A falling population presents a growing range of challenges for Puerto Rico and is now raising red flags on Wall Street regarding the island’s economic and fiscal future.
Slashing the island government’s credit rating, Moody’s Investors Service cited the “declining population” as it pointed to Puerto Rico’s “weak” economic outlook, one of four key drivers of its downgrade on Thursday.
“Economic growth prospects remain weak after six years of recession and could be further dampened by the commonwealth’s efforts to control spending and reform its retirement system, both of which are needed to stabilize the commonwealth’s financial results,” Moody’s said. “The lack of significant economic growth drivers and the commonwealth’s declining population have also reduced prospects for a strong economic recovery.”
Moody’s also blamed Puerto Rico’s high and growing debt levels, lackluster revenue growth and large structural budget gaps, and lack of meaningful pension reform as prime movers behind the downgrade to just one notch above “junk” grade. A shrinking and aging population can impact each of those three categories.
A preliminary CARIBBEAN BUSINESS review of previous ratings actions by Standard & Poor’s, Moody’s and Fitch didn’t turn up mentions of Puerto Rico’s population decline.
There has been an exodus of Puerto Rico residents amid the marathon local economic recession. Puerto Rico’s population fell by 2.2 percent over the past decade, according to 2010 Census statistics, shedding stark light on a demographic shift that represents a range of challenges for the island including the prospect of less federal funding, increased pressure on the financially ailing public-pension system and a dramatically aging population with fewer financial resources.
Puerto Rico’s population was pegged at 3,725,789 in the 2010 Census, down from the 3,808,610 residents registered in the 2000 Census. It marked the first time the island population has declined between census counts. A 2011 update tabbed Puerto Rico’s population lower still at under 3.67 million, representing a loss of 56,594 residents last year.
There are roughly 4.7 million Puerto Ricans living in the states. Nearly a third of Hispanics of Puerto Rican origin in the 50 states and D.C. were born in Puerto Rico, according an analysis of 2009 American Community Survey data by the Pew Hispanic Center.
The flow Puerto Rico residents leaving for the U.S. mainland was highlighted in new Census Bureau data that showed 76,218 people residing in the U.S. last year lived in Puerto Rico one year earlier.
The exit of people seeking work in the states and the related issue of “brain drain” have grabbed headlines, but Puerto Rico’s population drop is only partly due to people leaving the island.
Connected to the flight of young Puerto Ricans and professionals to the mainland is a falling local birth rate and a quickly aging population that economists and demographers warn will pose increasingly greater challenges to the island. Human resources executives note that those problems extend to island businesses.
“That means less people working, saving, investing, consuming and contributing to pay off the debts incurred by the commonwealth with bondholders and pensioners,” Sergio Marxuach, policy director for the Center for the New Economy, told CARIBBEAN BUSINESS online.
Puerto Rico is among just two dozen national statistical areas around the world that lost population between 2005 and 2010, according to a United Nations report issued last year.
As the global population topped 7 billion after an unprecedented surge of 1 billion over the past 12 years, Puerto Rico and 23 countries actually saw declines.
They are mostly former Soviet Republics and Eastern European countries. According to the latest U.N. count, of the 24 nations that registered population falls between 2005 and 2010 only Puerto Rico, Germany and some small island nations were not from this region.
Puerto Rico’s population growth slowed to a crawl between 2000 and 2010, posting an average annual increase of less than 0.5 percent during the period, according to Census statistics. That was the smallest population increase over a decade since at least the 1950s when it was 6.3 percent. The island’s population grew 15.4 percent in the 1960s, 17.9 percent in the 1970s, 10.2 percent in the 1980s and 8.1 percent in the 1990s.
Puerto Rico’s population growth rate over the past decade was less than half that of the U.S.
The island’s aging population, meanwhile, is getting grayer by the year, according to Census counts.
The percentage of the population over 65 years old was 7.9 percent in 1980, 10 percent in 1990, 14 percent in 2000 and 15 percent in 2010. Projections show that the under-40 population will drop by more than 300,000 by 2020, while the over-40 crowd will grow by 275,000. The population of islanders older than 70 is forecast to rise by 75,000 over that time.
Projections show that by half of the local population will be over age 50 by 2050.
Meanwhile, Puerto Rico’s birth and fertility rates have both fallen sharply since the onset of the island’s economic downturn — further evidence that few forms of birth control are as effective as the economy.
Both rates are among the lowest in the nation, and experts believe the trend is tied to the economy. Women with money worries may feel they can’t afford to start a family or add to it.
Puerto Rico’s birth rate fell to 11.3 births per 1,000 total population in 2010, according to the federal Centers for Disease Control. The birth rate was 12.4 at the start of the island island’s economic recession in 2006. Only seven states have lower birth rates.
The fertility rate in Puerto Rico was 54.3 in 2010, down from 57.2 in 2006. The fertility rate is the number of births per 1,000 women aged 15-44 years. Only four states had lower fertility rates in 2010.
There were 41,159 births in Puerto Rico in 2010, down from 48,597 births in 2006.
The national birth rate dropped for the third straight year, with declines for most ages and all races, according to the federal report.