Liberty Puerto Rico Speaks About its AT&T Acquisition

(File)

Assures Transition Will be Smooth, but Does not Clarify Future Changes

Editor’s note: This report first appeared in the Oct. 17 issue of Caribbean Business.

If you are one of the more than 1.1 million AT&T subscribers in Puerto Rico and the U.S. Virgin Islands or form part of the 1,300-strong workforce the telecom giant employs for those markets, you will not see changes in your service or at work, for now.

After news spread about the telecom provider reaching a definitive agreement with Liberty Latin America to acquire its wireless and wireline operations, doubts have arisen regarding the next steps for the latter company, which is on the doorstep becoming a major communications and entertainment conglomerate in the Caribbean.

What do we know? The acquisition of AT&T’s operations will entail an all-cash $1.95 billion deal, plus fees and expenses, a transaction that could occur in the next six to nine months, if the Federal Communications Commission (FCC) and U.S. Department of Justice give the go-ahead. The transaction is thought to ameliorate the debt resulting from AT&T’s $85 billion acquisition of Time Warner Inc. last year.

In July, Reuters reported that its sources said AT&T was exploring the possibility of selling its assets in Puerto Rico and the USVI for $3 billion. However, Liberty’s chief of communications said AT&T had denied that information and focused on the matter at hand: Is this transaction a good deal for Liberty in Puerto Rico and Latin America?

“The AT&T network is in very good condition and there has been a lot of investment in its network after the hurricanes. We would benefit from that investment that AT&T already made in its network. Likewise, we made very large investments; the network, which as you know was at zero, was fixed and, in less than a year, was able to be rebuilt. That is one of the positives that this combination would have, that we would be having two networks in very good condition, the best fixed network with the best mobile network, and it would become a single network that would bring more redundancy and more resilience if we were to have to face an emergency such as a natural disaster again,” Giovanna Ramírez de Arellano, director of communications & corporate responsibility for Liberty Puerto Rico, told Caribbean Business.

Although the acquisition does not include AT&T subsidiary, satellite-TV provider DirecTV; the relationships and responsibilities assumed by the network dedicated to emergency response, FirstNet; nor the Global Business customers of AT&T, the resulting fusion represents the birth of a stronger and competitive market player brought to the game, a move that could be confused with a monopolistic practice but, in the opinion of Liberty Puerto Rico’s management, is an incorrect assertion because the deal involves the acquisition of products and services Liberty did not previously have.

“I would not like to talk about other companies but what I can say is that we do not expect that there will be many challenges with that [anticompetitive advantage claims] because we really are entering a complementary business. The competitive environment will remain basically the same and some other mergers that have occurred lately are national; this is only about Puerto Rico and is a bit smaller in terms of reach,” Ramírez de Arellano said.

In early 2017, an agreement was announced between Sprint and PRWireless Inc., better known as Open Mobile, joining their businesses in Puerto Rico and the USVI, a business that sought to offer better wireless coverage, increase speeds and technological capabilities and better serve the interests of its customers, especially business clients. It is unknown whether that transaction, which was disclosed in 2017, finally materialized. What is known is that today AT&T remains the fastest wireless network and has the greatest coverage in Puerto Rico, based on research firm Ookla’s “Speedtest Intelligence” analysis for the third quarter of 2019.

“The combination of AT&T’s leading mobile and wired businesses with Liberty Puerto Rico’s leading high-speed broadband and TV business will create a strong and competitive integrated communications player,” said Balan Nair, president & CEO of Liberty Latin America, in a press release. “At Liberty Latin America, we are focused on investing in digital infrastructure, innovation and 5G networks, and on delivering a friendly customer-service experience. This transaction is evidence of that, and we are confident this new combination will be good for our customers and our employees, including those joining us from AT&T.”

Meanwhile, AT&T Chief Financial Officer John Stephens described the transaction as a “result of our ongoing strategic review of our balance sheet and assets to identify opportunities for monetization” that “only made sense if we received a fair value from a buyer that is committed to taking this well-run business, with its skilled employees and loyal customer base, and help it thrive. Liberty Latin America has a strong reputation for quality of service, and we believe they have the experience to build on the success of these operations,” he added.

What we still don’t know

After the general facts of the sale were revealed, the public’s opinion has been monitored by Liberty Puerto Rico, which assured that until the spring of 2020, there is no reason to worry because no existing services will undergo changes. In addition, the company will respect AT&T employees’ collective bargaining agreement, which remains in force until 2023.

“It’s too early to talk about that but right now there is no plan for [personnel] cuts. They [AT&T employees] have an agreement signed until 2023 and it is valid. What I can assure you is that we need the talent and experience of the AT&T employees and we know that it is a very committed and very professional workforce and we count on those resources.”

Regarding the possibility of pricing changes, Ramírez de Arellano did not elaborate on whether it is in upcoming plans.

“For now, the two companies are still separate. I cannot comment on what the fees will be because it is too early to talk about that, but what I can tell you is that both companies are known for providing a lot of value for the money, with quality products and excellence, and we will continue that way.”

AT&T enjoys proven credibility in its customer service area locally. How will Liberty maintain that level of satisfaction, CB asked.

“What we have seen in general is that our customers feel confident because we have not seen an increase in calls by our customers to our call centers. We believe that our clients feel confident and are used to the [level of service] we provide them, to our services, to the innovative products we have. We have seen uncertainty in certain comments on social media, but we must explain that nothing changes for now. An agreement was signed that now has to go into the regulatory process. At least until the second quarter of 2020, the two companies [will] remain completely separate; there can be no integration, and everything remains business as usual,” the executive said.

After that period of calm, the operational transition will begin at full steam, a process to which “AT&T committed to supporting Liberty for three years, to ensure it happens in a fluid, easy way and without interruptions to the service that affects the customers.”

In terms of marketing, will AT&T cease to exist and now be called Liberty? CB asked. Silence was followed by: “We don’t know” and a laugh. “At this point, I still can’t answer that question. The AT&T brand will continue for a while; this will not be immediate, but yes, eventually, with time and the transfer, it will have to change,” concluded Liberty Puerto Rico’s communications chief.




Growing Interest in Puerto Rico’s Cruiseship Docks

Editor’s note: The following originally appeared in the Dec. 20, 2018 – Jan. 2, 2019, issue of Caribbean Business.

The 20- to 30-year public-private partnership (P3) that includes $360 million to $500 million in private capital investment and management of Puerto Rico’s cruiseship ports entered the final stage when Global Ports Holding, Puerto Rico Cruise Terminals Partners and San Juan Cruise Terminal Partners were announced as qualified consortiums for this full-concession agreement.

“Qualified bidders were notified and, on Nov. 30, were given access to the requests for proposal [RFPs]. It contains financial, technical and operational elements, among others. The RFP process lasts until March 2019,” said Ports Authority Director Anthony Maceira Zayas. Although he recognizes this concession will have a positive effect on the visitors’ economy, he could not provide an estimate of the economic impact they expect to obtain from this lucrative business.

“This figure will be known at the time of receiving the proposals. However, the estimated capital investment is over $300 million. This would be a combination of private investment and recovery funds,” said Maceira Zayas, who explained that he works hand in hand with the Central Office of Recovery, Reconstruction & Resilience (known as COR3) to handle the arrival of millions of dollars to repair much of the Port’s system in Puerto Rico, which was battered after the passage of hurricanes Irma and Maria.

(Courtesy)

“To better manage the maritime transportation system as a whole and make ports more attractive to maritime businesses and investors, maritime industry experts’ input indicates the need for consolidating ownership and oversight of the [island’s] nine main ports,” reads both the draft and final version of “Transformation & Innovation in the Wake of Devastation: An Economic & Disaster-Recovery Plan for Puerto Rico,” the document that seeks $906 million in federal funds to repair ports in San Juan, Peñuelas, Guánica and Fajardo.

“The people of Puerto Rico are wonderful, but the inept politicians are trying to use the massive and ridiculously high amounts from hurricane / disaster funding to pay off other obligations. The U.S. will NOT bail out long-outstanding and unpaid obligations with hurricane-relief money,” tweeted President Donald J. Trump on Oct. 23.

Days later, Axios reported that White House officials have told congressional appropriators and leadership that the U.S. president does not want to give Puerto Rico any more federal money for its recovery from Hurricane Maria. “This is because he claims, without evidence, that the island’s government is using federal disaster-relief money to pay off debt,” said the story that was published Nov. 11 by Jonathan Swan. Maceira Zayas did not want to comment directly about these public assertions during his interview with Caribbean Business.

“The process of requesting recovery funds is a continuous one that we are working through COR3 on a daily basis. In addition, a few weeks ago, the executive director [Omar Marrero] was in [Washington] D.C. with the director of the P.R. Federal Affairs Administration, …Carlos Mercader discussing [among other subjects] the issue with port facilities,” he replied.

Last September, Maceira Zayas assured that his public corporation was “working on a legal process and mathematical formula, so once the federal funds begin to be received, the private entity may be able to function as a grant manager.” This way private investment is reduced and Ports’ income from the concession to manage the piers and surrounding areas is greater.

“The detail of the formula is part of the RFP that for the moment is only available to participants,” said the Ports director, who could not be precise about the amount of money received from the federal government, if any.

Puerto Rico Gov. Ricardo Rosselló and President Donald Trump (Courtesy)

Redundancy from La Fortaleza?

Although the proposed P3 model is a full concession, which will provide the proponent that obtains the agreement absolute control over the cruiseship ports and their surroundings, the First Lady of Puerto Rico, Beatriz Rosselló, announced Oct. 5 a million-dollar investment to improve the appearance of the San Juan docks under La Fortaleza Es Para Ti program.

“We have one of the best tourist destinations in the Caribbean and, for the next high season, after the passage of Hurricane Maria, the dock area will be the launching point for tourism in Old San Juan. We are focused on improving the visitor experience and injecting life into the business. The lighting projects have already started thanks to an alliance with the Puerto Rico Electric Power Authority and the Tourism Co.,” Rosselló explained in a press release.

Is this a process unlinked from the P3? Caribbean Business asked.

“It is not a detached process; quite the opposite. The renovation of our docks is a short-term solution that seeks to improve the first impression our tourists receive in what the [P3] is running. The works carried out by Ports are accounting for the [P3] process to avoid dislocations,” said Maceira Zayas, who could not say how much money has been invested in these improvements and to what effect, if any, this construction has had on the business model selected for the P3 project and its final value.

On Dec. 5, Gov. Ricardo Rosselló Nevares announced that Puerto Rico was recognized by CNN Travel with the Critics Award for Cruises for the best base port in the United States.

“This award is evidence of the great effort made by the Ports Authority and the Tourism Co. to boost the tourism sector and the economy that comes from this industry,” said the chief executive, who forgot to mention his wife’s efforts to convert Old San Juan into “the door to Puerto Rico.”




Smoke and Mirrors: The Puerto Rico Government Talent Bank

Gov. Ricardo Rosselló enacts a tax reform bill Dec. 10 (courtesy)

Editor’s note: The following originally appeared in the Dec. 13-19, 2018, issue of Caribbean Business.

“We will establish a methodical process for the selection of secretaries and agency chiefs and advisers aiding the governor, which will include standardized and periodic evaluations during the four-year term. Elected officials must commit to and be proactive in the prevention, detection and notification of acts of corruption,” reads page 91 of the master plan, titled “Plan Para Puerto Rico,” which Gov. Ricardo Rosselló Nevares vehemently referenced in debates, radio interviews and the media as the cornerstone of his 2016 election campaign.

At each opportunity, the strategists for the son of former Gov. Pedro Rosselló took this short paragraph to promote, by all possible means, a great idea: The Talent Bank.

Nearly two years since the leader of the New Progressive Party (NPP) was elected to take the island’s reins, that initiative has remained in a keepsake box. In fact, the website that was supposed to contain the form to request an evaluation as part of the process of selecting the best people to fill cabinet vacancies, www.planparapuertorico.com/unete, vanished along with the hope, for the first time in history, that a system would be established that could provide a real opportunity to hundreds of professionals, who dream of contributing to the island, by competing against candidates who traditionally occupy positions of power thanks to their contributions to political campaigns or the interests of the current administration.

Since August, Caribbean Business has been requesting from the administration’s press secretary, Rafael Vega, the results of that initiative. However, apart from a read-receipt Nov. 28, the efforts were unsuccessful, which raises a flag about the existence of that database.


Oversight felt at La Fortaleza

“No wonder the insistence,” reacted a source, who has full knowledge of the hiring process at the executive branch, after learning of the multiple requests made by Caribbean Business. “Since August, they have been insisting a lot that the resources of the Talent Bank must be used and that the heads of agencies cannot use outsiders,” said the source, who revealed the prevailing unease of several directors of executive branch entities, who have their hands tied when choosing their so-called trust personnel, or political appointees.

“Before August, each agency head brought their people and their team, except for certain positions such as communications, which Carlos Bermúdez picks along with Rossy Santiago. There is always the consideration that sometimes they said so and so must be named because he is the son of this person or that person, and sometimes [the appointments] came from lawmakers, mayors and politicians,” the source said, pointing directly to the former mayor of Yauco, the current NPP Sen. Abel Nazario Quiñones, when he was serving as assistant party secretary.

“In the other [party] positions, before Abel Nazario had his scandal, he had a lot of control over the appointments of the agencies and used as an excuse that they were in the Talent Bank. When they talk about the [Talent] Bank, the reality is the agency head doesn’t see it,” the source stressed.

So, what is the Talent Bank’s use? Caribbean Business asked.

“In the beginning, the Talent Bank was used if a candidate for deputy director or legal director or assistant was needed, to have a pool of options there, but since CB’s request, it has become mandatory. The requirement was by word of mouth and, during a meeting they held at the State Department, which was attended by almost all the heads of agencies, in which the topic of the Talent Bank was discussed,” the source said.

And what happened at that meeting?

“In essence, it was that there were rules that were not being implemented, that that was going to change and that from now on everything would go through the Talent Bank. But the truth is they use it as an excuse to place the people they want to reward. They never show the lists,” the source assured.

According to sources, the main problem with the so-called “Talent Bank” is that when an agency is about to name a person qualified for the position, but is denied, other government branches try to place someone who isn’t necessarily qualified, which damages the constitutional mandate of the separation of powers.

At the close of this edition, Caribbean Business learned that two main figures, one from La Fortaleza and the other from an agency linked to Puerto Rico’s economic development, exert undue pressure on agency heads to hire their relatives as a reward for actively participating in the political management of the NPP.




Uber Eats arrives in Puerto Rico

SAN JUAN – Uber Eats has arrived in Puerto Rico, promising to revolutionize food delivery service with its launch in the metropolitan area, along with different local restaurants and international chains.

The company is sure of this because starting Thursday, the delivery service will be free until Three Kings’ Day, Jan. 6, as part of its brand-recognition campaign. This represents a saving of $4.50 for users throughout the holiday season.

Some of the local restaurants that are already available are Stuffed Avocado, Piola, Kudough’s, The Crust, Señor Paleta and HP Tavern. Popular fast food chains such as Taco Bell, Subway, Pizza Hut, IHOP, KFC and Denny’s are also part of the Uber Eats network.

As part of its first phase, the service will be available in certain areas of San Juan, such as Santurce, Miramar, Old San Juan, Condado, Río Piedras, Punta las Marías, and in areas of Carolina such as Isla Verde. It is also available in the areas near Universidad Interamericana Recinto Metropolitano, Universidad de Puerto Rico, Recinto de Río Piedras and Universidad Metropolitana del Sistema Ana G. Méndez and others.

Customers will have the option to pay either with cash, via PayPal or with their credit card on the mobile application, which will include an option to tip drivers for their service.

Despite the existence of established online food-ordering services in the metropolitan area such as DameUnBite, Uva! and FoodNetPR, Uber Eats is betting on its differences as key to attracting more interest.

“Currently, Uber Eats is available in 14 countries in Latin America and we have 250,000 restaurants, which supports the restaurants and a large variety of users. In addition, users have the opportunity to see the food-order process in real time and provide instant feedback,” said Julie Robinson, Uber’s spokesperson for the Caribbean and Panama.

The spokeswoman also pointed out that the establishments join the Uber Eats delivery network will be able to obtain real data on users’ experience, which the restaurant can use for its decision-making and that the service represents an opportunity to increase their customer base without the need to make an extraordinary investment.

“We are very excited about this new launch in San Juan, supporting and complementing the island’s renowned culinary culture. Uber Eats arrived to offer a reliable and convenient option for Puerto Ricans and visitors to order their favorite food; providing new self-employment opportunities for delivery partners; and allowing both independent chefs and restaurant owners to connect with more customers,” Robinson added.

For his part, Puerto Rico Gov. Ricardo Rosselló expressed his approval of the new service, which he said will contribute to local economic development from the area of gastronomy.

“Our local entrepreneurs will now be able to reach many more customers who are looking for options to consume products outside of restaurants. It is an innovative opportunity that offers alternatives to consumers and more employment opportunities for Puerto Ricans,” the governor said.

Uber Eats will available on iOS and Android, and at www.ubereats.com, where users will be able to request their orders using a platform that is similar to Uber for passengers.

 




P3 Project for San Juan Cruise Port Conjures Airport Deal

Editor’s note: The following originally appeared in the Sept. 20, 2018, issue of Caribbean Business.

A public-private partnership (P3) for 20 to 30 years via $360 million to $500 million in private capital investment and management continuity under a master plan are some of the key points that would make up a Puerto Rico Public-Private Partnerships Authority (P3A) project that seeks to position the island as the lead player in the Caribbean’s cruiseship industry.

The Puerto Rico Ports Authority is struggling to maintain and improve the island’s airports and seaports due to deteriorating finances. Multiple owners and operators for other port facilities and a lack of coordination between ports are direct contributors to deep-seated issues that Director Anthony Maceira intends to address with the development of this project.

“We are going to transfer to private hands the operation and maintenance of some assets that right now are in a decrepit state, and after 20 to 30 years, we will receive them in a much better state. The vision is, in that period, that a solid cruise industry would have developed in Puerto Rico,” said the ports chief, who was emphatic in comparing this concession with the P3 model used in 2013, when a contract was granted to Aerostar Holdings LLC to operate the Luis Muñoz Marín International Airport until 2043.

The cruise industry is the fastest-growing leisure travel market in recent years. The Caribbean market comprises about 35 percent of the total, or more than 10 million passengers a year. “At its best moment, Puerto Rico serves 1.4 million passengers, and what the governor wants is for the island to be the leader in that market throughout the Caribbean,” explained Maceira, who took out his cellphone to read an email from a cruiseline executive.

“The CEO of a cruise company writes to me, ‘I am following up and letting you know that we’re looking forward to this process,’ and this is one who even submitted a letter favoring the P3 process because it is one of the cruiselines that right now can’t bring their vessels to San Juan,” Maceira said, adding Norwegian Cruise Lines as an example, as the company has expressed interest in docking its largest ship on the island, which doesn’t have a suitable dock for it.

Eight companies participated in the government’s market-sounding, which revealed that the industry would require more time for the request for qualifications (RFQs) because the project encompasses a substantial injection of private capital. Ports expects that at least four of these will participate in the RFQ. The names of these companies cannot be published due to the confidentiality of the process, but Maceira told Caribbean Business about the type of business they conduct.

“We cannot say the names but the company that submitted the unsolicited proposal is public knowledge—Global Ports Holdings. I can tell you that there is a bit of everything—there are [U.S.] American, European companies, with physical presence in Asia; port operators, cruiselines. There is a variety and that’s what we’re looking for, that there is healthy, but very strong competition,” Maceira said.

Does a P3 benefit Puerto Rico?

As part of the agreement with Aerostar, Ports received a $615 million payment in 2013. Until 2018, the corporation invoiced a fixed $2.5 million a year, with increases as dictated by the consumer price index. Starting next year, the payment will amount to 5 percent of the gross earnings of the airport operator, a figure that continues until 2033, when the total goes to 10 percent until the termination of the 40-year agreement in 2043.

Ports expects to benefit monetarily from this business, which seeks long-term rent of piers 1, 3, 4, 11, 12, 13, 14, the Pan-American docks and the pedestrian promenade between docks in the southern area of Old San Juan via fixed-fee and variable-revenue fee models based on the gross income of the project manager, an advance or a combination of these, as was the case for the Muñoz Marín Airport partnership.

Despite claiming the transfer of the airport to Aerostar was good business, Maceira pointed out that one of the mistakes when assigning a value to the property was failing to “optimize” the value of its assets. In the case of the cruise ports, while it is true billions in federal aid are expected to help rebuild them, it is not a mistake to push a P3 of this magnitude.

“At the moment, we are working on a legal process and mathematical formula so, once the federal funds begin to be received, the private entity may be able to function as a grant manager,” thus private investment is reduced and Ports’ income from the management concession of the piers and surrounding areas is greater, Maceira said.

“To better manage the maritime transportation system as a whole and make ports more attractive to maritime businesses and investors, maritime industry experts’ input indicates the need for consolidating ownership and oversight of the nine main ports,” read both the draft and final version of “Transformation & Innovation in the Wake of Devastation: An Economic & Disaster-Recovery Plan for Puerto Rico,” the document that seeks $906 million in federal funds to repair ports in San Juan, Peñuelas, Guánica and Fajardo.

Is there redundancy between the estimated private investment and the federal funds requested, Caribbean Business asked.

“The federal funds being requested are under section 428 of FEMA’s [Federal Emergency Management Agency’s] Hazard Mitigation [Grant Program]. Part of what the package allows is that money is assigned to recipients and subrecipients based on the shortened estimates between the federal government and local government, but the money can be moved. The authority [Ports] could decide to redirect this money to the airports because it got another way to finance the repair of the cruise ports, as long as it is for permanent work in compliance with FEMA parameters,” the Ports director explained.

“To ensure that backup capacity exists if the Port of San Juan is damaged, PRPA [Ports] and other port operators plan to further develop an existing seaport to provide redundant capacity through the use of public-private partnerships,” reads the final document submitted Aug. 8 and unanimously certified by the island’s fiscal oversight board 20 days later. The latter warned the administration of Gov. Ricardo Rosselló to avoid budgetary and implementation risks, in compliance with the Puerto Rico Oversight, Management & Economic Stability Act.




Puerto Rico Treasury investigation hinders audit of sin taxes

Editor’s note: A version of the following report originally appeared in the Sept. 6, 2018, issue of Caribbean Business.

At a time when the Puerto Rico government’s ability to improve tax revenue and move toward the financial responsibility outlined in the fiscal plan is questioned, 12 employees inside the Treasury Department’s Consumption Tax Bureau were escorted out of their offices and suspended from work, which has affected operations at the division attached to the Auxiliary Office of Internal Revenue.

In a brief statement, Treasury Secretary Teresita Fuentes confirmed to Caribbean Business that an internal investigation is underway. However, she did not share specifics regarding the investigation, nor the reason employees were removed without their belongings.

“The Department of the Treasury is conducting an internal investigation that involves 12 employees of the Consumption Tax Bureau. A provisional suspension measure was determined while the investigation process continues,” Fuentes said on Aug. 27.

Efforts to learn specific details from Treasury about the scope of the investigation, such as the names of those implicated, positions they held or whether fraud is involved, have been unsuccessful. Bureau Director David Coons has yet to answer requests for information first submitted more than a week ago. However, Fuentes’s office sent a brief statement Tuesday, saying the department will not issue comments for the time being tosafeguard the investigation and the employees involved.

The Consumption Tax Bureau, “as the name suggests, is the one that administers all taxes on consumption. This includes the sales & use tax [IVU by its Spanish acronym] and the different excise taxes. I would say it is the most relevant bureau because the IVU is of great importance in terms of revenue,” said the former assistant secretary of Internal Revenue, Víctor Pizarro Núñez.

The former official, who served under the term of former Gov. Alejandro García Padilla, also indicated that audits and internal investigations are routinely conducted in the bureau. However, he acknowledged that given the number of employees suspended, the investigation could be into potential fraud.

Several Caribbean Business sources, who spoke on condition of anonymity, said the suspended employees have industry-specific expertise in auditing. In addition, they said that since the abrupt removals occurred, the operations of some offices have been severely affected because the suspended employees have not been replaced.

“As I understand it, they were escorted to the exit and it wasn’t pretty…. I know they are from different areas of the Consumption Tax Bureau and that several of them deal with licenses such as alcoholic beverages, cigarettes, gaming machines and promotion licenses. Something was happening over there…,” said one events-industry source.

The source indicated that the one person responsible for the renewal of promoter licenses for shows was one of the suspended employees and that the person’s duties were assigned to those in charge of approving entry tickets, employees who do not have the necessary experience or access to the system that reflects how much IVU a promoter withheld and remitted.

“Of the 12 people who were taken away is the one who renews the promoter’s licenses. All promoters renew their licenses annually, but they are worked on as a group monthly, based on the last number of the employer’s social security. With this person gone, she was the only one who did license renewals, and all those cases she has been working have been left up in the air. We are the only industry that gets its IVU payments audited annually as part of the renewal of that license,” the source said.

The process to renew a promoter’s license may take more than two hours while approvals take about 15 minutes. “If one day, two people arrive to renew their license and they are sent to the cubicle of those who [do the] endorse[ment], they can paralyze the entertainment [division] office because they are renewing licenses and it will take a long time. There have already been people who have [left] at 2 p.m. and…left without an endorsement,” the source added.

The promoter of any event held in Puerto Rico that requires an admission fee or ticket needs to complete the endorsement process, which means the promoter must inform Treasury about the type of event, location, date, number of ticket offices and different pricing for the department to issue an authorization to withhold the sales & use tax.

A delay in that division could cause the sale of tickets to stop at a number of events already programmed at the island’s various venues of the island.




Bills introduced to hold vote to ‘eliminate’ Puerto Rico fiscal board

SAN JUAN – Lawmakers from the Puerto Rican Independence Party (PIP) introduced bills Thursday to hold a vote to “require Congress and the U.S. President to eliminate” the island’s fiscal oversight board and demand that a decolonization process be carried out.

The PIP’s Senate spokesman, Juan Dalmau, and Rep. Denis Márquez said the vote would be held on the day of the 2020 elections. They also said their efforts to seek consensus from Gov. Ricardo Rosselló were unsuccessful.

PIP Sen. Juan Dalmau and Rep. Denis Márquez (File / CB)

“In the absence of the will of the Executive to direct a concerted action plan with other political party presidents, we have decided to take the path of the legislative process to structure a mechanism that allows the majority will of our people to repudiate the board and demand a decolonization process from the U.S. Government. That vote would take place the same day of the elections, which would avoid an excessive spending of public funds,” Dalmau said on his social media accounts.

Specifically, House Bill 1714 and Senate Bill 1053 seek to order a referendum in which “the people of Puerto Rico have the opportunity to demand, directly, the elimination of the Fiscal Oversight Board imposed by the P.R.O.M.E.S.A. Law [Puerto Rico Oversight, Management, and Economic Stability Act], and require the Congress of the United States to set in motion a process of political self-determination that ends the colonial regime in Puerto Rico,” read the documents, which were presented simultaneously.

In a press conference, both legislators recalled that they have tried unsuccessfully to implement a political action agenda with political leaders, international organizations and the media to put an end to the fiscal board and for the U.S. Congress to address the status issue with haste.

After explaining that the governor did not respond to multiple calls, Dalmau said, “We have had to accept the governor will continue on the path of obedience.”

“It is our responsibility to seek alternatives against the board and colonialism,” added Márquez, who was emphatic in pointing out that his party warned about the effects of a federally imposed territorial entity on the interests of the working class.




Hurricane Maria Death Tally: A Matter of Credibility

Editor’s note: This report first appeared in the Aug. 2-8 print issue of Caribbean Business

“We have not talked about a preliminary report; we spoke about the final report, which corresponded to a May 22 delivery. That’s the only date talked about,” said the spokesperson for the Puerto Rico Public Safety Department, which commissioned George Washington University (GW) to produce a study on the actual number of deaths corresponding to Hurricane Maria’s devastating path across Puerto Rico on Sept. 20, 2017.

Contrary to what was expressed by the umbrella agency headed by Héctor Pesquera, Caribbean Business confirmed that the agreement signed not only included delivery of that report, but also the payment of $125,000.

Since May 4—long before the discrepancy arose between the official data and the contract—Caribbean Business submitted multiple requests for information from the communications office of GW’s Milken Institute School of Public Health. The petitions have included specific questions about the status of the reports, which cost the island’s Treasury $305,368; to interview the leader of the investigation, epidemiologist Carlos Santos Burgoa; and the amount the administration of Gov. Ricardo Rosselló must pay to receive the final answers to its questions.

“I’m connecting you with Yennifer Álvarez, the governor’s press secretary. She can answer your question,” replied the institution’s communications manager 80 days after CB’s first request. Immediately after, Álvarez contacted this publication, confirmed the existence of the preliminary report and coordinated its delivery through the Public Safety Department.

Preliminary report or sales pitch?

Caribbean Business found the GW document, “Ascertainment of the Estimated Excess Mortality from Hurricane Maria in Puerto Rico,” hardly qualifies as a preliminary report. Beyond raising concerns about the work that has been conducted since Feb. 22, it reflects poorly on the administration’s unusual insistence on its commitment to transparency.

“This preliminary report provides an update on the activities for the project, from its launching to date. It is a narrative of performance more than products,” reads the introduction of the 24-page document, which suggests the report is solely a document on contemplated methodologies and a proposal for a second phase, an “in-depth evaluation of the mortality,” to close a lucrative deal with the government.

“I recommend watching the press conference where it is explained that the first phase has a cost of $305,000 and, to complete the next phase, could reach $1 million; after completion of the first phase, a search for grants and/or donations to subsidize the rest will be worked on,” Rosselló Nevares’ press secretary said in May when asked about the total cost to commission the study. Álvarez resigned from her post on July 25.

The Milken Institute says in its report that it has contacted or received contributions from at least 24 entities, most of which are state and federal. However, private universities such as Penn State (No. 12 in QS World University Rankings), Harvard (ranked No. 2 worldwide by QS) and Ponce Health Sciences University do not appear on the list. These independent institutions have valuable data that could accelerate the investigation carried out by GW (ranked 345 worldwide by QS), a congressionally chartered nonprofit, which incorporates the institution at the federal level.

However, GW assured it will use Penn State, Harvard and Center for Investigative Journalism studies “to provide a way for the public to assess the relative differences between them and those produced by the current project.” “In the meantime, the work continues to develop the proposal for the in-depth analysis of the cause-specific mortality attributable to the hurricane, including more complex statistical modeling as well as an in-depth survey on death circumstances. Funding to complete this part of the project is actively being sought from different sources and institutional synergies,” reads the last paragraph of the report, which adds that a final report is expected to be produced “within the timeframe of the contract.” As recently as June 30, the contractual term was extended until Sept. 18 through an amendment to the original agreement.

“Since I’m not involved in this project, it is difficult for me to determine if it is a preliminary report. Certainly, this study is expected to certify and/or approximate a number of deaths associated with Hurricane Maria; this is according to the public expressions of the secretary of Public Safety himself. Since that data isn’t available, I believe there is still work to be done or information to be included,” said the director of a specialized program in estimates and projections at Pennsylvania State University, Dr. Alexis Santos Lozada. His comments directly addressed a controversial statement Pesquera made after publication by the New England Journal of Medicine of the Harvard study, whose researchers estimated there were 4,645 (95 percent confidence interval, 793 to 8,498) additional deaths on the island in the three-month period following Maria.

“Although we have not seen Harvard’s study, it is based on a survey; it’s not based on scientific data. George Washington’s comes with a different methodology. At some point, I’m sure GW is going to get up to speed with them and they will try to validate it, but a survey is not the same as a scientific basis, which is what George Washington is carrying out,” Pesquera said May 31.

For the expert in applied demography and population health, it is important for GW to establish what is meant by “rapid response,” which the school cites in the preliminary study to differentiate its research from other “more conventional research projects,” according to the report.

“We would have to ask the GW researchers what they consider is ‘rapid response.’ Certainly, this study comes after reports that have been available since November (for example, the study by Jeffrey Howard and I) and other studies by reporters. Our report was published two months [faster] after the phenomenon and when a large part of the island was still in the dark and without basic services. This report comes 10 months later, which is a slower response than all other analyses,” added Santos Lozada, who led an investigation that yielded an estimated 1,085 deaths from the hurricane, and was published in April by the journal Health Affairs.

“After analyzing the successes and failures experienced as part of the emergency after the passage of hurricanes Irma and Maria, our government is reviewing all protocols and processes to ensure we are ready for a new hurricane season,” Rosselló said March 20. At the time, the governor announced he would hold a summit May 29 with central government agencies and the Federal Emergency Management Agency, and a Municipal Emergency Summit the next day, the conclusions of which are unknown more than a month after the hurricane season began.

The contract between George Washington University and Puerto Rico’s Forensic Sciences Bureau:



Documento muertes vinculadas con huracán María (Text)




Hispanic Federation, HITN TV provide illumination to Puerto Rican families

The municipalities of Bayamón, Barranquitas, Loíza, Las Marías, Morovis, Ponce, San Sebastián, Utuado, Villalba, Dorado, Vega Baja, Vega Alta, San Lorenzo and Comerío will benefit from the initiative that is expected to spread throughout the island. (Jaime Rivera / CB)

SAN JUAN – In another laudable initiative to help Puerto Rican families face the hurricane season, the Hispanic Federation, along with the HITN TV Hispanic network, will deliver 18,000 solar lamps in 14 municipalities on the island.

The non-governmental organization’s collaborative initiative with the Spanish-language educational and entertainment content broadcaster was officially announced at WIPR studios. The radio station has an alliance with HITN through “Puerto Rico Contigo,” new series that shares economic recovery stories on the island in the aftermath of last year’s hurricane season.

“Since Hurricane Maria struck the island last year, Puerto Rico has been suffering from power failures. As this year’s hurricane season begins, what could happen is not yet known, so an alternate plan will be needed in the event of a new emergency that leads to further blackouts,” HITN President and CEO Michael Nieves said in written remarks.

“The commitment we have to the island, not only in the business aspect, continues and will continue later. With this effort, we have managed to distribute 18,000 solar lamps. Since we saw the impact of Hurricane Maria, it is necessary to prepare ourselves against any weather phenomenon,” added HITN Puerto Rico General Manager José Hernández, while assuring that the network will continue supporting all the worthy causes in Puerto Rico’s rebuilding process.

Keila Fontánez, Hispanic Federation’s operations coordinator (Jaime Rivera / CB)

For her part, Keila Fontánez, Hispanic Federation’s operations coordinator, emphasized that this aid is small compared with the work that remains to be done, work for which she urged the island’s mayors to take a lead on and to strengthen their leadership in their respective municipalities.

“The power that mayors and local governments have is important and must be reinforced. People continue to suffer and unable to relieve the horror of having anxiety and the stress of not being able to receive drinking water or power in their homes,” Fontánez stressed in a choked voice. She also said that, to date, the Hispanic Federation has delivered more than seven millions pounds of supplies such as water and food, as well as $27 million for 70 groups, and expects to distribute more than 100,000 additional solar lamps.

“Local government is a very important resource…we want to strengthen the country,” Comerío Mayor José “Josian” Santiago, the former president of the Mayors Association, said. “The mayors are going make sure these lamps reach where they need to be and those who really need them.”

Families from the municipalities of Bayamón, Barranquitas, Loíza, Las Marías, Morovis, Ponce, San Sebastián, Utuado, Villalba, Dorado, Vega Baja, Vega Alta, San Lorenzo and Comerío will benefit from this small, but significant, aid.




Home Sweet Home, By Contract: Slicing the housing program pie

Editor’s note: This story first appeared in the July 26 – Aug. 1 print issue of Caribbean Business.

espite alleged irregularities in the granting of Tu Hogar Renace’s management contract, the complex framework behind the effort to guarantee thousands of Puerto Rican families have a home that meets “minimal habitable standards” is on track. However, there are concerns over the effectiveness of controls over the federal funds granted by the initiative, which is subsidized by the Federal Emergency Management Agency (FEMA).

Time is of the essence for Puerto Rico’s Vivienda brigades because a cost-sharing exemption is set to expire in less than two months. Local Housing Secretary Fernando Gil Enseñat summed up to Caribbean Business what, in his opinion, have been the achievements in the execution of the Sheltering & Temporary Essential Power Program (STEP) he oversees, along with the organization PM Rising Phoenix, formerly Adjusters International.

“In the beginning, before the work began, there were a few days when there were some [court] rulings that affected…the receipt of applications. After the court acted on the first argument immediately taken to the appellate [court] and declared the work not canceled, and that [the Court of Appeals] was going to go deeper to see the case as such, we again rounded up the requests and the intake of all applicants for the STEP or Tu Hogar Renace service,” said Gil Enseñat, referring to the challenge presented by AECOM, a contractor interested in invalidating the “contract awarded to Rising Phoenix.

Housing Secretary Fernando Gil Enseñat, center, speaks to Hurrican Maria survivors.

As recently as July 13, and after several procedural errors by the Housing Department’s Bidding Review Board, the Court of Appeals received the agency and its project manager’s allegations. So, together with AECOM’s document in opposition, the court will finally put an end to the controversy, which was first reported by Caribbean Business.

AECOM currently manages the same program for the U.S. Virgin Islands, and its execution has been criticized by USVI Gov. Kenneth Mapp. “They have to bring their game up; their game is slow,” Mapp said during a July 12 press conference. He is hoping to speed up repairs by hiring APTIM, another major contractor, but only “if they are prepared to accept the fee schedule in the AECOM contract.”

In the case of Puerto Rico, repairs appear to be going full steam, judging by the most recent numbers provided by Housing, figures that can also be found on the website TuHogarRenace.com. Six months after Hurricane Maria hit, the program had barely managed to repair 300 homes, according to a press release issued by FEMA. Eleven months after the storm, Tu Hogar Renace has completed minor repairs on 31,875 of the 122,000 homes approved, which so far amounts to a cost of $306,470,040. The faster pace in great part has to do with adjustments made by Housing to the procedures, based on information collected from its seven construction managers at service areas throughout the island. As of this writing, the average repair cost was $9,614.75, less than half the $20,000 limit established for program participants.

“Their production is…735 to 1,000 houses per day. In Louisiana, the last time this program was deployed, 14,000 homes were done in a year, with seven contractors as well. Thus, this is the largest STEP program FEMA has seen. The feedback has been super-positive,” the Housing official said.

Questionable impact on economy

The Housing Department estimates the Tu Hogar Renace program has injected nearly $1 billion into the local economy because, in addition to the money assigned for home repairs, it has employed more than 14,000 workers during the rebuilding effort. Gil Enseñat said the economic impact is reflected as a blip in retail, as well as in motor vehicle sales.

At presstime, Caribbean Business’ attempts to obtain the specific source of this figure and a breakdown of the items to which this billion-dollar injection was directed were not successful. However, sources with direct knowledge of the reconstruction program question that amount. They said its operational flowchart includes multiple foreign contractors, which can delegate much of their responsibility through a chain of subcontracting services for a salary of no less than $8.25 an hour, which results in much of the money not staying on the island.

“The problem is the dignity of us Puerto Ricans and why our leaders don’t do better business to defend the interests of a people bankrupt and disadvantaged after the hurricane,” questioned a construction-industry executive, who asked to remain anonymous, adding that local businesses are placed in a disadvantaged position in that they assume a large part of the workload, making less than this type of work is worth.

“To turn Puerto Rico’s recovery into an economic development platform, we have to transform the current contracting trends,” tweeted Deepak Lamba-Nieves, research director, and Churchill G. Carey Jr., chair in Economic Development Research at the Center for a New Economy (CNE) think tank. The expert shared a chart, titled “Accumulated Post-Hurricane Maria Expenditures in Puerto Rico,” broken down by contractor, which shows a marked difference between what stateside contractors have been granted, about $4.5 billion, versus local ones, which have been awarded about $500,000,000 in contracts as of June 20. The CNE is analyzing official Puerto Rico government data on the island’s recovery after last year’s hurricane season to then publish its findings on a yet-to-be-determined date.

Contractor pricing

One of the most criticized issues in the Tu Hogar Renace program has been the price established for items included in the repair process. Some of these are valued at almost 50 percent more than their market price. For the Housing secretary, this alleged inflation has an explanation, when comparing Puerto Rico to the USVI, another territory that mimics cost structure in the local market.

“The [USVI] has geographical and legal circumstances that are very similar to those of Puerto Rico. The Jones Act increases the cost of products in Puerto Rico by around 20 percent, especially construction and construction goods, which have increased about 30 percent,” the secretary said, adding that pricing was established by contractors based on the market value.

“After we were given the prices, we proceeded to use a mathematical formula to discard everything illusory or unreal in terms of prices that were too high or too low. After that, the market price was averaged, and that is what is paid to all contractors around the island,” said Gil Enseñat, who expressed he was extremely pleased with the work done so far and hopes the process will be used by FEMA as an example to follow in future disaster responses.

The rates include a minimum 10 percent profit margin for the contractor, plus 10 percent of general expenses, which include permits, fees and insurance.

Dubious inspection invoicing amendment

From an administrative point of view, if the trend in the average investment of $9,600 per household continues, about $1,171,200 will have been spent on minor repairs. This sum includes both the cost for materials and labor, as well as the operating expenses of Puerto Rican contractor Caribe Tecno; stateside-based firms SLS, James W. Turner Construction and Excel Contractors; and local and stateside joint ventures (JV) F&R and BLDM JV, Yates-Bird LLC / JV and 4 Contractors JV.

Since it was announced these seven construction managers would be awarded a combined $1.5 billion, residents, political figures and construction-industry representatives have appealed to the press to denounce what they call a scheme akin to disaster capitalism.

One of the moves alleged to benefit everyone except aid applicants is the inspection process. Several sources with knowledge of this process turned to Caribbean Business to detail what they believe is an overbilling scheme that consists of unlimited changes to the requirements to approve a final inspection, with the objective allegedly being that up to four reviews of the work is produced. Final inspections are billed at a rate of $425 each, while initial inspections cost $575, or a total $1,000 per household.

After examining the contracts that establish these rates, Caribbean Business identified irregularities in the language of the agreement between Housing and Rising Phoenix, specifically, an amendment signed June 7.

“The [Department of Housing] DOH shall pay the program manager for the ‘inspection’ services based on the fixed unit prices set forth in Exhibit V. The parties acknowledge that the total number of ‘inspections’ represents the maximum number of any combination of initial site property visits and final inspections that may be invoiced to the DOH by the program manager during the term. Any increase in the total cost of ‘inspections’ will require an amendment to the agreement,” reads the amendment.

The exhibit referred to in the amendment, “Schedule of Fixed Unit Prices, Fixed Rates and Lump Sums,” shows that $75 million is assigned for the inspection of 75,000 properties, or $1,000 for each unit. That figure does not account for the fact there are now more than 122,000 households under the program nor does it specify a cap on the total allowed to be billed.

More than 65,000 families await repair and final inspection of their home. The inspections include the presence of a representative of the Housing project manager and an inspector from the corresponding construction manager responsible for the repairs.

“Because of so many failures that have occurred in the construction processes, a bureaucratic system was created in which a representative of the contractor is present in the final inspection to find a solution in case a flaw is found that puts a home in a position where it wouldn’t pass final inspection. At the organizational level, it is still inefficient,” one source stressed.

“The one who’s changing the rules almost daily is Adjusters [Rising Phoenix]. That caused a lot of homes to be hung [to fail inspection]. For me, it’s a way to justify why you’re going to charge what you’re billing for inspections. This project lacks a clear rubric to establish the quality of the work. There are some practices that are not clear; the evaluation in many cases is not clear,” another source said.

Moreover, the tablet used to register the construction work forces the inspector to select that both the initial and the final inspections were completed, even if it this was not the case. Specifically, these options appear on lines 57 and 58 of the digital system intended to log the entire process, data that both Housing and FEMA have access to and, according to the department’s secretary, no more than $1,000 is paid even if multiple registered inspections appear in the system.

“I have to verify well, but it doesn’t exceed $1,000. There’s no limit, but only up to a cap is paid. It’s part of the risk of doing things right, and the risk is taken by the contractors. If they exceed [the cap], it’s not paid. If they have to go more than once [for inspection], only the initial and final [inspections] are paid,” Gil Enseñat said when shown the document.