Weekly Review – July 16, 2020

Published on July 16, 2020 / Leer en español

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Dear Readers:

The news from the mainland regarding the spread of COVID-19 are worrisome. A majority of the states show the rate of infection is increasing and in several, notably Arizona, Florida, and parts of Texas, the outbreak appears to be getting out of control. Meanwhile, here in Puerto Rico, the positivity rate is also increasing as well as the number of hospitalizations.

This situation was in a sense foreseeable as the economy reopened after state-mandated lockdowns and shelter in place orders. The problem is that many jurisdictions, including Puerto Rico, failed to use that time to make the public investments in monitoring, surveillance, and contact tracing necessary to fine-tune public health policy.

Now we are stuck with a Hobson’s choice: using the blunt instruments of a quarantine or letting the virus burn through the population. Closing large parts of the economy again will have extremely adverse effects on the lives of millions of workers, especially with the termination of special unemployment assistance by the end of the month.

Then again, the abdication by governments of their duty to protect vulnerable populations in their midst would constitute an unfathomable moral failure that is also unacceptable. Difficult decisions, no easy solutions. The only clear thing is that when we need a scalpel we only appear to have butcher knives.

Sergio M. Marxuach, Editor-in-Chief

Insights + Analysis from CNE

Unemployment Compensation

By Rosanna Torres

As many as 17.8 million individuals – through no fault of their own – were laid off from work during the month of June, yet another month of elevated unemployment figures across the United States. However, great uncertainty lies ahead for the 50 million Americans that have relied on emergency unemployment compensation to meet basic needs after unexpectedly losing their job due to the COVID-19 pandemic, as the extra unemployment assistance is scheduled to end by July 31.

After stalling for nearly three months to issue necessary social distancing guidelines and promoting other disease mitigation and prevention practices, the federal government stepped in to provide short-term economic relief to those negatively impacted by the virus. Federal officials and Congressional leaders agreed to three major packages for economic relief, two of which directly addressed high unemployment levels: the Families First Coronavirus Response Act (FFCRA), and the Coronavirus Aid, Relief, and the Coronavirus Aid, Relief and Economic Security (CARES) Act.

Unemployment Compensation is a jointly administered federal-state program. The federal government issues general guidance on benefit coverage, eligibility, but it is states, as well as the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, that make the final determination about the scope of the program. However, the CARES Act provides an additional federal pandemic unemployment compensation of $600 a week for unemployed individuals. This is the special compensation that expires on July 31, 2020.

FOMB Certifies Fiscal Plan for PREPA

By Sergio M. Marxuach

On June 29, the Financial Oversight and Management Board (“FOMB”) certified the 2020 fiscal plan for the Puerto Rico Electric Power Authority (“PREPA”). According to the FOMB: “much work remains to be done” …including the “diligent implementation of the following key initiatives:

  • Improving operations: To ensure timely and on budget completion of key operational initiatives.
  • Modernizing the transmission and distribution system: Develop and execute a capital investment plan to modernize and strengthen the electrical grid.
  • Upgrading the generation fleet: Implement the PREB-approved IRP to modernize generation resources and increase renewable energy generation.
  • Improving workforce and public safety: Increase the use of technology in grid operations to improve workplace safety and protect the public against faulty infrastructure.
  • Transitioning the operation and management of PREPA’s electricity grid and generation assets to private operators: On June 22, the Public-Private Partnership Authority (P3A) announced the selection of LUMA as the new private T&D operator.
  • Restructuring legacy debt obligations: Support ongoing efforts to restructure PREPA’s existing, unsustainable debt load and regain access to capital markets.
  • Pension Reform: To balance rate affordability with PREPA’s pension obligations to its employees, PREPA must review the ERS funding policy and incorporate revisions into PREPA’s Title III plan of adjustment.”

That is an ambitious agenda for any electricity company, but especially challenging in the case of PREPA, which has a long record of failed attempts at strategic change. The FOMB appears to acknowledge this when it states that “to successfully execute on the Fiscal Plan and ensure progress toward the transformation, PREPA must effectively manage several contingencies and risks.” Which begs the question: what happens if PREPA cannot manage at least some of those contingencies and risks, as is foreseeable? Do we have a Plan B?

Data-based Decisions

By Deepak Lamba-Nieves, Ph.D.

The upswing in people infected with coronavirus in Puerto Rico has rekindled the conversation about the containment measures that must be taken to prevent the escalation of the public health crisis we are experiencing. Considering that we cannot continue flying blind and that any restrictive measures implemented by the state will adversely affect the operation of our economy and other social processes, it is essential to consult with proven experts and make good use of the best data available. Given this panorama, we share again our data panel or “dashboard” on the industrial sectors and the risk for COVID-19 in Puerto Rico.

Source: CNE, Industrial Sectors and Risk From COVID-19 Dashboard

The data we examined, as shown in the table above, reveals that the health, education, and retail sectors have the highest risk scores, while agriculture, manufacturing, transportation, and storage have the lowest. Certainly, risk levels can be reduced depending on mitigation measures taken by owners, business managers, and their workers. Our interest is not to alarm people or take sides on which sectors should open or close to contain the transmission of the virus but to provide useful information that can serve the public and government officials to make the best decisions during these difficult times. We invite you to take a look at the rest of the data in the dashboard, which contains information on jobs and sectoral contributions to the Gross Domestic Product.

“The data we are looking at today paint a picture of what happened weeks ago.”

Dr. Juan Alonso-Echanove, former Director of Epidemiology at Puerto Rico’s Health Department explains the stages of the virus when it affects a person and the importance of taking preventative measures. Click on the video above for an excerpt from our #LivingWithRiskConversations with Deepak Lamba-Nieves, CNE’s Research Director, or click here to watch the full episode in Spanish.

On Our Radar...

The Pandemic and the Future of DemocracyMartin Wolf asks in the Financial Times that “Covid-19 has been a global shock. But will it be a transformative one? The answer is that it might be a transformative event for a number of western societies, notably the US and UK.” But he also warns: “democracy will fail if we don’t think as citizens”.

The Psychological Effects of the Reopening – “Reopening is a mess”, writes Tess Wilkinson-Ryan in The Atlantic. “Photographs of crowds jostling outside bars, patrons returning to casinos, and a tightly packed, largely mask-less audience listening to President Donald Trump’s speech at Mount Rushmore all show the U.S. careening back to pre-coronavirus norms…As despair rises, the temptation to shame people who fail at social distancing becomes difficult to resist. But Americans’ disgust should be aimed at governments and institutions, not at one another.

The Cure is Not Worse than the DiseaseA group of researchers estimates that “COVID-19-mitigating public health measures will save between 900,000 and 2,700,000 lives in the US; however, the economic downturn from shelter-in-place measures and other restrictions on economic activity could create a collateral loss of 50,400-323,000 lives.” They conclude “that COVID-19-mitigating public health measures are justified; however they can create potentially significant, albeit less overt, mortality. A balanced approach that prioritizes public health while also restricting economic activity as minimally as possible is essential to emerging from the pandemic with the least amount of humanitarian cost from the virus and from the loss of economic opportunity combined.”