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Reuters English News Service
Puerto Rico Economists To Draft Long-Term Plan
By Kristin Roberts
October 2, 2002
MIAMI, Oct 2 (Reuters) - Economists, businessmen and former officials in Puerto Rico plan to draft a long-term development proposal for the island, offering the governor an alternative to a strategy that could be in the works by a famed Harvard professor.
The proposal would address the development agenda of Gov. Sila Calderon, elected in 2000 to replace an administration where some officials have since been the subject of corruption investigations. Calderon set her short-term economic plan after the Sept. 11 attacks on the United States, aimed at halting the effect of a U.S. economic slowdown.
Jose Villamil, president of forecasting firm Estudios Tecnicos Inc. and economics professor at the University of Puerto Rico, said local economists could serve the government just as well as Harvard's Michael Porter, a world-renowned economist and competition expert.
Calderon has courted Porter, head of Harvard's Institute for Strategy and Competitiveness, to lead development of a long-term economic strategy for the island, according to local economists and business leaders.
A formal agreement, however, has not been finalized, Porter's staff at Harvard said.
Villamil's group, the Committee on the Economic Future of Puerto Rico, is already at work on its strategy proposal and should have a final version ready by June, he said.
At that point, committee members will lobby Puerto Rico's lawmakers and the governor's administration to take the steps needed to reach their 10-year and 15-year goals.
"I'm convinced that if the nongovernmental sector goes at it with a consistent vision and with analyses to back it up, we might be able to achieve something," Villamil said.
"Given that the administration has nothing yet, I'm hopeful they'll hear us," Villamil told Reuters.
The governor unveiled a short-term plan in October 2001 aimed at pulling the reins on a downturn that was exacerbated following the Sept. 11 attacks. Her proposal involved raising $3.9 billion in U.S. capital markets, including money to finance new projects and funds to refinance old debt.
In fact, much of the debt Puerto Rico has taken on in the last 12 months is related to Calderon's efforts to build up the island's infrastructure and encourage construction.
Beyond those measures, the governor's "Puerto Rico 2025" program was to create a longer-term strategy, which has not yet materialized.
Porter's office said he was not available to comment because he was traveling on Tuesday.
THE LONG VIEW
Puerto Rico, through its Government Development Bank, has sold $6 billion in bonds over the past year, including a $1.16 billion tobacco bond deal on Tuesday. The Commonwealth's outstanding debt now totals about $30 billion.
Many local economists say they support the aggressive bond program, however, noting the proceeds raised are used to build the infrastructure needed to support increased construction.
Construction investment fell below expectations for 2001, ending down 0.8 percent for the year, according to government data. Officials expect construction to climb this year, due to a 24 percent rise in investment by the public sector.
"I expect to see more construction projects up for bids with the accelerating up of the permit process," said Heidi Calero, a San Juan-based economist, adding that she sees construction reigniting the island's economy.
Eugenio Aleman, managing director of the Latin America service at consulting firm DRI-WEFA, also cited the importance of construction projects in Puerto Rico, noting the Port of the Americas development on the southern coast.
Villamil agrees, but argues that little can be done about the near-term outlook. Officials should instead focus now on where they want to see Puerto Rico's economy in 15 years.
"What happens in 2003 to 2004 is decided," he said. "What's most concerning is what is going to happen five, 10, 15 years down the road."
For example, many government and finance leaders have not correctly assessed the business environment, Villamil argues.
They have not recognized, he said, that Puerto Rico's pharmaceutical manufacturing sector has reached maturity and is operating with excess capacity. He added the sector will likely consolidate activities.
Villamil said his group includes former Commonwealth finance officials, the head of the Puerto Rico Manufacturers Association, executives of island firms and the former director of the Puerto Rico Industrial Development Co.