Dec 10

Economic Perspectives: Beyond the Reconstruction

December 10, 2019
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Economic Perspectives: Beyond the Reconstruction By: José J. Villamil Estudios Técnicos, Inc. As expected, for the past two years, attention on the island’s economic situation has focused on reconstruction post-Hurricane Maria. There is still a long way to go for our economy to return to a pattern of sustained growth. The slow pace with which federal funds have been received has been an influential factor. Even so, these funds have had a positive impact on the local economy, as reflected by the indicators cited below:

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These indicators’ recovery is at the pre-Maria level or even higher. However, our economy has experienced more than a decade of contraction and loss of jobs. The recovery process is not only a consequence of Maria, but also the result of a prolonged economic contraction. For the next four or five years the economy’s growth will depend—to a large extent—on the amount of federal funds that reach Puerto Rico, the agility with which they are disbursed, and the uses to which they are allocated. The government and the agencies receiving these funds have processes in place to receive and use the money. Beyond federal funds, economic perspectives depend on several conditions. One of them is the government’s ability to emerge from bankruptcy—something that looks increasingly possible in a relatively short time, even knowing that the agreements will be subject to litigation by the different groups of creditors. The second is the government’s ability to return to the capital markets. Industries with growth potential Post-reconstruction perspectives will depend on whether we can identify and take advantage of areas of opportunity with growth potential in the following industries:
  • Tourism or the visitors’ economy and its different ramifications
  • Agroindustry and the possibility of substituting agricultural products’ imports while increasing exports
  • Technological, telecommunications, medical, educational, and advanced manufacturing services
  • Alternative energy generation systems, which have the advantage of not having to be large-scale in nature to be viable and efficient
  • Integrating new technologies in health, education, and government services to support small and medium businesses
Of course, it is essential that we have a stable political system; in addition to the regulatory framework to help the private sector’s activity become viable. In this context, the tax system plays a key role. The current one is complex, expensive, and difficult to manage. Although it includes aspects that encourage consumption, it should also have measures to foster investment and productive economic activity. Economies do not grow or are strengthened by consumption, especially if what is being consumed is mostly imported. We can achieve a better economic future. There are opportunities, but we must implement, as soon as possible, measures to achieve a better post-reconstruction economy. Banco Popular of Puerto Rico (“Popular”) is not affiliated nor related to the individuals or entities mentioned in this article. This article is for informative purposes only, and does not constitute an endorsement or guarantee of its accuracy. Neither Popular nor any of its affiliates, subsidiaries, or related entities are, nor might be held liable for any special, direct, or indirect, damages, resulting from reliance on the information contained in this article, which Popular did not prepare. Popular provides financial services) and does not provide the type of service referenced in this article. If you need any related service, you should request the advice of the competent professional of your preference.