Invest Puerto Rico banks on attracting overseas knowledge services firms to grow economy

In an overseas direct investment attraction strategy formulated by a private investment promotion agency (IPA), the government of Puerto Rico is shifting its focus away from traditional manufacturing to promoting highly skilled labor on the island to lure fast-growing companies in the so-called knowledge services and industrial value chain sectors.

The strategy—part of the promotional plan devised by Invest Puerto Rico, the commonwealth’s IPA—deemphasizes the promotion of a sunshine-filled, low-wage location and touts a high-quality talent pool residing on an island that is rich culturally and is reinventing itself economically. Tax breaks are still in the mix but are aimed at attracting companies providing better-paid, highly skilled work.

“We have to be surgical on how we target companies in sectors that make sense for Puerto Rico,” Invest Puerto Rico CEO Rodrick Miller said, noting that the island can no longer compete with low-wage locations such as Mexico and the Dominican Republic. “We want to go beyond this to aspire to a better economy. The generic pitch does not work; we have to refine the message.”

Last week, Miller unveiled a promotional plan based on research and analysis of global trends, economic data, perceptions, disruptive factors and Puerto Rico’s existing competitive advantages. The plan, which is being used to attract investment from key U.S. and foreign markets instead of looking for investors in all economic sectors, he said, noting that “global megatrends” such as the spread of artificial intelligence are “critical mass” sectors being targeted.

Invest Puerto Rico CEO Rodrick Miller said the IPA “has been a driving force in the recent surge of new business investments,” noting that IPAs in the states as well as Ireland and Singapore have helped the countries compete globally and create thousands of jobs. (Screen capture of Invest Puerto Rico)

Best bet for investments

The research yielded that Puerto Rico has the best chance in attracting overseas businesses involving knowledge services such as consulting, technical and business support services, including computer and software development and programming, as well as finance and insurance. These sectors include media services, professional services such as engineering and accounting, blockchain technology and web hosting, as well as investment firms, including hedge funds.

Another area of opportunity is overseas businesses involving the industrial value chain, including automation infrastructure, utility innovations, engineering testing and resiliency building.

“About 60 percent of promotional efforts are being concentrated in these core areas,” he said, noting that this strategy is targeting burgeoning companies in these sectors that are growing 20 percent to 30 percent a year. He added that jobs in these sectors are easier to bring to the island than for new manufacturing operations, which can take up to 18 months to open.

“We need to impact the economy today,” he said, noting that key selling points to attract investors include the island’s bilingual and highly educated workforce as well as lower wages in these professions compared to the U.S. mainland. 

Selling points for financial sector investors include U.S. market stability on the island, access to New York and Latin America, quality of life with high-end-living potential, and the Opportunity Zone program.

Investment is also being sought in “building industry capacity,” including “logistics enhancement” and “reinvention opportunities,” Miller said. This involves bringing in financing to shore up air and sea cargo systems, cover supply chain gaps, and ensure maintenance, repair and operations supplies. He said reinvention opportunities exist in the use of technology to grow agriculture and in a sustainable ocean-based economy.

According to the IPA’s study, the economic impact of Hurricane Maria included a loss of $100 billion in economic output and up to a 20 percent decline in economic activity. The catastrophic event prompted the immediate closing of 2,400 small businesses, while more than 5,000 small businesses are estimated to have closed permanently.

“Puerto Rico has very good incentives which are a critical part of its promotion, but the primary purpose of these incentives is to offset disadvantages in manufacturing, economy and infrastructure,” Miller said. (Screen capture / Invest Puerto Rico)

“This will make up 30 percent of our efforts, and involves the long-term health of the community, the rebuilding of the entire island-nation again, and not looking back,” he said, acknowledging that the success of this effort will rely largely on the flow of federal post-hurricane reconstruction funding to the island.

All in all, these promotional efforts target “high-tax” U.S. states and Europe, where investors are looking for lower tax jurisdictions and have been affected by the U.S.-instigated trade wars, Miller said, adding that long-term strategies include Latin America and Asia, which he pointed out as having a rapidly growing middle class. Invest Puerto Rico plans to open two business advisory council offices in New York and San Francisco, he said.

Invest Puerto Rico is part of a three-pronged strategy by the Puerto Rico Economic Development & Commerce Department (DDEC by its Spanish acronym) to attract and retain overseas business investment on the island. It includes Discover Puerto Rico, the island’s tourism destination marketing organization, and DDEC’s efforts to accommodate and retain businesses on the island.

Hand needed to reach economic goals

DDEC Secretary Manuel Laboy said that the task of attracting overseas investments was outsourced to Invest Puerto Rico because the commonwealth government was not being able to provide the “consistency and continuity” needed in this area due to changes in policy with every new government administration.

Invest Puerto Rico has a $4 million yearly budget provided by DDEC’s Special Fund for Economic Development (FEDE by its Spanish acronym) and the Act 22 Fund.

“It takes one to two years to design and implement a new promotional plan…so this can’t be subject to the political cycles,” the DDEC chief said. “To sell Puerto Rico is very difficult. Its image and credibility has been affected by such events as the Zika outbreak, the government bankruptcy and the 2017 hurricanes. Few people know about Puerto Rico. We need a group of people to amplify the message consistently. This is a long-term plan.”

Laboy said the strategy allows DDEC to focus on facilitating the local establishment of companies and retaining existing businesses, as well as working with looming threats such as the possible elimination of the federal creditability of Act 154’s 4 percent excise tax. Having an IPA is needed to reach the administration’s goal of raising the labor-force participation rate from 40 percent to at least 50 percent.

“We need to triple the number of investments,” he said. “There’s no way the government can do that [alone].”

Invest Puerto Rico is part of a three-pronged strategy by the Puerto Rico Economic Development & Commerce Department (DDEC by its Spanish acronym) to attract and retain overseas business investment on the island. (Screen capture / Invest Puerto Rico)

Invest Puerto Rico results

So far, Invest Puerto Rico’s initial efforts following this strategy have yielded some 2,000 leads, Miller said, noting that the entity has “engaged in direct contact and servicing” with more than 80 companies considering the island as an investment destination. About a third of these companies are in the knowledge services sector, he said, adding that 19 percent constitute retail or construction investments, 16 percent are healthcare companies, 13 percent are advanced manufacturing operations involving pharmaceutical and aerospace companies, and 19 percent involve agricultural and food services.

“Invest Puerto Rico has been a driving force in the recent surge of new business investments,” he assured, noting that IPAs in the states as well as Ireland and Singapore have helped those countries compete globally and create thousands of jobs.

Between fiscal year 2017, when Invest Puerto Rico was established, and fiscal 2019, the number of decrees for incentive Acts 20, 22, 73, 273 and 399 increased 1.4 times, rising from 593 to 1,434, according to a recent Estudios Técnicos Inc. report commissioned by the DDEC. In contrast, such incentive decrees rose 13.6 percent between fiscal years 2015 and 2017.

Most of the decrees were issued under the Export Services Act (Act 20) and the Act to Promote the Relocation of Individual Investors to Puerto Rico (Act 22).

(Screen capture / Invest Puerto Rico)

Miller was president and CEO of the Detroit Economic Growth Corp., the public-private partnership charged with leading the economic revitalization of that city, which filed for Chapter 9 bankruptcy in 2013. Miller helped the city exit from bankruptcy by negotiating the sale of key public assets to pay creditors. He also brokered the transaction to bring the Detroit Pistons back to downtown Detroit.

Previously, Miller served as founding president and CEO of the New Orleans Business Alliance, the official organization responsible for ensuring the long-term economic development of New Orleans, which was devastated by Hurricane Katrina in 2005. Since its establishment in 2011, the entity helped devise targeted tax incentives that attracted more than $720 million in new investment and 7,500 new jobs to the city.

Miller said that surveys involving business people and potential investors found that tax advantages are not as important to them as the quality of the workforce, logistics and infrastructure, quality of life and cost of construction.

“Puerto Rico has very good incentives, which are a critical part of its promotion, but the primary purpose of these incentives is to offset disadvantages in manufacturing, economy and infrastructure,” he said. “Puerto Rico is a complicated place but not a difficult place. [The problem is] it’s not functioning as an ecosystem.”

Puerto Rico’s fiscal agency publishes government investment guidelines

(Screen capture of

Apply to entities that engage in treasury operations, investment programs or market investments through a broker-dealer

SAN JUAN – The Puerto Rico Fiscal Agency and Financial Advisory Authority (Aafaf by its Spanish acronym) issued the new “Investment Policy Guidelines of 2019” for investments made by all government entities.

The planning document describes investment objectives and risk tolerance over a “relevant time horizon, along with constraints that apply to each Investment Program,” the document explains, adding that

Aafaf Executive Director Christian Sobrino Vega said the policies were issued by virtue of the powers delegated to the his agency by Gov. Ricardo Rosselló under Executive Order 2019-13, which was issued pursuant to Act 113-1995.

The guidelines apply to entities that engage in treasury operations, investment programs or any purchase of capital market investments through any broker-dealer, the document says.

“These measures will allow all investments of public funds to be made in a prudent and transparent manner in accordance with the best practices in the field. This way, AAFAF will continue strengthening its role and services as financial advisor for all the entities of the Government of Puerto Rico,” Sobrino said.

The guidelines address topics such as: “the governance of investment programs (ethics and conflicts of interest), criteria for delegating management to the government entity, planning for appropriate asset allocation, risk management, monitoring results, appropriate reporting, as well as the implementation of investment programs with internal and/or external managers,” according to the announcing release.

The new policies do not apply to debt service reserve funds or to entities that “merely hold depositary bank accounts, certificates of deposits or money market funds.”

The guidelines replace ones approved by the Government Development Bank in 2007 and amended in 2013.

See the new guidelines here.

Puerto Rico True Value retailers look forward to investor deal

SAN JUAN – Chicago-based retailer-owned hardware cooperative True Value Co. and ACON Investments entered into an agreement March 15 whereby the latter would make a strategic investment in the “new True Value operating company.”

Members of the cooperative in Puerto Rico welcomed the possibility to bring capital to their operations. Juan Bauzá, owner of Ferreterías del Hogar, which has had two True Value hardware stores in Puerto Rico for 30 years, expressed support for the initiative, saying it “will result in new and better opportunities to continue serving our customers in Puerto Rico.”

The Hardware Group, which comprises other True Value-affiliated hardware stores on the island, also looks forward to the move.

U.S. Housing awards $18.44 billion for Puerto Rico disaster recovery

True Value’s board is “unanimously recommending this transaction, which it believes represents a unique opportunity to accelerate the transformation of the business while also delivering compelling financial and retail benefits to our customers,” a release announcing the deal reads.

“We believe this is a fantastic opportunity for our hardware stores that will allow them to unlock the substantial majority of their investment while accelerating the transformation of the company to better serve our customers,” John Hartmann, president and CEO of True Value, says in the recent release.

“True Value’s ability to adapt changes is essential to offer the best service and opportunities to our clientele,” Bauzá added in his statement.

Puerto Rico Economic Development Dept. promotes investment in medical cannabis market

SAN JUAN – Puerto Rico Economic Development Secretary Manuel Laboy announced Monday that the island was presented to some 14,000 “world leaders” of the medicinal cannabis market as an ideal investment destination. 

The island’s pitch was given during the sixth annual Marijuana Business Conference & Expo, a major industry event, held this year in Las Vegas.

“The medical cannabis industry survived Hurricane María. This puts this industry in a privileged position, and at DDEC [Spanish acronym for the Economic Development & Commerce Department] we believe we had to let the world know. Therefore, through the Puerto Rico Medical Cannabis Association [PRMCA] we backed a commercial mission to present Puerto Rico as an investment destination and an ideal international market for medicinal cannabis,” Laboy said in a written statement.

Puerto Rico Medicinal Cannabis Assoc. working with gov’t to explore hemp’s potential

“This effort also served to demonstrate to the pioneers and connoisseurs of this market, who gathered to discuss the latest trends in the industry, that Puerto Rico is up, strengthened and ready to develop this industry so it represents opportunities for the country’s economic growth, generates jobs and provides alternatives for medical treatment to so many patients who need relief from their chronic conditions,” the official added.

Laboy Rivera said that after Hurricane María, the cannabis market, like other industries, faced challenges to be able to conserve crops and continue distribution, as well as working on an ecosystem that involves manufacturing, cultivation, laboratories, dispensaries and education.

“It is extremely important and necessary to deliver the message that Puerto Rico has taken measures to protect the industry and is doing everything necessary to continue developing it at the highest level of quality and competitiveness,” the secretary said.

He added that, during the event, funds were also raised to subsidize the cost of medicine for patients registered in the Medical Cannabis Program in Puerto Rico and to have new patients join it free of cost.

The effort is supported by celebrities such as Montel Williams, a multiple sclerosis patient and Emmy-winning TV personality who, through his LenitivLabs, established a fundraising alliance with the PRMCA.

Puerto Rico revenue projections from medical cannabis called ‘very optimistic’

“We have the ecosystem ready to continue with the production of medicinal cannabis to supply local demand and forge alliances with international business people, which will result in new investments for Puerto Rico. This industry has many opportunities to continue growing, develop new businesses related to this activity and become a significant source of jobs for the country,” PRMCA President Ingrid Schmidt said.

According to PRMCA estimates, the cannabis industry in Puerto Rico has generated more than $35 million for the economy and more than 1,000 direct and indirect jobs in its short development period.

According to Health Department reports, there are about 12,000 PRMCA-registered patients, who are being treated for epilepsy, Parkinson’s disease, multiple sclerosis, anxiety disorder, fibromyalgia, arthritis and cancer, among other conditions.

DDEC Secretary Says Gov’t Already Working on Puerto Rico’s Economic Recovery


SAN JUAN – Economic Development secretary-designate Manuel Laboy Rivera said Tuesday that the new administration is already working on the economic and fiscal recovery of Puerto Rico, while supporting the first executive orders signed by newly sworn in Gov. Ricardo Rosselló.

“The initial measures we have taken are the right ones to foster our island’s economic development,” stated Laboy, who was a former deputy secretary at Economic Development & Commerce Department (DDEC) during the administration of former Gov. Luis Fortuño.

DDEC secretary-designate Manuel Laboy said he will seek to implement the Plan for Puerto Rico, strengthen the economy and position the island as an investment destination. (CyberNews)

DDEC secretary-designate Manuel Laboy said he will seek to implement the Plan for Puerto Rico, strengthen the economy and position the island as an investment destination. (CyberNews)

According to a press release, the new head of the DDEC highlighted the proposal to amend the Public Private Partnerships Act to attract new investment, the creation of Enterprise Puerto Rico to improve the promotion of the island’s tourism sector, as well as the creation of new incentives to attract physicians and other professionals who have left Puerto Rico.

Moreover, Laboy said the administration will seek to implement the Plan for Puerto Rico promptly, strengthen the island’s economy to make it “participatory and technology-based,” and position Puerto Rico as a destination for foreign investment.

Immediately after being sworn in, Rosselló signed six executive orders to reduce operational expenses and politically appointed, or so-called trust, employees across the government, establish states of emergency in the fiscal and infrastructure areas and, create a new office for the management of federal funds, among other actions.

2017 Investment Forecasts: Possibly good, no longer great

FILE - In this Thursday, Oct. 27, 2016, file photo, trader Joseph Murray works on the floor of the New York Stock Exchange. After reaping big returns from stocks and bonds for years, investors need to prepare for weaker gains in 2017 and future years, strategists say. It’s a result of simple math: Stocks no longer look cheap, and bond prices will likely be hurt by rising interest rates. (AP Photo/Richard Drew, File)

In this Thursday, Oct. 27, 2016, photo, trader Joseph Murray works on the floor of the New York Stock Exchange. (AP Photo/Richard Drew, File)

NEW YORK – Get ready for investments to be merely good again.

They’ve already been great for years, as both stocks and bonds have delivered fat returns since the worst of the financial crisis passed in 2009. But after such a strong and long gallop upward, markets have many reasons to slow down, analysts and fund managers say.

So instead of getting 10 percent or more from stocks, which index funds are on pace to deliver for the sixth time in eight years, a better expectation may be for something in the low to mid-single digits, many of the predictions say. Few are expecting losses for stocks. But for bonds, which have been stellar for decades, even a flat year could be considered a victory.

“We’re in a different investing environment,” says Heather Kennedy Miner, global head of strategic advisory solutions at Goldman Sachs Asset Management. “It requires a little bit of a psychological shift in mindset, that investors are going to get paid less for each unit of risk in the next few years.”

Of course, analyst forecasts have a long history of being wrong. Many market watchers were forecasting only modest gains for this year, for example. And even though big, unexpected events repeatedly shook markets, from the U.K. decision to quit the European Union to Donald Trump’s victory last month, stocks still managed to turn in a better-than-expected year.

Many things could trip up forecasts for 2017, such as an unexpected rip higher in inflation. More potentially market-shaking elections are also looming, including ones in the largest European economies. Plus, the ultimate wild card still hangs over the market: Trump. Investors are notoriously bad at dealing with uncertainty, and they’re girding for a world where big shifts in U.S. policy may arrive via a late-night tweet.

Nevertheless, the crux of forecasts for more subdued returns in 2017 rests on simple math. Stocks are no longer cheap, at least relative to how much profit companies are producing. And interest rates for bonds are low and expected to be on the way up, which would mean their prices are set to drop.

Here’s a look at what market watchers are thinking:


A simple way to measure whether a stock is cheap or expensive is to compare its price against the profit the company is making. In recent years, stock prices have risen far more quickly than earnings, and that has many investors expecting slower gains ahead.

“We are not doubling down with our clients’ money,” says Rich Weiss, senior portfolio manager at American Century Investments. He’s been ratcheting back stock investments in the mutual funds that he runs. “It’s going to be wait-and-see for us.”

When the financial crisis was still burning in early 2009, the S&P 500 index was trading at the cheap level of eight times its earnings per share from the prior 12 months. Now, it’s trading at 19 times, according to FactSet.

At such levels, companies will need to produce bigger profits to warrant further gains in stock prices, analysts say. And while a proposed corporate tax cut by Trump would provide an immediate boost to earnings, strong economic growth has so far remained elusive.

Strategists along Wall Street, from Deutsche Bank to Goldman Sachs, are predicting the S&P 500 will climb to 2,300 or 2,350 in 2017. That’s less than 4 percent higher from where it was on Tuesday.

Barclays is a bit more optimistic, targeting the S&P 500 at 2,400 by the end of next year, but that would still be less than the 7 percent rise in earnings that it’s forecasting.

Where many analysts are more optimistic is in corners of the stock market that would benefit most from Trump’s proposals for lower taxes, less regulation and a stronger dollar. Chiefly, that’s smaller companies, which tend to do more of their business within the United States.

Wall Street also expects the milder returns to last past this upcoming year. Strategists at BlackRock see roughly 4 percent annual returns for big U.S. stocks over the next five years, for example. Still, that’s better than Treasurys, which they forecast will return closer to zero.


Bonds have been terrific investments for decades, delivering not only strong but also mostly stable returns.

That flipped on Nov. 9. Following Trump’s victory, interest rates began jumping on expectations for faster economic growth and inflation, and the yield on the 10-year Treasury note topped 2.60 percent this month, up from 1.86 percent on election day.

Rising rates mean newly issued bonds pay more in interest, but they also push down prices of bonds already in mutual funds and investors’ portfolios. The largest bond mutual fund by assets had its worst month in nearly 13 years during November, losing 2.6 percent.

“Bottom line, in a rising-rate environment, things will be very choppy,” says Bernie Williams, chief investment officer for USAA’s Wealth Management Investment Solutions. “But I don’t think we will have severe inflation, which is the reason to bail on bonds.”

Analysts are predicting a further, and mostly gradual, rise for rates in 2017. That has them forecasting slight losses to modest gains for the types of bond funds that traditionally sit at the core of a portfolio. They won’t approach the 5 percent-plus returns they’ve often turned in during the past decade.

“That said, a core bond portfolio does still play a role,” says Brad Camden, director of fixed-income strategy at Northern Trust Asset Management. “There’s a lot of optimism priced into the markets, but there’s also a wide range of uncertainty.”

Camden actually sees it as an encouraging sign that bonds have struggled since the election: It shows that stocks and bonds don’t always move in the same direction, proving once again the value of having a diversified portfolio. When stocks hit their next downturn, bonds will hopefully once again hold steady.

“It’s there for humility,” says Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management. “We could be totally wrong about the outlook for the equity markets, and that’s when core bonds are going to really come in handy.”

With Trump in the White House, what do I do with my 401(k)?

FILE - This Feb. 2, 2015, file photo, depicts a part of a U.S. $100 bill. The federal government is borrowing about one out of seven dollars it spends and steadily piling up debt _ to the tune of about $14 trillion held by investors. Over the long term, that threatens the economy and people’s pocketbooks. (AP Photo/Jon Elswick, File)

(AP Photo/Jon Elswick, File)

NEW YORK — Voters chose to shake up Washington and bring big change to the White House. Resist doing the same with your 401(k), analysts and fund managers say.

The first reaction for many investors around the world was to sell — nearly everything — late Tuesday as it became clear that Donald Trump would win the presidency. Stock markets tanked from Asia to Europe, and a similarly steep drop seemed likely when U.S. markets opened.

But stocks proved resilient Wednesday morning, benefiting those who sat on their hands instead of selling immediately. The market likely won’t stay this calm in the next few days and weeks. Analysts are forecasting big swings as investors digest the surprising election result, but their advice for investors remains: Stay the course. Elections can mean big short-term swings for stocks and other investments, but they historically have had minimal impact over the long term.

Here’s a look at what experts say to expect:



The answer is that no one knows. Not even the market knows. Late Tuesday, the futures market — where investors place bets on where stock indexes will end up — was calling for a drop of at least 5 percent for the widely followed Standard & Poor’s 500 index. By midday Wednesday, the S&P 500 was up, 0.6 percent.

History has shown that a presidential election doesn’t singlehandedly alter the stock market over the long term. Other factors, such as how expensive stocks are relative to their earnings and what the Federal Reserve is doing with interest rates, are more important factors than who sits in the White House.

Annual stock returns going back to 1853 have been virtually identical, regardless of which party sits in the Oval Office, at roughly 11 percent, according to the investment strategy group at Vanguard. The U.S. president may be the leader of the free world, but even that much power doesn’t allow for singlehanded control of the economy or interest rates.



Because no one knows what kinds of policies a President Trump would enact. One worry is that his election could lead to a global trade war, which would drag down profits for big U.S. companies that increasingly depend on customers in China, Europe and elsewhere.

He also represents uncertainty, one of the biggest bugaboos for markets.



More customers than usual at Fidelity are calling in to ask what they should do, but only a few more. The call volume is about the same as a typical Tuesday after a three-day weekend, Fidelity says. One measure of investor fear — an index that measures how much traders are paying to buy insurance against future drops in the S&P 500 — actually dropped 15.5 percent Wednesday.



Try to do nothing, even if the market starts to swing sharply, experts say.

Stocks are long-term investments, meant to be held for many years. Big swings in the interim are normal and should be expected. That higher volatility is the price that investors pay in exchange for the higher returns that stocks have historically provided over bonds and other investments.

If you’re feeling nervous, maybe the underlying problem is that your portfolio has too much in stocks, says John Sweeney, executive vice president of retirement and investing strategies for Fidelity. If you haven’t checked your 401(k) much the past few years, you likely have more in stock than you used to. The largest stock mutual fund has returned 183 percent since the start of 2009, for example, far outpacing the 37 percent return for the largest bond fund. So, unless you’ve been rebalancing your portfolio regularly, you may have a much bigger percentage apportioned to stocks than before. And as investors get closer to retirement age, experts suggest paring back on stocks and devoting more of their portfolios to bonds.

“If this news event has caused you some anxiety,” Sweeney says, “use this as an opportunity to rebalance.”

Nationwide Talks About Puerto Rico’s Fiscal Crisis, Local Expansion Plans

SAN JUAN — For Michael Karalewich, CEO of Nationwide Planning Associates, a broker-dealer, Puerto Rico residents need financial advice more than ever, as the local market faces increased litigation, strained client-adviser relationships and contracting investment operations.

“Most firms on the island that had been operating and created their own products, these products have suffered staggering losses and resulted in numerous customer complaints in arbitration cases,” he said in reference to the commonwealth’s recent debt and fiscal woes.

The firm’s founder & VP, Michael De Pol, noted how investors in Puerto Rico have “been burned,” and badly. “I see this almost as a perfect storm because not only did you have all these local banks create products with local securities that were sold, but on top of that, in many cases, they used leverage, or margin. One thing is to make an investment and find out it went down 70% in value, but when you add margin on that, you can go negative,” said De Pol, who along with Karalewich visited the island this week to inaugurate the firm’s new offices in San Juan.

Michael Karalewich, CEO of Nationwide Planning Associates

Michael Karalewich, CEO of Nationwide Planning Associates

He went on to explain how the lack of diversification—incentivized by local tax laws that led down a “path of least resistance” to invest almost exclusively in local products—is partly to blame for the blow the island’s debt crisis has landed on local investors.

“There was no regional, geographic diversification. Everything was here. That was the biggest mistake. And then you have the poor performance of the investments,” De Pol added.

As for Karalewich, recent events have led to a change in investor habits on the island, particularly over tax concerns. “What they realize is that the tax issue that they were so concerned about—paying extra tax—isn’t an issue when you lose 80% of your principal,” he said.

Ties to the island

As the firm seeks to insert itself in the Puerto Rico market, Karalewich explained how Nationwide would establish trust first. “We really want to connect with the communities,” he said, as the firm goes after perspective on what is going on locally “to understand as much as we possibly can, so when we make decisions, we have input from people on the island.”

That would include “professional networks” such as the one Nationwide already has with Bonistas del Patio—a Puerto Rico creditor group comprising local bondholders and led by former Government Development Bank President Jorge Irizarry.

“We met over the summer, in New York City, and then came down and met [Irizarry] again…. He basically helped me shape my perspective, and we exchange messages periodically and I know he’s available. We definitely wanted to align with an organization like [Bonistas del Patio],” noted Karalewich, adding Universal Life President José Benítez as “another key relationship” he has on the island.

The Nationwide CEO also spoke about the firm’s relationship with the Puerto Rico Financial Institutions Commissioner’s Office (OCIF by its Spanish acronym), and stressed the need to provide the entity with more resources to carry out its oversight role. “I think they are understaffed, they are overwhelmed, I think their heart is in the right place, but without knowing the full history of what happened, I think the big banks might have influenced how that organization was ran and that has to change,” he commented.

Eyeing long-term stay

“We wouldn’t be here if we didn’t want to build a long-term strategy. We believe there are brighter days ahead for investors,” Karalewich stressed, adding that Puerto Rico is the firm’s fastest-growing segment.

The firm arrived in the local market in 2009 and currently operates five branches in Mayagüez and San Juan. Out of the firm’s 100 associated individuals, 27 are on the island. To the tune of a $250,000 investment, the firm inaugurated this week its facilities in Hato Rey.

Founded in 1992 and based in New Jersey, Nationwide is “an independent, full-service broker dealer” registered with several regulatory entities, such as the Securities & Exchange Commission and the Financial Industry Regulatory Authority. It currently has $2.5 billion to $3 billion in assets under management, which are kept in Pershing—a subsidiary of the Bank of New York Mellon that is also used by Santander and Oriental Bank.

Karalewich said people don’t usually understand what a broker dealer is. It oversees individuals who are licensed to offer securities to the public, and acts “like a hub,” in charge of making sure securities laws and regulations are followed by its associates.

“We are very different than the banks. The banks have multiple conflicts of interest within their business model…. Our business model is an independent model where we don’t create our own products,” said the chief executive, vowing that Nationwide’s advisers are well-experienced and highly vetted before being allowed to join the firm.

During a roundtable with the local press, both Karalewich and De Pol made their case for Nationwide as a legitimate option for Puerto Rico residents who have lost confidence in investing their savings.

“We are kind of fortunate in a sense being new to the marketplace and our business model, since we don’t create or manufacture these products, we don’t have the litigation that a lot of these companies have on their books. That’s an advantage for us because we’re OK talking freely with clients; we didn’t cause the clients to lose value on their portfolios,” Karalewich said.

Bank of America’s Profits Rise 6 Percent, Beats Estimates

This Monday, July 18, 2016, photo shows the top of a Bank of America ATM booth, in Woburn, Mass. Bank of America is scheduled to report financial results, Monday, Oct. 17, 2016. (AP Photo/Elise Amendola)

This Monday, July 18, 2016, photo shows the top of a Bank of America ATM booth, in Woburn, Mass. (AP Photo/Elise Amendola)

NEW YORK — Bank of America’s third-quarter profits rose nearly 6 percent from a year earlier, helped by strong results in investment banking and trading, as well as lower expenses.

The consumer banking giant said Monday it earned $4.45 billion after paying dividends to preferred shareholders in the three months ending in September, up from $4.178 billion in the same period a year earlier.

The per-share figure rose to 41 cents versus 38 cents a year ago, easily beating the 34 cents per share analysts were expecting, according to FactSet.

BofA’s consumer banking division earned $1.81 billion in the quarter, up from $1.76 billion from a year earlier. While revenue was relatively flat year over year, largely due to lingering effects of near-zero interest rates, BofA was able to cut expenses from $4.711 billion in the third quarter 2015 to $4.37 billion this quarter.

Noting the ongoing Wells Fargo sales practices scandal, Bank of America executives said they have seen no evidence of similar behavior at their bank.

“It’s not the number of products we open, it’s how they are used,” Paul Donofrio, Bank of America’s chief financial officer, said in a call with reporters.

Bank of America’s global markets division reported net income of $1.07 billion, up from $800 million a year earlier. BofA’s bond trading desks had a strong quarter, up 39 percent from a year earlier. Citigroup and JPMorgan Chase had reported similar gains in bond trading last week.

Revenue rose to $21.64 billion from $20.99 billion.

BofA’s shares rose 2 percent in pre-market trading.

Wal-Mart Plans to Slow New Store Openings, Invest in Online

This Sept. 19, 2013, file photo, shows the sign of a Wal-Mart store in San Jose, Calif. Wal-Mart said Thursday, Oct. 6, 2016, it plans to slow new store openings as it looks to pour more money into its online efforts, technology and store remodels. (AP Photo/Jeff Chiu, File)

This Sept. 19, 2013, file photo, shows the sign of a Wal-Mart store in San Jose, Calif. (AP Photo/Jeff Chiu, File)

NEW YORK — Wal-Mart Stores Inc. is planning to slow new store openings as it looks to pour more money into its online efforts, technology and store remodels.

Wal-Mart closed on its more than $3 billion buyout of the fast online retailer last month, showing how heavily it’s willing to invest as it tries to boost online sales that totaled $13.7 billion last year – still just a fraction of the company’s annual revenue.

The world’s biggest retailer also said Thursday that it anticipates fiscal 2018 earnings per share being about flat versus its fiscal 2017 adjusted earnings per share.

Wal-Mart foresees fiscal 2019 earnings per share growth of about 5 percent.

Wal-Mart, based in Bentonville, Arkansas, outlined its plans for the next several years ahead of its meeting with investors Thursday. Executives are expected to offer more updates on how it will integrate its business with its online operations and offer more insight into how it will compete against online leader

“We are encouraged by the progress we’re seeing across our business and we’re moving with speed to position the company to win the future of retail,” said CEO Doug McMillon in a statement. “Our customers want us to run great stores, provide a great e-commerce experience and find ways to save them money and time seamlessly – so that’s what we’re doing.”

Like its direct store rivals, Wal-Mart is reinventing itself to be more nimble as it fights off competition from online leader, whose Prime shopping program is swiftly converting members into loyal shoppers. And it faces competition from dollar stores and traditional grocers like Kroger, which are ramping up promotions.

But Wal-Mart has seen its investments online and in the stores pay off – and it’s starting to gain ground over some of the competitors.

Wal-Mart has launched a flurry of changes, from making sure its vegetables look good to cleaning up its stores to being sharper on keeping prices low. It’s melding online services with its massive fleet of stores – rolling out a mobile payment system to speed checkouts. And it’s pushing ahead with online grocery and pick-up services. It’s in the second year of its $2.7 billion investment in its workers that involves higher pay and more training. It says that such investments as well as the other moves are already helping to improve customer service in the stores.

Wal-Mart raised its annual profit outlook in August after reporting its eighth straight quarterly increase in revenue of stores opened at least a year and the seventh quarterly gain in customer traffic at its Wal-Mart U.S. namesake business. Global online sales rose 11.8 percent in the second quarter. That’s up from the 7 percent pace of the first quarter but still far weaker than the 20 percent increases from less than two years ago.

Wal-Mart shares fell $2.16, or 3 percent, to $69.51 in morning trading Thursday.

In contrast, Target reported that a key revenue measure was down 1.1 percent in the second quarter, after seven straight quarters of gains. And it saw fewer customers in the store for the first time in a year and a half. Target is struggling to get its groceries right and it also didn’t push the second part of its “Expect More, Pay Less” slogan. Target’s shares are down 6 percent for the year and are hovering at about $67.

Last month, Wal-Mart closed the deal to buy It believes that it will help it grab higher-income and younger customers and will be incorporating some of’s technology that lowers prices in real time.

But Wal-Mart still has plenty of challenges. The company faces challenges in China, and it’s struggling in the U.K and Brazil. The company has been making some changes to bolster its business overseas. The company announced Wednesday that it was increasing its stake in, China’s No. 2 e-commerce site, to 10.8 percent from 5.9 percent. The move comes nearly four months after Wal-Mart bought an initial stake in in a deal that also gave ownership of its Chinese e-commerce site Yihaodian, including the brand and app.

In the release issued Thursday, Wal-Mart said it would spend $11 billion on capital expenditures this year, and the same for the following fiscal year. In the last fiscal year ended in January, the company spent $11.5 billion on capital expenditures. But Wal-Mart said it will be investing more of that money in e-commerce and digital initiatives.

The company said that it plans to open 130 U.S. stores this year, but that’s below its forecast issued last year that it would open 135 to 155 new stores. In its last fiscal year that ended in January, it opened 230 U.S. stores. It said it plans to open another 55 U.S. stores next year. By type of store, Wal-Mart plans to open 60 supercenter stores and 70 small-format stores or what it calls its Neighborhood Market stores this year. And for next year, the breakdown is 35 supercenters and 20 smaller format stores.

Wal-Mart reiterated that its earnings per share for the current year on an adjusted basis would be $4.15 per share to $4.35 per share on an adjusted basis.