PRMA suggests remedial steps for gov’t fiscal problems

Written by  //  May 29, 2015  //  Economy  //  No comments

PRMA President Carlos Rivera-Vélez.

PRMA President Carlos Rivera-Vélez.

During the opening day of its annual convention Thursday, the Puerto Rico Manufacturers Association delivered a list of recommendations — including cutbacks, government restructuring and fiscal measures — to administration officials, in hopes of doing its part to help the island pull out of its economic crisis.

PRMA President Carlos Rivera-Vélez was among a group of panelists discussing the topic of “Puerto Rico’s economy, what can the private sector do?” in which the following suggestions were offered:

  • The immediate introduction of a unified public procurement system, which represents a savings of $200 million a year. The system has the potential to create a sustainable industrial structure that encourages the purchase of goods and services produced in Puerto Rico. The implementation of a unified purchase system, using the Public Private Partnership (P3s) mechanism would eliminate the need to use public funds to implement it.
  • The transfer of services and construction of new facilities to P3s that would allow what is produced to be used to reduce the debt of the entity that originally provided the service and enable new financing for public works from private sources. P3s enable continuity of services and project development to be more effective and flexible, the PRMA said.

“Transferring some services that are deficient today, will have the effect of improving the services offered by the government. It will facilitate the development, construction, operation and maintenance of the island’s infrastructure and create new jobs,” Rivera-Vélez said.

New economic activity generated through P3s would shore up more revenue for the government, the trade group said. Services that can be transferred to the private sector, which represent a loss proposition for the government, are: health- and education-related; public transportation; road maintenance for PR-53, PR-66 and PR-52; construction and maintenance of public buildings; and revenue collection services, such as what is needed for the sales and use tax, among others.

  • Merging government agencies that offer similar services to avoid multiplicity of costs should be pursued, but must be preceded by a projection of savings and the impact it would have on services.

“Undoubtedly, the most important thing is to review government structures and processes and conduct a comprehensive government reform,” he said. “As for implementation measures in the medium and long term, the recommendations are aimed at controlling government spending to alleviate the fiscal crisis.”

The PRMA recommended that any subsidy or incentive incorporated into the budget should be analyzed, as they are significant and there is no clear idea of their impact on productivity. Any legislative or regulatory initiative should be subject to an analysis of its impact on Puerto Rico’s productivity and competitiveness, by an independent body.

Legislative measures that have negative effects on the economy or constitute a change in regulations on processes that adversely affect the cost of doing business, should not be approved.

“It is imperative that the Legislature work hand in hand with the private sector to analyze the effects of any initiative that might discourage economic development,” the PRMA leader said.

The tax system should incorporate measures to stimulate investment. One measure is to treat investment in productive activities as an operating expense in the year it is carried out.

The trade group also suggested that eliminating tax evasion should be a shared responsibility between government and the private sector.

“Achieving immediate revenue whose long-term impact would have the inevitable effect of undermining the competitiveness of the island affects future investment, expansion and maintenance of operating companies in Puerto Rico and reduces our competitiveness against other countries,” he said.

“High operating costs, as the cost of energy, coupled with a rise in costs through tax increases and eliminating incentives would be devastating to the permanence of foreign companies in Puerto Rico, which create jobs and move our economy,” Rivera-Vélez said.

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