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Building Change

Construction boom spurs economic growth, drops unemployment to historic lows; yet Puerto Rico voters demand change, elect first woman governor in island history

BY Francisco Javier Cimadevilla

January 4, 2001
Copyright © 2001 CARIBBEAN BUSINESS. All Rights Reserved.

Whether the end of the 20th century or the beginning of the 21st, the year 2000 was indeed historic for Puerto Rico.

It marked the end of a revolutionary eight-year period of nonstop substantial transformation of just about everything in Puerto Rico–from health services to tourism to infrastructure--led by a local, visionary, reform-minded government administration and by worldwide forces of accelerated technological innovation.

Despite early signs of a slowdown of the U.S. economy, due in part to skyrocketing oil prices, Puerto Rico maintained a pattern of moderate growth, registering a respectable 3.1% in 2000.

More significantly, in 2000, for the first time since May 1968, Puerto Rico’s monthly unemployment rate dropped to single digits when it registered 9.8% in September, averaging 10.2% for the first 11 months of the year, a feat not matched since 1969 when the unemployment rate registered 10.0 for the same 11-month period.

In 2000, both economic growth and the historic drop in unemployment were spurred, in significant measure, by a star performance of the island’s construction industry.

And yet, despite the overall sense of economic well-being and security, Puerto Rico voters went to the polls in 2000 and, once again, voted for change and elected the first woman governor in Puerto Rico’s history.

The stellar performance of the construction industry and the electoral victory of Gov.-elect Sila M. Calderon are, bar none, the top business and government stories of the year 2000.

Construction boom

Hands down, construction is the most dynamic sector in Puerto Rico’s economy today. Since the early 1990s, the construction industry has grown faster than most sectors, helping to sustain the overall growth of the economy.

The high number of construction projects–mostly housing–in the private sector, and large infrastructure projects in the public sector such as the Urban Train, highway construction, the Coliseum of Puerto Rico, and the North Coast Super Aqueduct were responsible for the industry’s dramatic growth during 2000.

For the local construction industry, it is the best of times. Based on Puerto Rico Planning Board statistics, the value of construction during fiscal year (FY) 2000 reached $7.03 billion, a 7.3% increase or 479.1 million more than FY 1999’s $6.55 billion.

That means in FY 2000, construction investment represented 17% of Puerto Rico’s gross national product (GNP) of $41.3 billion.

More significantly, this year for the first time since 1974, the total value of private sector construction surpassed that of the public sector for two consecutive years.

Private construction projects in housing, commercial, and industrial buildings as well as installation projects reached $4.5 billion in FY 2000, a 19% or $660.7 million increase over the previous year.

Private housing construction investment (not including those related to Hurricane Georges) reached $1.8 billion in FY 2000, a $338.3 million increase over FY 1999.

Some private, single-family housing developed during FY 2000 include Villa Caribe in Caguas, the Legends of Dorado I and II, Estancias Golf Club in Ponce, Los Montes in Dorado, and Las Palmas in Guaynabo to name a few.

Major apartment projects and walk-ups developed during FY 2000 include Aventura de Encantada in Trujillo Alto, Marbella Beach Front Condominium in Humacao, Colinas del Bosque in Bayamon, El Dorado Club in Vega Alta, and Millenium Condominium in San Juan among others.

Significant installation projects in FY 2000 include Searle Pharmaceutical plant’s expansion in Barceloneta, Jansen Ortho Ltd in Gurabo, EcoElectrica’s natural gas power plant in Peñuelas, and Applied Energy Systems’ (AES) coal power plant in Guayama.

In contrast, total value of construction of public projects in FY 2000 dropped $181.6 million or 6% from FY 1999 levels; still registering a mind-boggling $2.9 billion.

And there is apparently no end in sight for the ongoing construction boom.

The value of construction permits approved during FY 2000 reached an unprecedented $2.43 billion, a whopping $831.1 million, or 52.1% more than the previous year. According to Planning Board statistics, the hike is the highest year-to-year registered in the last 40 years.

The value of construction permits granted on a given year is an indication of future construction activity.

Total value of private sector construction permits for FY 2000 reached $1.7 billion, $507.9 or 42.6% more than the previous year, while the value of public sector construction reached $726.7 million, $323 million or 80.1% higher than the previous year.

Construction permits in FY 2000 for residential housing reached $991.8 million, a $297.1 million, or 42.8% increase over the previous year. Almost 89% of that total–or $881.9 million–were private sector residential projects. That’s a 41.1% increase over FY 1999’s total of $625 million.

Construction permits in FY 2000 for public housing reached $109.9 million, 57.7% or $69.7 million more than the previous year.

In the case of construction permits for commercial use in FY 2000, these reached $251 million, an increase of $144.8 million or 136.3% over FY 1999. These include projects such as One Office Park Building in Guaynabo, Phase I of Iriarte Office Park in Guaynabo, Universal Insurance Building in Guaynabo, Phase II of Capitol Office Building in Miramar, and the expansion of Walgreen’s warehouse in Carolina.

Construction permits for industrial projects in FY 2000 reached $96.5 million, an increase of $42.5 million, or 78.7% over the previous year. These projects included pharmaceutical industry expansions such as IPR in Canovanas, Schering Plough in Las Piedras, and Pharmacia & Upjohn in Arecibo.

As for the value of public and private construction permits for projects related to agriculture, education, religious facilities, hotels, banking institutions, penal institutions, and others for FY 2000, these reached $1.1 billion, a $342.8 million or 56.4% increase over the previous year.

As a result, the construction industry was also a significant source of jobs.

According to a survey by the Labor Department and Human Resources, employment in the construction industry during FY 2000 reached 85,000, an increase of 7,000 over previous year’s 78,000 construction workers. This number is expected to exceed 100,000 in 2001, according to some industry sources.

This is significant, because in the last decades the industry averaged 40,000 jobs annually.

Labor force availability will be a crucial issue for the industry, as it currently faces a shortage of approximately 10,000 skilled workers.

Industry sources fear that increases in fuel prices, along with the shortage of skilled construction workers and raw materials could increase construction costs even further–and hurt the local economy with a possible hike in inflation.

PDP returns big

On Nov. 7, 2000, Puerto Rico voters elected their first woman governor, Sila Calderon, of the pro-commonwealth Popular Democratic Party (PDP), reversing the winning streak of the pro-statehood New Progressive Party (NPP).

Despite a number of different polls that showed NPP gubernatorial candidate Carlos Pesquera ahead of Calderon, she prevailed with 48.6% of the votes to his 45.7%. Puerto Rican Independence Party (PIP) President Ruben Berrios received 5.2%. Pollsters and pundits pointed out that voter preferences changed drastically in the last month of the campaign.

The PDP also won a majority of the municipalities, and took control of the Senate and House, reversing the 1992 and 1996 NPP wins. According to the State Elections Commission (SEC), the PDP obtained 45 of the 78 municipalities, 30 of the 51 seats in the House and 19 of the 27 seats in the Senate.

Defeated NPP lawmakers included Senators Luisa Lebron, Luis Felipe Navas, Norma Carranza, Enrique Melendez, Carmen Berrios, and Roger Iglesias; as well as Representatives Edwin Mundo, Lourdes Ramos, Jesus Valle, Waldemar Quiles, Margarita Martinez, Luis Aramburu, Ivan Figueroa and Augusto Sanchez Fuentes. Lebron and Navas were later appointed by Gov. Pedro Rossello as Superior Court judges.

PDP Rep. Anibal Acevedo Vila also prevailed against NPP two-term Resident Commissioner Carlos Romero Barcelo, 49.3% to 45.4%, ousting the pro-statehood veteran and former two-term governor.

Although NPP Sen. Jorge Santini won his bid to become the next mayor of San Juan, wrestling the capital city away from the PDP, he won over PDP Sen. Eduardo Bhatia by less than two points, 48% to 46.3%. That came as a surprise because polls had shown Santini as much as 15 points ahead of Bhatia less than a month before.

Pundits, including some within the NPP, blamed Carlos Pesquera’s loss on a successful corruption-themed campaign by the PDP, Rossello’s unpopular actions within days of the election, and a change of campaign strategy by Pesquera in the weeks before the election.

Rossello, who has said his greatest regret was not being able to further advance statehood for Puerto Rico, fired a female Cabinet member a few days before the election for publicly disagreeing with him, supported a $25 million megamonument in a public park which was opposed in polls by a majority of the people, and lashed out at members of his own party who acknowledged that corruption had plagued the party.

The governor also pushed to have Puerto Ricans vote for U.S. President on election day. Many considered the move a political blunder because it mixed the general election vote with what appeared to be a pro-statehood initiative–always an ill-fated combination.

During 2000, federal investigations resulted in high-profile convictions of elected officials and others associated to the NPP.

Pesquera, observers said, failed to separate himself enough from Rossello by taking differing positions and paid the price at the polls. On election night, after his defeat was evident, Pesquera said he would retire from public life and dedicate himself to his family.

Still, he was asked to stay on by NPP members who didn’t want First Vice President Norma Burgos to take over the helm, and became embroiled in a controversy over who would lead the minority delegation in the new Legislature. While Pesquera said he wanted new blood to renovate the party’s delegation, outgoing House Speaker Edison Misla Aldarondo said he had the votes to become minority leader and would not desist from his plan.

At an NPP legislative caucus last week, Misla prevailed over Pesquera’s objections. Minutes later, the NPP president resigned, paving the way for Burgos’ interim presidency.

The PIP, meanwhile, did not receive as many votes as expected, despite Berrios having spent almost a year in Vieques protesting the U.S. Navy’s military practices, and battling prostate cancer and other ailments. Berrios received about the same amount of votes that he’s received each time he has run for governor, far below the 8% to 10% that had been projected.

Pundits said this was owed to the fact that, at the last minute, may pro-independence supporters decided to vote for Calderon to prevent the NPP from achieving a third consecutive term in office, something no political party has yet been able to achieve since 1968.

CB Associate Editor Ivonne Garcia and Staff Reporter Jose Carmona contributed to this story.

Value of Total Construction Investment

Fiscal Years 1992 — 2000
(In billions)

Year Total
1992 $2.64
1993 $2.82
1994 $2.94
1995 $3.25
1996 $4.09
1997 $4.68
1998 $5.35
1999 $6.64
2000 $7.03
Source: Puerto Rico Planning Board

Value of construction permits

For Fiscal Years 1999 and 2000
(In millions)

Sector 1999 2000 Change
Private $1,191.9 $1,699.8 42.6
Public $ 403.5 $ 726.7 80.1
Total $1,595.4 $2,426.5 52.1
Source: Puerto Rico Planning Board

Jobs in Construction
(In thousands)
Year Amount
1995 57.0
1996 59.0
1997 64.0
1998 69.0
1999 78.0
2000 85.0
2001 100.0*

Source: Puerto Rico Planning Board

This Caribbean Business article appears courtesy of Casiano Communications.
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