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Enough With The Rhetoric–Puerto Rico Needs Action


December 30, 2004
Copyright © 2004 CARIBBEAN BUSINESS. All Rights Reserved.

Once more, Puerto Rico’s economy reported a disappointing year. In 2004, real growth was about 2.5% in Puerto Rico, much lower than the economic performance in the mainland U.S., which reported a growth rate of 4%, and the 5.5% growth registered in Latin American & Caribbean countries.

You don’t have to be an economist to grasp the implications of this situation. The economic gap between the U.S. mainland and the island just keeps getting wider. Puerto Rico continues to steadily fall behind. The island’s per capita income compared to Mississippi’s, the poorest state in the nation, continues to widen.

Making Puerto Rico’s situation more precarious is the fact that our neighbors from Latin America , although still behind, are closing the gap that exists with the island; growing twice as fast as Puerto Rico, which only grew between 2.2% and 2.5%, while our neighbors to the south and in the Caribbean grew by more than 5%. The oil-price hikes that surpassed $55 per barrel of crude affected most of the economies of the world, not just Puerto Rico, but they still managed to perform better economically than Puerto Rico. If you take into consideration the fact that 30% of our energy now comes from natural gas and coal, Puerto Rico has an advantage over some of our neighbors.

The island’s economy continues to be highly dependent on the public sector. The participation rate in the labor force was under 50% and the average unemployment during 2004 remained high at over 10% throughout most of the year. This, in spite of the fact that employment in the commonwealth government increased, now employing 30% of the salaried employees in Puerto Rico.

The island’s economy continued to be driven by public investment and government expenditures, as is always the case during election years. Yet, despite this, the quality of life in Puerto Rico didn’t improve, with our streets becoming increasingly more violent every day and nearly 800 people murdered in 2004 alone, the highest number since 1996. No wonder Puerto Rico residents are moving in large numbers to the U.S. mainland, especially to Florida. To make matters worse, there is no confidence a highly politicized commonwealth government can adequately address Puerto Rico’s economic and social ills.

The island’s new government will have to revamp its economic model if our economy is going to catch up, even with the poorest states in the nation. This means Puerto Rico not only needs a tax reform, but a complete overhaul of its fiscal system, to alleviate the existing burden on taxpayers and local businesses, and maintain Puerto Rico’s bond ratings. But tax reform won’t be sufficient unless it is accompanied by a complete overhaul of the fiscal side–meaning government spending– and improvement in how public corporations are managed. And without a doubt, the level of Puerto Rico’s government spending must come under control, as must the crime problem.

Four years into the 21st century, Puerto Rico remains at an economic crossroads, with the need to revamp its economic, social, and infrastructure model. Most economists agree that in order for Puerto Rico to achieve adequate growth levels, proactive and aggressive measures are necessary or the economy will continue to experience sluggish growth. Puerto Rico must become more competitive by improving its economic performance and the efficiency of government.

Puerto Rico doesn’t need more political rhetoric from government officials and legislators or partisan battles. What we need is a complete revamping of the public sector, and if the commonwealth government isn’t willing to do so, it is up to us, the taxpayers and the private sector, to demand they do so. Enough is enough!

This Caribbean Business article appears courtesy of Casiano Communications.
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