Monday, July 16, 2018

[EDITORIAL] Up By The Bootstraps—Again

By on June 22, 2018

Editor’s note: This editorial was originally published in the June 21-27 issue of Caribbean Business

There was some good news on the jobs front for Puerto Rico—perhaps light at the end of the tunnel that is not a freight train barreling toward us—in an announcement by Sartorius, a German firm that manufactures pharmaceutical and laboratory equipment, would be moving forward with an expansion of its operation in Yauco. That $130 million investment will create 300 jobs.

Importantly, the German firm’s expansion is the result of work begun under a previous administration—Gov. Alejandro García Padilla and Economic Development & Commerce Department (DDEC) Executive Director Alberto Bacó Bagué—concluded under the administration of Gov. Ricardo Rosselló and DDEC Executive Director Manuel Laboy.

Thus, the German firm’s decision to invest in Puerto Rico is the result of a bipartisan initiative, an example of the art of the possible when opposing parties—in this case, the pro-Commonwealth Popular Democratic Party and the Pro-Statehood New Progressive Party—work together for the good of Puerto Rico.

The result of that expansion—job creation—conjured important infrastructure work, the Teodoro Moscoso Bridge, which commenced construction under the administration of Gov. Hernández Colón (1989-1992) but was inaugurated during the first term of Gov. Pedro Rosselló in 1994.

When the time came to cut the ribbon prior to the bridge’s first fare, then-Gov. Rosselló invited Hernández Colón to participate in the inaugural ceremony. That is the sort of statecraft that celebrates progress and leads to the creation of jobs. “Just because he has a different ideology doesn’t mean we should not cooperate; he started that project and it was right for him to be there,” Rosselló told this journalist in an interview that took place nearly a decade after that momentous occasion.

We must recapture bipartisan initiatives as Puerto Rico muddles toward frugality in this new abnormal. Sadly, there is very little of that spirit on display in the middle of this latest perfect storm spun by a mammoth debt crisis and a natural disaster the likes of which Puerto Rico has not experienced in nearly a century. Instead, we have disaster capitalists—some feeding on funds for recovery, others feeding on the costly process of debt restructuring—hovering above.

During an exclusive interview with this newspaper, U.S. House Natural Resources Committee Chairman Rob Bishop (R-Utah) said it would be a good idea for Puerto Rico to put fed funds coming to the island to work in this economy. He has expressed the same concern about the legal fees—overblown billable hours—being spent on financial advisers working their “restructuring magic” under the Puerto Rico Oversight, Management & Economic Stability Act. Bishop believes it is a good idea if that money goes to local firms to help kick-start an economy that is aching for a jolt to commence a path to sustainable growth.

Bishop stressed the need for the private sector and entities from the nonprofit realm to cooperate in pulling Puerto Rico up by the bootstraps once again. In other words, don’t count on the government and don’t count on the U.S. Congress.

There is no cavalry coming to save this economy. Yes, there is a trailer full of fed funds coming down the pike. A huge windfall is expected for Puerto Rico’s economy, commencing in the last quarter of 2018, tied to two separate grants by the U.S. Department of Housing & Urban Development (HUD) totaling $20 billion. The first assignment coming down the pike is a $1.5 billion Disaster Recovery (DR) grant announced in February that will start to trickle into the local economy in September. The local Housing Department has already filed a plan with HUD laying out the specific use of those federal funds, which are likely to be used to rebuild homes, assist businesses and help repair critical infrastructure. Another $18.5 billion in grants have been earmarked by HUD through the Community Development Block Grant (CDBG) program.

How much of that is put to good use with local talent will be very important for maximizing this economy’s growth. Attract capital to remain here (see Top Story, p. 4) and create jobs, lest we find ourselves in the same spot long after we have blown through the disaster fund windfall.

Will Puerto Rico Incentives Code help offset tax slide?

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