The lack of available, reliable economic data and a deficiency in transparency from the government are several key factors that must be addressed for Puerto Rico to improve its ranking in an index published annually by The Heritage Foundation, local economists said Monday.
Following months of research by the nonprofit, nonpartisan Center for Economic Renewal Growth and Excellence, Puerto Rico has been included in the “2016 Economic Freedom Index” for the first time, ranking 31 among 186 countries.
The commonwealth ranked just below Botswana, but above the U.S. mainland with regards to monetary freedom. The island matched the U.S., Albania and Chile in financial freedom, according to the findings of the index revealed by the Center and presented by former Puerto Rico Governor Luis Fortuño.
The Index ranks 186 countries based on 10 categories of quantitative and qualitative criteria grouped into four key pillars: law and order (property rights, freedom from corruption); limited government (fiscal freedom, government spending); regulatory efficiency (business freedom, labor freedom, monetary freedom); and open market (free trade, investment freedom, financial freedom.) Each category is recorded on a scale of 0 to 100, to hit an average overall score.
Puerto Rico’s deficiencies, aside from the two mentioned, include the lack of transparency and reliability in the process of property registration; the number of processes and time related to obtaining building permits; political patronage that permeates the government structure; the onerous tax burden on individuals and businesses; and the restrictions posed by maritime transportation laws.
Economist Vicente Feliciano, president of Advantage Business Consulting, said while it is “great that Puerto Rico was benchmarked with other jurisdictions,” it is difficult to broaden economic liberty on the island.
“An example is the effort by the Fortuño administration to deregulate legal charges on real estate transactions. In spite of the commitment by then Gov. Fortuño, the legislature didn’t approve the request for more economic liberty. To have a proper recovery, Puerto Rico needs to commit to economic liberty,” Feliciano said.
Fortuño described the index as an effective tool to assess the strengths and weaknesses of the economy to maximize economic freedom and promote growth.
“The index is an X-ray. It provides an objective picture with clear and measurable parameters that allow governments to develop public policy focused on expanding economic opportunity and prosperity,” he said.
“Therefore, it is not an exercise to be performed only at times of crisis like the one we live today, but consistently so that we can yield positive results,” he said.
A source who spoke off the record said these types of indexes are not as reliable as they’re thought to be and “lead to error in economic policies.”
Still, the index produced a series of recommendations to improve Puerto Rico’s status versus other economies, including: enhancing transparency in public policy development; expanding the availability of reliable economic data; and reducing the tax burden on commercial activity.
“Economic freedom is not an abstract concept. It is a socio-economic model proven to produce direct benefits for people and their communities,” Fortuño said. “As we promote a society based on the principles of economic freedom, the doors to opportunity and growth open.”