Puerto Rico’s economic situation has reached rock bottom, but the island may as well be standing on quicksand given the instability of the U.S. economy and subsequent federal cutbacks, the volatility in petroleum prices and a potential deterioration of the housing market once local incentives run out.
Such were the conclusions offered by economist Joaquín Villamil during the morning session of this year’s 19th Housing Congress, taking place today at the Ritz-Carlton hotel in Isla Verde.
Among other things, Villamil, who heads research firm Estudios Técnicos, said 2012 economic projections could be affected by the expiration of American Recovery and Reinvestment Act funds this year, as there is little or no chance of new incentives coming down the pipeline.
Job creation, he said, is the island’s biggest challenge to address the economic downturn.
“Creating jobs is the biggest challenge we face. You can not divorce the labor market situation from the social problems. Even with projected growth rates, Puerto Rico can not recover the lost jobs within five years,” Villamil said, while putting the island’s employment rate at 30 percent.
He also noted that taking steps toward reactivating construction investments is key to re-charting the course of the island’s economy.
“The goal should be to match the ratio between investment and gross national product to how it was in 2001, which calls for increasing investments from the current $3.5 billion to between $8 billion and $9 billion in 2015,” he said.
Although current projections do not suggest it, Villamil said Puerto Rico’s growth capacity could improve down the road, generating social and economic development.
For that to happen, the island must: develop an innovation system that enables it to migrate from being “path followers” to being “path creators;” change the economic culture; socialize the economic policies; and achieve an economic structure that is in line with the global environment.