Puerto Rico Economic Pulse ©

March 2016: A Clear and Present Danger

Analysis of the proposed Federal Oversight Board for PR

Chairman Rob Bishop of the US House Committee on Natural Resources submitted a draft bill on March 29, 2016 to “establish an Oversight Board to assist the Government of PR, including its instrumentalities, in managing its public finances, and for other purposes.” The bill grants broad powers to a 5 member Board, charged with the task of proposing necessary reforms to solve PR’s fiscal crisis. It will audit the central government and its corporations; create efficiencies, and reforms with transparent fiscal plans and balanced budgets while improving services; and facilitate a court supervised debt restructuring if voluntary agreements are not achieved (but not under the umbrella of Chapter 9 since that would imply “a bailout of PR on the backs of US taxpayers”.) Why does PR need a fiscal board? Will the Board be subject to the claims of numerous bondholders all requesting priority in their debt payments? Or, will it be accompanied by a package of federal assistance to stabilize the Commonwealth’s liquidity problems and set out a roadmap for economic growth?

Q1 2016: Uphill All the Way in Puerto Rico

An analysis of 1st. Quarter 2016 economic indices

Puerto Rico is now in its tenth year of economic recession, which it started in 2006. The fiscal crisis, which has played center stage in the past administrations, has been defined by a failure to provide effective governance and leadership in response to serious economic challenges. The fiscal crisis has not gone away and the harsh tax increases have been compounded by a migration crisis. Q1 in 2016 was plagued with uncertainty, fueled by: government’s inability to pay its public debt, suppliers, reimbursements to taxpayers, fear of job losses at GDB, poor retail sales performance, and an unsympathetic US Congress intent on enforcing a Fiscal Control Board over Puerto Rico with unknown implications. Among all these uncertainties, only one thing is certain: the future will be uphill all the way and at significant political and economic cost. This issue examines the performance of our six quarterly indices, which depict an economy in trouble.