April 2014: Two Blades to the Budget Scissors

Has the Puerto Rico economy recovered from its protracted economic recession? This is a hot-button issue and the answer is: Not yet. So far, Fiscal 2014 has been another tough year. General Obligation bonds were downgraded to below investment grade. Many Puerto Ricans have experienced a significant loss of wealth since 2005. Unemployment and fiscal revenues have been disappointing. Hence, we conclude the PR Planning Board’s mild recovery of real economic growth in FY 2012 and 2013 is simply a mirage. No good news is coming from the mainland. Oil prices remain stuck at high levels and an endless political infighting has taken the PR economy as hostage. Without external windfalls and short-term relief, such as ARRA funds in 2009-12, Puerto Rico will have to go through a necessary economic adjustment. The proposed balanced budget of the government is needed but the budget scissors will also cut investment needed for growth. This issue analyzes some ideas to start a long awaited take off.