[EDITORIAL] Trumponomics Unveiled
The image on the cover of Caribbean Business—President-elect Donald Trump being hogtied by Puerto Rico’s business community—alludes to what it will take for Puerto Rico to begin to grow the economy again, which is for the private sector to stop relying on the government and take matters in hand. Can it be done? We believe so.
The hundreds of companies listed in a special report on Puerto Rico’s Top 400 Locally Owned Companies and the selection of 40 Under 40 fine young cannibals devouring their competitors (see editorial inside pullout) is proof of such potential.
Yes, Puerto Rico has high-caliber executives who continue to innovate with cutting-edge solutions in the face of an economic downturn that seemingly has no end in sight. In the decade since this crisis began, Puerto Rico has lost more than 250,000 jobs, more than 12,000 companies have shuttered and more than 328,000 residents, many of them professionals, have taken flight for friendlier confines.
The steadfast resolve of the Caribbean Business Top 400 is a truly herculean virtue. In 2015, the combined revenue of the Top 400 was $25.64 billion, up by $658.38 million, or 2.63% from 2014. All told, the corporate stalwarts provided 130,267 full-time jobs in 2015. Although this is a tremendous achievement in the face of so much turbulence, these companies are providing 3,206 fewer jobs year after year.
The jobs downturn is a sign of continued overall job losses—50,000 jobs lost so far in 2016; a trend that is likely to continue unless we secure economic development incentives.
The business community is concerned because there is much talk of austerity being pushed by the Financial Oversight & Management Board enabled by the Puerto Rico Oversight, Management & Economic Stability Act (Promesa). That is a euphemism for job cuts that the board will require of Gov.-elect Ricardo Rosselló.
As part of an economic analysis, Caribbean Business learned that public-sector cuts to jobs will lead to further economic decline when the island needs exactly the opposite. The rough calculation is that the island’s economy will contract by some 0.7% if the public payroll is reduced by 20%, and it could shrink by 1.7% if public payroll is sliced by 40%. Where are the incentives for economic development?
The answers to that question are reportedly contained in a report that Promesa’s Task Force for Economic Development will be presenting to the control board.
Among the proposals submitted are tax incentives contained in Section 245A, which would grant 85% tax exemption to manufacturing companies established in Puerto Rico on funds that are repatriated to the U.S. Parity in Medicaid funding for Puerto Rico is another initiative that is being broadly discussed, representing as much as $5 billion annually for Puerto Rico.
In the run-up to the election, a conga line of Puerto Rico’s private-sector coalitions descended on the nation’s capital to meet with several members of Congress and the occasional staffer. That is not going to get it done.Así no se bate el cobre en el Congreso. Caribbean Business spoke to two high-level sources in the GOP on Capitol Hill who laid out the congressional landscape in no uncertain terms. This is how we are viewed: “The issue is that everything in Puerto Rico sounds like it is different and special. And everybody who comes to D.C. is trying to get something different and special. Puerto Rico’s private sector isn’t really engaged. The private sector doesn’t have a long view of the relationships.” The truth is painful.
We should know exactly where we stand and make our case in Congress—de tú a tú. This economy needs incentives to grow jobs now.