A pizzeria in Guánica, Puerto Rico, was destroyed by the earthquake that hit the southern part of the island Jan. 7. On Jan. 16, FEMA made federal emergency aid available to six municipalities in the Commonwealth, including Guánica.
Source: Dominga Morales
When a series of earthquakes and aftershocks shook the southern part of Puerto Rico in late 2019 and early 2020, banks on the island were prepared thanks to protocols and backup power and communication systems established in the wake of a much more destructive natural disaster in 2017 — Hurricane Maria.
"This is not a Maria-type event," Ignacio Alvarez said of the recent string of earthquakes. Alvarez is the president and CEO of Popular Inc., Puerto Rico's biggest bank.
"We never lost communication," Alvarez said in an interview. "The power was out for a while, but it came back on relatively quickly. And if you were to come to San Juan, you would not notice anything different."
When Hurricane Maria tore through the island in September 2017, it was a very different story. Maria was one of the most destructive storms in Puerto Rico's history. It caused an estimated $90 billion in damages across Puerto Rico and the U.S. Virgin Islands and led to an estimated 3,000 deaths in Puerto Rico. It wiped out the island's electric grid and telecommunications systems, leaving wide swaths of the island without power, phone or internet for months.
It also disrupted ATM networks across the island and damaged or destroyed dozens of bank branches.
"This is a very different type of event," Alvarez said of the earthquakes.
When Alvarez spoke to S&P Global Market Intelligence on Jan. 21, he described the banking industry as "basically up and running."
Popular has the island's largest branch network. As of Jan. 21, three of the bank's 164 locations were temporarily closed due to damage. "We are taking the time to have them reviewed by an engineer to see what repairs are required," Alvarez said. "None of them are total losses or anything like that."
The impact on the bank's clients has also been minimal. "We haven't seen the kind of economic dislocation that was caused by Maria where we had literally tens of thousands of people calling where they needed assistance," Alvarez said.
By Jan. 8, the first full day after a major 6.4-magnitude earthquake struck, about 90% of the island's 292 branches were open and about 89% of its 1,554 ATMs were functioning, according to George Joyner, Puerto Rico's top financial regulator. Joyner knows because he requested daily updates from Puerto Rican banks about their networks, and then shared that information with mainland regulators such as the Federal Reserve Bank of New York and the Federal Deposit Insurance Corp. — a post-disaster protocol he established in the immediate aftermath of Maria.
The industry's speedy recovery from the earthquakes is partly due to better preparation. "After the hurricane, all of the banks hardened their backup or standby power generation capacity so that they could operate their ATMs and their branches even if their power on the grid was off for an extended period of time," Joyner said. "They also had more redundancy in their communications so that the ATMs were able to stay online and connect to their systems of record to be able to transact business."
Damage from the earthquakes was also limited to a handful of municipalities in the southern part of the island — unlike Maria, which hit the whole of Puerto Rico.
"We weren't really put to the super test," Alvarez said. "Yes, we have built a lot, and we are a lot more resilient. But I'd say it was mostly due to the fact that the event was not of the magnitude of Maria."
Alvarez said headlines about the earthquakes have scared away some tourists, though he noted that tourism and leisure only account for 7% of Puerto Rico's GDP.
"It seems that everyone in the States has the impression that Puerto Rico has been flattened. This is hardly the case," said Joe Gladue, a bank analyst who lives in San Juan. While damage to the south coast of the island is serious, "the whole island is not crumbling. Some people here in the San Juan area have been a little rattled by the shaking, but I have not heard of any serious structural damage to buildings in this area and life is going on as normal," he said.
Alvarez said the biggest impact from the earthquakes is psychological.
"People are really scared. Many people are not sleeping in their homes even though their homes were not damaged. Many people are sleeping outside in their yards," he said. "This is all new to us."