CCE: Overestimated Retail Sales Do Not Affect Government Fiscal Plan
Editor’s note: The following article originally appeared in the August 3 print edition of Caribbean Business.
SAN JUAN — In light of a recent announcement about overestimated retail sales in relation to the government’s plan certified by the fiscal control board, the new numbers are not expected to have an impact on the plan’s economic projections.
That is how Ricardo Llerandi, executive director of the Trade & Export Co. (CCE by its Spanish initials), explained the estimates from data from the agency’s “InfoVentas” study, which were not utilized in drawing up the government budget and economic plan, meaning the plan’s projections would not be affected.
“Nothing [in InfoVentas] affects previous bond emissions, nothing affects the approved fiscal plan, and nothing affects the budget because it does not take into account this report concerning the drawing up of the budget, not now and not before. It has never been used to draw up the budget and does not touch the general fund,” Llerandi assured in an interview with Caribbean Business.
The public entity in charge of fomenting the growth of Puerto Rico’s small and midsize enterprises (pymes, according to its Spanish acronym) recently announced the implementation of new methodology to prepare the InfoVentas retail sales report, which presents an overview of the state of local businesses and reflects an overestimation of about $10 billion per year.
Sources consulted by this newspaper agreed the change is immaterial because it does not affect real income. They added that although the study’s overestimation of sales is important in establishing a lower starting point for sales, the fiscal plan is based on income received by the Treasury Department and not by projections from InfoVentas.
Llerandi held that InfoVentas’ primary task is to offer a glimpse into retail sales to measure the business sector’s performance and establish this sector’s public policies for the economy.
Economist Héctor Román believes the government’s message should go further to assure the new information will not affect its budget or fiscal plan. He said the goal should be to push innovative measures for economic development based on the findings to promote the successful growth of the enterprises and their positive impact on the economy.
“Now there is more reliable information on what Puerto Rico’s business landscape really is. What we have to extract [are] which strategies of economic development will be implemented utilizing data that is more accurate. Now, we have much more accurate economic intelligence that is both positive and clear, so what are we going to do with this economic intelligence?” Román asks.
Along this line, the trade official expressed that his agency would wait to rely upon next year’s fiscal data before making necessary adjustments to public policy. He also expressed that his priority is to boost sales of pymes through initiatives such as the “Puerto Rico Emprende” program, which provides incentives for the establishment of these kinds of businesses on the island.
Changes in methodology
Since 1972, InfoVentas has been used to provide a comprehensive framework on the retail economy. A change implemented in 2005 by the CEE established that the sample of 2,823 businesses would be collected on paper, telephone and email, presenting a problem about the compiled information due to its inaccuracy and absence of reliable numbers.
The CEE could have introduced the changes since 2014, but they were never realized. According to Llerandi, the previous methodology had been in disuse for nearly 10 years, while the demonstration prepared in 2005 excluded businesses that arrived on the island after that date.
Under the new methodology, it is the Treasury Department that sends the information about sales revenue that the businesses report through the sales & use tax, known as IVU by its Spanish acronym. So, compared to the 2,823 businesses that were previously reviewed, the quantity now equates to more than 6,000 establishments. This reflects a growing reliability of the data.
In accordance with the new numbers, from October 2016 to December 2016, the major business channels reported significant sales in the economy of a little more than $6.159 billion, while the SMEs reported sales of about $2.593 billion.