Tuesday, September 25, 2018

Puerto Rico manufacturers: Fiscal board adviser’s remark hinders efforts in Washington

By on June 8, 2018

SAN JUAN – The president of the Puerto Rico Manufacturers Association (PRMA), Rodrigo Masses, wrote to the island’s fiscal oversight board to criticize a remark by one of the panel’s advisers.

He stressed that, in a podcast with the executive director of the American Bankruptcy Institute, Sam Gerdano, board adviser Andrew Wolfe made a comment that was inconsistent “with the position of the government of Puerto Rico and the private sector in matters of economic policy.”

In his letter, addressed to board Executive Director Natalie Jaresko, Masses said Wolfe should not make public comments that harm Puerto Rico’s initiatives. He also questioned why the board would have someone who is “directly opposed” to the efforts of the island’s government and the private sector in Congress.

Amid the island’s economic crisis, “both the government of Puerto Rico and the private sector have been in Congress for months promoting a more equitable tax treatment for the island that promotes and encourages manufacturing investment in the island,” the PRMA stressed in a release Friday.

In the podcast, Wolfe said Puerto Rico should not focus on promoting tax incentives to stimulate its economy because “in 20 years somebody would take those breaks away again,” as happened with the section 936 incentives, according to the PRMA release.

The association’s president added that investment in manufacturing is currently the “best option” for the island because it “has the greatest multiplier effect in terms of employment and better wages than the tourism sector.”

The PRMA said its main concern is that the comments “are not only contrary to what was discussed” with the fiscal board, but “could also be used against our efforts in Congress.”

Masses said he was available to meet with Wolfe and “present the arguments of the PRMA in favor of the incentives to manufacture.”

Wolfe was independently contracted by the board as an economic adviser. He has a doctorate in economics and earned a bachelor’s degree in engineering. He retired in 2014 from the International Monetary Fund after 27 years, where he was a senior manager of the Western Hemisphere Department, and co-authored “Puerto Rico: A Way Forward,” a government-commissioned report in 2015 on recommended structural and fiscal reforms, as well as the island’s public debt.

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The full text of the PRMA president’s letter to the fiscal board follows:

June 7, 2018

Mrs. Natalie Jaresko
Executive Director
Fiscal Oversight and Management Board
Seaborne Plaza
Hato Rey, Puerto Rico

Via email: natalie.jaresko@promesa.gov

Dear Mrs. Jaresko:

The Puerto Rico Manufacturers Association is deeply concerned with a recent statement made by your economic consultant, Andrew Wolf, in a podcast with the American Bankruptcy Institute Executive Director Sam Gerdano.

His statement directly opposing initiatives in Congress to place Puerto Rico in much better competitive position by seeking a more equitable tax treatment for the Island, signals his lack of understanding of Puerto Rico’s needs in order to achieve sustained growth.

It is difficult to comprehend why the Board would have as its economic consultant someone who is directly opposing the efforts of Puerto Rico’s government and private sector in Congress. As you know, before the economic crisis of our island, both the government of Puerto Rico and the private sector have been in Congress for months promoting a more equitable tax treatment for the island that promotes and encourages manufacturing investment in the island.

We quote directly from what he said: “I’m very reluctant from the economics of it, to say that you should go back to Congress and get some of those tax breaks again because who knows, in 20 years somebody would take those breaks away again.” This statement is not only contrary to what we have discussed with you, but it also harms Puerto Rico’s efforts in the Congress to obtain conditions that could pave the way for future economic growth. Any such statement will be used against Puerto Rico’s efforts.

Furthermore, far from presenting a viable option, it indicates that the island should promote the growth of the tourism sector that in some Caribbean islands represent up to 35% of GDP.

We respectfully differ from the economist Wolf. Although we agree that it is important to diversify our economy by stimulating different sectors, in an economy like ours, stimulating manufacturing investment is the best option at this time. Manufacturing has the greatest multiplier effect in terms of employment and better wages than the tourism sector.

We are at your disposal to meet with your adviser and present the arguments of the PRMA in favor of the incentives to manufacture.

Sincerely,

Rodrigo Masses

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