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By FRANCISCO JAVIER CIMADEVILLA
November 25, 2004
Its been a developing story for some years now. And CARIBBEAN BUSINESS has brought it to you blow by blow.
Our front-page articles "The Puerto Rico Bank Invasion" (CB Jan. 10, 2002) and "The New Conquistadors" (CB Aug. 29, 2002) told the story behind the moves of Popular, R-G Financial, First BanCorp, and Doral Financial to expand their businesses beyond island shores.
The expansion of Puerto Rico-based banks to U.S. mainland markets is nothing new. Banco Popular, the islands largest financial institution, first ventured stateside more than 42 years ago.
But in the past few years, their aggressive expansion moves stateside, and into Florida in particular, have continued to top the news. The latest are Populars acquisition of the eight-branch Kislak National Bank, a commercial bank based in Miami, and R-Gs acquisition last month of 18 SouthTrust Bank of Alabama branches, 15 of them in the Sunshine State.
These aggressive expansion strategies come at a time when local financial institutions have been posting record profits on their island operations. In the past few years, when so many businesses in Puerto Rico have been feeling the pinch of an economic-slowdown-turned-recession, the banking industry has been thriving amid the favorable, low-interest-rate environment, posting record-breaking net income levels, in some cases 50% above the previous year.
That begs the question: If local banks have been doing so well on the island, why are they expanding somewhere else?
The answer is: because they are investing in long-term growth. Top management of Puerto Ricos largest banks knows what any savvy businessperson should know. The long-term viability of any business depends on its ability to grow, not just to stay afloat. A business that doesnt grow eventually dies.
And although every expert in the industry agrees there still is room for local banks to grow on the island, theres no question Florida, one of the fastest-growing states in the nation, already boasting a population estimated at over 17 million, represents a rich new market for them. The explosive growth of the Hispanic population all over the state, and of the Puerto Rican population in the Orlando area in particular, is well-documented.
That alone represents a tremendous business opportunity for our very well-managed, sophisticated, and well-capitalized local banks.
Add to that the number of other Puerto Rico businesses that are expanding in the Sunshine State. Some of the islands top residential and commercial real-estate developers have mounted full-blown operations in Florida, in part precisely to cater to the growing Hispanic population in that state, at least for starters. Bear in mind there are already more Puerto Ricans living in the States than on the island, roughly at a 5-to-4 ratio.
So, our front-page story is great news for companies and businesses in Puerto Rico seeking to expand beyond the islands shores. They will find very friendly Puerto Rican banks ready to help and serve them in Florida.
But, as we have warned in the past, it also raises a flag: What are we doing, or not doing, in Puerto Rico to foster a better business climate, better economic-development opportunities, a higher standard of living, and a better quality of life? What are the conditions here that are motivating so many of our businesspeople and other professionals to seek better opportunities in Florida?
Are we just going to sit down and watch places such as Miami and Orlando pass us until they are more successful at attracting our middle- to upper-income families than we are at retaining them on the island?
Once again, we must issue a stern reminder to both the government and the private sector on the island: We had better get our act together or risk being left behind.
This Caribbean Business article appears courtesy of Casiano Communications.