Infrastructure is defined by the “American Heritage Dictionary” as the basic facilities, services, and installations needed for the functioning of a community or society, such as transportation and communications systems, water and power lines, and public institutions including schools, post office, and prisons.
Historically, politicians have tended to give infrastructure spending short shrift while favoring social and other short term spending, likely to have a more immediate appeal to voters.
And now we have Puerto Rico. More than a month after the destruction brought about by hurricane Maria, the island’s infrastructure is a shambles. Large parts of the island still do not have cellphone service, access to clean water is limited and nearly 80% of Puerto Ricans do not have power.
It is evident that recovery is likely to be painfully slow, due in part to the fact that Puerto Rico is an island with the attendant logistical issues, compounded by generally marginal levels of maintenance, over decades, before the storm delivered a final blow.
A robust infrastructure is an essential of a modern society. Investors should consider the condition and political commitment relating to infrastructure, or lack thereof, as part of an assessment of investment opportunities.
Walter J. Kirchberger, CFA®