Puerto Rico Economic Pulse ©

May 2011: The Energy Crisis in Perspective

An evaluation of Via Verde and the government’s energy policy

Soaring oil prices and six years of economic recession are prompting the government to take swift actions to reduce the country’s dependency on oil-fueled electricity. At the center of its strategy lies the construction of the highly controversial “Via Verde”, a 92 mile gas pipeline running northbound across the Island to supply natural gas to power plants in the north region. The government argues that the pipeline is the best short-term solution to reduce the cost of electricity. Opponents are concerned about the safety hazards; permanent environmental impact and many are skeptic about the savings that could actually be accomplished and whether it is the best alternative available. As the different groups debate, in this issue we provide an objective evaluation of Via Verde and the government’s energy policy.

Puerto Rico Economic Pulse ©

April 2011: Global Threats to Economic Recovery

How these events can impact Puerto Rico

Much has occurred since our last issue of March wherein we analyzed the PR economy in 2010 and forecast for 2011 through 2013. Since then, we have seen the escalating price of gasoline as oil prices and wars have escalated; the heated debate in US Congress on account of the federal budget deficit and the rapidly approaching ceiling of the trillionaire public debt of the US. And if these events were not enough, Japan, the third largest economy in the world experienced a major earthquake followed by a tsunami and the fear of radioactive fallout from some of its atomic plants. Puerto Rico is not isolated from the adverse effects of these international threats. What could potentially be the most pessimistic economic outlook for the island? How can you as a businessperson and consumer be ready? The key to your success lies in the use of this information to identify risks and opportunities.

Puerto Rico Compass ©

Q1 2011: We Hope and Wait

An analysis of 1st Quarter indices of the PR economy

Economic indices are hitting a soft patch as business and consumers struggle to cope with rising energy and food costs as well as continued concerns regarding further weakening of the global economy. Both here and in the US mainland, economic news continues to dampen optimism regarding a quick and substantial economic recovery. The consumption rebound of 4Q 2010 with healthy new car sales bottomed again this quarter. We hope for less job losses in manufacturing and other economic activities but the reality of this quarter is otherwise. We hope for less rising energy costs and less federal spending cuts but the debate in Congress continues to unravel for political gain. And we wait locally for the start of the Public Private Partnerships, the expected positive effects of the tax and permitting reforms, and more lending from banking.

Puerto Rico Economic Pulse ©

March 2011: A Lost Decade at the Start of the 21st Century

An overview of the PR economy in 2010 and forecasts

In FY2010, PR experienced its 4th straight year of negative economic growth. This is the worst recession in PR history since the beginning of the national accounts in 1947. In fact, the only period when PR has experienced consecutive years of negative growth in the past was between 1981 and 1983 when GNP shrank annually at 0.6%, 2.6% and 2.6%, respectively. Besides this three-year recession, PR has only had negative growth for single years in 1975 (-3.3%) and again in 2002 (-0.3%). The current recession officially started in FY2007 when real GNP grew at –1.2% and worsened in subsequent years with annual rates of –2.8%, -4.0% (revised) and –3.8% (estimated) between FYs 2007-2010. The hit on the economy has been so hard that real GNP in FY2010 is now 3% below its FY2000 level. This issue reviews the contributions of consumption, investment, government and net exports to the past and future growth of the PR economy.

Puerto Rico Economic Pulse ©

February 2011: Is Puerto Rico Missing the Boat?

An update on the Port of the Americas

Trade is increasingly important for the continued growth of the PR economy. Extensive and efficient infrastructure is also critical for the effective functioning of the economy. In addition, the quality and extent of infrastructure networks significantly impact economic growth. Puerto Rico needs both. Ports of entry are PR’s gateways to the world, enabling international commerce, immigration, and tourism. Ports provide a crucial link between land and sea transport. They also have an important social function, through the provision of jobs both directly and indirectly. As a supplier of jobs, ports do not only serve an economic but also a social function. However, since cargo nowadays is loaded and unloaded mechanically, the effects of changes in the amount of goods handled on local employment or the demand for port services is difficult to ascertain. Consequences of inaction or delay in improving trade-related infrastructure will have real costs to the economy. In this context, it is important to review why the Port of the Americas in Ponce has not taken off. Did we miss an opportunity?

Puerto Rico Economic Pulse ©

January 2011: Will the PR Tax Reform Generate Jobs?

Gaining knowledge on taxes and jobs

As calendar year 2010 nears its end, we take a panoramic view of newsworthy economic events in Puerto Rico. The preface of course is what happened in the rest of the world and which also impacted our economy. The insatiable appetite of China’s exports as well as banking everywhere has touched us. At the start of the year, we were all hopeful that selected government policies would start turning the economy. Instead, we have seen the continuation of what could be described as the longest (4 years) and, so far, deepest economic recession in our modern history. In real terms, the economy’s real GDP has shrunk $767 million since 2006 and the labor market lost 176,000 jobs. Unemployment increased to 16% by October 2010. Indeed, 2010 feels as if 12 years instead of 12 months have elapsed. Policies, jobs, and houses have a lot to do with it.