Author: Richard R. Tryon
PUERTO RICO REPORT
Businessmen Fret Over Government
Inattention On Economy
by Robert Becker
June 22, 2001
Copyright © 2001 THE PUERTO RICO HERALD. All Rights Reserved.
Business people in Puerto Rico these days are worried. They tell you,
privately, that sales are slow, people aren’t spending, and that they and
their friends are not investing in anything until “things clear up.”
Puerto Rico’s economy is inseparable from that of the United States. Part
of the current slowdown is simply the inevitable effect of the concurrent
slowdown in the U.S. economy. Puerto Rico’s economy is far less
diverse than that of the United States, so it is more vulnerable to the
swings of the business cycle. When the United States sneezes, Puerto
Rico catches pneumonia.
But there is more to it.
There is also a sense among many business people here that Gov. Calderón’s focus, to
the exclusion of everything else, on Vieques is harming the economy. The huge
governmental bureaucracy of Puerto Rico has insinuated itself into every nook and
cranny of the economy. The government has the ability to spend billions of dollars on
private sector contracts and to stimulate business growth through tax and regulatory
policy. Like it or not, the government calls the tune in the Puerto Rican economy.
Puerto Rico’s statist, over-centralized economy has also been dependent for decades
on federal tax incentives to lure outside investment. The most effective of these, Section
936 of the Internal Revenue Service code, has been repealed by Congress and is in the
latter part of a phase-out. For this -- and other -- reasons, industries here are scaling
back on investments, laying off thousands of employees and leaving the island for more
advantageous locations.
Business people grouse that Calderón should be focusing her energies on creating new
business incentives and opportunities to spur economic growth. Instead, she engages
in activities that contribute nothing to Puerto Rico’s development, and worse, have an
inimical effect on Puerto Rico’s future. Her anti-Navy stance and perceived
anti-Americanism has made her deep and lasting enemies in the U.S. Congress,
including Rep. James Hansen, R-Utah, who chairs the House Resources Committee,
which has jurisdiction over Puerto Rico.
A measure of the animosity can be gleaned from Hansen’s remarks in a recent National
Public Radio interview. Hansen, in comparing the attitudes of Puerto Ricans towards
U.S. military bases with the attitudes of the people of Okinawa, declared that Puerto
Ricans should not get any “favorite treatment.”
“They sit down there on welfare and very few of them paying taxes, got a sweetheart
deal.”
A San Juan weekly carried an interesting item in its gossip column about a meeting
between a group of wealthy Popular Democratic Party contributors and Calderón. The
column said the donors told Calderón in no uncertain tones that she had to get off
Vieques and on to the economy.
It is perhaps just coincidence, but Calderón unveiled, on June 19, a blueprint to create
100,000 new jobs with $379 million in government funds invested in the first year of the
plan. While the plan was long on promises but short on details, it sent the message that
Calderón was, at least, thinking about the economy.
Flanked by her top economics advisers, Calderón predicted that private sector
employment would increase from the current 1,146,300 jobs to 1,246,300 jobs at the
end of her four-year term.
On closer inspection, Calderón’s jobs plan is based on the natural growth of the
economy at a rate of 3 percent to 4 percent. That, given Puerto Rico’s slowing economy
and poor prospects of getting federal tax incentives for investors, appears overly
optimistic. Calderón’s plan is to stimulate private sector growth through government
spending and bureaucratic reforms, including agricultural incentives, job training
programs, subsidies for jobs creation, tax incentives for new investments and
simplifying the process of obtaining permits.
That is all well and good, but it is exactly the same promises that each incoming
administration makes for economic growth and, as Puerto Rico’s history shows, those
promises always fail. No politician in Puerto Rico, from either the PDP or the New
Progressive Party, has shown the courage to slay the dragon of government
bureaucracy, which is an immovable dead weight on the island’s economy.
Calderón spent many of the early days of her administration bemoaning the poor shape
of government finances bequeathed to her by former Gov. Pedro Rosselló. More than
half of her jobs stimulus funds will come from the federal government, but it remains to
be seen from where Calderón will get the rest, given the ostensible penury of her
government.
Puerto Rico’s worried businessmen can at least take solace that Calderón is beginning
to address the economy. Whether it turns out to be empty press conference promises
will be learned over the next 3 1/2 years.
Robert Becker, Managing Editor of The San Juan Star, writes the weekly Puerto
Rico Report column for the Puerto Rico Herald. He can be reached directly at:
dkarle@coqui.net
Hi Bob,
Dick Tryon is now in Frankfort, MI with cool weather around 50F. Al Gore must have taken 'global
warming' with him! But, summer is here!
I just read your fine economic report on the growing evidence of Caulderón failure on PR's
dependent economy. You are right on the target. I have been dealing with one of the key PR firms
in her plan and I have yet to see that her government has found a way to do what they talk about! It
seems that she has paralyzed all subordinates who are more fearful than usual of making a
mistake because she is so evidently a micro manager. Worse, she has a mean vindictive character
for those that she thinks have 'crossed' her.
I would like to think that I am wrong and that soon we will see evidence of creative effort and
freedom to act. But, having made so much noise about corruption- real or imagined- in the past, the
Governor has in effect made the socialist passions of the past seem to be now stuck in the mud of
indecision.
The emphasis on Vieques is slowly taking PR into the path of an aroused Congress and it may well
get around to legislation aimed at resolving the status issue in a way that Sila will like! Yes, if it
forces her to help PR decide to be either a State or go Independent, then she can negotiate for her
favorite 'Enhanced Commonwealth' to happen concurrently with Independence as it is forced upon
her. That will make her the President of the Independent "Estado Asociado y Libre de P.R."
otherwise known as the Commonwealth of PR.
Of course, she will hope to get the U.S. to pay for this relief with money, removal of U.S. military
bases, etc. with annual subsidies for some number of years because the U.S. 'owes' it to us for
what we have done for 102 years as colonial servants. Unless the people fail to be as aroused as
she wants them to be about the phony issues of health among the folks of Vieques, she may get
her way. Then again, if the economy falters, she could lose her following.
The legacy of Tugwell is still combining with that of Marín to leave PR in a dependency syndrome
position and no where is this more evident than in agriculture. With most of the best land still stuck
in control of the Land Authority's insane notion of trying to revive the Sugar Corp. and farming of
sugar cane, little is being done to encourage growing of crops for export! The fact is that too much
food is imported and those with this vested interest do not want to change that.
Our farm is trying to arrange banking to expand planting of trees and sod, but is stalled waiting for
the FSA to subordinate. The USDA controls the FSA and both are equally stalled by a failed
investigation of corruption that has caused hundreds of PR farmers to sue for breach of contract n
a class action suit. We will join that suit.
So, I hope you can keep publishing the commentary needed to get PR back on track. It was doing
pretty well for a few years, wasn't it?
Regards,
Dick
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