Hurricane Maria Threatens to Disrupt Pharma Supply Chain Activity in Puerto Rico and Other Caribbean Islands

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This alert has been provided by BSI.

September 20, 2017

The recent movement of Hurricane Maria over Puerto Rico and neighboring Caribbean islands will likely significantly threaten the continuity of pharmaceutical supply chains and broader business operations in the region, according to BSI’s SCREEN supply chain intelligence network. Electricity outages, strong winds and rain, and flooding will likely threaten the operations of local factories and supply chain hubs, such as air and seaports, threatening to disrupt local and regional trade.

The director of Puerto Rico’s emergency management agency indicated that the hurricane caused an electrical outage covering virtually the entire island, threatening to disrupt output for local factories. Additionally, factories and other business will likely remain understaffed for some time as employees struggle to reach their workplaces even after the hurricane passes, due to flooding and debris blocking many roads. Additionally, authorities closed the island’s largest international airfreight hub, located in the capital, San Juan, Tuesday night ahead of the hurricane’s landfall, and power outages and heavy flooding will likely prevent the facility from immediately reopening. Similarly, the U.S. Coast Guard’s closure of Puerto Rico’s seaports ahead of the storm has halted the movement of sea cargo to and from the island.

Even after Hurricane Maria passes beyond Puerto Rico and nearby Caribbean islands and supply chain hubs officially reopen, regional commercial trade will not likely immediately resume. Following other recent disasters, such as Hurricane Irma earlier this month, authorities restricted commercial cargo traffic into and out of Caribbean supply chain hubs, giving priority to incoming disaster aid shipments and security and emergency response forces. Due to these restrictions, cargo consignments may be diverted from their intended destinations to other facilities or held for extended periods of time at air or seaports. These irregular shipping patterns expose goods to threats of tampering, theft, illicit diversion, and expiration, in the case of perishable products. Diversions and shipping disruptions caused by incidents such as Hurricane Maria underscore the importance of close business partner vetting during times of increased natural disaster activity.

Resilience capabilities in Puerto Rico, which include the local government’s ability to prepare for and also respond to natural disasters, will likely be compromised in the coming days and this will only heighten the risk of supply chain disruptions posed by disasters that occur in the territory. Notably, the territory’s ongoing public finance struggles, underscored by the local government’s bankruptcy filing in May, have limited the resources that are available for even critical government services, such as disaster preparation and infrastructure resilience. For example, most routine maintenance projects for the country’s government-operated electrical grid have halted in recent months due to a lack of funding, likely heightening the scale of the recent outage. The storm’s close timing behind the strong Hurricane Irma will very likely exacerbate its potential for supply chain disruptions, as many islands are still recovering from the previous natural disaster.