Banco Popular celebrates 125th anniversary
SAN JUAN – Contrary to public belief, Ignacio Álvarez, president of Banco Popular, said the private sector has very little influence over the government and it is only consulted to support decisions that have already been made.
“If there’s a place in world, I believe, where the private sector exercises very little power over the government, it’s Puerto Rico,” Álvarez said.
Over the past few years, Banco Popular has been viewed by some sectors as part of the big business interests that can sway public policy for its benefit. Álvarez said that perception is wrong: “What has the government done in the past 10 years to help Banco Popular? What legislative measure can you truly say was made for Banco Popular? Have they lowered taxes? Have they eased the burden of operating?”
Asked about the role of the private sector, Álvarez said it “should not dictate public policy…. We’re not elected by the people.” While the executive admits public officials have sometimes sought his opinion, often “they call you to support a position that has already been taken.”
Álvarez made his remarks during a sit-down with the press on the occasion of Banco Popular’s 125th birthday Friday, in which he spoke about various topics including Puerto Rico’s fiscal crisis and the need to regain investors’ trust.
“The problem is Puerto Rico removed itself from the world 20 years ago. We need to sell Puerto Rico and put ourselves back on the map,” he said.
While the investment environment is improving, Álvarez said the government must still find ways to foster trust because there are people exploring the possibility of investing in Puerto Rico.
Puerto Rico has several tools at its disposal to attract investors. One of them is the recently enacted Opportunity Zones program that included 94% of Puerto Rico. Opportunity Zones are a new community development program established by Congress in the Tax Cuts and Jobs Act of 2017 to encourage long-term investments in low-income urban and rural communities. Firms establishing themselves in opportunity zones qualify for preferential tax treatments.
However, Álvarez said the island should stop changing the operating rules for investors overnight because it creates mistrust and uncertainty. He noted as an example the executive order signed by Gov. Ricardo Rosselló that raised the salaries of construction workers to $15 an hour.
“While many people think it’s correct to increase salaries, there was no discussion, no studies, no transition plan,” he said. “Puerto Rico has a track record of doing those kinds of things.”
Regarding Acts 20 and 22, which were enacted in 2012 to attract stateside investors to Puerto Rico, Álvarez said they are not attracting the super-rich millionaires like investor John Paulson but are helping certain economic sectors such as real estate. While these new residents pay very little to no taxes, they eat at island restaurants and shop in local stores. “So who are they hurting?” he said.
Álvarez remains optimistic. He is not worried about the island losing its population as long as it is richer, more balanced and sustainable. Despite the grim economic outlook, he said many people are willing to start businesses.
“We have been given an opportunity by this hurricane to question a lot of the things we have done in the past to change the path of the island and create a better, well-thought-out country,” he said. “We believe in Puerto Rico.”
Regarding the fiscal crisis, Álvarez said resolving the matter of Puerto Rico’s debt is important for its economic future.
“To provide Puerto Rico security, we need to reach agreements as soon as possible,” he said. “However, it has to be done correctly, because we don’t want to become Argentina, which renegotiated its debt and ended up back at the International Monetary Fund asking for money five years later. We need to reach the best possible deal but that it is also sustainable.”
The island’s Financial Oversight and Management Board and government must reach the best agreements possible with creditors, based on real numbers because “Puerto Rico cannot continue to go without paying the debt and its suppliers,” the executive stressed.
Banco Popular’s 125th anniversary probably makes it the only business on the island created under Spanish rule that is still operating. The bank has been around for events that marked Puerto Rico’s history and culture, including the change of sovereignty, world wars, economic ups and downs, and hurricanes.
“Banco Popular is intertwined with Puerto Rico. The bank was created because there was a sector of the creole class that was not being served…We are still here fighting. This is our frontline,” he said.
While other commercial banks have opted to close branches or reduce operations after Hurricane María struck the island last year, Álvarez said 40,000 customers joined Banco Popular. The institution wants to continue to grow and find “niches where we can grow here in the United States but in a stable and sustainable fashion,” he said.
In honor of the occasion, Banco Popular is donating $1 million to the University of Puerto Rico in Río Piedras over the next five years. The donation will pay for the construction of a “Trading Room,” equipped to provide business students exposure to the markets. He said the funding will also be used to bring world-renowned speakers who will be chosen by the UPR and the bank in the areas of economics, banking and finance.