Puerto Rico Economic Pulse ©

July 2016: Can PR’s Budget Adjust to the New Norm?

10 years after the government shutdown

Fiscal budgets everywhere seek to balance the basic needs of the population with the resources available to the government. In PR’s case, the fiscal challenges are even starker as meeting its current debt obligations—without any viable economic alternative to back it up—will continue to drive up migration, thus further contracting economic activity and the current tax base. In this sense, the Commonwealth is facing a dire chicken and egg problem.  Stopping the population drainage will require positive economic prospects, yet to materialize. Not meeting its debt obligations will feed more uncertainty to the business community and certainly continue to deny the island access to capital markets, necessary to promote economic growth and development. All this makes it difficult to further reduce outward migration. Meanwhile, the government will need to continue to adjust its spending pattern to the prevailing socio-demographic profile of the resident population, a task easier said than done.

Puerto Rico Compass ©

Q2 2016: It is Still a Long Bumpy Ride

Analysis of Puerto Rico’s 2nd Q 2016 economic indices

The goal of Compass is to provide insights on drivers of PR’s overall economy and key economic sectors with the latest financial and economic data on a quarterly basis. The 2nd Quarter of 2016 depicts an economy still in the doldrums with a negative short-term outlook. Banking, Manufacturing, and construction seem stuck in negative territory. Manufacturing keeps losing jobs, which are often middle paying, largely because of technology and worldwide weakness in China. This year’s presidential race in the US and the gubernatorial race in PR raise more issues than solutions. Start with minimum wages. US candidate Hilary Clinton supports raising the federal minimum wage to $12 an hour, up from today’s $7.25 and candidate Trump recently endorsed a rise to $10 an hour. A higher minimum wage would help some workers in the low-paying food services and accommodation industries, so long as the higher minimum did not destroy their jobs by making it unprofitable to employ them. On the local front, the expected US fiscal control board has done little to halt the island’s mood of uncertainty.