Wednesday, May 22, 2019

Puerto Rico Gov Launches Cuentas Mi Futuro to Address Social Inequality

By on February 28, 2019

Editor’s note: The following originally appeared in the Feb. 28 – March 6, 2019, issue of Caribbean Business.

As part of the latest revision of the Puerto Rico Incentives Code, Gov. Ricardo Rosselló Nevares announced last week the creation of “educational development accounts,” as were originally proposed in his government administrative platform, Plan for Puerto Rico.

The governor made the announcement accompanied by the executive director of the Fiscal Agency & Financial Advisory Authority (Aafaf by its Spanish acronym), Christian Sobrino Vega, along with his counterpart at the Economic Development & Commerce Department (DDEC), Manuel Laboy Rivera, and Education Secretary Julia Keleher.

Rosselló explained that the program, renamed, “Cuentas Mi Futuro,” or “My Future Accounts,” consists of the creation of savings accounts for students who start in kindergarten, and in which the state will invest $1,000 as an initial contribution. After students complete their senior year of high school, they can access these funds either to continue higher education, start a business or simply as an incentive, intended to combat the island’s school-dropout rate.

“It is an initiative that we will put into the Incentives Code we will be introducing because it has a social benefit that goes far beyond money,” the governor argued.

“In other jurisdictions around the world, this system has proven to be very effective because it is an investment in the development of our citizenry and our human resources. The idea is to contextualize that these accounts will be opened when the student is in kindergarten. When there, the state will deposit $1,000 into that account, which over time, with the interest it will be receiving, will grow,” he explained while underlining the initiative’s success, in what he called the “Enabling State,” in other jurisdictions such as Canada and the United Kingdom.

Rosselló indicated that because of the way the initiative would operate the student accounts may receive additional contributions from other sources and will not be limited to obtaining dividends from the initial amount, at a conservative interest rate of 4 percent.

“These accounts have multiple purposes, and not only that the money stays there and nothing is added, but that there may be other contributions…from the family, from the municipalities, which sometimes make this type of contribution, and other resources such as competitions or social initiatives that cannot be compensated in cash, that the compensation can be a contribution to this account,” he said.

Rosselló insisted the initiative is an important mechanism to address the problem of social inequality that exists in Puerto Rico, which is among the 15 jurisdictions in the world with the greatest economic inequality among its population.

The government’s contribution to the accounts, which would begin to be made in August, when the 2019-2020 school year starts, would come from the island’s general fund and be deposited in a trust fund. The governor also indicated that the contribution would be made in August for all new kindergarten students and repeated annually.

Rosselló said students who do not graduate would lose the account’s privileges and said the funds would be kept in the trust to match the annual contribution required by the initiative.

For his part, Sobrino, who is also the Rosselló administration’s ex officio representative to the fiscal oversight board, ruled out that the federally established panel would have objections to the bill because programs of this type already have an allocation of funds within the board-certified fiscal plan.

“In the fiscal plan and recent budget letter sent by the board, several programs and funds are mentioned for these [programs], which are either to support educational measures or public safety,” Sobrino said. “Public safety is clearly a separate issue, but those programs, although they are included in the fiscal plan, have not really been delineated yet and have not been given form…so we are putting the ball into play. In terms of budget, the important thing here is that this initiative is executed, and seeing the positive effect it is going to have, no one should doubt that it is something that should be supported. I do not see, nor do I expect there will be, many obstacles.”

The Aafaf director also explained that an independent trustee will be selected through a competitive process in accordance with the way in which the government has established these trusts in the past two years.

Likewise, Laboy stressed that developing the island’s labor force is a vital part of the Rosselló administration’s fiscal plan.

“The development of the workforce is part of the fiscal plan. It is included as one of those important components, and when you look at other jurisdictions, the main concern is precisely the development of the workforce, so in that sense Puerto Rico is no different than the rest of the world, where they have to make specific bets to ensure they have the workforce, not only the present one but also of the future, and this measure directly addresses this concern and ensures we have that labor force for the island’s future,” DDEC’s Laboy said.

The governor made the announcement less than a month after also saying he is running for a second term as governor for the 2020 elections while summoning his supporters to a March 3 campaign event.

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