Puerto Rico Compass ©

4Q-2016 Industry Leaders React to New Policies

4Q-2016 industry analysis and PR Administration policies
This edition of Puerto Rico Economic Compass, analyzes the 4Q-2016 economic indices and includes an industry analysis of the PR economy plus economic policies proposed by the new Administration. The elected governor, Ricardo Roselló and the PROMESA Fiscal Oversight Board have certainly altered expectations for 2017. New executive orders, approval of sweeping labor legislation, and continued dialogue with the PROMESA Board regarding key recommendations to be implemented in the near term, have raised both praise and criticism by several industry sectors. For instance, the recently approved Labor Reform Act has been praised and promoted by several industry and retail employers but has met a backlash from many in the labor movement. No doubt, the new government has been very busy trying to adopt and implement the fiscal and economic plan demanded by the PROMESA board since last December. What’s the rest of the story?
Puerto Rico Economic Pulse ©

Jan 2017: A Needle Hard to Thread

The challenges of health and PROMESA for Puerto Rico
A new year has arrived and brought with it a series of complex issues that require immediate attention. The US Congress mandated fiscal supervisory Board under PROMESA is dealing with PR’s fiscal and economic crisis. Health is one of the priorities as well as payment of PR’s public debt. With the upcoming repeal of Obamacare in the US, Puerto Rico faces a shortfall of almost $1 billion in federal funds for the public healthcare system, putting thousands of Puerto Ricans at risk. The Board is just starting to demand quick action from the new government by establishing a dialogue and trying to expedite under a tight timeline the process of certifying a sustainable fiscal plan that would restore fiscal discipline, provide access to financial markets, pay the public debt, and bring economic growth to PR over the next decade. But, will it succeed? Amidst all these priorities is Puerto Rico’s healthcare plan for the medically indigent. Find out what has happened since started on September 1993 and what lies ahead in the immediate future for PR.

Puerto Rico Economic Pulse ©

Dec 2016: A Bag of Shocking Economic News

Puerto Rico changed its course in 2016
Change hit Puerto Rico abruptly and hard as its fiscal crisis unfolded and rolled out public debt default with limited or no access to traditional financial markets. Badly needed investment in infrastructure stalled and the economic recession is now in its 11th year. This time the US told the Island there would be no bailout. Instead, Congress approved PROMESA with an oversight fiscal board that has almost omnipotent powers even over elected local politicians. It is not hard to find many in favor of the Board who hope it can trigger badly needed structural reforms in taxes, health, education, labor, pension systems, and government, among others. But, this hard medicine that produced upheaval in the past can also lead to rebellious mood in the year ahead. The dramatic election of Donald Trump promises a rollback of Obamacare and an inward-looking America. This Pulse reviews the forces of change in PR in 2016 that will shape its economic future.

Puerto Rico Economic Pulse ©

Nov 2016: Reality Check for Puerto Rico’s Fiscal Plan

Success will depend on the premises it makes
The government’s latest version of its fiscal and economic growth plan has come under close scrutiny since being submitted to the Financial Oversight & Management Control Board (FOMCB) for PR.  Some critics have pointed to its lack of policy specifics while others have scorned the fact that it does not contain a debt sustainability analysis while resting on additional federal funding. The PR fiscal plan (FP) has various technical points and assumptions that have also been singled out. The plan’s viability, regardless of the gaps, will ultimately depend on the validity of its assumptions. Policy makers must find a way to boost PR’s long-term potential output first but the appointed board may want to restructure public debt obligation first. Growing the economy will ensure that the future roadmap rests on credible future income flows. This edition of the Pulse takes a look at the fundamental assumptions behind the fiscal plan.

Puerto Rico Compass ©

Q3 2016 – Is Election 2016 Different for Puerto Rico?

Does the upcoming race change anything?
With elections just around the corner, do Puerto Ricans think the next Governor will have a profound impact on the economy? This issue of Compass analyzes the performance of HCCG’s six quarterly indices during the past non-election years compared with historical election years from 2000 thru 2012 and this year’s results. Find out if the consumer index tracks Puerto Ricans’ sense of financial security in their spending patterns. However, banking, construction, and manufacturing as well as the coincident index suggest the results of this election could prolong the lengthy economic recession of the past 11 years. Any election year brings uncertainty and many business owners could be hesitant to make long-term decisions. To complicate matters, the recently US Congress mandated Fiscal Control Board has absolute powers over the administration of the Island until fiscal discipline is restored, public debt is serviced, and there is access to financial markets. What is certain is that all of this will take years in the making.

Puerto Rico Economic Pulse ©

Oct 2016 – One More Time: Puerto Rico’s Agenda

Election 2016 – Analysis of Economic Platforms
On November 8th, 2016, Puerto Ricans will face a stark choice between six governor candidacies, consisting of 4 political parties and 2 independent candidates. According to recent polls, independent candidates are attracting 22% of voters. Still, Ricardo Rossello from the NPP and David Bernier from the PDP are leading the polls to be the next Governor of PR. However, with the recent approval of a US Congress mandated Fiscal Control Board for PR, most people consider the elected governor and the legislature will have limited powers and areas of influence. Under these circumstances, the next four years will be tough for the new government and the people of PR. Economic issues include recession, outmigration, debt payments, retirement and health time bombs, and a harsh relation with the Fiscal Control Board. Voters in PR will have to analyze carefully the various platforms of these candidates and determine if some of these measures are economically unfeasible, not fiscally prudent, unclear; or depict lack of organization and cohesion, among other flaws. Can you judge who might be the better candidate for PR?

Puerto Rico Economic Pulse ©

Sep 2016: Urgency of Now for Credit Cooperatives

An important component of Puerto Rico’s Financial Sector

Believers of the credit-union movement talk of a “social mission”: to serve communities. As of March 2016, credit unions in the Island had 976,550 members with $8.7 billion in total assets. Earnings are returned to members in the form of better interest rates and dividends. Traditionally, credit unions have offered higher rates than banks to savers and lower rates to borrowers. During this financial and current economic crisis in PR, most credit unions have been more resilient than banks. They have been able to compete with banks and small loan companies who complain loudly about credit unions’ exemption from local income tax. Though credit unions may pay no taxes, neither have they needed taxpayers’ money for bailouts, until now. Many credit unions, which purchased PR bonds (currently rated as junk) are facing tough challenges with their capital requirements. Its regulator COSSEC has been considering a “bailout” type of proposal for these credit unions. Will it be enough without endangering their regulartor COSSEC? Find out in this Pulse.

Puerto Rico Economic Pulse ©

November 2015: Of Sun & Sand – Is it Enough?

Challenges facing the tourism sector in Puerto Rico

November 13th terrorist attacks in Paris had a negative impact on tourism. French hotels and restaurants reported a major impact. These events highlight the need for protection from disruption to business and leisure travellers. The 2015 Global Summit in Madrid looked at how companies and destinations go on to reinvent their products, businesses and ways of working, to emerge stronger and more resilient to meet future challenges head on. Realizing these opportunities will require businesses and governments to adopt deeper levels of connectivity, openness, and trust in years to come. Today, travellers are more demanding and make their voice heard around the world, positively or negatively in minutes; and millions of new jobs in the industry will demand people skills and talent. What can PR learn from these new challenges? How do we compare with our Caribbean neighbors? Is PR ready?

Puerto Rico Economic Pulse ©

October 2015: Quo Vadis Puerto Rico – Part II

PR’s proposal for a fiscal & economic growth plan

On October 15, 2015, the PR House of Representatives and the Senate presented bills for the fiscal and economic recovery of PR. This call to action responds to a plan for FY2016-2022 submitted by a Working Group (WG), designated by Governor Alejandro García Padilla. The plan includes several measures and calls for a Fiscal Control Board (FCB) to be appointed by Governor Padilla but all this has not yet been approved by the PR Legislature. The task of the FCB is to approve a final detailed fiscal and economic plan by December 2015. This issue focuses on analyzing the WG’s plan and its FCB. Several questions remain unanswered throughout this process. For instance, is the underlying assumption that fixing the fiscal crisis will promote economic growth? What has been the experience of fiscal control boards in the US, such as, NYC, DC, and Detroit? Where do we stand now.

Puerto Rico Compass ©

Q3 2015: Recession’s Sharp Bite Continues

Puerto Rico’s sagging economy, 3Q-2015

It will take more than patience to free the PR economy from nine years of negative real growth. Failure to design and execute earlier in 2013 an effective economic plan explains in part our current situation and doing nothing is no option. It is important to understand if the continued declines in the 6 quarterly indices of HCCG for the PR economy are a cyclical phenomenon or a longer-lasting transition to a new, slower state. During Q3-2015, PR continued facing fiscal challenges with a shortfall of liquidity for payment of public debt service; a continued challenge with restructuring of the PR Electric Power Authority and other public debt; hearings before US Congress in an effort to present PR’s dire fiscal and economic situation to obtain some relief; a move to avert an upcoming cut in Medicaid and Medicare Advantage funds; and last minute amendments to a legislated 4% B2B service tax, among others. The prospect of a government shutdown is madness. All quarterly indices indicate nothing seems right. What is the right response?