By Ray Birch
SAN JUAN, Puerto Rico—One lesson Hurricane Maria taught the people of Puerto Rico is that credit unions are more important than ever to the island’s economy and to the province’s future.
The record storm that ripped through Puerto Rico in September 2017, killing hundreds–the exact number remains unknown–and leaving infrastructure beyond repair, has led to a mass exodus of people, as thousands of residents flee the island hoping to establish a better life on the U.S. mainland. Maria, too, has sent a number of banks packing, sources say.
Two members of the local credit union movement here spoke with CUToday.info about what credit unions and their members have experienced in the aftermath of the historic storm.
Many of the banks that have remained have not yet reopened. That has placed the job of getting the people and the economy back on solid footing, right on the shoulders of credit unions—many of which were handing out much-needed cash to members one or two days after Maria struck.
Residents Show Their Confidence
The growth in credit union assets following Maria indicate not only how much credit unions are helping Puerto Rico, but the confidence residents have in cooperatives here, sources say.
“In October last year, a report showed there were 17 towns or municipalities in Puerto Rico in which the only financial institution providing services were credit unions. Not the big banks,” said José Julián Ramírez Ruiz. executive director of the Asociación de Ejecutivos de Cooperativas de Puerto Rico. “As the result of that, our credit unions have grown.
The Corporación Pública para la Supervisión y Seguro de Cooperativas de Puerto Rico (COSSEC) —the local regulator—reports that as of December 18 of 2017, credit unions showed $288 million in asset growth over that one-year period. Our people believe in cooperatives more than ever.”
There are eight federally chartered CUs on the island with aggregate assets of $761 million, and an additional 116 Cooperativas de Ahorro y Credito—financial cooperatives like CUs in the continental U.S. but regulated locally—which serve more than a million members with combined assets of more than $8 billion. Taken together, the financial coops represent the third-largest financial institution on the island.
Eddie Alicea Saez, executive president of the Cooperativa de Ahorro y Credito Sagrada Familia, a CU just outside San Juan, talked about what his credit union and members experienced right after the storm struck.
“We have four branches plus our headquarters, and our main office is the location that sustained the most damage,” he said. “But the real problem was the power outages, which are still unresolved in some parts of the island.”
The credit union’s systems were down for more than a month, Alicea Saez said.
“We did not have power until December in our headquarters, and even when power was restored, the service was not consistent, and it still isn’t,” Alicea Saez said.
The credit union has relied on diesel gas generators at all of its offices when the power has been down.
Price of Gas Skyrockets
“The problem with that is the price of gas on the island has skyrocketed,” Alicea Saez said. “At some points we were paying $10 a gallon for diesel. When we had to run all of the generators the cost to the cooperative is huge. We were paying $1,500 a week for gas for just one office—multiply that by five. That’s approaching $10,000 a week just to keep operations going.”
Alicea Saez said the credit union was able to provide services to members two days after the hurricane hit.
“We were running branches with limited personnel, because many of our staff could not make it to work since the roads were cut off due to storm damage,” Alicea Saez explained.
Alicea Saez said a declaration by the government that 95% of the power is restored to the island and that the emergency situation is over is misleading. He said that many towns, in disrepair, still lack power.
The Toughest Issues
The toughest issues facing the credit union and its members post-Maria has been not only the lack of power but also few resources and broken communication lines.
“Since many of our systems and the communications channels were not operating, we would have to drive to San Juan every business day to upload the ACH files,” explained Alicea Saez. “We had to update members’ accounts so they knew how much money they had left.”
The CU also had to bring cash back to the credit union.
What should have been a 30-minute daily drive turned into several hours due to the damaged roads. Saez said that sometimes the financial institutions in San Juan would not have enough available funds, and that would lead to an overnight stay.
“This was a big problem we had at the time, and a big risk institutions were taking, because there was a 24- to 48-hour delay in the posting of balances,” said Alicea Saez. “So in many cases, in reality, we were providing short-term loans to our members.”
Alicea Saez said the cooperative had to take this risk because its members desperately needed cash. He said that was their biggest need following the storm. He said they needed money to pay for food and water when they could find it, repairs for their homes, fences …
“Everyone was scrambling for resources,” he said.
A Future in Question
With a lot on the island unsettled still, many Puerto Ricans have left. That has placed the future of the economy, and credit unions, in question, experts have stated. But Alicea Saez sees a certain future for cooperatives here, despite the hurricane and a financial crisis that has lasted several years.
“Members have reaffirmed their commitment to work with credit unions, and we have seen a big increase in our business, even after the hurricane,” Ramirez Ruiz said. “The local credit union system has been recognized by Puerto Ricans as the resource for this country, now and in the past. They recognize how credit unions are involved and are a big part of their communities, unlike the banks, and they want to support them. The entire system growing by more than $200 million in assets after the hurricane, that shows the people trust credit unions and they know they can count on them.”
Ramirez Ruiz said there will not be a future for Puerto Rico without credit unions.
“There will not be a future for the island without cooperatives in general,” Ramirez Ruiz said. “We have to move toward cooperative energy and power for the island, and I mean for all of the islands here. I am confident in the future of Puerto Rico, for credit unions, and the cooperative model. The big banks in ten years won’t even be here. They are going away now, and they are not local. Credit unions aren’t going anywhere. There is no easy exit to this situation, so we are staying and working hard, and we will grow our economy and the prosperity for our people.
“We’re very grateful for the solidarity from the mainland credit union movement. The New York Credit Union Foundation, the National Credit Union Foundation and the National Federation of Community Development Credit Unions responded very quickly and provided disaster relief grants that provided tremendous relief to employees of local credit unions affected by Maria,” added Ramirez Ruiz.
Can’t Plan for Everything
Looking back again on the days right after Maria ripped through the island, Alicea Saez said there is no way his credit union and others could have prepared for the monster storm.
“We all had contingency plans, but they all fell short for a storm of this magnitude,” Alicea Saez said. “We all had to improvise, as we never planned for power outages to last for months. This was devastating.”
Ramirez Ruiz said that credit unions have done all that they could to support the people and their communities throughout the crisis. He said many have opened their offices to provide local residents with a place to shower, change clothes, get a meal and some resources, and even sleep overnight.
“Credit unions have stayed true to their social mission,” he said. “The message I’d like to pass along to credit unions on the mainland is that their help is very important to us and we appreciate their support very much”. We’re working with the National Federation of CDCUs to facilitate access to external resources for the local coops and look forward to developing closer relationships with everyone in the continent”
CUToday.info recently reported how credit unions in Puerto Rico are seeking assistance from their partners in the mainland U.S.
Credit unions interested in partnering with CUs in Puerto Rico should contact Pablo DeFilippi, SVP of membership and network engagement at the Federation of Community Development Credit Unions, at ablo@cdcu.coop