by Oscar Soria
Puerto Rico’s economy has been in decline for some years and it isn’t showing signs of recovering from previous hits, hopefully an expert on the field talks about what he think needs to be done in order to battle our current falling economy.
Puerto Rico has been experiencing during the last thirty years “dramatic reduction in productive capacity; the extremely low participation rate of the labor force; the drastic decline in manufacturing activities; the serious increase in public debt; and the very low capacity of tax collection,” said economist Dr. Edwin Irizarry Mora via email for a press conference on Nov. 12th, 2013. Even while every aspect of a stable economy is on decline the public debt increases, meaning that for the last 3 decades loans and malpractices have been a must to try and fix the economic gap that has been growing.
Moreover, there is no need for a debt restructure plan Dr. Irizarry explained. “There is one reason: from a constitutional point of view, creditors (bond holders) are in the first place in the line of recipients when the central government processes its payments. In other words, the first collections from the tax system are channeled to paying public debt (both principal and interest accrued). Therefore, even in the case that taxes collected diminish to a very low level, creditors will ALWAYS get their payments” This is although it may sound like a great idea it is not liable because that means that while no further plans may be needed to pay off the public debt, the higher it is the less money the government will have to fund other programs making our internal economic resource scarce.
In finding ways to improve the economy thinking about credit unions might not be the safest option. In reality there are several ways that credit unions could help fix or repair the economy if even a little. “So far local credit unions have accumulated almost 8 billion dollars in total assets. Most of this amount is held for internal operational purposes. However, several hundred million dollars may be channeled to promoting local or community economic development projects,” said Dr. Irizarry. Providing funding to surfacing economic development projects might be a good start on building a new way to incorporate young new minds with ideas that could potentially fill in for old ones.
Another consequence of a low economy and one that could affect negatively the country which it happens to is capital flight. Capital flight may occur when investors take their securities out of the country. To prevent this in Puerto Rico, Dr. Irizarry notes that “credit unions must assure investors high yield in their investments in diversified economic activities, which should encompass services, agro-industry, manufacturing, recycling, retail commerce and any other non-traditional activities. The market exists, so the next step is to provide the necessary financial resources.” These investments shall prevent a capital flight while promoting these activities and making it a more stable ground for private and local companies on the same field, thus maintaining a good postured economy.
The country’s economy is something that should concern everybody and as a ways to help improve it small and midsize companies “must be the main targets of a new economic development strategy in the foreseeable future in Puerto Rico.” The Dr. explained. “Most of the newly founded economic activities are being conducted by local companies, which are diversifying their operations in industrial sectors such as agro-industry, specialized services at all levels, recycling, labor-intensive manufacturing, retail trade at a community level, savings and loans.” These as opposed to large companies are the ones growing and are the potential economic pillars that should come to focus when thinking of fixing Puerto Rico’s economy. “The key for success is strongly related to identifying market opportunities within regions and municipalities.” Dr. Irizarry proposes that an action plan has to be articulated regionally instead of country wise and that this will help Puerto Rico achieve a stable economy.