CNE: Puerto Rico has ‘once-in-a-generation’ chance to turn economy around
Following 15 years of economic stagnation, a fiscal and debt crisis, the bankruptcy of its government, the damage caused by Hurricanes Irma and María in 2017 and a series of earthquakes in 2020, and the pain inflicted by the COVID-19 pandemic, Puerto Rico has a “once in a generation opportunity to turn its economy around,” said Sergio M. Marxuach, Policy Director at the Center for a New Economy.
In the May edition of the CNE Review, the Puerto Rico-based think-tank focuses on positive trends that are converging in 2022 to open a window for the island to turn around its economy and start a process that would generate long-term economic growth and development.
CNE’s net assessment is that, despite the existence of certain substantial risks, current conditions are ideal for undertaking a broad-based economic development effort in Puerto Rico.
“However, that will happen only if we design an economic strategy that allows Puerto Rico to take advantage of this opportunity. Economic growth will not happen on its own. We need to take concrete, affirmative actions to make the most of the current situation,” Marxuach said.
The analysis explains four positive trends:
- The debt restructuring process is over. The certified Plan of Adjustment provides significant debt relief to the island by cutting the Commonwealth’s debt by approximately 50%. The think-tank concluded it is difficult to determine whether this amount of debt relief is sufficient. What is clear is that the medium to long-term viability of the Plan depends on jumpstarting economic growth in Puerto Rico, it stated.
- The Biden Administration has been willing to disburse the money appropriated by Congress five years ago. These funds will finance hurricane reconstruction efforts, which will allow Puerto Rico to significantly upgrade a large part of its physical infrastructure endowment in a relatively short period of time.
- There is reason to believe, or at least hope, that the worst of the pandemic may be ending soon. While the risk of the emergence of a new variant is still, and will probably always be, present, it is also true that humankind has made tremendous progress in understanding the clinical evolution of this disease and developed in record time both vaccines and new treatments that reduce the incidence of severe symptoms, hospitalizations, and deaths.
- The intellectual and political turn toward a more activist state affords Puerto Rico the necessary policy space to develop and implement creative solutions to its economic problems. The spirit of the times is favorable for the development and implementation of a carefully crafted economic strategy for Puerto Rico, the CNE stated. It stated that while the Pierluisi administration and the Financial Oversight and Management Board for Puerto Rico have proposed new economic incentives and the implementation of structural reforms, respectively, both efforts “fall well short of crafting an economic strategy for Puerto Rico.”
“We shouldn’t make the mistake of equating a set of quite disparate and perhaps marginally effective structural reforms with an economic strategy. Simply stated, the structural reforms favored by the FOMB and set forth in the Fiscal Plan are second-order issues and will not generate the long-term economic growth Puerto Rico requires, both for increasing the living the standards of its people and to pay off its restructured debt, unless they are embedded or framed within a larger economic strategy or vision,” Marxuach said.
The May edition of the CNE Review also concluded that while the trends mentioned are generally positive, the current economic environment is also characterized by significant uncertainty and downside risks.
This analysis is part of a larger initiative focused on economic growth.
The CNE will be convening a broad group of stakeholders from academia, government, the private sector, and non-governmental organizations over the next few weeks “to jumpstart a process that, hopefully, will generate the long-term economic growth and development Puerto Rico so desperately needs,” he said.
“It’s vitally important that this process be led by Puerto Ricans. We have the commitment, capacity, and willingness available locally to collaborate to jumpstart our economy and chart a sustainable path forward,” said Marxuach.