Puerto Rico Compass ©

Q4 2007: When Will the Recovery Begin?

As discussed in the previous Compass, the HCCG Coincident Index showed a continuation of the recession that started in Puerto Rico since Q3 2006. The last quarter of 2007 depicts negative figures again, but the magnitudes have improved in most of the indices. The leading index dropped in Q4, and the banking index depicts timid growth. Find out how tourism and exports bring hope; how the Puerto Rican consumer survived the holiday season; and what issues concerned households at the end of 2007. A closer look at these indices will indicate how this election year affects the economy and addresses the question that concerns all of us: when will the recovery begin?

Puerto Rico Economic Pulse ©

December 2007: The Hope for a Second Miracle

A historical review of the PR economy and challenges ahead

Praised as an economic miracle in Latin America, Puerto Rico’s economy has undoubtedly lost steam. The same island that pulled off an amazing transformation in just two decades, is now struggling to get back on a steady path of growth. The economic model is showing fatigue and former recipes that once fostered investment and development, seem ineffective nowadays. This issue briefly reviews the long uphill path of PR, from the dawn of industrialization to an economy burdened by debts, unemployment, and an overweight public sector. This is the story of a spectacular rise, slowdown, recession, and the hope for a second miracle.

Puerto Rico Economic Pulse ©

November 2007: Migration Watch

An analysis of the Puerto Rican migration to the USA

In recent months, there has been a media blitz about PR migration towards the US. Many have said the traditional migration patterns of low-skilled workers have changed, and now perhaps too many highly qualified professionals may be leaving (a “brain drain” problem). This issue reviews historical trends, the characteristics of Puerto Rican population in the United States, the main states of destination, how this flow has changed during the past seven years and what are the economic effects of these migratory patterns in Puerto Rico. Find out if we face an exodus of professionals or blue collar workers?

Puerto Rico Economic Pulse ©

October 2007: The Dawn of a New Index for Inflation

On the new Consumer Price Index for Puerto Rico

After struggling for many years with a flawed Consumer Price Index, Puerto Rico finally has a new CPI. The previous index had become a useless tool that placed Puerto Rico amongst the top countries with highest inflation in the world.  The obsolete index proved so misleading that many economists disregarded it. Now, a new index has seen the light and has fixed many of the flaws afflicting its predecessor. The basket of the new CPI shows 3.1% inflation with food, housing, and transportation being responsible for 70% of the weight in the index. Still, we are now better poised to track inflation on the island and portray a more realistic picture of the economy. This issue analyzes the young index and opens a door for a more accurate and complete analysis of inflation in Puerto Rico.

Puerto Rico Compass ©

Q3 2007: Are We Still in the Eye of the Storm?

The signs of storm in the indices of the last quarter were true. The six HCCG economic indices for 3rdQ of 2007 show the worst performance since the 3rd Q of 2001. The causes are both, external and internal. Among the external factors are the US economic slowdown, weakening of the manufacturing sector, financial market turbulence, specially in the subprime lending sector, and escalating energy prices. Internal factors include recession in the island’s construction and manufacturing sectors, delays in extension of the Incentives Law, and the loss of confidence of the Puerto Rican consumer. Find out what factors could return Puerto Rico to economic recovery and growth.

Puerto Rico Economic Pulse ©

September 2007: Is Puerto Rico Overbanked?

An outlook of the local banking industry

From 1992-2005, Puerto Rico’s banking industry enjoyed historical growth rates thanks to favorable economic conditions and low interest rates. For the past two years, the banking industry has faced an economic deceleration, an inverted yield curve, and a credit crunch. All these factors are forcing banks to look for ways to increase efficiencies in order to maintain profitable operations. Many argue that an overdue industry consolidation is necessary to reach those efficiencies. During the past 15 years, the industry consolidated from 22 institutions in 1992 to 10 in 2007. Given this trend, is Puerto Rico still overbanked?

Puerto Rico Economic Pulse ©

August 2007: The Long Awaited Minimum Wage Raise

Analysis of the minimum wage hikes in the PR Economy

At last, after ten long years, low wage workers finally received some relief from the overall price increases of the past decade as the minimum wage increased $0.70 to reach $5.85 an hour on July 07. Further increases are scheduled to reach $6.55 on July 08 and $7.20 on July 09. There is little research for PR and no hard evidence whatsoever regarding the effects of minimum wage. This issue analyzes the likely effects of the minimum wage increase on the PR economy. Will we end up with fewer employed workers earning higher hourly wages?  Find out how many workers are at risk; which industries are the most affected; and  what are the expected short and long run effects.

Puerto Rico Economic Pulse ©

July 2007: In the Grip of Public Debt

The state of public debt in PR and its economic implications

Over the past ten years and whether from the central government, public corporations or municipalities, Puerto Rico has piled up a huge amount of public debt. Puerto Rico is not the only developed country afflicted by large public debt, but we have many reasons to be concerned. Despite big injections of money, our public infrastructure is nothing to be proud of. The government has covered budget shortfalls with debt issues. It is definitely time to find a way out of this perverse trend that drags the economy and clouds its recovery. This issue zooms on public debt in Puerto Rico and analyzes how sustainable is the pace of public debt and its implications for economic growth.

Puerto Rico Compass ©

Q2 2007: Is the Recession Over in Puerto Rico?

Living in Recessionary Times

Not yet. Puerto Rico’s economy is showing vital signs and the system is still far from claiming the start of economic recovery. It appears the economy has begun to show some minor positive signs for the next three months, but still it remained in recession in the second quarter of 2007. Construction continues to pull the economy downwards while banking still holds the fort. Puerto Rico Compass, a proprietary tool of HCCG, has recently revised the methodology and data of the indices. Find out how the new six quarterly economic indices of PR Compass gauge the overall performance of the economy.

Puerto Rico Economic Pulse ©

June 2007: Brains on the Go

A new public policy faces educational challenges

How far is Puerto Rico from becoming a Bio-Island? A new public policy is geared to taking PR in that direction. But, is PR equipped with the basic educational endowments needed for this new development phase? Educational outcomes indicate there is a wide gap between our current educational level and the state’s policy goal. Proficiency levels in Math and Science tests are low. Reducing high school dropouts and the need to increase the skills of labor are essential ingredients if PR wants to get ahead in the race for high quality education. This edition of Economic Pulse analyzes how biotechnology and R&D can work if education plays center stage in the island’s economy.