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The following article was published after Gov. Fortuno’s State of the Commonwealth address on Tuesday night. His address highlights many areas in which the current administration has taken drastic measures including: Energy through a new natural gas pipeline, restored and retained credit rating to the island, huge budget cuts reducing the deficit, and a measurable reform to the tax system. But have the changes been felt by the island’s people?
By : JOHN MARINO, Caribbean Business
Gov. Luis Fortuño used his State of the Commonwealth address Tuesday night to highlight his administration’s achievements, telling Puerto Ricans that “in only two years, we have completed our pledge of bringing you a true change of good government.”
The governor said that his administration inherited a government on the verge of insolvency and in two years managed to:
— Stabilize government finances
— Pay off more than $1.5 billion in past bills
— Reduce the $3.3 billion budget deficit by 75%
— Save Puerto Rico’s credit rating and with it thousands of jobs, and the values of homes and individual retirement accounts
— Get positive ratings from credit rating agencies
The governor also discussed several of the reforms his administration instituted over the past two years, including creating a new permit system that makes it easier for everyone, but especially small and midsized businesses, to expand, grow and create jobs, and instituting an energy reform that will reduce Puerto Rico’s excessive dependence on foreign oil in favor of cleaner and safer sources such as natural gas, solar and wind. Read the rest of this entry »
Last month, a housing fair in San Juan, Puerto Rico, drew an estimated 34,000 visitors, of whom 2,700 were pre-qualified on the spot for home loans by mortgage companies exhibiting at the event.
A resurgence in home-buyer interest is, in no small measure, attributable to what has been billed as the most far-reaching housing stimulus that’s been offered so far by any state in or territory of the United States.
That program—which Puerto Rico’s Gov. Luis Fortuno signed on Sept. 2 and is scheduled to run through next June—produced remarkable results in the last four months of 2010, when the sales of 1,108 new homes and 3,259 existing homes were closed, representing an 18% increase over the same period the year before, according to the island’s Department of Economic Development and Commerce. The dollar value of those closings rose by nearly 35% to $868.3 million.
Even with those increases, however, unit sales in Puerto Rico grew by only 4.22% for all of 2010, which indicates just how low its housing market had sunk before this stimulus package kicked into full gear. Read the rest of this entry »
Once again, Puerto Rico is being looked at as an example for creative avenues of controlling the budget deficit. After reducing the overall tax rate for both personal incomes and most businesses, the governor of Puerto Rico has installed a very creative means for ensuring all revenues are reported and taxes paid by businesses.
The number, printed at a Ponce restaurant by a machine that reports sales directly to the Commonwealth’s Treasury, seeks to turn every Puerto Rican into an enforcement agent. The program will give anyone with a receipt a chance to win $1,000 or a car, while forcing businesses to report and pay taxes.
Consumers have a “personal interest in making sure that the tax is collected and sent over to our local Treasury Department,” Fortuno, a 50-year-old Republican, said in an interview in his San Juan office. Read the rest of this entry »
by Marshall Kirby, Public Policy Analyst
For the first time since 2008, Puerto Rico will begin a general obligation bond sale. The exact figures are not yet disclosed, but the President of the Government Development Bank, Carlos Garcia, has announced that the sale of bonds will be to finance infrastructure and significant public projects. He estimates that there will up to $2.1 billion in other bond sales this year (Plans General-Obligation Sale). Portions of the bond sale will include financing projects for capital improvements in the electrical and natural gas sectors (the other portion of the project’s financing will be discussed later).
This is a significant step for the Commonwealth, as it could mark a clear financial and credit turn around from impending disaster. The island currently has a bond rating which is lower than any state in the US (Plans General-Obligation Sale). For years, the island has been mired in financial and credit issues which have led to trouble financing needed projects/programs and meeting its continuing expenditures. Read the rest of this entry »
Por Julia Cortazar, Policy Analyst
¿Qué pasará con los pequeños empresarios del turismo en Puerto Rico en los próximos 10 años? Si te preguntas cuál será su futuro, entonces aquí te dejamos algunos puntos para que imagines hacia donde podría dirigirse el negocio.
En los últimos años la actividad económica del turismo se ha convertido en una de las que más ha crecido alrededor del mundo y lo que está sucediendo en Puerto Rico puede confirmarlo. Se estima que la economía del turismo genera cerca de $1,100 millones, sostiene alrededor de 60,000 empleos directos e indirectos y tiene una aportación aproximada al Producto Nacional Bruto (PBN) que sobrepasa el 7%. Además, la relevancia que está ganado el Turismo Sustentable, entendido como la actividad que contribuye a generar ingresos y empleos en el sector turístico para la población con un bajo impacto sobre el medio ambiente y la cultura local, al interior del sector. Por lo que el tamaño y la competitividad que la actividad del turismo está adquiriendo aumentan la confianza en ella como motor de crecimiento de la economía puertorriqueña.
Entonces, ¿Cómo pueden los pequeños empresarios beneficiarse con estos datos tan esperanzadores? Observemos el caso de los empresarios dueños de Paradores. Read the rest of this entry »
By: Marshall Kirby, Public Policy Analyst
Israel Ortega wrote a short piece in the Washington Caller, in which he praises Puerto Rico’s economic model which was laid out by Governor Luis Fortuno. (The article can be found here). Mr. Ortega has long been a conservative voice in the Hispanic policy community. In his analysis, he lays out strong arguments supporting the governor’s economic policy including the overhaul of the tax code.
Mr. Ortega’s analysis is spot-on in some aspects. Puerto Rico was in the midst of a serious economic crisis stemming from a lack of investment, slow economic growth, and ballooning government deficits only several years ago. In the years that have followed, strong economic growth has been made, partially led by large amounts of investments made by foreign firms in technology and life sciences. The investments made by these firms were not a product of an economic miracle, but rather a product of opening up the island to business by producing an investment friendly environment, simplifying the tax code, and lowering the tax rate. We have seen this have a positive effect for domestic firms and small entrepreneurs.
Additionally, Mr. Ortega is right in saying that Governor Fortuno has succeeded in establishing an administration which has managed the economy rather well – including cutting the size of government and spending. Reducing spending has helped the island reduce its expenditures and become much less conscious of raising revenues with additional taxes. Lower taxes allow businesses and individuals to have more money and to spend it within the economy, which has created a multiplier effect and increasing growth rates.
However, Mr. Ortega’s analysis misses a key point – the new tax system adopted in Puerto Rico under Governor Fortuno’s plan has a very economically damaging aspect to it. Read the rest of this entry »
By: Marshall Kirby, Public Policy Analyst
The US Department of Labor issued their funding provisions for states in the Trade Adjustment and Assistance Program (TAA) last month, which could affect the benefits Americans receive for unemployment. However, this year there was an interesting caveat; there are two proposed funding amounts. One proposed amount gives the amount of money that is guaranteed to the states/territories and the other is the amount which they would get if Congress extends the program expansion put forth under the American Recovery and Reinvestment Act of 2009 (aka the stimulus bill).
TAA, in more detailed terms, is a program funded by the US Department of Labor which gives states funding for assistance, job training/re-training and education programs for workers affected by outsourcing and foreign trade. It affects the unemployed who fall into the categories of both structural and frictional unemployment. Read the rest of this entry »
See related articles here.
Implementation of the National Broadband Plan (NBP) in Puerto Rico has thus far proven to be a significant hurdle for the Federal Communications Commission (FCC). The NBP was well received by the telecommunications and technology industries, policymakers, and several leading national Hispanic, Asian, and African American groups, all of which are quickly realizing that, without access to broadband services, they will not be able to compete and participate in the 21st century’s digital economy.
In a recent study conducted by the U.S. Government Accountability Office, the U.S. fared very well in its broadband deployment, with more subscribers of broadband residing in the U.S. than anywhere else in the world. While shortcomings still exist, the state of broadband in the U.S. fares better than or equal to all 33 countries within the Organisation for Economic Co-operation and Development (OECD), which are lauded as the most economically prosperous countries worldwide. However, the FCC’s recent study on broadband adoption found that no one in Puerto Rico has access to broadband.
Consider the following:
by Marshall Kirby, Public Policy Analyst
January 17th, 2011 could be a big day for the island of Puerto Rico. That day is the anticipated start date of the Puerto Rico Bridge Initiative (PRBI), which will set up a fiber optic “bridge” network from Florida to the Commonwealth of Puerto Rico. The project was funded by the Recovery Act (Stimulus Bill) at a cost of $25.7 million through the US Department of Commerce’s National Telecommunications and Information Administration (NTIA). Critical Hub, the company awarded the contract, contributed another $6.8 million to the project.
The goal is to fund fast and affordable broadband to the island. A secondary goal of the project is to provide Puerto Rico with a “stimulus” to their economy in the information technology sector. The island ranks last in the United States for broadband penetration and use, and the statistics found on the issue show less than 40% subscription rates. Additionally, the current broadband infrastructure on the island is much slower (78%) and more expensive (60%) than elsewhere in the US. This project should boost the economic potential for Puerto Rico, given that it will allow for greater job creation, allow for more educational and e-learning opportunities, and raise the islands competitiveness for attracting more firms. Read the rest of this entry »