Puerto Rico is a fascinating island located in the Caribbean Sea, and it has always held a special place in my heart. Lush rainforests, vibrant culture, and stunning beaches have long made it a dream vacation destination. However, the island I hold dear faces significant challenges: its infrastructure has a dire need for repairs and modernization. Years of underinvestment, compounded by the devastating effects of hurricanes like Maria (2017), have left roads, bridges, power grids, and public transportation systems in a precarious state. 

The 2019 Report Card by the American Society of Civil Engineers (ASCE) gave Puerto Rico's infrastructure a D-minus, with an estimated need of $1.3 billion to $2.3 billion annually – or $13 to $23 billion over 10 years – to bring it up to standard.

A Strained Budget and a Growing Need:

With a population exceeding 3.2 million, the island struggles with a high poverty rate of 41.7% and a GDP of $113.4 billion in 2022 (2). Puerto Rico's economic woes are compounded by a population decline of nearly 14% since 2010 (3). This shrinking tax base makes it difficult for the government to fund essential infrastructure improvements. 

Nonetheless, the Biden-Harris administration has recognized these challenges and taken significant steps to support Puerto Rico's recovery. Various government initiatives, such as the American Rescue Plan (ARP) and the Bipartisan Infrastructure Law, have allocated over $140 billion in Federal obligation funds to Puerto Rico since the start of the Biden Administration (4). These funds can be used for various purposes, including infrastructure improvements, public service workforce support, and economic development initiatives.

Hurdles to Infrastructure Development

While Public-Private Partnerships (PPPs) offer a promising path forward for Puerto Rico's infrastructure development, several overarching issues demand attention: 

• Legacy of Neglect: Years of underinvestment have left much of Puerto Rico's infrastructure in a state of disrepair. Roads crumble, bridges deteriorate, and power grids struggle to meet demand. To put it into perspective 31% of the island’s Public Transportation is currently past its economic life.
• Strained Finances: Puerto Rico's economic struggles limit the government's capacity to allocate sufficient funds for infrastructure projects. A shrinking tax base and a high poverty rate further complicate the equation. Creative financing solutions, such as leveraging federal aid effectively and attracting private investment through PPPs, become essential.
• Hurricane Vulnerability: The island's geographic location makes it prone to devastating hurricanes, which adds complexity and cost to projects of such nature. Recent storms like Maria exposed the fragility of existing infrastructure and highlighted the need for resilient design and construction practices that can withstand future natural disasters.
• High Construction Costs: The cost of construction materials and labor in Puerto Rico tends to be higher than in the mainland US. This can be attributed to factors like limited local production, import dependence, and the island's unique logistical challenges.

Public-Private Partnerships: A Path Forward

This is where Public-Private Partnerships (PPPs) emerge as a promising strategy. PPPs are collaborative ventures between the public sector (government) and the private sector (investors and companies). They offer several advantages for Puerto Rico's infrastructure development:

• Funding Infusion: Private investors bring much-needed capital to projects, alleviating the strain on government finances.
• Expertise and Innovation: Private firms often possess cutting-edge technologies and construction management skills, leading to more efficient project delivery and potentially more resilient infrastructure design to withstand future hurricanes.
• Risk Sharing: PPPs distribute project risks (construction delays, cost overruns) between public and private partners, ensuring a balanced approach.

How Private Companies Benefit

For private companies, PPPs offer several financial benefits:

• Long-Term Contracts: PPPs typically involve long-term contracts (20-30 years) that provide predictable revenue streams for participating companies.
• Reduced Risk: By partnering with the government, private companies share some project risks, such as regulatory changes or unexpected delays.
• Profit Potential: PPP projects can be lucrative, especially if they involve user fees or tolls that generate income for the private partner over the life of the contract.
• Market Access: Participation in successful PPPs can enhance a company's reputation and open doors to future infrastructure projects in Puerto Rico and elsewhere.

On-going Projects: Investing in the Future 

Here are a few key ongoing infrastructure projects on the island:

• Toll Road Modernization: The Puerto Rico Highway and Transportation Authority (PRHTA) tackles toll road (PR-20, PR-52, PR-53, PR-66) modernization through a PPP. A private partner will handle operation, maintenance, and potential improvements, freeing public funds for other needs.
• LUMA Energy: This PPP began in 2021, marking the initial steps towards enhancing reliability, minimizing outages, and integrating renewable energy sources. While there is still progress to be made, a more sturdy and resilient power grid is essential for Puerto Rico's economic development and overall well-being.
• San Juan Bus Network Transformation: PRITA collaborates with a private entity on a PPP to improve San Juan's bus network. The goal: enhanced service reliability, expanded reach to underserved areas, and increased ridership through better management and intermodal connections.
• Digital Transformation: Recognizing the importance of a robust digital infrastructure for economic growth, the PRHTA leverages a PPP to modernize and maximize its telecommunications assets (fiber optic cables, broadband networks). This collaboration aims to attract a private sector partner to optimize and expand PRHTA's digital infrastructure, potentially leading to network improvements, broader broadband access, and new services.

Success Stories

Puerto Rico boasts several successful Public-Private Partnership (PPP) projects that showcase the model's effectiveness. Here are a few key examples:

• San Juan Cruise Ship Terminal: This port, which plays a vital role in Puerto Rico's tourism industry, benefited from a PPP that modernized facilities and improved passenger flow. The project itself began construction in the mid-to-late 2010s, with ongoing maintenance and upgrades continuing as needed. The project not only boosted the island's economy but also enhanced the experience for cruise line visitors.
• Aguadilla International Airport (BQN): Located on the northwest coast, Aguadilla International Airport has significantly grown thanks to a PPP. The project, completed in the early 2020s, expanded the terminal, improved passenger amenities, and attracted new airlines. This not only benefits tourism in the region but also opens up new business opportunities.

Looking Ahead: Careful Planning Is Key

Rebuilding Puerto Rico's infrastructure is a complex challenge, but there's hope. Its strategic location, rich culture, and resilience position it for a bright future. Public-private partnerships offer a promising path forward, leveraging private sector investment and expertise to address critical infrastructure needs. By overcoming challenges and fostering collaboration, Puerto Rico can create a more modern, sustainable, and prosperous future for its citizens.

Learn More:

For a detailed look at current and past Public-Private Partnership initiatives in Puerto Rico, visit the Puerto Rico Public-Private Partnership Authority website: https://www.p3.pr.gov/

Sources:

• Infrastructure Report Card 2019: Puerto Rico
• World Bank- GDP Puerto Rico
• White House Report: Puerto Rico
• COR3 transparency portal: Funding Disbursements
• Past and On-going P3 Projects
•  https://www.whitehouse.gov/wp-content/uploads/2023/10/Puerto-Rico-Fact-Sheet.pdf
• Toll road Monetization Project
• https://www.cfr.org/backgrounder/puerto-rico-us-territory-crisis#chapter-title-0-9
• Luma Energy Fact Sheet