Now that the dust has settled on one of Puerto Rico’s most contentious political campaigns and elections, the island’s private sector is hopeful that government officials, especially Governor-elect Alejandro García-Padilla, will set aside partisan bickering to work together to re-energize and move the economy forward.
That seemed to be the common thread among Puerto Rico’s largest trade organizations, which on Wednesday expressed a desire for a “new style of governing” that calls for inclusion and focus on the real issues at hand.
“The great challenge we have is to heed the call the island made of working together and finding a way to mutually help each other in seeking our collective prosperity because we have no other choice,” said Pablo Figueroa, president of the Puerto Rico Chamber of Commerce. “We must learn to collaborate and cooperate in benefit of the island.”
The CofC, he said, is ready to work hand-in-hand with the new administration that takes office in January to develop initiatives to create jobs, spur economic and social development, improve the island’s investment climate to attract local and foreign spending and “above all else, achieve quality of life and security.”
During the campaign period, the CofC presented recommendations to the candidates, anchored by three main proposals: redirecting the task of promoting Puerto Rico in the areas of science, entertainment, industrial, film service exports and high-demand medical services through the creation of an independent quasi-public agency; boost the science and technology to spur research and development; and reduce government operating costs by submitting all existing and proposed legislation to a cost-benefit test.
The trade group is also steadfast behind continuing to push for the adoption of Section 933A of the U.S. Internal Revenue Code, which was put on hold earlier this year.
All of the interviewed executives agreed that there are three main issues that the new administration must tackle immediately: the agonizing Retirement System, the Puerto Rico Electric Power Authority’s fiscal situation, and the island’s credit capacity.
“The key immediate challenge is the Retirement System. Unless this is addressed appropriately, access to the credit markets by the Puerto Rico government would be curtailed,” said Economist Vicente Feliciano, president of Advantage Business Consulting. “Pain and bad news will be required to deal with the issue.”
The government’s structural challenge is how to get sustainable economic growth, he said.
“There are three issues: labor reform, PREPA, and capital markets. Unit labor costs need to come down, business electricity bills must decline, and the panoply of passive investment incentives needs to be reduced to channel investment into employment-generating alternatives,” Feliciano added.
Democratic ties that bind
The hope for unity between the Popular Democratic Party’s García-Padilla and the New Progressive Party Resident Commissioner Pedro Pierluisi, who will remain in office another four years, is based on the premise that in spite of being on opposing local political teams, their common Democratic affiliation will be grounds for a positive working relationship.
That, coupled with President Barack Obama’s re-election, could also help keep the island from slipping into stagnation in the next four years, executives agreed.
“We certainly hope they can come together in that sense. While Pierluisi won’t be involved directly in the day-to-day of local government, there are things in Washington, such as protecting and improving Puerto Rico’s participation in the Nutritional Assistance Program, that require that they work together,” said Manuel Reyes, vice president of the Marketing, Industry and Food Distribution Chamber.
The trade group known as MIDA also has a list of proposals for the incoming administration, which boils down to establishing a food policy for Puerto Rico, addressing anti-monopolistic practices and attracting investments. Another area that MIDA wants García-Padilla’s government to review is the mandatory cargo inspections process at ports begun last year.
Reyes said so far the inspections have fallen short of their purpose, while costing local businesses at least $25 million — an expense that ultimately affects consumers.
“We want somebody to come in and take a fresh look at that process. We don’t object to improving security, or of inspecting cargo. We’re opposing the way in which it’s being done,” Reyes said.
‘People want change’
“The people are asking for a new way of governing. That’s the message that must be understood, and whoever wants to govern this island, must do so in an inclusive manner,” said Manuel Cidre, president of the Puerto Rico Products Association.
“Also, people want change in the areas of security, economy and education. There’s a need for direction toward a clearer future,” he added. “In that sense, we’re making a call for unity and effort.”
Saying that “under no circumstance can we expect an elected official to single-handedly fix the island’s state of affairs,” Cidre urged the private sector, labor unions and political parties to set an example by working together on proposals.
He also said that to fulfill any political status aspirations, Puerto Rico must first have resources.
“The resources, or riches of a country, are not measured just by money. They’re also measured by R&D, quality of life, security, education, an atmosphere of peace and, obviously, all those things together are enabling environments for sustainable economic and social development,” he said.
“The governor has to understand that we need to address poverty with responsibility, looking for ways to optimize that close connection with the U.S. and developing models based on social development and independence,” Cidre noted.
“Puerto Rico must also understand that social and economic development cannot be a four-year strategy,” said Cidre. “If the incoming administration prioritizes and understands that all of those elements are important, I’m completely confident it will be an easier task for them to manage the government.”
“Re-energizing the economy”
Waleska Rivera, president of the Puerto Rico Manufacturers Association, said now that elections results are in, “everybody, the public and private sectors, majority and minority politicians, must work together to achieve our goals of having a solid and prosperous economy. Puerto Rico needs everyone to re-energize our economy.”
To do its part, the PRMA will approach García-Padilla this week or early next to propose establishing a work group to set in motion a 10-point list of “tactics” that should be prioritized early. The list includes: reducing energy costs and overhauling PREPA; pursuing Section 933A; creating and promoting local entrepreneurship and consumption; restructuring the Puerto Rico Industrial Development Company; finding ways to inject capital into local companies; generating investment through a Real Estate Investment Trust; allowing the private sector to handle industrial promotions; institutionalizing the effort of reducing public deficit and debt; using Public-Private Partnerships to reduce public debt and create jobs; and tackling education.
“The PRMA defined tactics rather than long-term strategies because we have an urgency and obligation to transform our economy. We can not wait,” she said, noting that the so-called tactics require no legislation and could be implemented and show results in three to 24 months.
García-Padilla has expressed his support of the PRMA’s proposal, which has taken on the responsibility of establish the team to “set the tactics in motion,” she said.
“The recommended tactics focus on three interdependent areas to re-energize the economy: lower the cost of operating in Puerto Rico, attract investment and facilitate access to capital at lower costs and promote economic activity creating jobs,” she said.
Continuity also an issue for banking, tourism
Private sector representatives from the areas of banking and tourism agreed separately that the government’s historic lack of continuity represents a major setback for growth.
“For our industry, that’s key. What’s most important is giving continuity to the good things and staying away from the ‘change syndrome’ that comes up frequently when a governor changes,” said Puerto Rico Bankers Association Executive Vice President Arturo Carrión.
“Our expectation is for that, and García-Padilla himself has said it many times that the good things would remain and those that weren’t would be changed. That gives me hope that our message has gotten through,” he said, adding that continuity, encouraging investments and transparency are the three fundamental expectations the trade group has from the new administration.
Meanwhile, another group looking to eliminate disruptions that come from political flip-flopping is the Puerto Rico Hotel and Tourism Association, which has been pursuing the establishment of a Destination Management Organization to take over tourism marketing responsibilities from the government, to eliminate the re-branding and image changes that come with each administration.
For the better part of the last two years, the PRHTA has been shaping the draft bill to create the DMO. That bill was to be submitted to the legislature in January, with the governor’s backing. However, the change in administration could put a wrench in those plans, given that García-Padilla has publicly rejected the idea of a DMO.
“Initially, he saw it favorably, but we believe that he received mistaken information that compelled him to withdraw his full support,” said PRHTA President Clarisa Jiménez. “He has already said he would back it as long as it meant no job losses.”
The PRHTA will seek to meet with the governor-elect as soon as possible, she said, to discuss the project in detail. Among other things, the group will stress that creating a DMO to handle Puerto Rico’s marketing and branding needs will free up the Tourism Company to focus on product development to continue attracting visitors.
“The greater demand there is from the private sector, the more hotels will be needed, and more jobs will be created. These are jobs that are created immediately,” she said.