04/2018: A New Privatization Model for PREPA

Competition can support Puerto Rico’s future

PrivatizationThe aftermath of hurricanes Irma and Maria essentially sealed PR Electric Power Authority’s (PREPA) fate, at least in its current legal form. The magnitude of the physical destruction experienced both by its generation capacity and its distribution networks renewed historical calls for its privatization. That possibility now seems irreversible, particularly given the Fiscal Oversight Board’s (FOB) drive to impose austerity across the public sector and the government’s market-friendliness inclination. However, not all privatization processes are the same and, by extension, not all lead to the same outcome. This issue of Pulse presents a novel approach to privatization—one based on the controlled introduction of competition in regional markets. The approach described herein has been successfully applied elsewhere. More importantly, it is designed to align electricity generation with PR’s changing socioeconomic landscape at zero cost to the government, consumers and businesses. Sometimes, privatization does work.

Puerto Rico Economic Pulse ©

03/2018: Tic-Tac-Toe – Game Changer

Hurricane Maria changed Puerto Rico’s economic forecast

Tic-Tac_ToeDespite geopolitical tensions between the US and North Korea, most of the world and the US posted gains in real economic growth during FY2017. On November 2016, President Trump was elected in the US and Governor Rosello was elected in PR. A lot has happened since then: a US Congress mandated oversight fiscal board with ample powers over the Island; two hurricanes in September 2017 that left destruction and devastation in an economy already in economic depression; destruction of infrastructure, and a flurry of reforms and fiscal plans. Economic recovery in PR will take many years; require billons of disaster monies; and a transformation of our economy towards other key sectors, besides manufacturing. Governance has become more complex with clashes between the PR Government and the Oversight Fiscal Board. The impossible occurred when bankruptcy proceedings for PR under Title III of PROMESA began in May 2017. Find out how Tic-Tac-Toe impacts Puerto Rico’s economic outlook.

Puerto Rico Economic Pulse ©

02/2018: Out With the Old, In With the New – Part II

The Government’s Revised Fiscal Plan stumbles on assumptions

Out with the Old In with the NewEconomic modeling is both science and art. Failure to take this seriously leads to wrong decision-making scenarios in PR. If that was acceptable in the past, it is not at present. Old ways relied on a relatively stable population to forecast growth and fiscal revenues. As per the revised fiscal plan, this appears not to be the case. Old ways relied on government revenues forecasted, in many cases, as trend of past collections. Now, these revenues must be tied to demographics and economic growth in the aftermath of hurricane Maria. Old ways relied on GNP growth forecasts by the PR Planning Board. Now, the forecasts in the fiscal plan need to use a coherent economic model of PR’s economy rather than mere assumptions with irreconcilable results. This issue questions the assumptions and results of the most recently revised Central Government Fiscal Plan.

Puerto Rico Compass ©

Q42017: A Shattered Economy After Hurricane Maria

Shattered EconomyAnalysis of 4th Quarter 2017 economic indices

At the end of 2017, PR exhibits a shattered economy with a broken infrastructure due the devastation of hurricane Maria on September 20, 2017. As of January 2018, more than 400,000 clients or 30% of PREPA’s clients still had no electricity. As analyzed in our previous Q3 issue, a fast recovery of electricity is a key factor in the island’s economic recovery. Other basic infrastructure, such as, water, communications, and roads continue to have problems. The lack of a fully operational and reliable infrastructure is hitting businesses as well as households. With lower demand and rising operational costs, many businesses have reached the point of no return and have closed or filed for bankruptcy. Families have chosen the option of mass migration, particularly to the USA. HCCG’s six quarterly economic indices highlight the effects of the broken infrastructure and a weak economy in the post Maria era.

Puerto Rico Economic Pulse ©

01/2018: Out With the Old, In With the New – Part I

Elements of a much-needed economic plan
Out With The Old In With The NewOut with the old and in with the new is a two-part analysis of key strategic elements that Puerto Rico’s economic plan must outline and execute if we are to compete and regain our title of the “Shining Star of the Caribbean”. Infrastructure is a recurrent topic in economic growth and development strategies. Hurricane Maria devastated the Island’s electrical system, highways, ports, water facilities, and telecommunication systems. To this date, neither the Government nor the Supervisory Fiscal Board have communicated the outline of such a comprehensive Plan and instead, the Governor has announced the need to privatize the PR Electrical Power Authority and the Board has insisted on a revised Fiscal Plan. Meanwhile, government liquidity and credibility issues threaten the continuation of government services and timid recovery efforts. This Issue addresses what needs to change from the old to the new focus in strategy and execution if PR is to compete, worldwide.