Puerto Rico Economic Pulse ©

May 1999: Venezuela: Lessons to be Learned

Short Course Of Dos and Don`ts For Puerto Rico

To understand Venezuela`s crisis, it is useful to examine the economic programs that preceded it. With oil prices riding high in the mid-seventies and eighties, both government and consumers spent more than their income. Find out how inefficient subsidies interfered with the free market; how prices soared; and why the people took to the streets and rioted. During 1998, economic growth was negative and income inequality worsened. For many retailers on the island, the collapse of oil rich Venezuela has not been good. What are the lessons of Venezuela`s crisis for Puerto Rico. Can the PR economy say that on average it is OK? Find out the answers in this issue.

Puerto Rico Economic Pulse ©

April 1999: The Economic Model of Puerto Rico after 50 Years

And ways to keep it running for another 50

Is the Puerto Rico economic model of the past fifty years dead? We used three measures to evaluate the performance of the model: growth in output, productivity, and job creation. The record in terms of growth and productivity is impressive but the fruits of economic growth have not been shared by those persistently unemployed. Times have changed and we are challenged with a new economic model based on tourism and services. Find out if these sectors can replace manufacturing as the engine of growth and high wages. Learn how PR can overcome the handicap of high wages on competitiveness in this fourth industrial revolution.

Puerto Rico Economic Pulse ©

March 1999: Why Puerto Rico’s economy surprised all of us in 1998

An overview of 1998 and forecasts for 1999 and 2000

The growth of the Puerto Rico economy in 1998 was higher than expected. Why? Partially, the impulse of the US economy echoed in PR, mainly through exports and record low interest rates that zapped construction. Find out how Viagra helped PR. Government contributed with a massive program of public works. Productivity posted significant gains, particularly in manufacturing. Tourism also thrived under the umbrella of government incentives. Our economy grows apart from the US. Is this a trend? With this landscape, our model forecasted a continuation of positive but lower growth for most sectors, coexisting with still high unemployment and inflation during 1999 and 2000. Y2K remains a risk factor.

Puerto Rico Economic Pulse ©

February 1999: Understanding the PR Budget for 2000

An easy-reading guide to a hard to read document

Great social reforms, mega projects for infrastructure, and a widening gap between recurrent revenues and expenses, but how will all this be paid for? An analysis of the complex $20b PR Budget for year 2000 provides some answers and raises many more questions. By focusing on the economic consequences of trends in revenues and expenses we provide the reader insights into the size of the budget; how we compare with other countries, how are we financing it; and how much is paid for by taxpayers, federal government, public debt. Find out whether in fact there is a balanced budget, not only in terms of revenues and expenses but indeed, in terms of economic priorities.

Puerto Rico Economic Pulse ©

January 1999: The Euro Challenge

What the new European currency means to the US dollar – and you

The power of Europe’s new single currency, the Euro, to transform global political and financial markets is not to be underestimated. Participating countries of the Economic and Monetary Union (EMU) account for 18.6% of world trade and produce 19.4% of world GDP. The Euro is expected to generate growth primarily within Europe but also spilling over to the rest of the world.  The Euro will challenge the US dollar supremacy as international reserve currency.  Will competition between Euro and dollar push interest rates and inflation in PR?  Find out how the Euro will impact Puerto Rico’s exports, prices, and interest rates.

Puerto Rico Economic Pulse ©

December 1998: 1998 Economic Year in Review

What the top economic news mean to you

To the surprise of many analysts, published figures revealed the economy ended fiscal 1998 with more fizz than a flute of champagne. Real GNP grew 3.1%, a bigger rise than previous forecasts of 2.5% to 2.7%. The question is how soon in 1999 will the economy’s effervescence fade. A review of the year’s top economic news provides some answers. Construction rolled at high speed. Consumers, burdened by debt, the aftermath of Hurricane Georges, and more than 5% inflation, were not on a spending spree. Manufacturers reported strong exports, but overall job markets were weak. Banks continued merging in the hope of maintaining and improving earnings. All in all, the economy in 1998 was one of mixed results in the face of many potential pitfalls, at home and abroad.

Puerto Rico Economic Pulse ©

November 1998: The Economics of Status

Tools to assess the political options for PR

On December 13, 1998, Puerto Ricans held a plebiscite to decide on the political options of statehood, commonwealth, associate republic, and independence.  The majority voted for “none of the above.”  Thus, the issue remains unresolved.  Since politics is intertwined with economics, informed decisions on status must start by asking how each option affects federal aid programs, taxes, investment, employment, and the size of the local government.  Find out what the convergence theory means and how other factors, besides status, allowed PR to grow faster than the US for a while.  Finally, the article challenges the reader to decide on the best option.

Puerto Rico Economic Pulse ©

October 1998: Construction Mania

Where will it lead us?

There is an extraordinary amount of energy in construction today, some of it optimistic, some bewildering. During 1997, the construction boom in PR accounted for almost half the 3.2% real growth of the economy. Is this sustainable? Public construction concentrated on infrastructure projects, instead of public housing. Private construction concentrated on housing, instead of industrial and commercial building.  In the SJ metro area, industrial construction shrank 47%. Paradox: the commercial space grew a hefty 26%, while retail sales increased by 8%. Sounds like shopping space overbuilding?  As consumer debt and the number of bankruptcies continue climbing, retail activity will lack luster. Manufacturing downsizing will not spur an increase in the demand for industrial space. This article addresses the issue of whether a continuation of this mix will increase productive capacity, which means future growth.

Puerto Rico Economic Pulse ©

September 1998: What Georges Left Us

A candid assessment of Hurricane Georges Economic Consequences

On September 21, 1998, Hurricane Georges hard hit Puerto Rico. The imprint of this natural disaster is visible, not only on the transformation of our landscape but also on the thousands of families and businesses, who lost property and revenues.  What is the extent of the damage and how should it be assessed? For instance, the loss of capital is an important damage but GNP figures do not register this loss. What are the economic consequences for the rest of the year? Will the emergency aid, insurance payments, loans, and increased construction activity boost the economy during fiscal years 1999 and 2000? Is Georges our only risk or is the Asian crisis a worst disaster still to hit the island? This article addresses all these questions and provides revised forecasts for real GNP growth for 1999 and 2000 respectively.  Inflation and unemployment will increase further as we break into the millennium.

Puerto Rico Economic Pulse ©

August 1998: Manufacturing Meltdown in PR:

Is there Life beyond 936?

Puerto Rico was given ten years to restructure its economy. With the phase out of Section 936 by year 2006, Puerto Rico worries that manufacturing, currently 41% of GDP, could pass into the hands of other, lower cost, emerging markets in Latin America, Europe, and Asia. Though this may be true, major breakthroughs in biotechnology, MEMs, nanotechnology will begin to create entire new industries over the next ten years!  Europe and the US are poised for further growth and sources of investment for PR and other countries. This issue addresses how PR could avoid a manufacturing meltdown and what instruments it must add to its development toolkit.