NEWS

Under the watchful eyes of the credit rating agencies, a reshaping of our tax system has been proposed. Here we consider, the effects on several critical economic variables, including investment, consumption, and government spending, implicit in the new plan. We also point out some unanswered questions about the tax reform proposal. It is surely time for the elected representatives of all the political parties to ask whether the proposed measures do offer hope of dealing effectively with crucial problems facing Puerto Rico. Although we do not have all the answers, we feel that the important questions have been left out of the debate. Specifically, who is the biggest winner, and who will lose out?

China and India have become the new growth poles in the world economy. With more than one third of the world population, both economies possess enough dynamism and weight to transform the global economy. The world had never seen a simultaneous takeoff of two countries that combine their strengths well enough to challenge the US economy dominance.  By mid century, China is expected to take the #1 position from the US and India will be the third biggest world economy ahead of Japan. If these two countries converge into the Chindia Region, they will take over the world tech industry. With such challenges ahead, how does Puerto Rico stand in this new world order and what will it take to compete?

With the arrival of the Sam’s Clubs, Costco and the reinvention of Kmart and Walmart to include groceries, many would have thought that was the beginning of the end for the local traditional chain-supermarket industry in Puerto Rico. Surprisingly enough, statistics show that mostly locally-owned chain supermarkets are stronger than ever. Although large and comprehensive studies have yet to be conducted in this industry, limited information indicates that the aforementioned stores have kept a good pace of annual growth. We call them the “purists” since for the most part they have kept themselves from crossing the line to sell many products beyond food items. Find out what seems to be their success formula and how their prospects look like going forward.

After a tough battle in the US Congress, CAFTA-DR got a long awaited approval. This new agreement is another page in the revolution of free trade, started by NAFTA in 1994 and fueled by subsequent bilateral treaties between the US and other countries. Now, it is Central America’s turn, a region battered by war, poverty and natural disasters, but engaged in a process of political and economic reconstruction. Will this new trade block enhance or restrain trade with Puerto Rico? Are there opportunities or risks for us? In this issue, we analyze the potential implications of CAFTA for Puerto Rico in a not so distant future.

Credit rating agencies are carefully scrutinizing PR’s finances. For the next few months, S&P and Moody’s will be once again evaluating the liquidity of the central government, in order to determine if yet another credit downgrade is in order for PR. This situation already occurred in May of this year and is not new, proving true that “those who forget their history are doomed to repeat it”. Puerto Rico faced a similar situation in 1975 and tough decisions were taken to correct the mess. The island is once again in the middle of a fiscal mess, with public debt taking center stage. Find out what is the history behind our public debt and why it is necessary to find solutions to this problem now.

The world does extend beyond Puerto Rico and the US. Just a few miles from our island, a scattered group of large, small, and tiny islands offer an amazing world; an interesting mix of cultures, languages, races and economic systems. The history of the Caribbean is the history of regrettable failures and also of very successful economic experiments. Viewed for a long time just as tourist destinations, some of our tiniest neighbors in the Caribbean have many lessons to offer. After many years of scarce interest in the rest of the Caribbean, the time has come to become acquainted with our neighbors. This issue provides a first outlook of the region and challenges of upcoming agreements for Puerto Rico.

Starting 2006, Medicare will have a new structure to assist seniors and disabled patients in covering health care costs. We are entering the new era of Medicare Advantage with extended coverage, subsidized prescription drugs, and emphasis on prevention. Some of the drawbacks are a more complex program that requires informed patients, and as in the old version, some out-of-pocket expenses. Medicare Advantage aims to improve the quality of lives of our seniors while reducing PR government expenditures in health care via the health care reform plan. In this issue, find out how this program will impact Puerto Rico.

Migration is maybe one of the most dynamic components in any society. Inflows and outflows of people shape culture, ethnography, religion and the economy overall, and change in a short time what otherwise would take many years. Migration impinges on the foremost economic factor: human capital. Notwithstanding the importance of migratory movements, policymakers in Puerto Rico resist to give them the priority they deserve. In this issue we address this unknown side of our society. We will explore this world, the world of people coming to our island but also those Puerto Ricans who are looking for better luck in other lands. Find out how migration is shaping Puerto Rico’s present and future.

The 90’s were golden years for construction in PR. Investment in public infrastructure projects, a housing explosion, and a strong increase in commercial and industrial buildings by the private sector injected $16.6 billion in this economy. However, as big projects were near completion, the construction boom was over. For the first time in a decade, construction investment shrank, employment in the sector fell and housing, not government projects, took center stage as the driving force behind the industry. Today, as the Governor and the Legislature struggle to approve a new budget, this sector is finding ways to remain on the positive side. Find out how the new Network City can instill new vigor and reshape this industry in the near term.

Are high prices a mirage in Puerto Rico? Last year, inflation reached its highest level in PR since 1980. An adverse combination of external and internal factors is draining our pockets, and no truce appears in sight. Besides the problems posed by high prices, the PR Consumer Price Index (CPI) is quite flawed and barely can predict a trend in prices. Since 1993, inflation in PR and US are moving apart, a weird behavior that seems to defy economic laws and has left the PR economy without one of its foremost indicators. It is time to enter this fascinating and entangling world of inflation. Join us in this travel to learn how to deal with this puzzle and find a cure for this misbehaved index.