“The Economy Evaporated Pretty Much Overnight”
As most of you know by now, the damage to the US Virgin Islands from Hurricanes Irma and Maria are very severe. The Virgin Islands have been struggling badly for the last decade. With the HOVENSA oil refinery closed down and many businesses long since gone after Washington killed the islands’ tax breaks, the economy is now totally dependent on tourism.
And the tourism industry is now gone too:
And as Virgin Islanders wait for doctors, medicine, fuel and manpower to rebuild the flattened communications and power grid, the economic toll from the storms is only starting to come to light.
“The economy evaporated pretty much overnight,” said Clint Gaskins, the owner of Longboard, a restaurant on the island of St. John where the only customers these days are the locals who stop by twice a day to pick up meals provided by the Red Cross.
Across the island, the picture is grim: The two largest resorts will not be able to open until next year, if not longer; owners of the restaurants and bars that came away unscathed wonder who will be left for them to serve; and residents who are suddenly without jobs are leaving en masse for the mainland.
“And you’ve got a nearly bankrupt government,” Mr. Gaskins added. “I don’t know how they get out of this.”
But on a per-capita basis, the often out-of-sight, out-of-mind Virgin Islands carry more debt than Puerto Rico. Wall Street analysts have warned that the territory may be unable to pay back the nearly $2 billion it owes creditors and keep up with billions more in payments it is required to make into a pension system that is projected to be insolvent in less than six years.
“We believe there is a large chance they will default,” said David Hitchcock, an analyst with Standard & Poor’s, which has said it plans to withdraw its ratings of the Virgin Islands — already at a level considered junk by investors — by October because the government has stopped providing it with basic information on its cash flow and financial outlook.
With the Virgin Islands now a post-apocalyptic wasteland, I expect many of them to migrate to the US to look for work. Right now, the Virgin Islands has no economy and no capacity to produce anything, and no money with which to rebuild. A recovery may take a decade or more.
The islands have a population slightly in excess of 100,000. What’s that number going to look like next year?