News about the economy

The governor of Puerto Rico requested an extension on the deadline to have a plan in place that can potentially be approved by the PROMESA federal board (they are in charge of the finances of the island now at direction of congress).

A response from them was that they would consider extending the deadline to February 28 (from January 31) provided the government would work on a plan that would increase the government take by 1.5 billion, save another billion from healthcare, reduce funding for the PR university by 300 million and reduce pensions by 10% (average pension is around 1,000 a month). Basically they want the budget to change by around 3 billion. This needs to be accomplished by the plan if it can meet the above and balance the budget by 2018 / 2019 years.

If you know of someone considering working in Puerto Rico, they should read the following section:
At the same time there is a proposal that has already passed the PR senate and is being amended some by the other chamber. This proposal would cut private sector employee rights in the following areas:
a) Less vacation, only 6 days of vacation a year (was 12)
b) 6 sick days a year (was 12)
c) pro visionary job status for 18 months before an employee becomes permanent employee (was 3 months).
d) A lot easier to fire an employee, the requirement to prove unfair firing practice will fall on the employee to prove.
e) several other not so good either

This is likely to increase the number of people leaving the island as other states are raising the hourly wages and increasing benefits while Puerto Rico is freezing wages and cutting benefits. So expect more people moving out and even more lousy service since employees will be pissed.

It is also my opinion that this will increase the number of people that will go into the underground economy, and pay a doctor to declare them unfit to work, so they can make money in the grey economy, get welfare, food stamps and pay zero taxes.

Either group, those leaving and those stoping working will damage the economy even further as neither will pay PR taxes, which means the rest will pay more, and the cycle repeats again.

I do not know about you but to me this makes no sense, it makes maters worse in my opinion.

So what's your solution, Rey?

No solution, just passing the news, what is yours?

Was thinking of buying more property in San Juan but you make a lot of good points. Will need to think about this further.

Hey Paul,
I do not see the above negatively affecting you unless you depend on a job. It may create more properties that you can buy at a reasonable price.

Even if amended as proposed, the legal environment in PR for employers is abysmal.   The reforms fall far short of creating an environment to encurrage and support economic development and support small business growth.   

Purchased a place in Condado two years ago by just retired a couple of months ago and my wife and I moved in down this past December, the building we are in seems to be active with renters from all over. The best part of Condado is everything you need is here,

I have no plan, Rey.I wish I did. Most of the natives I've spoken to are in favor of staehood, which would open up many opportunities to them.

Igustaf,  I fail to see how statehood will make a difference when it comes to opportunities. They already can own a business and take advantage of small business administration. They can export services and products world wide. They can not participate in foreign policy and can not make deals with countries that the US prohibits but other than that they have good oportunities. Can you elaborate on how they think statehood will help them?

Currently all they have do is move to any state of the union to be a 100% certified US citizen, so the only difference is where they live.

Do they realize that they will have to pay Federal Taxes + PR taxes or do they just think that free money will just fall out of the sky?

There is inequality between the states and PR when it comes to Medicare and medicaid and maybe some other federal program, but for the average person those do not create opportunities other than better health care.

Having the vote for the president, having a few congressmen and senators provide a voice and a vote but do not provide much more, those votes do get diluted by the other 50 states.

What am I missing?

Statehood?...  what are the chances that a republican congress would support adding another state to the union that is mostly democratic to the union?  How would this inclusion affect the next presidential election?  From a republican perspective, not something they want.

My guess is that the concept is DOA in the current congress. 

When it comes to predicting the future political outcomes, its kinda like predicting the weather...  tomorrow (generally speaking) will be about the same as today.

LOL Sitka,
The PNP is in a rush to push statehood because the ELA (Estado Libre Asociado) was declared a colony which leaves statehood and some form of independence as the only choices.

The current party in power is rushing in the knowledge that Puerto Rican's do not want to loose their citizenship and are afraid of independence.

Likely PR would not be considered for statehood for another 20 when the mess with the economy is gone. My fear is that they would use an early yes vote by PR in May 2017 and get it 20-25 years later without a resent vote. People do change their mind but once admired they can not change.

They are going to get a Fu$& off if they ask, congress specially a republican congress is not in a rush.

It was approved with some changes, here is an article about it. http://www.elnuevodia.com/english/engli … l-2282554/

This seems to help the employer specially the part about being able to more easily fire employees.
http://www.elnuevodia.com/english/engli … l-2282554/

My perspective on the situation in PR could be beneficial to a small portion of the population and this is based on my experiences in Puerto Rico in tandem with my experiences on the mainland. This is it in a nut shell....Look at where Cuba was when the Soviet Union collapsed. Fortunately PR has not hit that kind of bottom. According to a documentary called "Green Revolution" Cubans had no access to Gas/oil. No food as tractors could not run, No fertilizer or pesticides as they were gas/oil produced. Rather than starve they developed organic and sustainable agriculture. They now have  thriving businesses in organic pesticides, fertilizers and a level of health at a higher standing than the US. Organic honey sales to Europe has reached a billion dollars in revenue. Living a more simple holistic life with a higher standard of health has it's own benefits along with helping mirco businesses grow and flourish. Cubans are doing it with a European Market and yet Puerto Rico has the mainland market and how many businesses take advantage of it. Tourism is another area that can be developed from a grass roots level. Airbnb rentals. If one has access to an interesting property it is very easy to set up. Once established the market is developed by reviews. This keeps the standards high. Online markets for quality crafts. micro foods and products are available online via Etsy, Amazon, etc. This is also easy to set up. No store front is necessary or business licensing. I actually operate these types of businesses so I know they work, I have plans in the works to develop other products and possibly set up work shops to help others to walk through the steps and product development.  It is not a 72 billion debt solution but it would give hope and opportunity to some. Puerto Ricans have the opportunity to leave the Island and attempt to recreate the standard of living on the mainland that has failed on the Island. Cubans cannot leave their Island so they work with the problem. Maybe some folks, who truly love living on the Island, will work  within the perimeters based on what the Island can offer and  be less dependent on government and more as a producer of products than a consumer of products.

A million here and another there and suddenly we start talking about real money. LOL

The Cuba example is very good, they had a sink or swim situation, while PR has a valve, move to a state.

Large investors and some of the new local businesses are expanding to the US as a market, so it is happening but slowly.

Some are starting to talk about Europe and Latin America but they don't seem to be moving at a good speed.

We (Puerto Rican's) are still too lazy to really take off and we are mostly not expanding our minds to exporting things other than food and farm products. We need to think a little out of the box and come up with more ideas and offer talent and professional services which can generate large income with little expenses.

The measure is still being opposed http://www.elnuevodia.com/english/engli … e-2282928/

Governor opposing the recomendations of the federal board, says what they want is not in line with his plan. http://www.apnewsarchive.com/2017/Puert … 0d3bb4ec52

Here is an article about the new "green revolution" in PR.   They may be onto something that pays real dinero.

Not sure this link will work, but here goes.


http://www.thelegalintelligencer.com/id … -Boomtown?

The link has a little info then ask you to become a member to get more info.

a couple of items of note in the plan the new governor has:
1) He wants to start charging the IVU (11.5%) to all Internet purchases, if he gets it, those of you making purchases in the Internet will see items cost a lot more (11.5% more).
2) He also wants to review the property tax, the Federal Board is also pro this measure, so likely this will pass in some form or another. However the governor has wording in his proposal about not giving the towns any money from the property tax, which makes no sense as that is the major income line for the towns as the properties are in their towns. Unclear if they will reasses all the properties and assign new values, that is up in the air and has not been done in probably 20+ years. If they do do it and assess each property, that will take a whole lot of time. Unclear if they plan to give people a break in the property taxes for those that make little or nothing (not talking about cheaters, talking about those that legally get very little money and can not work). There are a lot of elderly people living in a parcela (parcel) which was granted long ago by the government for a couple of hundred dollar and where the neighbors and owners put those houses together at an actual cost of maybe 5-10K which could be valued today around 25-50K. Those people do not have a pot to piss on and it is unclear how the government will go about dealing with them and taxing them, note that these people have only incomes in the area 300 dollars a month. Attacking them would be very unpopular and political suicide.

On the other hand the Federal board was proposing reducing the payments to the bond holders by 79%, I find it hard to believe that they have proposed that, it must be misunderstanding, I do not believe that the bond holders will go for that at all and would negotiate with the board or government when they are shooting for such a huge cut to the bond holders. Probably a misunderstanding.

Here is a link that cover some of this http://www.elnuevodia.com/english/engli … o-2283231/

Oh wow!!! My husband just started his job here and we were so excited over the vacation days here versus Califirnia.

Looks like they may allow people that are already employed keep their rights, but it is not a sure thing. Unfortunately employers may decide to fire employees and hire new ones because they will be cheaper. I'm sure some will and others will consider it because it affects their profitability and ability to compete with other businesses that do.

I plan on moving to P.R. from the U.S. and have a online business. If resident purchase from me online once im there they could be charged the 11.5 %? I would like more info on this..i know they just had the election..did this law pass

No the law is under discussion. The tax is something the governor is proposing, it is not in a bill yet so hard to say if it will see the light of day. As I understood it, the idea is to charge people in Puerto Rico taxes on items purchased in the Internet. For example charging tax on purchases made via Amazon. Currently there is no tax in Amazon purchases and other sites and the governor will like to change that as additional income for PR government. Many states have failed to implement it, it is not as easy as they think.

Running a business in Puerto Rico that exports items and or exports service is something the PR government wants to grow the economy so I do not think it will be taxed as that would kill the efforts of law 20 and 22.

They are stupid but not that stupid.

Not sure if I posted this, it is an opinion piece related to what the Federal (PROMESA) board is requiring of the goverment of Puerto Rico and the opinion of the writer and some economist. Take it with a grain of salt, it is an opinion and may not be balanced.
http://www.elnuevodia.com/english/engli … e-2282928/

The PR government has received an extension to Feb 28 to submit and get approval of a new government plan to balance the budget in two years and meet all the requirements of the Federal board. While the Federal board made some requirements for the approval of the extension, it seems that at yesterday meeting they were sufficiently satisfied that the alternate solutions proposed by the government could attain similar savings. There is no guaranties that the plan to be submitted by the government will be approved by the Federal board on Feb 28 and there is no guaranty that serious austerity measures will not be imposed. Several leaders of the government and economists have made their fears clear that attempts to balance the budget in 2 years based mostly on austerity will further compress the economy and that it will accelerate the exodus of people out of the island. Solutions to grow the economy at a fast pace so far has been elusive and is not one of the key interests of the federal board.

Calls continue to increase the funding for Medicare Advantage and Medicaid, but there are no signals that Congress is listening. PR receives only a portion of the funds for these services. Remember that all of Puerto Rico citizens DO PAY INTO MEDICARE like the rest of the US mainland citizens, so technically they should receive similar funds in these areas, but that is not the case. This has had a major impact in the refunds the hospital receive and the money payed to doctors, therefore increasing the likelihood that doctors will continue to leave the island and for hospitals to close more wings. Latest numbers is that 1.5 doctors leave the island daily. The island Medicaid program (MySalud) is a major contributor to the government expenses since about 45% of the island uses it. The current block of money provided by the Obamacare program will likely run out by the end of the year or March next year. A lot of uncertainty is in the air since they are talks of replacing Obamacare with some other program and it is unknown what that will look like or how Puerto Rico will be affected by that change.

This is a quick sand situation, the moratorium of payment of the debt was also extended to May 1 during this meeting yesterday. After which all the law suits by the bond holders will no longer be blocked which will result in legal fights in which both sides will try to get the most for their side. Quite a bit of money will go to deal with court costs and lawyer fees if an agreement is not reached with the bond holders soon. As I understand the Federal Board has been meeting with the bond holders but it is unclear what offering they are suggesting. Some of the news about the board and the PR government seems to point that the board is considering that the debt negotiations are going to require a cut in the debt of 79%, yes 79%. I find it hard to believe that the bond owners will go for this but we shall see. Previous attempts by the government in negotiating a cut of 20-50% have gone nowhere, so I don't see how the Board can negotiate a target haircut of 79%. Likely the board will have to go for a bankruptcy legal fight in order to gain a substantial haircut of the debt. But this is very much in the air.

http://www.elnuevodia.com/english/engli … s-2285689/

http://www.wsj.com/articles/health-secr … 7?mod=e2fb


I am making phone calls to Washington about this, hoping others will read and if they would like, do the same.

You got connections in DC?

http://www.elnuevodia.com/english/engli … 1-2285967/
This affect public workers and public corporations

I wish! But I've been calling Senators every morning! I am against Tom Price and his plan to bleed what's  left Puerto Rico. As of right now he is Puerto Rico's number one enemy.

Unfortunately Washington is not listening and are concerned that anything good they do for PR they are going to need to do for all other territories.

Rumor, not news:
There is a rumor that the mayor of Ponce is giving out 300 pink slips tomorrow. This is only a rumor.

We shall see in a day or two.

ReyP wrote:

Rumor, not news:
There is a rumor that the mayor of Ponce is giving out 300 pink slips tomorrow. This is only a rumor.

We shall see in a day or two.

Yup! It's all over FB as well. Suposly there is no money to pay the employees.

Hmm, according to La Perladelsur periodico. There is a copy of a letter that the mayor of Ponce sent to 300 employees guaranteeing  their employment. These are transitional employees. it says they do not have an extension for an unlimited time and that they will be going thru a process of evaluation.

How do you guarantee a transitional employment?
Your last statement sounds like bleak news for them.

Consolidation of agencies
http://www.elnuevodia.com/english/engli … s-2286304/

There is also a law in the works where the goverment becomes a single employer, allowing for the movement of personnel from one agency to another or location. This law does allow movement of an employee from the east coast to the west coast. While distance is to be taken into consideration, there is nothing preventing it. Likely some will quit if too much for them. Also unclear if people will be trained sufficiently to be able to perform well at their new job when moved.

These law do open the door for potential savings, but the devil is in the details and execution, so they may not add up to much.

This is an opinion piece that in my humble opinion is likely to be correct. Basically the political will to implement significant cuts does not appear to be there and the measures enacted so far are not really meeting the Federal PROMESA Board targets, so as the article states it is likely that the task of balancing the budget and removing a 7.6 billion yearly deficit will be in the boards hands. By February 15 the governor needs to provide the board with a draft financial plan for them to review and is required to submit the final plan by February 28. If the plan does not meet the requirements of the board, then the board will act and use their pen to start cutting and laying off.

You may want to read the article, I find it both interesting and likely given all the delay tactics by both governors so far. Note that the protection of PROMESA runs out May 1 and after that the bond holders are free to suit the goverment and ask for their money so a plan needs to be in place before that and hopefully agreements on payments for the debt (very unlikely).
http://www.elnuevodia.com/english/engli … s-2289545/

The next 2 years will be hell maybe 3.

PS. The current debt is 73 billion without counting the debt of the retirement system which is around 40 Billion. With a budget that has a yearly deficit of 7.6 billions, there is not enough money to run the country and much less to pay the debt, so big times cutback of a minimum of 7.6 billions yearly will be needed, every minute wasted makes the problem worse.
Unfortunately the cut backs will affect services, taxes will go up and there will be less money to collect because those not working do not pay taxes, so it is a death spiral at the moment and the economy with shrink further.

Apparently the PROMESA board has requested that the governor submits all upcoming law proposals for consideration prior to the proposals becoming law. This has created a bit of trouble as according to the governor, he is to submit the laws after they are fully approved / signed into law. Upon reading he seems to be correct and it seems the Federal board is stretching its power past the congressional power that governs them.

This seems to be occurring because the board appears to have the impression that several laws and contractual agreements do not take the budget situation into account.

We shall see how this develop over the next week or so.
Here is the article: http://www.elnuevodia.com/english/engli … r-2290765/

Here is the letter the governor send:
http://rec-end.gfrcdn.net/docs/editor/1 … 791178.pdf

For those lawyer likes, your view?

A bit of a sad story here, seems that global and well respected accounting / auditing firms are not willing to be contracted to audit Puerto Rico. The article seems to imply that it is a threat to the firms name.
http://www.elnuevodia.com/english/engli … t-2290268/

Do you remember the Texas Enron Co that imploded in 2001?  They had been audited by the Arther Anderson accounting company from Chicago.  After the s**t hit the fan, the Enron bankruptcy took down Anderson too!

The entire text of PROMESA can be found here:

https://www.congress.gov/bill/114th-con … 82E5DAB85B

It seems to me that the point of disagreement turns on Section 204(1) of PROMESA.

"SEC. 204. REVIEW OF ACTIVITIES TO ENSURE COMPLIANCE WITH FISCAL PLAN.
(a) Submission Of Legislative Acts To Oversight Board.—

(1) SUBMISSION OF ACTS.—Except to the extent that the Oversight Board may provide otherwise in its bylaws, rules, and procedures, not later than 7 business days after a territorial government duly enacts any law during any fiscal year in which the Oversight Board is in operation, the Governor shall submit the law to the Oversight Board."

While Governor Rossello is right, note the opening language, "Except to the extent that the OB may provide otherwise in its bylaws, rules and procedures..."  So it seems to me that the short of it is that the Oversight Board has the authority to amend the rules and procedures concerning the submission of legislative acts.  It therefore can (but not necessarily should) require the governor to submit acts prior to his signature.