depot Foundation, at the time of the pledge. “We have been engaged in long-term recovery efforts in Puerto Rico since Hurricane Maria in 2017 and will continue to work closely with our nonprofit partners to provide relief for communities impacted by the earthquakes,” she said in a statement.

Similarly, Lanco is providing direct relief and coordinating donations to the island through groups like United for Puerto Rico, which has already granted $1.9 million to nine nonprofit organizations that will provide relief to those most affected by Hurricane María.

In the aftermath of Maria, Lanco invested $2 million to renovate its San Lorenzo headquarters in Puerto Rico, including a backup power system.

New Housing Investments Earmarked

The new federal funding should help the housing market in Puerto Rico recovery fully. As of last year, over 100,000 homes on the island of 3.6 million inhabitants had been rebuilt, while some 30,000 homeowners had applied for government funds to rebuild their homes.

Most of the housing investments come from FEMA, which coordinates its assistance through Puerto Rico’s Central Office for Recovery, Reconstruction and Resilience, or COR3.

Another entity supporting the housing rebuild is Puerto Rico Housing, which has rolled out the Community Development Block Grant – Disaster Recovery Action plan, with $800 million earmarked for 2021 loans. The program provides long-term, low-interest loans up to $50 million for commercial, mixed-use and infrastructure developments.

One new project funded by Puerto Rico Housing was the March construction startup of Hogar Manuel Mediavilla Negrón III, a new $26 million housing project for the elderly, in Humacao.

Apart from traditional housing reconstruction on the island, a construction wave of new luxury homes is underway, largely serving a U.S. mainland investor community, according to Mansion Global.

Paint and Coatings Suppliers Plan for Renewed Demand

Among paint companies that are well-positioned to benefit from increased demand in Puerto Rico is Lanco Paints, which manufactures on the island at San Lorenzo, among other locations. Regionally, Lanco has 10 manufacturing facilities and six distribution centers.

Lanco announced plans in early 2020 to invest $20 million in new manufacturing plants in Chile, Guatemala to expand its presence in the regional market beyond distribution. “We’re talking about paint (which) has put us in head-to-head competition with Sherwin-Williams and PPG, something that would not have been possible if our products hadn’t been designed to withstand everything that nature throws at us in Puerto Rico,” said Juan Pablo Gaztambide, president of Lanco United States, in an interview with El Nuevo Dia.

Other players in the Puerto Rico paint and coatings 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. DIY distributors include Home Depot, which has 10 locations on the island.

Infrastructure Rebuilding Advances

Apart from the need for replacement and new housing, infrastructure projects are also underway on the island. Almost all of the buildings in Puerto Rico were damaged by Hurricane Maria, Federal Emergency Management Agency (FEMA) determined in a study.

One $6.5 million (FEMA) loan earlier this year will provide for the rebuilding of the José Miguel Agrelot Coliseum and Bahía Urbana, two of the island’s largest arts and entertainment venues. The entertainment industry in Puerto Rico generates close to $2 billion per year in revenue and supports 30,000 direct and indirect jobs.

Other tourism industry investments underway include new hotels, like the Four Seasons Cayo Largo, covering over 600 acres of beachfront on the north-east coast of Puerto Rico, with a planned Q3 2021 startup.

Similarly, Residence Inn by Marriott Isla Verde, near San Juan, was recently renovated and is now open for business.

Puerto Rico Finances Headed for Recovery

Puerto Rico declared bankruptcy in May 2017, affecting $70 billion in loan debt and $50 billion in pension liabilities. Recently, however, financial entities have begun to refinance much of the island’s debt.

In February, a settlement was announced with bondholders and with the Financial Oversight and Management Board to restructure $18.8 billion in debt, as part of a deal to help the government recover from bankruptcy.