Private Sector Group Presents Proposals to Overcome Economic Impact of Covid-19
SAN JUAN – The closure of businesses in Puerto Rico since March 15 has created an unprecedented impact on the Puerto Rican economy. It is vital to see in this scenario the role of the private sector, which generates 94.3% of the value of the productive activity. The government, for its part, represents 5.7% of the generation of economic activity. Thus, for every dollar the economy of Puerto Rico produces, 94 cents are made by the private sector, while the government makes 6 cents. So, six weeks after the start of the lockdown, what has happened? Private companies are not producing and, therefore, are not generating in order to make the economy viable.
This situation leads the local industry to move for an immediate economic push. Faced with this reality, the Movement for a Healthy Economy has developed a series of recommendations aimed at guiding the reopening of the economy by following the necessary protocols and safety measures.
“A two-week shutdown to prevent a collapse in the healthcare system is something that most businesses can handle. But maintaining the restrictions for more than six weeks will force the bankruptcy and failure of most businesses and jobs in Puerto Rico. The economic collapse will be devastating. The health system has ample capacity. It is time to produce,” said Federico “Friedel” Stubbe, chairman of the Prisa Group, one of the founders and spokespeople of the movement.
At the moment it is estimated that 300,000 people are temporarily out of work in the private sector, which translates to 45% of employees in the private sector being affected. Of these, an estimated 170,000 have already applied for unemployment benefits. Looking at the effect in numbers, estimates from consulting firm Inteligencia Económica Inc. point out that by extending the curfew until May 3, the direct economic impact of the crisis would amount to $8.4 billion. If extended until May 31, the impact could reach $12.1 billion. The most heavily affected business sectors include: real estate, retail, manufacturing, tourism and entertainment, cars and health.
Another relevant point is the impact that the lack of federal aid that Puerto Rico receives would have on the local population, since they could be at risk in the near future. This situation would have an impact for 45% of the families that depend on some type of aid such as Medicaid, PAN and Public Housing.
The economic situation resulting from Covid-19 brings with it the following main risks: paralysis of the private sector, insolvency of households, the financial collapse of the government and the possibility that the economic depression may worsen. With this scenario in mind, the spokespeople for the Movement for a Healthy Economy have proposed a program called Protecting Health and Production with the following points:
- We have to understand that the public and companies are smart and have learned. The markets are efficient. Both workers and customers will not go outside until they are comfortable with the solution offered to them.
- Puerto Rican businessmen are as good as the best in the world. They have the capacity and need to develop protocols that protect the health of both the client and their workers.
- Each industry presents its protocol that adapts to its circumstances and needs. In a free market, customers decide.
- Government should trust and count more on the capacity of its business leaders, workers and customers. It will provide much more strength to the solution.
- Let’s control our fears and work together, government and business to pursue a better life solution.
“The current crisis represents a general risk from which it will be difficult to get away from if comprehensive solutions and well-founded strategies are not implemented. Knowledge and participation of the private sector will be essential to complement the government’s efforts in reopening the economy. It is time to rethink how we will meet the needs of our businesses to direct effective and productive action that benefits everyone,” said group spokesperson Gustavo Vélez, Inteligencia Económica’s founder.
“It would be a serious mistake to think again that federal funds will be the lifeline of Puerto Rico and its economy. The federal government has increased its deficit and debt to historic levels; therefore, no one can guarantee the permanence of the federal funds currently received by the Island. We must move and demonstrate to the Trump administration that we can produce like the rest of the 50 states,” the economist added.
The group calls on government leaders to trust the ability of private industry to think of innovative ideas and offer alternatives that help build a program of effective solutions to succeed, which in turn leads to building a strategy of long-term development. This strategy should be aimed at not depending so much on federal funds and looking for recurring sources of investment and production. Above all, it is of vital importance and urgent action to make possible the permanence of the 273,000 jobs of private companies and the 60,000 of the government that are at risk of being lost.
The initiative will have the support of an educational media campaign aimed at raising awareness about the relevance of reopening private industry with the proper protocols for the benefit of the financial health of the Puerto Rican family.