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Editorial & Column
Which Is Right?
By FRANCISCO JAVIER CIMADEVILLA
July 8, 2004
Two weeks ago, Gov. Calderon and members of her administrations economic team painted a rosy picture of the economy of Puerto Rico.
They took credit for job-creation and company-retention efforts that, according to the governor, have yielded sustained economic growth during the past 10 months.
Last year, Gov. Calderon promised that 2004 would be the year of the harvest, when we would all enjoy the fruits of her administrations hard labor. Today, she is six months away from leaving office, so no one expected her to say anything else.
But the economic reality of many businesses out there is quite different. Many of them struggled with slow sales and higher costs, especially energy, in the first half of this year. And although optimistic, many have a guarded outlook for the next six months.
Part of the reason businesses havent recovered from the economic slowdown is that consumer spending has choked. As we reported in our front-page story June 10, the $100 million in tax breaks this year failed to offset the $1.4 billion sucked out of the local economy by military spending cutbacks, excise tax hikes, and job losses.
In fact, its interesting to note that, when asked about the economic outlook for the next six months, most local businesspeople dont appear concerned about the much-anticipated interest rate hike that the Fed just announced.
Rather, they point to some of the same problems that have affected them in the past few years and about which the local government could do something. For example, construction executives note that although the gridlock in the permitting process has been alleviated a bit lately, and developers are finally seeing their projects receive their much-awaited construction permits, there are still delays affecting not only private-sector projects but, ironically, public-sector projects as well.
So, while the administration boasts of having invested close to $8 billion in new infrastructure construction projects, and now says many bids for new projects have to be canceled because there arent enough contractors to handle the amount of work, the local economy has hurt tremendously throughout the past three years because the administration has held up most of the projects.
In tourism, industry executives continue to contend with infrastructure limitations in such areas as electricity, water, and telephone service. Hotels also face a limited supply of skilled personnel, including staff with adequate bilingual skills. In addition, they complain that the local government always looks to the tourism industry every time it needs added sources of revenue. "When we get these added burdens, it just increases our operating costs, which end up being passed on to our guests, making us less competitive," complained an industry leader.
Finally, as we have reported in the past few weeks, local businesses not only had to struggle to make ends meet during the first half of this year but also had to fight a local Legislature that went berserk, proposing some very important antibusiness legislation that would have thrown the island back to the dark ages of economic competitiveness.
In that regard, we have to once again commend the governor for standing firm in the past few weeks, either vetoing or blocking a slew of bills that might have helped a few legislators seeking re-election but would have been disastrous for Puerto Ricos economic development.
Nevertheless, to say, as the governor and her team said two weeks ago, that the island has been in a sustained economic recovery in the past 10 months thanks to her administrations efforts defies credibility.
This Caribbean Business article appears courtesy of Casiano Communications.