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A World-class Opportunity


February 10, 2005
Copyright © 2005 CARIBBEAN BUSINESS. All Rights Reserved.

Travel and tourism are the world’s largest industry, generating 200 million jobs globally. By 2010, worldwide travelers are projected to reach one billion tourists seeking new and interesting destinations to visit and spend their vacation budgets. By 2020, the World Tourism Organization predicts global tourism expenditures will surpass the $2 trillion mark. Within the travel and tourism industry, ecotourism is the fastest growing sector, generating millions in revenue while promoting the conservation of natural resources.

On an island blessed with so much diversity and plenty of natural resources, one would think Puerto Rico would be aggressively competing for the ecotourism market. Not so. In the six years since the local Legislature enacted the law establishing public policy to promote ecotourism and creating a board of directors to coordinate the development of this sector, not a single thing has been done. No members have been appointed to the board; therefore, no one has met to develop this sector of the economy. The Tourism Co. hasn’t been able to market Puerto Rico as an ecotourism destination because the agency is waiting for the ecotourism board to establish the industry’s guidelines. So, the development and promotion of this sector is basically on hold. There is no reason, however, for the Tourism Co. to wait for an ecotourism board to be approved before it starts promoting this sector. The attractions are there, so why not let tourists know.

Tourism presents Puerto Rico with the greatest economic growth opportunity for many decades to come. A labor-intensive, clean industry, tourism can generate tens of thousands of jobs in Puerto Rico. Tourism depends solely on the island’s resources, climate, and human capital, and the jobs created in the industry can’t be outsourced. With such potential, Puerto Rico’s new government administration must consider making the tourism industry one of its main priorities for economic development. A growing tourism industry not only will generate economic growth, it will help absorb some of the overwhelming number of employees currently weighing down the public sector.

In March, analysts from the credit-rating agencies are returning to Puerto Rico. The rating agencies recently downgraded the outlook for government bonds and the Government Development Bank (GDB) from stable to negative. The credit ratings agencies, says new Treasury Secretary Juan Carlos Méndez, aren’t coming to see more studies telling them what the commonwealth government plans to do to improve its fiscal situation. The government of Puerto Rico will have to show the rating agencies exactly what is being done or a downgrade of the government’s bonds rating is imminent. "I don’t think we can prevent a downgrade of the bonds by saying we are studying something, or another committee is studying something else; no, I don’t think that will work," Méndez says.

The new heads of Treasury, Management & Budget and the GDB acknowledged the government’s $1 billion deficit has created a crucial economic situation for Puerto Rico where immediate tax and fiscal reforms must be enacted. But the question that must be addressed is how much fiscal reform can be enacted when 72% of the government’s budget is spent on operational expenses, only 15% is invested in capital improvements, and 13% in servicing the Commonwealth’s debt. One out of three salaried employee in Puerto Rico works for the government, which is why the majority of the commonwealth’s budget is spent on payroll or related professional services.

In spite of this, the government executives interviewed by CARIBBEAN BUSINESS this week—who one way or another have to deal with the fiscal crisis—say reducing employment isn’t an option because Gov. Aníbal Acevedo Vilá is publicly committed to not cutting jobs. So, what exactly will the GDB tell the credit-rating agencies next month? Puerto Rico has few alternatives, other than increasing taxes. Whether the new administration calls it tax reform, sales tax, or value added, Puerto Rico taxpayers can expect the government to dip deeper into their pockets this year to balance the budget; to continue financing the huge government bureaucracy; and to demonstrate to the credit rating agencies that something is being done to resolve the Commonwealth’s fiscal crisis.

This Caribbean Business article appears courtesy of Casiano Communications.
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