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Pesquera Proposes A New Economic Model For The Island… Rossello Favors Substituting Excise Tax With Sales Tax


Name: Carlos I. Pesquera

Birth date: Aug. 17, 1956 in Santurce

Education: Bachelor’s degree in engineering from University of Puerto Rico-Mayaguez (1978); master’s degree and doctorate in structural engineering from Cornell University (1985)

Professional experience: Professor and director of the Civil Infrastructure Research Center at University of Puerto Rico-Mayaguez (1986-92); secretary of the Department of Transportation & Public Works (1992-99); chairman of the Governor’s Infrastructure Council (1994-99); executive director of the Infrastructure Financing Authority (1998-99); president of Steel & Pipes; co-founder of the Hemispheric Center for the Transfer of Technology between the U.S., Puerto Rico & Latin America (1991); president of the New Progressive Party

Marital status: Married to agronomist Irasema Rivera; father of two: Carlos Roberto, 20; Frances Raquel, 18

Pesquera Proposes A New Economic Model For The Island

Will seek federal funds for infrastructure projects

October 30, 2003
Copyright © 2003 CARIBBEAN BUSINESS. All Rights Reserved.


WOW News

New Progressive Party (NPP) President Carlos Pesquera says Puerto Rico needs to develop an economic model that focuses on the island’s resources and strengths, encourages the participation of the private sector, and improves the skills and knowledge of the local work force.

Pesquera, who is running against former Gov. Pedro Rossello for the NPP gubernatorial candidacy, says the island’s economic setback is the result of the lack of vision of the Calderon administration, the halt of infrastructure projects, and the poor relationship Puerto Rico has with the federal government.

"This administration is responsible for the island’s economic slowdown," said Pesquera. "It has halted or changed public work projects and has canceled permits issued to the private sector, some of which had already been approved, thus creating uncertainty among entrepreneurs."

He says Gov. Sila Calderon’s constant improvisation has adversely affected economic growth and provoked a mistaken perception about Puerto Rico on the U.S. mainland.

"Each time I speak with members of Congress and federal officials, they ask three things: How’s corruption down there? How’s the economy. What’s going on with Vieques," Pesquera said.

Accordingly, one of Pesquera’s priorities if elected governor would be to establish with the resident commissioner a direct relationship with federal officials and members of Congress, thereby reducing the government’s expenditure on lobbyists.

He says that although Puerto Rico must ensure federal funding for projects such as the Urban Train, federal incentives such as those to promote manufacturing should be things of the past.

"The Urban Train is here. It is the result of good planning, and it has been partially funded through federal allocations," said Pesquera. "Now it is our turn to spur the economy near train stations using our own resources to develop an economic corridor in the San Juan area."

Puerto Rico’s economic competitiveness depends in part on the quality of the work force. "It is essential that we prepare a knowledgeable labor force, emphasizing technology, and strengthen the backbone of our economy, which is entrepreneurism."

Pesquera sees great opportunity in the imminent shutdown of U.S. Naval Station Roosevelt Roads in Ceiba. Although the base is expected to close in six months, it could take years for the local government to acquire the property, he says. Communities in Ceiba and nearby Naguabo are already asking to use the base’s water supply, but there are environmental considerations because of the base’s proximity to El Yunque Rain Forest.

Pesquera proposes implementing a hybrid model whereby federal entities such as the Department of Homeland Security and the Air Force establish operations at the base. A research & development model, which would include the participation of universities, would serve as the foundation for building a technology center.

Two of the first things Pesquera will do should he be elected are simplify the permitting process and spur public works projects. He believes government can contribute to economic growth through construction and infrastructure improvement initiatives.

In Pesquera’s view, having a good infrastructure creates more possibilities for entrepreneurs and investors. He says the island has suffered tremendously because of delays in large-scale projects such as the convention center in Isla Grande.

"The government has to do its part…and has to do it correctly. It has to improve what it does," said Pesquera. "Government must also be reduced, but it has to update its facilities and systems to serve the people adequately."

Pesquera, who holds a doctorate in structural engineering from Cornell University in New York, also envisions the completion of PR53 from Yabucoa to Guayama, the extension of PR22 from Hatillo to Aguadilla, the completion of the long-awaited Route 66, the extension of PR10 from Adjuntas to Utuado, a connection between Lares and San Sebastian, and the construction of other roads in Añasco, Cidra, Cayey, and Isabela.

He also plans to improve medical services, revamp the trauma unit at the Rio Piedras Medical Center, and build other medical centers in the western and southern regions.

The completion of all these projects would create a more attractive business environment. "The private sector gains confidence in the government as soon as it sees things are moving in the right direction," Pesquera said.

He says the private sector would play an active role during his administration, but the government wouldn’t give up its responsibility for providing electrical and water services.

Pesquera says he wouldn’t privatize the Puerto Rico Electric Power Authority (Prepa), though electricity costs must be stabilized. Prepa also needs a long-term plan to ensure it can meet the residential and commercial demand for electricity and can offer better rates for industries and businesses.

"We also need to retake control of Prasa [the Puerto Rico Aqueduct & Sewer Authority]; it is a matter of service and public health," Pesquera said.

He acknowledges the privatization of Prasa during the Rossello administration hasn’t yielded the expected results. "Prasa was going to collapse so privatization was necessary," Pesquera said.

According to Pesquera, Prasa got worse when the Calderon administration decided to cancel the previous management contract with the Water Co. and instead signed a $3.82 billion, 10-year contract with Ondeo. "The current administration didn’t perform an in-depth analysis of Ondeo [before signing], only to discover later that Ondeo has a history of bidding low to win the contract and later asking for increases," he said.

Pesquera proposes a hybrid model for Prasa whereby a private party handles management and administrative tasks while the agency is responsible for maintaining and improving the system.

He also believes employees should participate in the decision-making process and there should be an investment plan for modernizing the system.

Beside improving the island’s infrastructure, Pesquera proposes tax reform that includes a 25% reduction in the tax rates across the board; the elimination of the excise-tax hike on sport utility vehicles (SUVs), cigarettes, and beer implemented by Calderon in June 2002; and the simplification of the rules related to finance and insurance transactions. He would also replace the 6.6% excise tax with a 6% sales tax.

Pesquera is also committed to improving English-language education in Puerto Rico since that is the language of business and technology around the world. To that end, he would create three bilingual schools per school district. He would also focus on science education.

"I did everything I could for my children to learn English," said Pesquera. "I want students to have the opportunity to learn English. It is a matter of economic competitiveness, not ideology."

If Pesquera wins the gubernatorial election, he will also address the status issue. The statehood leader says most of the island’s economic and social problems stem from the island’s status. He proposes a referendum so that Puerto Ricans can ask the U.S. president and Congress to resolve the issue definitively.

Pesquera is certain he will prevail in the Nov. 9 primary. Pesquera notes that during Rossello’s administration, he spearheaded a $5 billion infrastructure development plan, the largest such effort in the past 40 years. In 1999, he resigned as head of the Department of Transportation & Public Works to assume the presidency of the NPP and run for governor. He lost the 2000 gubernatorial election to Calderon.

As he did then, Pesquera is certain now that he is the best candidate. "It is the people who determine who is the best candidate," he said. "I am tolerant, honest, and results-oriented. I have experience in government. I am the candidate with the best chance of getting votes from members of other parties. What you see now is what you’ll see after the Nov. 9 primary. I am the instrument for change."


Name: Pedro Juan Rossello Gonzalez

Birth date: April 5, 1944 in San Juan

Education: Bachelor’s degree in medical studies from University of Notre Dame (1966); doctor of medicine degree from Yale University (1970); specialization in pediatric surgery; master’s degree in public health from University of Puerto Rico (1981)

Professional experience: Harvard University and George Washington University professor (2001-03); Puerto Rico governor for eight years (1993-2001); Southern Governors’ Association president, Democratic Governor’s Association president; president of the New Progressive Party; resident commissioner candidate (1988); municipal health director for San Juan (1985-88)

Marital status: Married to Maga Nevares; father of three: Juan Oscar, 32; Luis Roberto, 30; Ricardo, 24

Rossello Favors Substituting Excise Tax With Sales Tax

Will continue major infrastructure development


WOW News editor

October 30, 2003
Copyright © 2003 CARIBBEAN BUSINESS. All Rights Reserved.

Should he win the gubernatorial candidacy of the New Progressive Party (NPP) in the Nov. 9 primary, former Gov. Pedro Rossello says his campaign platform will include a proposal to replace the island’s 6.6% excise tax with a sales tax.

In addition, he will seek federal legislation aimed at designating Puerto Rico an empowerment zone, which would give the island access to federal grants and tax incentives to promote its economic development. "We believe that if legislation is drafted in Congress to include Puerto Rico in the empowerment zones, then basically the entire island would qualify," Rossello said.

While his administration (Rossello was elected governor in 1992 and 1996) obtained congressional approval to make the benefits of Internal Revenue Code Section 30A applicable to Puerto Rico through 2005, as an alternative to the defunct Section 936, Rossello blames the Calderon administration for not lobbying in favor of extending 30A beyond its expiration date, choosing instead to lobby for Section 956, which, according to him, had no possibility of approval and wouldn’t have been a good incentive for economic development incentive in any case. In fact, Rossello thinks it is time to show that the island offers many more attractions to manufacturing companies than just tax benefits.

He does favor tax incentives that are tied to job creation, such as 30A, and acknowledges that they are important to businesses. However, he believes other factors are equally important in making a jurisdiction attractive to business investment.

"We have to put this in perspective," Rossello said. "A myth has been created…that the Puerto Rican economy is Section 956 or Section 936, and if they don’t exist there is no economy, and that isn’t right."

Another economic tool that Rossello will pursue is that which Sen. Bob Graham also supports: adopting an Earned-Income Tax Credit (EITC) in Puerto Rico. Rossello would like state and federal EITCs and the elimination of the marriage penalty.

Rossello, who during his two four-year terms as governor was responsible for rebuilding and expanding the island’s infrastructure to a greater extent than in any period in the past four decades, retired from politics in 2000 and went to the U.S. mainland to teach. He is now making history by participating in Puerto Rico’s first gubernatorial primary. His contender on the NPP ticket is party President Carlos Pesquera, Rossello’s former secretary of Transportation & Public Works.

Although in recent days Rossello has blamed Pesquera for the party’s defeat in 2000, during his interview with WOW News / CARIBBEAN BUSINESS, the former governor declined even to call Pesquera an opponent. "My opponents are outside the party. There are no opponents within my party," said Rossello. "There is a primary and the NPP has to decide which of us will run for governor."

He believes the primary won’t divide the party. "Division occurs when the right of the people to express themselves is denied," Rossello said. He recalls that such division occurred when then-incumbent NPP Gov. Carlos Romero Barcelo didn’t allow Hernan Padilla to run for governor. The former San Juan mayor left the NPP, formed the Puerto Rican Renewal Party, and both lost the 1984 general election to the Popular Democratic Party.

As governor of Puerto Rico, Rossello occupied many important posts on the national level, including chairman of the Democratic Governors’ Association. Many thought this would prompt the U.S. Congress to take action and promote a binding referendum to resolve the island’s status. Although a congressional bill to that effect was approved by the House (the Young Bill), it didn’t pass the Senate.

A fierce believer in statehood for Puerto Rico, Rossello now has two new proposals for changing the island’s status. One is to go to court to say that it is unconstitutional not to grant island residents all the rights of fellow U.S. citizens on the mainland.

The other is to call for a referendum whereby the people of Puerto Rico decide whether to ask Congress to act toward resolving the status issue. Rossello believes that with the results of the referendum in hand, Congress wouldn’t be able to refuse to take a stand. Congress would then have to define noncolonial and nonterritorial options from which Puerto Rico can choose.

Rossello, who implemented a wide-ranging health reform to give all low-income people access to private healthcare though government-funded private health insurance, criticizes the way the Calderon administration has mishandled his healthcare plan, which he says was unlike any in the States. He says that by July 2000, before he decided not to run for a third term, 99% of the people in Puerto Rico had health coverage. "It was shown that it could be done," Rossello said.

Rossello says the new administration set out to destroy the Health Reform. Within Calderon’s first year, the budget was cut considerably and services were eliminated from more than 200,000 beneficiaries.

In terms of infrastructure projects for Puerto Rico, Rossello proposes a train for both people and cargo to loop around the whole island. All passenger trains operate at a loss, he says, so transporting cargo would help subsidize the operation. The train would travel around the coast and connect to the Urban Train in the San Juan metro area.

Rossello would also pursue developing eight ports identified in studies by the U.S. Army Corps of Engineers. Each port would be equipped to handle a specific type of cargo. One of the eight is at the soon-to-close U.S. Naval Station Roosevelt Roads, which will be turned into a transshipment port.

Rossello also has ideas for increasing the production of energy based on demand. These include replacing some of the generators with models that are more efficient and have more capacity. He also proposes adding two generators using the resources of the Puerto Rico Electric Power Authority (Prepa) since most electricity now comes from the island’s south coast.

If the funds aren’t available, the government could resort to co-generators. It was during Rossello’s administration that the co-generation model (EcoElectrica in Peñuelas and AES in Guayanilla) was first implemented in Puerto Rico.

He also intends to resume the plan of his administration to construct a natural-gas line. EcoElectrica uses natural gas, which costs less and is cleaner than petroleum.

Rossello says that when he took office, petroleum was used to produce 98% of the island’s electricity. Because of his administration’s diversification policies, Puerto Rico now uses 67% petroleum, 17% natural gas, 15% coal, and 1% hydroelectricity. He also has plans for Puerto Rico’s regional and international airports and highways. He would extend PR10 to connect Adjuntas and Ponce and PR53 to connect Yabucoa and Guayama.

Rossello says the main problem at the Puerto Rico Aqueduct & Sewer Authority (Prasa) is its inability to create interconnected systems, as the Superaqueduct promises to do. He would add eight similar systems.

He disagrees with Juan Agosto Alicea’s suggestion that the government should retake the administration of Prasa. Rossello believes a private operator works better. "People don’t remember, but there were numerous problems when the government was in charge of Prasa," said Rossello. "Just because it isn’t operating well now, under this administration and its chosen operator, doesn’t mean the idea is wrong. What we need to do is find a good operator."

One of Rossello’s most controversial actions was to sell Puerto Rico Telephone Co. (PRT) to GTE, which later became Verizon. The decision prompted PRT union members to go on strike and numerous other sectors to oppose the sale.

The arguments in favor of selling PRT were that it would give consumers more options and the government-run company lacked the resources and the knowledge to compete against giant private telecommunications companies in an era of federally mandated deregulation.

Rossello still defends his decision. "It was believed that the government wasn’t losing money owning the telephone company, when in reality it was," he said.

This Caribbean Business article appears courtesy of Casiano Communications.
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