So far, only 25% of eligible businesses can charge lower sales tax on prepared foods

See which establishments are certified

SAN JUAN — Mere days before a lower sales and use tax (IVU by its Spanish acronym) on prepared food takes effect, only a quarter of eligible businesses have been certified to offer the reduced 7 percent rate, the Puerto Rico Treasury Department said Wednesday.

Treasury has sent reduced IVU certificates to 5,345 businesses that prepare food, or 25.5 percent of the 21,000 businesses registered under the North American Classification System (NAICS) that could qualify for the certification, Treasury Deputy Secretary Ángel Pantojas told Caribbean Business on Wednesday.

“We believe that with the ongoing [business] orientation on the certification process, those numbers will continue to increase,” he said.

In fact, Treasury Secretary Francisco Parés said in a release Wednesday that qualifying establishments may still obtain the Authorized Business Certificate in time to collect the reduced IVU by Tuesday, Oct. 1, when the new rate takes effect.

As certified IVU-withholding agents for Treasury, businesses that sell prepared food, such as restaurants and fast-food outlets, will be able to collect IVU at the reduced 7 percent rate, down from 11.5 percent.

On Tuesday, Treasury sent the 5,345 certificates to the Internal Revenue Unified System (SURI by its Spanish acronym) accounts of businesses that completed the compliance process for certification by Sept. 22, Parés said.

The certificate will be valid starting Oct. 1 and should be printed out and placed in a visible location at the entrance of the establishment so customers can identify that the business is authorized to charge the reduced IVU rate.

“We urge those business owners who did not receive the certificate yesterday [Tuesday] and want to be able to charge the reduced rate starting Oct. 1, that they still have this week to catch up and apply for the certificate through their SURI account,” the Treasury chief said in the release, while stressing that uncertified establishments cannot charge the lower rate.

He urged business owners with questions to visit the agency’s website, www.hacienda.pr.gov, or call 787-622-0123, option 8.

Besides possessing a valid merchant registration with a qualifying NAICS code number, businesses wishing to obtain certification must be up-to-date in tax filings, including IVU filings, and not have outstanding tax debt or be participating in a tax-debt payment plan, Parés Alicea explained, adding that businesses must also have a fiscal, or point-of-sale, terminal that is connected to Treasury.

To qualify, the merchant registration must have at least one of the following NAICS codes: 72231, 72232, 72233, 72241 and 72251, the Treasury chief said, adding that businesses currently selling prepared foods with registrations lacking these codes should update them. Once businesses have complied with the requisites, they may apply for the certificate through SURI, he said, noting that these applications are evaluated daily.

Parés said the 7 percent IVU can only be charged by businesses that sell prepared foods, carbonated beverages, and candy and sweets, as defined in Section 4010.01 of the 2011 Puerto Rico Internal Revenue Code, as amended. He said alcoholic beverages are not included in this list.

Treasury had sent automatic notifications Aug. 9 to businesses that qualified under the NAICS code, apprising them of the requirements to obtain the certificate. Then, on Sept. 6, the agency sent more than 17,000 notifications to businesses that had yet to fully comply with the requisites to be able to offer prepared food at the reduced IVU.

Which establishments can charge the lower rate?

Pantojas said many of the eligible businesses that have not been certified failed to have a proper fiscal terminal installed. He said merchants, regardless of their aggregate sales volume, who lack a fiscal terminal should contact any of the 13 processing companies certified by Treasury and identified in Administrative Determination 19-03, which can be accessed online, at www.hacienda.pr.gov.

Pantojas said the monthly maintenance fee of such terminals comes out to $8 to $10 a month, although he could not provide a number for the initial investment businesses must make to acquire the equipment.

“This should not be an impediment given that this system has been established for a decade,” he said.

Another sizeable group of businesses have been unable to get certified because they have outstanding tax debts, Pantojas said, adding that these businesses can become eligible for the reduced IVU certificate as soon as they have agreed to a payment plan with Treasury.

“They don’t have to erase their tax debt to comply; they just have to have an up-to-date installment plan with us,” he said.

The procedure to reduce the current 11.5 percent IVU to 7 percent on prepared food is automatic for businesses connected to SURI and business owners don’t have to visit Treasury offices to get an update on the requirements, given that the messages that have been sent to their accounts explain the steps that must be taken to benefit from the adjustment of the IVU rate, Parés said.

Treasury estimates that the lower IVU rate on prepared foods will result in a decrease of approximately $90 million a year in revenue, Pantojas said. He added, nevertheless, that the reduced rate will encourage prepared food establishments to comply with IVU collections, which he said could increase Treasury’s ability to increase revenues in this tax category. These businesses will likely see a greater influx of costumers due to the lower tax, he said.

See which establishments can charge the reduced IVU rate at SURI’s website, suri.hacienda.pr.gov; click on Authorized Business to charge the 7% on prepared foods.




Former Cobra Energy president pleads not guilty in FEMA scheme

The U.S. District Court of Puerto Rico (CB file)

Ellison arrested 20 days after grand jury returned corruption indictment 

SAN JUAN — Just as everyone in Puerto Rico prepared to face Tropical Storm Karen, former Cobra Energy President Donald Keith Ellison was arrested on the island. He pleaded not guilty of the charges against him before U.S. Magistrate Judge Marcos López.

Unusually, the arrest of the Cobra executive occurred 20 days after the charges against him were formalized and 13 days after U.S. Attorney for Puerto Rico Rosa Emilia Rodríguez gave a press conference making public the arrests on Sept. 10 of Ahsha Tribble, the former deputy regional administrator of the Federal Emergency Management Agency’s (FEMA) Region II, assigned to work in Puerto Rico as part of FEMA’S response to Hurricane Maria; Ellison; and Jovanda Patterson, FEMA deputy chief of staff, assigned to San Juan.

On Monday, the initial hearing was held before Judge López, who imposed a $500,000 bail. 

The former executive indicated in the courtroom, through his defense attorney, Sonia Torres, that he pleaded not guilty to the eight criminal charges against him for allegedly orchestrating a fraud with FEMA funds to repair Puerto Rico’s electric power service in the aftermath of hurricanes Irma and María.

The judge told the defendant that he has to look for a job and mental health treatment, if necessary, and that he can only travel between Puerto Rico and Georgia.

Ellison was then released under the probation conditions.

According to the indictment, one month and two days after the devastating impact of Hurricane Maria, Cobra Energy and its then-President Ellison won a series of contracts with the Puerto Rico Electric Power Authority (Prepa), which ended up totaling $1.8 billion, allegedly through a fraud, extortion and bribery scheme orchestrated with Tribble.

Ellison, Tribble and Patterson allegedly participated in a conspiracy to commit bribery of public officials; acts affecting a personal financial interest; false statements; disaster fraud; honest services wire fraud; Travel Act violations; and wire fraud.

According to the Registry of Corporations administered by the Department of State, on Oct. 13, 2017, Cobra was incorporated in Puerto Rico as a foreign company, and two days later obtained its first contract with Prepa. The resident agent of Cobra Acquisitions is the Prentice Hall Corporation System, which in turn obtains services from The Fast Solution.

On March 26, 2018, Cobra and Prepa signed a second contract for an additional $900 million with funds reimbursed by FEMA.

The federal indictment argues that in exchange for Tribble pushing the contracting of Cobra services at Prepa, Ellison gave the federal official gifts of value such as a helicopter tour over Puerto Rico in February 2018; assistance procuring a place to live in New York in or about February 2018; the negotiation and hiring of Patterson by Cobra Energy; airfare from Miami to Orlando and first-class tickets from San Juan to New York, provided personal security services and gave her access to his credit card, among others..

The former FEMA regional administrator’s hearing is slated to be held on or before Oct. 4 at the Federal Court in Hato Rey. No time or day has yet been specified by federal Judge Francisco A. Besosa, who will preside over the case.

Meanwhile, on Wednesday, federal authorities formalized the arrest of Patterson in Puerto Rico, and the initial hearing was before Judge López, who imposed a bail of $10,000.

Patterson pled not guilty to the three charges against her. She was represented by José Aguayo. Judge López allowed her to travel within the United States as part of her job with one of Cobra’s subsidiaries. Her non-work related trips are limited to travel between Georgia and Puerto Rico.

Follow Limarys Suárez Torres on Twitter: @Limarys_Suarez




Puerto Rico gov makes worker pay, pensions her priority

(Juan José Rodríguez/CB)

Act 29 also under discussion with fiscal board, says Vázquez, who is also watching Port of San Juan agreement

SAN JUAN — Puerto Rico Gov. Wanda Vázquez said in recent media roundtable that one of her priorities is to ensure government workers receive their annual bonus.

Vázquez stressed that the issue of the year-end part of eligible public employees’ salaries—referred to as the “Christmas” bonus because it must be paid between Nov. 15 and Dec. 15 of each year—is one of the discussions underway with the Puerto Rico Financial Oversight and Management Board. 

“I have always said that one of my priorities is for the bonus to be paid. We have had those conversations with the board. Obviously, it’s an additional income for public workers and we want for them to have the opportunity of receiving it,” Vázquez said. “My commitment has been that we will speak with the board about this; I have already presented it to them. So, in the process, and amid the good relationship we have started with the communications with the board, this is being worked on for the people of Puerto Rico so public workers can receive this compensation.”

When asked by Caribbean Business if the funds to be able to pay the bonus have been identified, Vázquez said the administration’s commitment was to determine the way the bonus will be paid, noting that discussion with the board on the matter is ongoing.

Regarding Act 29, which exempts municipalities from paying into the retirement system and contributing to the Health Insurance Administration (ASES by its Spanish acronym), Vázquez said that was yet another issue being discussed with the fiscal board.

“This contribution or income that the municipalities receive is important,” Vázquez assured. “Therefore, it’s one of our priorities, just as the Christmas bonus and the public workers’ pensions. All of those topics are being worked on… I can guarantee to the people of Puerto Rico that we will do everything possible so that all those benefits continue.”

Underscoring that her position is to protect pensions as much as possible, Vázquez said she will be a retired public worker at some point as well. 

“Certainly, my interest is that [pensioners] are not affected; that there are no cuts, and that is part of the conversations” with the board, Vázquez said, adding that “the retirees, the pensioners have conversations with the board. All these elements will be taken into consideration when making a determination. My interest is that there are no cuts and that they are not affected.”

As for the collaborative agreement at the Port of San Juan between Puerto Rico Terminals (PRT) and Luis Ayala Colón under the name Puerto Nuevo Terminals (PNT), Vázquez said that she sent a letter Friday to the Federal Maritime Commission (FMC) that made the agency aware of her concern that it could distort competition. 

“I know the FMC is monitoring the development of the agreement closely, but in the meantime, our concern was expressed in the letter.” 

Last week, a group comprising trade and labor organizations, dubbed Junte de Voluntades, asked Vázquez to put a stop to the agreement that allows the cargo companies to operate as PNT.

While Junte de Voluntades claimed the entire operation at the Port of San Juan has been conceded to PNT, the executive director of the Puerto Rico Ports Authority, Anthony Maceira, told Caribbean Business that only the Justice Department would be able to intervene with the new venture, were it to find it in violation of antitrust regulations.

At a press conference last week, Junte de Voluntades spokesman Mark Anthony Bimbela, accompanied by the executive vice president of the Chamber of Food Marketing, Industry & Distribution (MIDA by its Spanish acronym), Manuel Reyes; United Retailers Association (CUD by its Spanish acronym) President Jorge Arguelles; Germán Vázquez, president of the Transportation and Related Branches Union; and other representatives said that under the agreement, PNT would manage about 80 percent of the containers and 11 of the 14 cranes in the Port of San Juan, with the remaining 20 percent of the containers and three cranes managed by Florida-based Crowley Maritime Corp.

Vázquez said that unlike the previous administration, she was letting the FMC know she would object to the collaborative agreement it allowed between the port terminal operators, were it to affect commerce or consumers in terms of competitiveness, reduction of transportation services or increasing costs. 

“According to what I have been informed, under the public policy of the previous governor, no objection was presented before the FMC about the said merger. It is our duty to establish that [our] position is in contrast to the [previous administration’s] and that, certainly, I will promptly address the concerns and complaints about the jurisdiction of the government of Puerto Rico, as well as the scope of the agreement and its implications on consumers and commerce in Puerto Rico,” Vázquez said.




Gov. Vázquez: Unlike last administration, I’m looking at Port of San Juan agreement closely

An aerial view of San Juan Bay’s cruiseship and cargo ports three days after Hurricane María, Sept. 24, 2017. (CB photo)

Will write to Maritime Commission as Justice Dept. investigates Puerto Nuevo Terminals

SAN JUAN — In a statement Wednesday evening, Puerto Rico Gov. Wanda Vázquez said that unlike the previous administration, she was letting the Federal Maritime Commission (FMC) know she would object to the collaborative agreement it allowed between Port of San Juan terminal operators were it to affect commerce or consumers.

The governor pointed to wanting to ensure that the agreement between terminal operators Luis Ayala Colón and Puerto Rico Terminals does not affect competitiveness, reduce transportation services or increase their costs. 

If the resulting Puerto Nuevo Terminals venture is detrimental, the governor assured she would “make the corresponding determinations in the best interests of Puerto Rico.”

Vázquez further noted that although she has already requested a Justice Department investigation, she was also looking into the details of the agreement whose opponents believe could affect competition, resulting in poorer, costlier service for consumers.

“According to what I have been informed, under the public policy of the previous governor, no objection was presented before the FMC about the said merger. It is our duty to establish that [our] position is in contrast to the [previous administration’s] and that, certainly, I will promptly address the concerns and complaints about the jurisdiction of the government of Puerto Rico, as well as the scope of the agreement and its implications on consumers and commerce in Puerto Rico,” Vázquez said.

The FMC allowed the collaborative agreement between the adjacent Port of San Juan terminals to go into effect Aug. 29. However, the commission noted concern about the agreement’s impact on the market, saying it would monitor it closely.

The commission did not reach a consensus on the threshold question of whether the agreement comes within Shipping Act jurisdiction, Commissioner Michael Khouri said in an FMC press release, adding that “a majority could not determine that we have enough information and evidence at this time to go to Federal Court to seek an injunction to prevent this agreement from going into effect. We understand what the parties are trying to achieve, but serious concerns remain about the implementation of the agreement. The Commission will take necessary measures to ensure that the agreement is not implemented in a manner that violates the Shipping Act.”




Puerto Rico included in federal budget measure

(Screen capture of www.soto.house.gov)

Island counting on continuing resolution to address health funding

SAN JUAN — As organizations and individuals from Puerto Rico’s public and private sectors lobby lawmakers in Washington, D.C., for an immediate injection of Medicaid funds as well as a longer-term solution, the president of the College of Physicians and Surgeons, Dr. Víctor Ramos, was expecting the island would be included in the continuing resolution (CR) to fund the first weeks of the new federal fiscal year, a development that occurred Wednesday evening.

Puerto Rico was included in the continuing resolution introduced by House Democrats, which, if passed, would keep the Medicaid matching ratio for the island at 100 percent until Nov. 21.

In a statement, Gov. Wanda Vázquez said: “Our efforts in the Federal Capital together with the Secretary of Health, Rafael Rodríguez, and other agency heads and the Resident Commissioner, Jenniffer González, paid off, given that in [the] visit [to Washington, D.C.] we were able to reestablish communication and the trust in this government. I hope that this resolution will be approved….”

“This will provide time to continue efforts to get a four-year assignment for the Medicaid program for Puerto Rico, for the benefit of thousands of Puerto Ricans,” the Health secretary added.

Dr. Víctor Ramos, president of the College of Physicians and Surgeons (Screen capture of www.facebook.com)/

Ramos pointed out the prevailing issues. First, the $4.8 billion allocation that Puerto Rico received as part of the post-Hurricane María recovery package is set to run out sooner than projected, leaving the island again facing the possibility of a healthcare cliff. Secondly, the doctor stressed, was the matter of working on increasing the federal Medicaid matching rate, or Federal Medical Assistance Percentage (FMAP), for Puerto Rico.

“We are [holding meetings] both in the House and in the Senate, pushing two things: that we are included in the CR, which is the temporary extension until November 21, and the long-term bill. In the CR, we intend to maintain the government [allocation] as it is,” the physician said earlier Wednesday.

“Our argument is, since we are at 100 percent Medicaid financing then give me the same I have now or at least what I am asking for in the measure, which is an FMAP of 83 percent,” he added. 

As a territory, Puerto Rico’s annual Medicaid funding is subject to a cap with a fixed FMAP of 55 percent. In contrast, states receive Medicaid funding on an open-ended basis, with an FMAP that varies based on state per capita income. However, the recovery package approved under the Bipartisan Budget Act of 2018, was of $4.8 billion, which Puerto Rico’s government used to cover 100 percent of its Vital health program. 

If Puerto Rico was treated as a state, its FMAP would be the maximum allowable rate, 83 percent.

This would be the third healthcare cliff Puerto Rico has faced since 2016 despite continuous attempts to increase healthcare funding for the island. The latest one is a bill introduced by Florida Rep. Darren Soto and co-signed by Puerto Rico Resident Commissioner Jenniffer González, which seeks to have Puerto Rico’s FMAP raised to 83 percent.

Besides working toward a more permanent solution, González is also actively trying to include Puerto Rico in the continuing resolution Congress is looking to pass to avoid a showdown over immigration-related funding. 

In her letter to the congressional leadership, the resident commissioner argued that Puerto Rico is about to start negotiations with providers, and uncertainty about whether the island will have sufficient funds could result in a reduction of an already shrinking healthcare provider pool. 

González also argued that given the $222 million budget cut in healthcare the island’s Financial Oversight and Management Board expects, a lack of funds would force the local government “to cut benefits, and possibly beneficiaries.”

Although on Tuesday morning the resident commissioner had said in a Radio Isla interview that including Puerto Rico in the continuing resolution would be an “uphill” effort, Ramos indicated that it was González that told the doctors’ group of the potential inclusion.

“We don’t have the actual language in the agreement, but apparently it is included, the resident commissioner office informed me,” Ramos said, adding that he believed inclusion in the continuing resolution was more likely than in the long-term bill, especially because they see hesitance in the Senate.

Ramos, who is being accompanied by delegations of various Puerto Rico healthcare organizations, indicated that senators keep bringing up the issue of transparency and the arrests this summer of the head of the island’s Health Insurance Administration as well as contractors on charges related to fraud and misuse of federal funds. 




Puerto Rico senator: Tax reform that’s immune to presidential whims needed

Sen. Juan Dalmau (File photo)

Urges higher, permanent tax on multinationals’ net income

SAN JUAN — Puerto Rican Independence Party Sen. Juan Dalmau stressed Tuesday that the best way to deal with the possibility that the federal government will impose a transition plan that ultimately eliminates the ability of controlled foreign corporations (CFCs) to receive federal credit for the Act 154 excise tax is by passing comprehensive tax reform.

The lawmaker assured that the breadth of that reform must structure the taxation of multinationals based on net profits, that is permanent, of at least 10%, and that is under the control of Puerto Ricans, not subject to the whims or interests of whichever U.S. president or administration is in power, he said.

Dalmau’s remarks come after U.S. Treasury Secretary Stephen Mnuchin asked Gov. Wanda Vázquez to present a transition plan for the federal credit given against the excise tax paid by stateside companies on the island.

“That allows us to collect more revenue. That way, we do not have to rely on an ephemeral and vulnerable special treatment based on the 4 percent of the special [excise] tax,” said Dalmau, adding that “the counter-argument of breach of contract related to exemption decrees does not hold up in a ruined country. Extraordinary conditions allow that harm. We are now threatened since the federal Treasury countdown began to eliminate the 4 percent credit for the tax on foreign [corporations]. That income represents 20 percent of the General Fund.”

For Dalmau, a comprehensive tax reform, particularly in the corporate sector, that eliminates the distinction between exempt and non-exempt companies, and a fiscal policy that modestly increases the tax liability of foreign corporations, is urgently needed and will allow the government to obtain revenue it currently lacks to make social investments in healthcare, mass transportation, the environment, education and culture that elevate the quality of life of Puerto Ricans.

“If we had imposed the tax rates that those companies should have, inn fairness, paid in Puerto Rico, collections in the past 30 years would have exceeded $50 billion: Enough for the working middle class to have been enjoying tax justice for a long time; the government would not have the fiscal crisis it currently suffers; the imposition of an IVU wouldn’t be necessary; the UPR [University of Puerto Rico] would not have budgetary problems; and tens of thousands of workers would not have lost rights or benefits or have to be laid off,” he said.

Dalmau reiterated his call for the Legislature to pass the related measures he has introduced.

“Only in this way can the fiscal deficit be adequately addressed and, in the future, guarantee a more stable and prosperous economic and fiscal framework that will do justice to the majority of our people,” the senator stressed.




Despite governance crisis in July, Puerto Rico tax revenue exceeds projections

Puerto Rico Treasury Department headquarters in San Juan (CB file)

Treasury chief attributes record collection to corporate activity

SAN JUAN — The government crisis that led to the resignation of former Gov. Ricardo Rosselló in July did not affect the Puerto Rico Treasury Department’s tax revenue that month, which exceeded estimates and reached “historical” levels, Treasury Secretary Francisco Parés announced Tuesday.

Preliminary general fund net income during July, the first month of fiscal 2020, totaled $1.05 billion, some $305.5 million, or 41.2 percent, more than the same month last year, Parés said in a release, noting that the figure exceeded estimates by $159.9 million.

The Treasury chief attributed the month’s record-breaking revenue mostly to income tax collections resulting from “economic activity by corporations.” Corporations on the island paid $255.7 million in income taxes, nearly three times the $89.5 million paid the same month last year. July’s corporate income tax revenue exceeded projections by $101.9 million, or 66.3 percent. Parés simply said it was “attributed to a particular business transaction of a company that resulted in payment of taxes.”

Another big revenue driver was Act 154’s 4-percent excise tax, paid by stateside companies on their purchases from Puerto Rico-based subsidiaries, the official said. The hugely successful tax has become the focus of controversy after U.S. Treasury Secretary Steven Mnuchin reportedly told Gov. Wanda Vázquez’s administration to prepare for the eventual elimination of the federal tax credit that allows stateside manufacturers on the island to offset the impact of the excise tax. He said the tax does not align with President Trump’s corporate tax reform to bring business back to the United States. For tax purposes, Puerto Rico is considered a foreign jurisdiction.

The Act 154 excise tax generated $383.4 million in July, a 53 percent increase compared with the $250.1 million collected the same month last year. The July figure is $35.9 million above estimates, Parés added. Act 154 collections rose 8.8 percent, or $168.3 million, between fiscal years 2018 and 2019. Revenue in this category, which constitutes almost one-fifth of general fund revenue, rose from $1.68 billion in fiscal 2018 to $1.83 billion in fiscal 2019.

Individual income tax collections totaled $143.3 million in July, $13 million, or 10 percent, more than in July 2018. Revenue in this category exceeded estimates by nearly $8 million, Parés said.

However, Treasury also registered declines in other major revenue categories, including the sales and use tax (IVU by its Spanish initials). IVU collections totaled $91.6 million in July, a drop of $10.8 million, or 11 percent, compared with July last year, when Treasury received $102.4 million. The July figure was nearly $9 million below estimates.

IVU collections for July totaled $179.3 million, Parés said without providing the year-ago total. He said the method used to register IVU payments was modified in July due to the Puerto Rico Sales Tax Financing Corp. (Cofina by its Spanish acronym) adjustment plan resulting from an agreement with bondholders in February.

“Under the new methodology, [IVU] payments received will be registered at the moment the tax return is filed,” the Treasury chief said. “For this reason, some payments made in the month of July will be reflected in the month of August starting on the 20th, the deadline for filing the monthly IVU return.”

Motor vehicle excise tax collections totaled $34.2 million in July, a $9.7 million drop compared with last year, but $10.5 million above estimates. Excise tax collections on alcoholic beverages reached $20.7 million, a $1.7 million decline versus July 2018, but $10.5 million more than estimated.

Meanwhile, non-resident withholdings fell 30 percent, from $51 million in July 2018 to $35.7 million in July this year. Estimates in this category were off by $17.5 million.

Parés said last month that projected tax revenue for fiscal year 2020 is expected to drop by nearly 9 percent due to the planned cut of the IVU on prepared food from the current 11.5 percent to 7 percent, which starts Oct. 1, as well as to enacted income tax cuts, and the earned-income tax credit.




Motion for release of tax breaks report filed in Puerto Rico Supreme Court

Stateside watchdog groups considering filing friend of the court briefs to back motion by Espacios Abiertos

SAN JUAN — Espacios Abiertos (EA), or Open Spaces, a government watchdog group, filed a motion Monday before the commonwealth Supreme Court demanding the disclosure of the contents of the Tax Abatements report the government prepared and submitted to the Financial Oversight & Management Board (FOMB) in July 2017.

In its motion, EA is petitioning the island’s highest court to reverse a divided (3-2) ruling by the Court of Appeals in favor of the government’s position that the report should remain out of the public eye. The government had appealed a San Juan Superior Court ruling favoring publication of the report.

EA Executive Director Cecille Blondet said in a release that, stateside, information about tax concessions and exemptions is usually in the public domain.

EA Executive Director Cecille Blondet (Screen capture of www.youtube.com)

“In the motion, [we] state that the Court of Appeals erred in its appreciation of the facts in the application of the law, [given that] Puerto Rico Supreme Court jurisprudence establishes that access to information and documents generated by public agencies is a right protected by the Constitution derived from the right to free expression,” Blondet said. “Moreover, the information collected and contained in the report is not available to the public in any other place. It is the ministerial duty of the Treasury secretary to divulge [this information] to guarantee an effective participation by citizens.”

EA requested copy of the commonwealth Treasury Department report more than a year ago. Amid the agency’s refusal to provide a copy to the organization, it filed a mandamus motion at San Juan Superior Court. Last December, the court ruled in favor of EA and ordered the government of Puerto Rico to immediately divulge the requested information. However, the government insisted in keeping the information secret and resorted to the Court of Appeals to avoid publication of information Blondet said is “public in the United States since [the 1970s], as well as in other countries….”

Blondet said Puerto Rico cannot “remain in the dark” when discussing fiscal and budget matters.

“You cannot [work on a budget] without access to this information,” she said. “Before, the response was that information on [tax] concessions and exemptions was not available. Now we know that it is because it was collected for this reported. The country [Puerto Rico] has a right to have this report made public.”

EA has received the backing of Washington, D.C.-based watchdog groups that have expertise in fiscal matters. Good Jobs First, which publishes Subsidy Tracker on the web, and the Center for Budget and Policy Priorities said they are considering filing friend of the court briefs in the Puerto Rico Supreme Court supporting EA in the case, Blondet said.

“In Puerto Rico, the battle for the right of access to information has been a years-long struggle,” Blondet said, noting that either out of “evil, fear or ignorance,” some people in private and public institutions “insist” on limiting access to information on public assets needed for policy decisions. “Citizens should not give up on enforcing a right that assists us. Although there is vast jurisprudence in Puerto Rico on access to information, we still encounter many obstacles.”

The case brought by EA over the tax abasements report was the object of multiple comments posted by the tight circle of La Fortaleza officials on the Telegram chat group that led to the resignation of Gov. Ricardo Rosselló in July. Apart from the discussion of communication and legal strategies to be used in the case, the messages revealed how its participants carried out a campaign of intimidation and discredit against the organization and its executive director.

EA is a nonprofit, nonpartisan organization that since 2014 advocates for transparency and accountability in government finances and assets in Puerto Rico.




Puerto Rico Treasury: 40 submit qualifications to insure island agencies

New process being used to contract coverage for 100 entities, corporations

SAN JUAN — Puerto Rico Treasury Secretary Francisco Parés Alicea announced Monday that 40 insurance producers submitted their qualifications and proposals to cover more than 100 government entities and public corporations starting Nov. 1.

An insurance producer is someone licensed to sell insurance products on behalf of insurers within a particular state. The term producer is interchangeable with agent, representative or broker.

“After the announcement of Aug. 1, 40 interested producers submitted proposals on evaluation of risks, loss control, and advice in management and contracting of risk insurance for the government of Puerto Rico,” Parés Alicea said in a release.

He said these proposals will “immediately” be vetted by an evaluating committee composed of officials from Treasury’s public insurance and legal divisions as well as the Insurance Commissioner’s Office, a representative from the Fiscal Agency & Financial Advisory Authority, and an “observer” from the Financial Oversight & Management Board.

The committee is tasked with evaluating the insurance producers’ knowledge and experience, said Parés Alicea, noting that qualifying producers will be managing coverage at assigned government agencies and public corporations. He said he ordered a new contracting process for insurance producers in July, after receiving reports of poor performance by certain producers and complaints that the former process was “too open to subjectivity.”

The new contracting process, done in coordination with the Insurance Commissioner’s Office, requires that applicants possess “specialized resources” in the areas of insurance coverage, claims, management of risk, and loss control, the Treasury chief said.

“The committee will responsibly evaluate the background of the producers to ensure that they comply with the requisites,” he said. “We are working through this process in the most transparent way possible to guarantee the public interest.”

The following is the list of insurance producers who responded to Treasury’s RFQ:

Edwin I. Rivera

CVR Insurance Group 

Garcia Cespedes Ins

Fedelta Insurance 

Emilio Villaverde

Conde Insurance

Antonio Maldonado 

Bonnet Insurance 

Jose A. Diaz Agosto 

I Benefits Insurance 

Lone Star Insurance

Virtue Insurance Group

L. Campos & Associates

Ikon Insurance

Font Insurance Inc.

Jorge R. Urrutia Valles

Baco & Amador Matta

Owners Risk Insurance 

Vagib Corp

Christiansen Insurance

Aegis Internacional 

Lopez Luna Insurance 

Aon Risk Solutions

Consuelo Revuelta Ins

Vidal & Rodriguez, Inc.

First Class Lighthouse Ins

360 Risk Solution (Enrique Padial)

Goas & Associates

General Insurance Brok 

Chapel & Associates 

Get Insurance (Christofer Fuentes Mas)

Popular Risk 

Marcos Vidal

Manuel Garcia Gonzalez 

Marsh Saldana

Integrated Solutions 

DSG Insurance Corp.

Strategic Group (Francisco Gomez)

Maria De Lourdes Fernandez




Puerto Rico economic activity for July drops compared with last year

Economic Development Bank index reflects 2nd year-on-year drop after 11-month climb

SAN JUAN — Puerto Rico’s economy continues to show signs of weakness, as a leading indicator, the Economic Development Bank’s Economic Activity Index (EDB-EAI), registered a second consecutive annual drop after what had been 11 straight months of increases.

According to the latest report, July’s EDB-EAI reached 120.5, 0.1 percent higher compared with June, but 1 percent less than for July 2018.

The seasonally adjusted EDB-EAI is made up of four indicators: total non-farm payroll employment reflected in the establishment survey; total electric power generation in millions of kilowatt-hours (kWh); cement sales in millions of 94-pound bags; and gas consumption in millions of gallons.

Two indicators, total nonfarm payroll employment and total electric power generation, showed year-to-year increases of 1.6 percent and 2.9 percent, respectively. However, cement sales and gas consumption decreased by 7.8 percent and 18.7 percent, respectively.

“It should be noted that the annual comparison is with respect to a period during which the island’s electrical system was not completely restored after the impact of hurricanes Irma and Maria,” reads July’s report, which notes that the annual EDB-EAI for July last year had increased by 0.2 percent. “Consequently, EDB-EAI growth is gradually approaching the behavior that existed prior to the hurricanes.”

The EDB-EAI had been decreasing on an annual basis before the storms struck the island, with the last annual increase registered in 2012.

The index began an 11-month inter-annual increase in July 2018, as the island’s economy was lifted by the influx of hundreds of millions of dollars in post-hurricane aid for emergency repairs. Nevertheless, the index reflected its first year-over-year decrease in June, as most of these projects, including the Federal Emergency Management Agency’s (FEMA) $1.2 billion “Tu Hogar Renace” (Your Home Reborn) home repair program, ended earlier this year.

Puerto Rico’s economy has yet to see the effects of the billions in additional federal funding assigned for permanent reconstruction of housing and infrastructure damaged by the powerful hurricanes in September 2017, given that such monies have been largely held up by bureaucratic wrangling between federal agencies, such as FEMA and the U.S. Department of Housing & Urban Development (HUD), and the commonwealth government.

In an interview with Caribbean Business, Alejandro J. Abrams, president of the Associated General Contractors of America, Puerto Rico Chapter, said the number of employed construction workers had increased from about 20,000 to more than 50,000 with post-hurricane repairs, but had dropped back to about 30,000 in the last few months. He attributed the slowdown to the gap in construction activity since the end of the first phase of reconstruction.

“Gov. Wanda Vázquez is developing efforts as never before to propel economic activity, efforts that will be positively reflected in the next reports,” EDB President Luis Carlos Fernández Trinchet said in a statement. He said these efforts involve the arrival of Community Development Block Grant-Disaster Recovery (CDBG-DR) Program funds, the implementation of “strategies for economic development” for small and midsize businesses and through the Opportunities Zones program, as well as other housing programs, including aid to potential homebuyers “who work in critical tasks.”

Fernández noted that the EDB-EAI increased 5.8 percent during fiscal year 2019, which ended June 30, the first positive growth after six-consecutive declines. He added that the index rose 1.7 percent between January and July this year.

The new EDB chief said that, in contrast, fiscal year 2018, which encompassed the immediate post-hurricane emergency, which lasted months, ended with a 6.4 percent decline, according to the EDB-EAI.

The EDB-EAI report states that when annualized, the index level is “highly correlated” with the real gross national product (GNP), although it is not a direct measurement of real GNP, which includes other factors not considered in the EDB-EAI. GNP is commonly calculated by taking the sum of personal consumption expenditures, private domestic investment, government expenditure, net exports and any income earned by residents from overseas investments, minus income earned within the domestic economy by foreign residents.

In fact, in another indicator of a stalling economy, retail sales fell by 6.3 percent in May compared with sales for the same month last year, according to the last monthly economic report to the governor, issued in August.