Electoral Code May Impede Outgoing Puerto Rico Chief of Staff from Running for Elective Office

SAN JUAN — The Puerto Rico governor’s outgoing chief of staff, former New Progressive Party (NPP) Sen. Zoé Laboy, could potentially see herself prevented from running for any elected office, as gleaned from the Puerto Rico Electoral Code itself.

Specifically, Article 8.0001, subsection B, sub-subsection (7) states that “any applicant for an elective office, who serves as the head or nominating authority of an agency, department, government dependency or public corporation in the Executive Branch, except the Governor, must submit their resignation to said position thirty (30) days before the start of the period of filing applications.”

Laboy’s resignation to the position she will hold until Dec. 31, after having handed her letter Wednesday morning to step down from her appointment by Gov. Wanda Vázquez Garced, should have occurred on or before Nov. 1, 30 days before the State Elections Commission (CEE by its Spanish acronym) began its candidacy filing period Dec. 1, according to the electoral code.

The chief of staff position was created by former Gov. Rafael Hernández Colón in 1986 through Administrative Bulletin 46690, which constituted the Ministry of the Interior and its Advisory Body. In addition, it provided him with powers of direction and oversight of “the interaction of the Governor and the departments, organisms and instrumentalities of the Executive Branch of the Government”.

In 1993, under the administration of former Gov. Pedro Rosselló González, Executive Order 1993-01 emerged, which expanded more on the functions inherent to the office.

The aforementioned order has as its inherent function the duty “to direct and supervise the execution and instrumentation by the members of the Constitutional Cabinet and the Operational Cabinet their respective departments, agencies, organisms and instrumentalities of the Executive Branch of the Commonwealth of Puerto Rico, of the Government public and program policy, as established by the governor. ”

Finally, the executive order empowers the chief of staff to “appoint, subject to the approval of the Governor, those assistants or advisers that he deems necessary in the discharge of his responsibilities and functions as Chief of Staff, delegating to those persons those powers that he considers pertinent and those people who will be part of the Body of Advisers of the Governor.”

Therefore, after reading the Electoral Code and the Executive Order that creates the position, it could be concluded that the functions attributable to the position occupied by Laboy could be considered as those performed by a chief or appointing authority within the executive branch.

Should we understand that as of today the resigning chief of staff cannot run for elective office because she does not fulfill the requirement of having resigned 30 days before the start of the candidacy filing process, Caribbean Business asked.

“I am unable to answer that question, since that matter could become a controversy to be adjudicated by this servant,” CEE President Juan Ernesto Dávila Rivera.

A similar question was brought to the attention of Popular Democratic Party Rep. Jesús Manuel Ortiz González while he served as Public Affairs and Press secretary of former Gov. Alejandro García Padilla. When officially announcing his candidacy for a House seat on Dec. 16, 2015, he was emphatic in pointing out that he would not have to resign his appointment.

“No. The law [Electoral Code] is addressed to agency heads, heads of public agencies and heads of public corporations. The position of secretary of Public Affairs is not one of the three that I just mentioned. It is a position created by executive order. Therefore, I am not part of the officials that the law requires that they have to resign from their position,” Ortiz said at that time.

The executive order to which Ortiz referred to is EO 2015-41, which contrary to the order that created the chief of staff position, does not establish language conducive to the Public Affairs and Press secretary having the power to serve as chief or appointing authority of the executive branch.

CB left a request with the CEE for any document or order in its files that interprets the scope of the Electoral Code on the matter.




Donation to Former Gov. Calderón Foundation Called a Political Reward

SAN JUAN — Only days after former Puerto Rico Gov. Sila María Calderón Serra invited José Hill Román Abreu, who is running for a Popular Democratic Party (PDP) Senate seat for the district of Humacao, to the dais while endorsing him in a political event, the San Lorenzo municipal legislature was preparing Thursday to grant Calderón’s foundation a $40,000 donation.

That is how it was denounced to Caribbean Business by the majority New Progressive Party (NPP) candidate for mayor of that town and member of the municipal legislature, Jaime Alverio Ramos, who characterized the act as a political award ordered by the incumbent José “Joe” Román Abreu, who is the brother of the politician who received the former governor’s public blessing Saturday and who is also part of the Legislative Assembly of said autonomous municipality and chairs its Social Welfare and Government Committee.

Payment of the $40,000, which would be made from the donation fund and not from the operational fund, was to be made at 5 p.m. Thursday through Resolution 63-OT Series 2019-2020, an administration bill that seeks to grant said sum to the Centro para Puerto Rico de la Fundación Sila M. Calderón. A quick search resulted in a single mention of the municipality of San Lorenzo on the foundation’s website, which does not show any recent initiative that met the needs of residents. The bill also lacks any mention of the $40,000 being allocated to future projects that directly or indirectly benefit constituents.

Section 9.014 of the Autonomous Municipalities Act establishes that “the municipality may assign or donate funds or assets it owns to any nonpartisan nonprofit entity which is engaged in public interest efforts or activities which promote the community’s general welfare.”

“I believe in organizations such as the Sila María Calderón Foundation. They are foundations that are very important and there should be many more because of the social work they do, especially with the special communities. Nevertheless, it has been a long time since the former governor was seen at a political activity, and all of a sudden we see her participating in the announcement of the candidacy for the Senate of the mayor’s brother, who in turn is a municipal legislator, and several days later the municipal legislature of San Lorenzo is convened to approve a donation of $40,000 to the foundation of the former governor,” said Alverio Ramos, who recalled that the mayor himself acknowledged that his municipality faces an economic crisis in the M-20-02 Audit Report issued by the Comptroller’s Office in July, which indicated that 130 workers were classified as temporary employees for periods longer than those established by law.

“This figure is correct, and the situation has been worked on to the extent that the economic condition and the administrative reality of the municipality have allowed it. This, despite the fact that the municipality has faced great economic challenges and that we have been taking precautionary measures amid new economic challenges that the municipalities will face as a result of the economic situation that Puerto Rico is going through. We must bear in mind that carrying out the ordinary hiring and selection procedure to hire probationary career employees entails costs and in addition to this we must make employer contributions to the employee retirement system, which at this time most of the municipalities cannot do,” the mayor reacted to the audit’s finding at the time.

The letter in which the donation is requested is dated Nov. 22, just over two weeks before the brother of the mayor of San Lorenzo received the political endorsement of Calderón. (Courtesy)

The letter in which the donation is requested is dated Nov. 22, just over two weeks before the brother of the mayor of San Lorenzo received the political endorsement of Calderón. (Courtesy)

“What we are questioning and denouncing is that if this is not a reward for the endorsement given, why are we making this denouncement? Because hundreds of people from San Lorenzo go to the municipality every day to ask for help, having real needs and the municipality always answers that there is none, that it is not possible and that they do not have the funds. That is what fills me with indignation, because if there is nothing for a people, are we then going to donate to an organization because days before its president participated in the political activity of someone so related to the municipal administration?” the municipal lawmaker questioned. 

“Apart from the accumulated deficit, rural and country roads are destroyed, sports facilities are in terrible shape and the needs of our elderly people with homes in deplorable conditions could be mitigated,” concluded Alverio Ramos.

On the other hand, Carlos Rosado, a municipal legislator of the Puerto Rican Independence Party, admitted that he was still evaluating the document but showed that, if the allegations of the NPP lawmaker were true, he would vote against the donation.

“We would have to see for what purpose because the municipalities grant countless donations for civic activities. I would vote against it, but we must see the for how much…and the reasons there are,” the minority legislator said.

“Meanwhile, the president of the municipal legislature, Víctor Bonilla Sánchez, reacted to the allegations of the NPP candidate for mayor and assured that the introduction of the resolution complies with all the procedural provisions dictated by the law and the applicable regulations.

“We have donated to several foundations such as the Double A park and other foundations and [the disputed donation] should not be taken as a political issue, but they should rather look for how many jobs the foundation has created, what has been done and what is going to be done. It is a non-profit foundation for which I and all the volunteers of our country work for. I don’t know what the intention of the legislator is, that I respect minorities, I don’t know what the purpose was [for challenging the resolution],” said Bonilla Sánchez, who pointed out that the letter in which the donation is requested is dated Nov. 22, just over two weeks before the brother of the mayor of San Lorenzo received Calderón’s endorsement.

“The legislature has to see the act, not the assumptions and budgets of whether it was endorsed or not endorsed. I have to look at that as a body. We received a letter where she is requesting [the donation]. I don’t have the date, but that is the process…and that is what I have to look at, not other appreciations. We got the resolution on time, it was circulated, we will evaluate it and action will be taken on it,” he concluded.

Gracias por el respaldo a la siempre Gobernadora Sila M. Calderón

Posted by Hill Román Senador 2020 on Sunday, December 8, 2019




Prepa defends health contract awarded to highest bidder

Prepa Exec. Director José Ortiz: “This reminds me of [the movie] ‘Weekend at Bernie’s.’ Every time there is something, they bring in Elías Sánchez.” Courtesy/Alvin Baez

The executive director of the Puerto Rico Electric Power Authority (Prepa), José Ortiz, defended Monday the awarding of the health insurance contract to the highest bidder, Triple-S, and ruled out that the decision to choose the insurer responds to links with Elías Sánchez Sifonte, who was confirmed to be the lobbyist for the health insurance company during the bidding process for the government’s Vital health plan.

Ortiz’s expressions come after complaints that the $42 million contract was awarded to the insurance company even though its proposal had the highest in cost, by $5 million, and proposed lowering benefits to Prepa employees. It is the second time Triple-S has received this contract even though the company presented the highest cost for the public corporation in the request of proposal (RFP) on both occasions.

“The Fiscal Oversight Board is currently evaluating this contract. We have requested additional information from the Electric Power Authority [Prepa] to complete this analysis,” the fiscal board responded to Caribbean Business’ inquiry about its position regarding the healthcare contract awarded to Triple-S and its compliance with the projected $29 million in healthcare savings established in the fiscal plan that was certified in June 2019.

“This
reminds me of [the movie] ‘Weekend at Bernie’s.’ Every time there is something,
they bring in Elías Sánchez. We haven’t heard [anything] about Elías Sánchez for
a year and a half. At least I haven’t seen him anymore,” the executive director
responded to press questions.

The 1989 comedy film he referred to is about two friends and co-workers, who discover evidence of fraud at the insurance company they work for, and their boss, Bernie Lomax, rewards them with a stay at his luxurious island beach house. When they arrive to his property, they find him dead. Little do they know that Bernie is the perpetrator of the fraud they’ve uncovered and is arranging to have them killed after he left the island. To stay alive, they try to convince the unknown killer that Bernie was alive as well.

“Triple-S
has been with the Puerto Rico Electric Power Authority for many years and still
a bid was held. To give you a hypothetical example, if you have a health plan
that costs you $10 million and you are going to change it for another one, the
claims that are in process, which have not reached the plan, have to be assumed
by the agency. And there is talk that between one and the other there is a
difference of one and a half million or so or two million [dollars], but those
are the claims that are still running. If you change your plan, which seems to
be cheaper, you must add the claims that are running to that new plan,” he
stated.

“The
medical plan for the employees of the [Electric Power] Authority is very
important. More now that, we will have a clearinghouse that will decide about the
medical plan in the coming months. You know we are going to bring in a privatizer
and they will decide on the medical plan. So, making a change now, to make
another change later, when it doesn’t save us money, it’s not worth it,” Ortiz
concluded.

Popular
Democratic Party (PDP) Rep. Jesús Manuel Ortiz took to social media to denounce
that at the Health Insurance Administration (ASES by its Spanish acronym) there
are already federal defendants favoring third parties with money that should be
directed to the government health plan.

“There is
federal investigation on the bidding [process] for the Vital plan, and now we
see Prepa’s pattern to repeatedly renegotiate, choose the most expensive offer
and reduce benefits to the insured,” he said.

When asked by Metro newspaper, Ortiz said this new contract could be challenged by any of the insurance companies that did not prevail in the RFP. In fact, the first bid was challenged by healthcare company Medical Card System Inc. (MCS) in 2018 because Prepa did not grant the contract to the less expensive offer and it considered elements not specified in the RFP document.

However,
on Jan. 29, 2019, the Puerto Rico Court of Appeals validated the results of the
bid.

The legislator also requested Puerto Rico Gov. Wanda Vázquez Garced to investigate the Triple-S contract deal with Prepa.”What will the Governor do to prevent more irregularities from happening with the new federal allocation (12 Billion) for the health plan? Will you also put the responsibility on the Fiscal Oversight Board? Will the government allow third-party profit at the expense of essential services such as the health plan? The governor has to explain to the country how she will ensure an honest handling of the money to take care of people’s health services.”

“What cannot happen is that third parties continue to profit at the cost of essential services, such as the health service,” he concluded.




Puerto Rico business organizations rail against expected inventory tax bill

The Puerto Rico Capitol in San Juan (CB file)

Assure it would not address issue of having sufficient provisions to face a natural disaster

SAN JUAN — Members of the Puerto Rico private sector issued public statements Tuesday in rejection of a draft bill they are urging the island’s legislature to reconsider as it would cap the inventory tax businesses pay and exempt any amount over it from being taxed, which they assure does not address what they call a national security issue. 

They said the proposal Rep. Antonio “Tony” Soto and the chairman of the Municipal Revenue Collections Center (CRIM by its Spanish acronym), Javier Carrasquillo, intend to introduce only days before the legislative session ends would keep inventory levels on the island too low.​

“At this point, we still have not had access to the draft and, according to media reports, the private sector and Puerto Rican citizens’ call for the elimination of the inventory tax is not being addressed at all. We have been discussing and analyzing for almost two years and it does not seem prudent for them to want to pass a bill that does not address the situation concretely,” Retail Trade Association President Iván Báez said in a statement.​

Meanwhile, Liliana Cubano, president of Hecho in Puerto Rico, the Made in Puerto Rico brand, warned of serious long-term consequences if the measure were approved because, as she put it, “eliminating the inventory tax is not even talked about, but rather a fixed amount for five years as the period to find a substitute [to the tax] that they have yet to exert the will to produce. Our call is to not introduce it and not approve it.”​

For his part, Puerto Rico Automobile Distributors Association President Julio Ortiz stressed that experts, economists and citizens had reached a consensus on the issue, that not learning from experience and past emergencies would raise the risk of a crisis occurring on the island.​

“The issue of the elimination of the inventory tax is critical to preparing for another emergency since it not only impacts food and water, but also all supplies and throughout the year,” he said.​

They all stressed the need to count on having sufficient basic provisions and supplies throughout the island, citing official statistics that Puerto Rico only has an inventory sufficient for less than 20 days were the shipping supply flow to be somehow impaired.​

They also pointed to reports by Professional Market Research, which found that 2018 ended with an alarming percentage, of more than 20 percent, of aisle products out of stock and that 2019 was averaging 15.7 percent in out-of-stock products, or almost double the 8 percent with which other markets operate, so they will continue advocating for the elimination of the inventory tax by emphasizing that the island’s geography requires a tax system that does not penalize businesses for preparing and stocking up on supplies to face natural disasters.

“It is beyond belief that this tax has not been eliminated two years after the [2017] hurricanes [Irma and Maria] and we are talking about waiting five more years. This imposition has transcended from being a bad tax to being an obstacle to the security of the people and for the economic recovery of the country. The pressure exerted by the mayors on the legislature has certainly been stronger than the duty to the people of Puerto Rico, thus we request that this measure is reconsidered and not approved,” said Kenneth Rivera, the former president of Puerto Rico’s Chamber of Commerce and CPA Society.​

The private sector representatives demanded that the government tackle the issue seriously, not with temporary bills that do not address the root of the matter.




Amazon Marketplace purchases not taxed, despite agreement

Puerto Rico Treasury Department. (Juan J. Rodríguez / CB)

Editor’s note: This report first appeared in the Oct. 24 issue of Caribbean Business.

Unlike purchases made by Puerto Rican consumers directly through Amazon, which have been subject to the island’s 11.5 percent sales & use tax (IVU by its Spanish acronym) since the beginning of 2018, the retail giant’s third-party vendors do not withhold the tax.

Caribbean Business was able to confirm this information after examining a series of bills provided by local consumers, and approached the Puerto Rico Treasury secretary, Francisco Parés Alicea, with the issue.

“Without going into the details about a merchant in particular, the agreements with merchants can only be between the sales that the merchants make and the state. If there is a third party that uses, in a way, a website, but is a vendor, as the law stands today, it makes us go into an agreement with that third party directly. Obviously, it goes without saying that this is a very difficult task,” Parés Alicea said regarding what he referred to as “cyber flea markets.”

Back in July 2018, Caribbean Business first reported that the Treasury Department was going to present legislation to adapt the sales & use tax regime to the new findings and developments that have occurred as a result of the U.S. Supreme Court ruling in the South Dakota v. Wayfair case, which changed the rule of law in force since 1992 to allow state treasury departments to charge taxes on online purchases from retailers that have no physical presence in U.S. states and territories but still sell their goods and services to a state’s consumer.

Back then, Parés Alicea, as the deputy secretary of internal revenue at the Puerto Rico Treasury Department, assured his technical team was “cautiously and responsibly” evaluating the change, which was put in place by the Fiscal Plan to raise $44 million in new revenue.

Now, after overcoming the chaos generated by the changes from having three different governors and two Treasury secretaries in less than a year, the top person at Treasury and his advisers work with an administration project that seeks to strengthen Act 25 of 2017, moving away from voluntary agreements and covering the spectrum of opportunities to raise funds in cybertransactions that have arisen as a result of this era’s technological changes.

Francisco Parés Alicea, Puerto Rico Treasury Department Secretary . (Juan J. Rodríguez / CB)

Act 25-2017 requires businesses with an online presence to voluntarily send a report to Treasury with the names and addresses of their customers, so the department may oversee and collect the IVU from Puerto Rico businesses and residents that acquire merchandise without having them self-impose the tax. The idea behind this legislation was that if a local business did not want to submit the information, it had the option to become a withholding agent and remit the tax. With the 2018 U.S. Supreme Court ruling, this became an obligation with the existence of approved legislation to that effect.

“That is why it is very important that in this legislation, in this second turn at bat, that these cyber flea markets are addressed to place more responsibility on these merchants that are putting at the disposition of others merchants the use of their digital platforms for the sale of products,” the Treasury secretary said. The next steps to confront the challenge of online sales, he added, “will be to address the marketplaces and other sites that are being used as flea markets or platforms for third parties to buy and force people who sell, rent or give access to digital products to become retaining agents,” to achieve similar results to those reached through confidential voluntary agreements under Law 25. He said the agreements under the law have reached $20 million in new income for the agency’s coffers.

The Treasury secretary was confident there is consensus between his agency and the Legislature to make changes to this legislation, which could be presented starting in the next regular session. The amendments would benefit the small and midsize local retail merchant, who could compete under equal conditions given that the factor of paying taxes is the determinant when deciding whether to buy in a physical or virtual establishment.




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.