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A Bipartisan Economic-Development Agenda
The next four years dont need to be a waste if the PDP and the NPP deliver on the surprisingly long list of promises their two platforms have in common
By FRANCISCO JAVIER CIMADEVILLA & CB STAFF
November 11, 2004
A house divided...
If the executive and the Legislature have the political will to make it work, they can. Heres how.
Take a deep breath.
If you are scared stiff about the prospect of four years of paralysis in government, wondering how your business and the islands economy will move forward, you arent alone.
But there is hope.
Following the preliminary results of the Nov. 2 election giving Popular Democratic Party (PDP) gubernatorial candidate Anibal Acevedo Vila a razor-thin margin of two-tenths of 1% (0.2%) out of almost two million votes cast, many are wondering whether a divided governmentin which the governorship ends up in the hands of the PDP and the House, the Senate, the resident commissioners post, and the majority of the municipalities in the hands of the New Progressive Party (NPP)would be a recipe for an unending partisan squabble and irreconcilable disagreement over cabinet appointments, government budgets, major infrastructure projects, and public policy on everything from economic development to fighting crime and from health to education.
At press time Monday, the State Elections Commission, which the day after the election certified preliminary results from 98.27% of the electoral units counted, had started to tally the remaining votes and it appeared almost certain that a recount would follow. Under local law, a losing candidate has a right to a recount when the margin is less than 0.5%.
NPP resident commissioner candidate Luis Fortuño was preliminarily certified the winner of that race with 947,098 votes; his PDP opponent Roberto Prats, with 937,572 votes, conceded the election the following day.
Although the mandatory recount expected to start this week might yet change the preliminary results and deliver the governorship to the NPP, the final official result wont be known for weeks, or possibly until late December, thus adding to the uncertainty that, come January, we might have two different parties running the government.
Fast-forward to 2008 and you can almost hear both sides blaming each other for their obstructionist tactics as an excuse for not having fulfilled the promises they made to the electorate in 2004.
But it need not be that way. CARIBBEAN BUSINESS has analyzed both the PDP and NPP platforms and found a surprisingly long list of items on which the two parties agree.
The specific initiatives or programs may have different names, but they are in essence the same. So, if the executive and the legislative branches have the political will to make it work, they can.
The good news for the economic development of Puerto Rico is that both major parties are committed to partnering with the private sector to pursue a better quality of life and economic performance. And they both are committed to improving the business climate in Puerto Rico.
Acevedo Vila and Rossello agreed that having a double-digit unemployment rate in Puerto Rico is simply unacceptable.
They also agreed that Puerto Rico should move aggressively toward exporting its goods, services, and professional expertise.
Acevedo Vila proposed various initiatives to boost local entrepreneurship: Apoyo al de Aqui (Support to Our Local Entrepreneurs) is a capital-risk fund for local small and midsize companies, and "Operation Success" would provide 1,000 entrepreneurs with resources needed for their effective performance. Participating businesses would be required to create 10 jobs in a four-year term, for a total of 10,000 jobs.
Meanwhile, Rossello proposed a broad incentives program for the agricultural industry; the inclusion of the island in the federal Enterprise Zones program to give tax incentives to local businesses, and an aggressive infrastructure plan to satisfy Puerto Ricos decades-old needs.
Construction and infrastructure
In the areas of infrastructure development and revitalization of the local construction industry, the PDP and the NPP platforms have some common ground to build on during the next four years.
While their methodology may differ, each partys political platform calls to eliminate the red tape and speed up the slow, costly, and cumbersome permits-issuance process by streamlining and re-engineering the governments permitting procedures, certifications, endorsements, and consultations at all pertinent agencies.
To do so, the NPPs platform proposes the implementation of an autocertifiable permit, which would apply to all permit requests involving construction with no environmental impact or need variances to current laws and regulations. This represents about 32% of all construction permits. The agencies would issue these permits in one hour or less.
Under the NPPs platform, projects under the jurisdiction of the Regulations & Permits Administration (ARPE by its Spanish acronym) that involve variances or exceptions will be processed within 30 to 90 days. In projects requiring public hearings, a determination would have to be made after no more than nine months. Agencies would have a time limit in which to answer endorsement requests or to make comments. If no answer is given within the time period, it would be assumed that these agencies dont object to the project.
The PDPs proposal, on the other hand, would increase the number of Express Processing Centers from one to seven and would decentralize the process by passing the evaluation and approval of small and midsize projects to the regional level. The Planning Board would still handle larger projects that have a much broader impact and that would be too complex for the regions to handle.
One area both party platforms agree on is the need to implement and approve a land-use plan for Puerto Rico and to invest in technology to update zoning maps. Both parties maintain that with such a plan, everyone (private sector, contractors, developers, and the government sector) would know exactly which areas are for development and which ones are earmarked for environmental preservation. This would end the endless litigations and legal battles between developers and environmentalists.
In the area of infrastructure, both parties agree on giving priority to solving the islands water-supply problem, completing the islands road-infrastructure network, and extending the Urban Train to Caguas and Carolina.
The NPP proposes the construction of seven superaqueducts in its program Agua por un Tubo y Siete Llaves (Water Through One Pipe & Seven Faucets); it also calls for the regionalization of the islands potable water systems to reduce the number of systems in use today.
In its proposal Agua Segura (Safe Water), the PDP commits to investing $1.6 billion in strategic water projects. Legislation would be drafted to fund the projects and would specify that the money could be used only for specific ones.
Both parties also agree on the need to complete the islands road network. Projects include completion of the last section of PR10 between Utuado and Adjuntas, PR66 or the East Corridor, and the Maunabo tunnels; and the conversion of PR2 to an expressway from Hatillo to Aguadilla and from Mayaguez to Ponce.
While both parties also agree on extending the Urban Train to Caguas and Carolina, their vision of how to do so differs. The NPP has also proposed adding an islandwide commuter and cargo train called Tren Todo Puerto Rico (All Puerto Rico Train). The PDP, on the other hand, has limited its proposal to securing additional federal funds to extend the Urban Train to Caguas and Carolina. Both parties look to federal funds to complete the islands road network.
In the area of housing, both have proposed increasing the number of social-interest homes provided by the government to low-income residents.
As in other areas, both political parties platforms agree on the issuethey are in favor of providing tax relief to taxpayersbut their methodology differs.
The NPPs tax proposals involve federal and local components, while the PDP limits itself to local measures.
On the federal level, the NPP proposes the inclusion of Puerto Rico in the federal Earned Income Tax Credit (EITC), to give tax benefits to working people, and the Social Security Administrations Supplemental Security Income (SSI) programs.
On the local level, the NPP calls for the implementation of a local version of the earned-income tax credit; the elimination of some of the excise-tax increases imposed by the Calderon administration in June 2002 on sport utility vehicles, minivans, cigarettes, and alcoholic beverages; and complete elimination of the marriage penalty.
The NPP also proposes re-establishing other tax exemptions, including an increased deduction on dependents educational expenses. It also supports increasing the deduction on educational individual retirement accounts (IRAs) from the current $500 to $1,000. Retirees age 60 and older earning $15,000 or less would receive a tax exemption (it is now capped at $11,000), and for those age 59 and younger, it would be increased from $8,000 to $11,000. Tax deductions for donations would be increased from 33% to 50% under the NPPs proposal.
The NPP also has proposed the implementation of a consumer sales tax to replace the 6.6% general excise tax to spread the tax burden more evenly and to increase the tax base. This, in turn, would allow the government to reduce income tax rates.
In its platform, the PDP states its commitment to substantially reduce income tax rates to the middle class, although it doesnt specify by how much. Nonetheless, it proposes increasing the minimum income required to file an income tax return from the current $10,000 a year to $15,000 a year. It makes no mention of revoking the excise-tax increases imposed by the Calderon administration.
Although the PDP originally considered replacing excise taxes with either a sales tax or a value-added tax, it reneged just weeks before the election. However, during an interview with CB (CB July 22), Acevedo Vila said he would seriously consider a Treasury Department study carried out by the stateside research firm Bearing Point on replacing the excise tax. He said that if analysis shows the excise tax doesnt fulfill its purpose or it should be modified or eliminated, a different consumer tax would be implemented.
The Bearing Point study hasnt been made public, but it is rumored that it recommends a hybrid tax system: A value-added tax would be imposed on merchandise as it passes through the distribution chain, and a sales tax would be tacked on at points of sale.
In previous interviews with CB, Acevedo Vila and Rossello acknowledged the importance of tourism for Puerto Ricos economic development and promised to support the industry. This sector generates $9 billion for the islands economy and employs more than 83,000 people.
For Acevedo Vila, tourism is a key component of a multisector economy, which includes everything from manufacturing to the services sector, and he stressed the importance of Puerto Rico being competitive on every front.
According to the NPP platform, tourism is the spearhead of the economy, and Rossello believes Puerto Rico will successfully compete in what is the fastest-growing economic sector in the world. For an island in need of jobs, he sees tourism as just the sector to provide not only many jobs, but a wide array of job options, for everyone from specialized professionals to skilled workers.
Both leaders have said they were committed to reviewing and adopting the Transportation & Tourism Strategic Plan recently completed by the Tourism Co. in conjunction with the private sector, but to different degrees. The plan is an effort to give continuity to the islands tourism promotion efforts. Among other things, it calls for an integrated and consistent marketing campaign, with the input and support of the private sector that would stay in force regardless of changes in government administration.
Acevedo Vila and Rossello differ on who should be in charge of marketing and advertising, however. The PDP platform favors the government supervising these efforts through the Tourism Co. Rossello would create a government-run Tourism Authority to integrate the tourism marketing and advertising strategies.
The PDP and NPP platforms state the parties commitment to diversify the islands tourism product by providing a more diverse array of lodging options, including moderately priced hotels and bed & breakfasts. Both documents also agree new attractions and exploiting niche markets such as ecotourism are also needed.
The NPPs platform proposed the creation of a museum network and views the Puerto Rico Coliseum and the forthcoming Convention Centerboth conceived while Rossello was in office from 1993 to 2000as part of Puerto Ricos attraction inventory.
Acevedo Vila has proposed the creation of a Caribbean Theme Park, an IMAX cinema, and an aquarium. The last two ideas have been thrown back and forth for years as part of the Golden Triangle proposal created during Rossellos first term as governor.
The Golden Triangle would, among other things, connect and improve Old San Juan, Condado, Isla Grande, and Miramar, areas that are all important for tourism.
Other components of the Golden Triangle, which outlines nearly 30 infrastructure projects, also receive special attention in the NPP platform. It includes projects to improve ground transportation and to create new public spaces for commerce and tourism activity.
Both candidates believe the Port of San Juan should be devoted to tourism activity and that the San Juan metro areas should be revamped to serve the hospitality industry better, including maximizing the forthcoming Convention Center.
Both Acevedo and Rossello support strengthening regional brands in Puerto Rico. To that effect, Rossello said the party is committed to analyzing and improving the Porta del Sol brand, a marketing initiative designed to promote tourism in western Puerto Rico.
Acevedo Vila proposed continuing with Porta del Sol as well; he also called for the creation of a regional brand to promote eastern Puerto Rico, which includes the El Yunque rain forest, Vieques, and Culebra. The latter two would be used for nautical activity. Together, these regions would be the pillars of the tourism industry, he said.
Electricity has been a large concern for Puerto Ricos manufacturers and business owners, and both party platforms promised to reduce power costs. During their campaigns, the PDP and NPP candidates also agreed on the need to build new electricity-generation plants. Rossello suggested two be constructed: One in the east and one in the west; Acevedo Vila recommended only one be added in the west. They also called for repowering San Juans Units 5 and 6.
In addition, both platforms called for building an interisland pipeline to provide natural gas for commercial and industrial use and supported developing solar, wind, solid-waste-to-energy programs, and other alternative energy sources.
Employee benefits in the manufacturing sector were a concern for candidates from both parties, and they discussed the cost of doing business on the island. However, their proposals differed when it comes to how to rein in costs without affecting production quality. One item both platforms agreed on was the need to create childcare centers to allow mothers to rejoin the work force.
The parties political platforms also discussed the issue of attracting research & development (R&D) from more technology and pharmaceutical companies to the island. Both considered the use of tax incentives as an effective tool to do so, although in varying degrees. Both parties said they would particularly target high-technology companies.
The PDP and NPP platforms agree that protecting the environment and stoking economic development can go hand in hand. Both call for creating a master land-use plan for Puerto Rico; tagging more land for conservation; and protecting the watersheds, the karst region, beaches, and estuaries.
Specific proposals differ, however. The NPP platform proposed the Great Park of Puerto Rico, which would cover at least 15% of the land; Acevedo Vilas Heritage 100,000 cuerdas (one cuerda equals 0.97 acres) would aim to identify 100,000 cuerdas of land for conservation.
In the area of recycling, Acevedo Vila committed to recycling 50% of the islands solid waste and developing aggressive educational campaigns to promote the effort. The NPP proposed strengthening the islands recycling infrastructure and adopting new technology such as waste-to-energy plants as they are more efficient than landfills.
Universal health coverage
Another major issue both party platforms agreed on during the campaign was the need for everyone in Puerto Rico to have medical coverage.
During the campaign, Rossello was the first to discuss universal health insurance; Acevedo Vila, however, also proposed his own version as part of his partys platform. Enough common points exist between the two, that, as long as politicking doesnt get in the way, universal coverage may become a reality.
Under both Rossello and Acevedo Vilas proposals employers take a part in providing healthcare. "We could ask employers to contribute to employees health benefits to help the 200,000 or 300,000 who dont have medical plans," said Acevedo Vila during an interview with CB.
Rossello outlined his partys view during a separate interview with CB. "Those whose income is greater than 200% of the federal poverty level [currently, $12,123 a year, per person so 200% would be $24,246] would be covered by private health insurance provided by their employers. All employers would be mandated to offer health insurance to their employees. About 85% of the employees in this income segment already have health insurance from their employers. This proposal would ensure the rest have fundamental coveragenot basic or minimum, but fundamental" said Rossello.
According to the NPP leader, employers would have three options for providing insurance to their employees. First, they could purchase group insurance directly from any private insurance company, as most businesses already do. Second, they could purchase the governments more affordable health-plan insurance. Third, they could set up a payroll tax so the money would go directly to the local Treasury Department; the government would then provide insurance through the Health Reform.
Those businesses whose employees meet income requirements for the Health Reform would have no problem, because those workers are already covered by the Health Reform. Employers who want to offer employees extra benefits to attract the best could do so. But everyone would have at least the same fundamental coverage.
Acevedo Vilas plan calls for the creation of a discount card similar to the one Medicare offers. "Although the cards arent health plans, we can negotiate rates with providers so beneficiaries pay lower rates per visit. The advantage for providers is that they will attract clients," he said.
To make healthcare access more widespread, Acevedo Vila said the government could allow ineligible residents to sign on to the governments health plan at an affordable price.
Rossello, meanwhile, went into detail on how the party would guarantee coverage for the rest of the population. "People over 65, regardless of income, would continue to be covered by federal Medicare. Those under 65 with income below 200% of the federal poverty level would be covered by the local governments Health Reform, as originally implemented under our administration. The local government would buy and finance health insurance from private insurance companies for this group," he said.
The two party platforms also agree Centro Medico should be kept in government hands. They part ways on municipal emergency rooms, however. The PDP has committed to never privatizing health facilities, including municipal emergency rooms. The NPP believes some emergency rooms will need to be privatized.
"In some isolated communities such as Culebra, Vieques, or Castañer, demand alone [for a municipal emergency room] is insufficient, and the government must take over to guarantee access even if it isnt cost-effective," Rossello said.
Rossello added, "The government also must be in charge of complex and expensive servicessupratertiary services such as a heart transplants, for examplewhen the market cant sustain them, as they arent cost-effective. A hospital such as the government-run Centro Medico would then offer services that private hospitals dont have the funds to provide. Centro Medico wont be privatized. Obviously, if private hospitals want to offer the same supratertiary services as Centro Medico does, that is fine."
While Puerto Rico waits with bated breath for the final results of the 2004 elections, politicians from all parties need to cast their own votes, so to speak. Will they look past their differences to build on common ground, or will they take a divisive campaign and follow it up with a divisive four-year term?
CARIBBEAN BUSINESS associate editors Jose L. Carmona, Marialba Martinez, and Taina Rosa; reporters Joanisabel Gonzalez-Velazquez, and Proviana Colon Diaz contributed to this story.
Pedro Rossello and Anibal Acevedo Vila were rarely on the same page about the future of Puerto Ricos shipping industry and the islands insertion into the global transshipment industry.
It is true both candidates were committed to finishing Ponces Port of the Americas Rafael "Churumba" Cordero Santiago, but each differed about what kind of cargo movement it would handle. While Acevedo Vila favored the ports implementation as a mixed-use port for both domestic and international cargo, Rossello proposed it handle part of San Juans domestic cargo as part of the NPPs network of specialized supply ports around the island.
The NPP feels with all its cargo and cruise-ship traffic San Juans port is nearing full capacity so cargo bound for the southern coast eventually will have to enter and leave through Ponce.
Being right next to the Mona Passage, the only way for shipping to and from the Panama Canal in order to cross through the Western Hemisphere, Puerto Rico is ideally situated for a transshipment port. But given the size limitations of the port of Ponce to handle major transshipment operations, the NPP platform identified Ceibas Roosevelt Roads, which is eight times larger than the Ponce port as the ideal location for the development of a world-class transshipment port.
Meanwhile, Acevedo Vila favored Gov. Sila Calderons local redevelopment plan for Roosevelt Roads, which includes tourism and residential development, a technology park, and health and educational facilities.
The candidates agreed on the Port Authoritys reallocation of land from San Juans Port of Puerto Nuevo, including the transfer of the Central Market and other companies that dont need to be in the immediate area. As part of the tourism-district program, the NPP platform favored moving domestic cargo operations from San Juan to Ponce; according to Acevedo Vilas tourism program, it would be sufficient to move San Juans cargo operations in the northern part of the Bay of San Juan to the bays southern area.
As to air transportation, Acevedo Vila said he would continue the Calderon administrations commercial-spaces marketing program for Carolinas Luis Muñoz Marin International Airport. Rossello also supported more-efficient marketing of the airports commercial spaces, adding that improvements would be made to the airports general cargo area.
In the area of crime, the PDP and NPP party platforms only agreed on the police departments need to give more equipment and new technology to criminal investigators and forensic scientists. But when it comes to reducing crime, there are drastic differences.
Given that 60% of all crimes go unsolved in Puerto Rico, Acevedo Vila proposed a plan called Castigo Seguro (Sure Punishment), to boost the effectiveness of criminal investigations to increase the crime-solving rate and penalize criminals.
Rossellos party platform, however, calls for the return of Mano Dura, or Strong Hand, to maximize prevention and increase the effectiveness of law-enforcement forces, be they from the police department or the National Guard in pursuing the criminal.
It is no surprise the PDP and NPP approach the status issue from different angles. Both platforms, however, say the winner will call for a referendum within the first six months in office. They differ, however, on the specifics of the mechanism. The PDP platform supports a constitutional assembly, but will let the people ultimately choose the mechanism. The NPP platform favors a referendum to let the voters decide whether they want the U.S. Congress to define which nonterritorial and noncolonial status options it would allow for Puerto Rico.
Corruption was the thorn in the Rossello administrations side, something Rossello himself has admitted. Amid the accusations of corruption from both sides, there nonetheless exists some consensus.
Both favor reinforcing law-enforcement agencies. For Acevedo Vila, this would mean, in part, creating an elite team of prosecutors and investigators specialized in finances, accounting, and other areas within the Department of Justices Public Integrity Office. They would attend seminars given by the Federal Department of Justices Public Integrity Division.
The PDP platform also calls for reinforcing the Commonwealth Comptrollers Office and the Government Ethics Office and creating an anticorruption office to investigate possible acts of corruption.
Acevedo Vila also promotes integrating anticorruption agencies such that personnel from the Department of Justice, the Comptrollers Office, and the Government Ethics Office could rotate among the agencies and improve their collaboration.
CARIBBEAN BUSINESS associate editor Marialba Martinez and Proviana Colon Diaz contributed to this story.
This Caribbean Business article appears courtesy of Casiano Communications.