Thursday, April 25, 2013

A new U.S. Labor Department report was bad news for new Puerto Rico Governor Alejandro Garcia Padilla’s pledge to create 50,000 jobs in 18 months. During his first three months in office — one sixth of the period, the territory lost 6,466 jobs - Puerto Rico Report

Puerto Rico Report

Islands Lose One-Fifth of Jobs in Six Years
A new U.S. Labor Department report was bad news for new Puerto Rico Governor Alejandro Garcia Padilla’s pledge to create 50,000 jobs in 18 months. During his first three months in office — one sixth of the period, the territory lost 6,466 jobs.
The job loss came despite repeated claims by Garcia Padilla that jobs were being created towards his 50,000 additional jobs goal. His assertions have been based on announcements of corporate investment plans, which he attributed to his administration’s policies and efforts — and which may or may not come to pass.
“Commonwealth” party candidate Garcia’s narrow election last November is widely attributed in part to the loss of jobs during the administration of his statehood party predecessor. During Luis Fortuno’s four-year term, 119,653 jobs were lost.
But 125,684 jobs were lost from May 2006 until Fortuno’s term began at the beginning of January, 2009 under another ‘commonwealther’ governor in whose cabinet Garcia served, Anibal Acevedo Vila.
The real story of Puerto Rico’s job loss is that it relates little to individual governmental administrations or political parties. It is that the territory has been on a downward jobs spiral since April 2006, the high point in the history of numbers of jobs in Puerto Rico.
Since April 2006, Puerto Rico has lost 251,803 jobs. The loss is almost one-fifth of the 1,277,560 jobs that existed in April 2006. At the end of this March, there were only 1,025,757 jobs in the islands.
The staggering job loss is a consequence of Puerto Rico’s political status. Because of the status (really territory but popularly called “commonwealth”), Puerto Rico lacks the economic opportunities that it would have as a U.S. State or as a nation. Puerto Rico and its US. citizens can be treated unequally with the States and their citizens in Federal program and tax laws — and are treated worse under some major program and taxes — depriving the economy — and individuals — of billions of dollars in income every year.
At the same time, Puerto Rico does not have the business advantages that it would have as a Nation.
The islands of 3.67 million people also lack voting representation in Congress and in the election of the president of the United States — making it difficult to get their needs addressed by the Federal government.
The loss of jobs in Puerto Rico has coincided with — and has helped caused — a loss of population. As U.S. citizens, Puerto Ricans can move freely elsewhere in the Nation in search of greater economic opportunities and a better life.
There are now more than a million people of Puerto Rican origin in the States more than in Puerto Rico. One-third was born in the islands.
The new residents of the States have ‘voted with their feet’ for the equality of opportunity that statehood means for the U.S. citizens of the States but not for the U.S. citizens of Puerto Rico.


Wednesday, April 24, 2013

Analysis: Puerto Rico's economy may get worse before it gets better - Reuters

» Analysis: Puerto Rico's economy may get worse before it gets better - Reuters
24/04/13 07:07 from puerto rico news - Google News
Drug War Chronicle Analysis: Puerto Rico's economy may get worse before it gets better Reuters All three leading Wall Street credit-rating agencies have in recent months knocked Puerto Rico's credit rating to near junk-bond status,..




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Analysis: Puerto Rico's economy may get worse before it gets better

Wed Apr 24, 2013 7:06am EDT
(Reuters) - Puerto Rico's new governor is trying to heal the Caribbean island's wounded public finances with an austere budget heavy with new taxes that could sap life from a wobbly economic recovery.
When Governor Alejandro Garcia Padilla presents his first budget on Thursday, he will be closely watched by America's $3.7 trillion municipal market, which is ever more worried about the U.S. commonwealth's ability to finance its public debts.
All three leading Wall Street credit-rating agencies have in recent months knocked Puerto Rico's credit rating to near junk-bond status, pointing in part to an economy sapped by a six-year recession that only ended in 2012. Further ratings cuts are possible.
The island's unemployment rate is 14.2 percent. It is a major worry for Puerto Rico's government as it presents a fiscal 2014 budget plan that will rely on borrowed money to close gaps. Officials don't expect a balanced budget for another year, at best. The budget plan is expected to face little opposition from legislators.
"As government tightens its belt, one can see the unemployment rate going higher," said Dan Heckman, senior fixed- income strategist at U.S. Bank Wealth Management, a firm that owns very little of Puerto Rico's $53 billion of muni bonds.
"That's one big challenge," Heckman said. "And they are talking about tax increases that can affect hiring and business. You can have unintended consequences when you raise taxes."
RECESSION RESPITE MAY BE BRIEF
Last year, the commonwealth's economy expanded for the first time since 2005, but Puerto Rico's tepid economic recovery now shows substantial signs of sputtering - a turn that would aggravate worries among bond investors about chronic budget deficits and its $53 billion of debt.
In December, January and February, the economy - dominated by manufacturing, finance and government services - ended 12 months of modest but encouraging growth and posted declines from year-earlier levels, according to the Economic Activity Index of the Government Development Bank, which is fiscal agent and advisor to the U.S. commonwealth.
February's coincident index, which tracks payrolls, cement sales, gasoline consumption and electricity use, was off 1.31 percent from February 2012. The data issued last week included especially big declines in cement and electricity consumption.
"That economy will continue to grow slowly," said Anthony Valeri, fixed-income strategist at LPL Financial in San Diego. "If we don't see material improvement in the economy and other debt metrics, we could see a downgrade."
In contrast, economies in the Caribbean and Latin America were getting a lift from strong expansion in Brazil and Argentina, and were forecast on Tuesday by a United Nations agency to grow 3.5 percent in 2013, up from a 3 percent increase last year.
"The economy is pretty blah, pretty tepid, and if the economy were to get worse ... I think a downgrade could come soon," Janney Capital Markets Managing Director Alan Schankel said of Puerto Rico.
Ratings downgrades typically raise interest rates for borrowers, and lenders now require Puerto Rico to pay by far the highest rates of any big issuer. Its weekly spread over AAA-rated yields reported by Municipal Market Data is 320 basis points, well over twice that of Illinois and near the island's all-time high of 340 basis points hit in 2009.
Puerto Rico's $99 billion economy has long endured population declines, double-digit jobless rates and losses of tax benefits that bolstered manufacturing.
The island's economic performance is central not only to Garcia Padilla's budget, but also to dealing with outsized government debt and government pension systems underfunded by $37 billion.
Garcia Padilla, who criticized the austerity measures of predecessor Luis Fortuno, has won praise from Wall Street for okaying sweeping changes in government pensions and leaving in place a long-term leasing to private companies of San Juan's main airport.
The new budget is expected to have revenues of $9.7 billion, including tax increases of about $1.65 billion, according to finance officials.
Earlier this year, Puerto Rico increased an excise tax on multinational manufacturing that raised $600 million annually. The governor also wants to raise $550 million by eliminating deductions and expanding the reach of a sales and use tax.
Some $150 million will be raised through a proposed 4 percent tax on self-employed professionals earning more than $150,000 annually. Officials also want to increase cigarette excise taxes to raise $50 million and boost lottery earnings by $40 million by joining the multi-state Powerball game and other initiatives.
Spending priorities will be crime fighting and economic development, with more resources put into those areas, officials have said.
(Reporting by Michael Connor in Miami; Additional reporting by Reuters in San Juan; Editing by Tiziana Barghini and Jan Paschal)