Puerto Rico Compass ©

Q4 2008: Every Sector Takes a Beating

Economic indices in Q4 tell the story the PR economy

Puerto Rico is in its third year of an economic recession. The current economic crisis is worldwide with a financial crisis that has not been resolved. As the mortgage market failed and many financial systems were rescued by government intervention, consumers and investors were less willing to spend and invest. Our consumer has also turned more cautious and thrifty. Gasoline and electricity bills have taken a big bite out of household budgets. Consumption is restricted and credit constraints are tightened. All economic sectors in PR, including banking, manufacturing, and construction have taken a beating and are struggling to charge ahead. As 2008 ended, a new governor was elected and together with a new team, Puerto Ricans hope to resolve the fiscal crisis and avert more unemployment.

Puerto Rico Economic Pulse ©

December 2008: Effect of the Financial Crisis on Puerto Rico

What can be expected in 2009

As reported previously, the two main problems of the current financial crisis are mortgage-backed securities and credit default swaps. This triggered a massive and coordinated worldwide response. By mid-October, central banks throughout the world had implemented different measures to counter the ongoing situation including loan guarantees, bank nationalization, interest rate reductions, foreign currency sell-offs, and direct liquidity injections. The US Emergency Economic Stabilization Act (EESA), signed into law on October 3rd, designed several programs to be financed with taxpayers’ money.  In principle, the total value of the rescue package is $700 billion although the overall rescue effort could easily topple more than $2 trillion. Some banking institutions in PR could benefit directly from some of these programs. Find out what these plans are and how the crisis could affect us in 2009.