The 70% economy of Puerto Rico

Q2/2020 – The 70% Puerto Rico Economy

Analysis of economic indices in Q2-2020 for Puerto Rico
As of Q2-2020, the Puerto Rico economy is an average 70% of what the quarterly indices used to be in Q2-2006, just before the onset of the current economic depression. This reduction in the economy is miserable and far from “normal”. By all major metrics, most economic sectors have been adversely affected and the fear of a second wave of Covid-19 will cause even more financial hardship to households, municipal, and the central government in PR. Even before the Covid-19 pandemic, unemployment was far worse than the official unemployment rate. The effects of the Covid-19 induced recession will likely be profound and long-lasting. Fear of the disease and uncertainty regarding prospects for a vaccine or whether immunity will endure impacts consumers and the goods and services they normally buy and sponsor. Many businesses are also strapped for cash reserves and cannot withstand continued lockdown or even partial lockdown. No doubt, joblessness will worsen and cause even casual work hard to come by.

Earthquakes, COVID-19 and unemployment: three storms

Q1 2020: Tremors in a Shaky Economy in 2020

Analysis of economic indices in Q1-2020 for Puerto Rico
At the start of 2020, three storms at once hit the already distressed Puerto Rico economy. First, in January 2020, tremors throughout the Island, but more intensely in the South of PR, shook and destroyed historical buildings in urban centers, homes, roads, and other infrastructure installations that had not yet recovered from the disastrous Hurricane Maria of September 2017. Second, COVID-19 came like a tsunami, rushing over countries worldwide, through urban centers and attacking the elderly, overwhelming health systems globally. Lots of time for blame and accountability later, but on the front end, the only response leaders had was to issue stay-at-home orders and curfews and desperately try to secure personal protective equipment and ventilators. The Governor of Puerto Rico issued an Executive Order in March 15, 2020, whereby nonessential businesses were shut, people were ordered to stay at home with a daily curfew in place. And that led to the third storm of now more than 30,000 average weekly unemployment claims compared with 1,700 before. All three storms are feeding each other.

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Q4/2019 At Year-end, Another Lackluster Quarter

Economic highlights of Q4-2019 economic indices for Puerto Rico
At yearend, the fourth-quarter economic lackluster performance of the PR economy in 2019 depicts weakness in construction, consumption, and more importantly, the leading index for the next quarter into the new year. Although the Banking index grew, its performance was not really due to extension of credit in areas where Puerto Rico desperately needs to rebuild. Instead, healthy net income in banking continued to depict increases in personal loans, including car loans. Overall, this mixed outturn reflects continued sluggish negative growth due to the combined effect of trickle down, limited disaster federal monies after Hurricane Maria; a less than convincing transition from former Governor Ricardo Rosello to the current administration of Governor Wanda Vazquez; and political uncertainty regarding the lack of US Government and President Trump’s trust in Puerto Rico’s competence to manage and disburse disaster funds effectively.

Q3/19: A Long Hot Summer

Economic highlights of Q3-2019 economic indices for Puerto Rico
Who could imagine Puerto Rico was to witness the resignation of then Governor Ricardo Roselló in August 2019!! Daily protests disrupted sales in shopping centers and on-location retail and other businesses in Old San Juan. A consumer shocked by political corruption became more thrifty conscious. Despite some meager increases in construction jobs, that sector remains in recession. Manufacturing, though geared to export markets, has remained flat and observant of a global slowdown and impacted by the as yet unresolved US-China trade war. The exit of yet another foreign bank – Santander Bank (Spanish owned) – could see the end of bank consolidations in the Island. Will PR start focus on feasible public debt renegotiations under the leadership of the Promesa Board? Will the new Governor choose a path of economic growth? Will President Trump continue to withhold badly needed federal disaster monies? Still, what lies ahead may not be short of drama.

Puerto Rico at a Crossroads

Q2/2019: The Roots of the Problem

Inside Q2-2019 economic indices for Puerto Rico
Puerto Rico still needs to find a new economic compass. At the root lie not only endemic generations of political corruption to which people now have said enough, but a search for new leadership that defines a new vision of economic growth and efficient performance by cabinet members and the private sector. A few of Q2-2019 quarterly indices are in positive territory, but construction and the consumer index are definitely negative. Our leading index is positive, but only barely. There is no definite take-off by Banking, which continues profitable at the expense of car loans. The next 3 to 4 months are not exactly a forecast of economic recovery, a crossroads between stagnation or realizing opportunities in Tourism, housing, and infrastructure, among others. Will President Trump continue with a different assessment of the threats facing PR? This Compass attempts to shed some light on these questions.

A Race to Economic Recovery? What Q1-2019 economic indices tell us Strong business activity is not yet evident in Puerto Rico. Although all Q1-2019 quarterly indices are in positive territory, the path forward is still unclear. Construction, fueled by some federal disaster recovery funds, continues to have some wind under its wing. However, the consumer remains cautious as evidenced by continued decline in retail sales. Manufacturing is not a growth rod, although it is a stabilizing force. Banking continues profitable and reacting, rather than, providing stimulus with industrial and commercial loans. Where are we heading in the next 3 to 4 months? Are there signs of positive growth or not enough to pull the PR economy from its current depression? Will President Trump’s incorrect perception of a $91 billion package of inflated relief assistance change the outlook? This Compass attempts to provide answers to these questions. Q1/19

Q1 2019: A Race to Economic Recovery?

What Q1-2019 economic indices tell us

Strong business activity is not yet evident in Puerto Rico. Although all Q1-2019 quarterly indices are in positive territory, the path forward is still unclear. Construction, fueled by some federal disaster recovery funds, continues to have some wind under its wing. However, the consumer remains cautious as evidenced by continued decline in retail sales. Manufacturing is not a growth rod, although it is a stabilizing force. Banking continues profitable and reacting, rather than, providing stimulus with industrial and commercial loans. Where are we heading in the next 3 to 4 months? Are there signs of positive growth or not enough to pull the PR economy from its current depression? Will President Trump’s incorrect perception of a $91 billion package of inflated relief assistance change the outlook? This Compass attempts to provide answers to these questions.

Q4-2018: Less Than the Sum of Its Parts

Less Than the Sum of Its Parts How Puerto Rico´s Q4-2018 Economic Indices Performed

How Puerto Rico´s Q4-2018 Economic Indices Performed

The end of 2018 left a rather enigmatic picture of PR’s economy as most indices performed well in Q4 with the notable exception of the key leading indicator. It looks as if the accumulation of delays in the disbursements of reconstruction funds coupled with continuous decline in the resident population and the pending consequences of the federal government shutdown started in December—including the possibility that funds initially appropriated to PR could be reallocated to finance the President’s wall—simply worsened expectations Island-wide. At the sector level, manufacturing continued to pull its weight on the back of US demand in spite of changes to the tax code whilst banking slowed down slightly. The first $1.5 bn recently disbursed CDBG-DR funds surely bode well for economic activity over the next few quarters. It remains to be seen, however, whether these will be enough to sustain economic growth in the long-term.

Q3/2018: Is PR’s Economic Recovery a Mirage?

Is Puerto Rico's Economic Recovery a Mirage?Analysis of Puerto Rico’s Q3-2018 Economic Indices
During the past decades, Puerto Rico has not been known for its execution of economic plans.  Last year, Hurricane Maria put us to the test and Q3-2018 results appear to reflect positive gains.  In fact, many of these gains could be the result of a devastatingly poor Q3 last year, so any small gain this year would appear as a solid road to economic recovery. However, a meager Leading index signals “we are not there yet.” We still need to execute an economic plan to rescue PR from being left behind. Competition from China is formidable, and we have not seen the full effects of a trade war between US and China. Big companies demand a large, skilled workforce, city amenities, and transportation. Mr. Trump’s negative perception of Puerto Rico or worse, our local use of federal disaster monies, adds to the Island’s perils. We need policymakers to focus on these issues.

Puerto Rico Compass ©

Q2-2018: Impact of Millions in Puerto Rico

Analysis of Puerto Rico’s Q2-2018 Economic Indices
Economic recoveryAlmost 11 months have gone by since hurricanes Irma and Maria struck the Island in September 2017. The unconvincing and uneven economic recovery is a deterrence for attracting new investments to the Island. Construction and consumption are the biggest winners in this quarter and the other quarterly indices have also improved, but will this trend continue? What is the real amount of federal disaster funds allocated for Puerto Rico? Given the impact of the recent hurricanes, have all relevant federal agencies seen an increase in their budgets for Puerto Rico? Has the job market shown clear signs of recovery in 2Q-2018? This issue answers some of these questions and analyzes the post hurricane economic situation by sector.

Puerto Rico Compass ©

Q42017: A Shattered Economy After Hurricane Maria

Shattered EconomyAnalysis of 4th Quarter 2017 economic indices

At the end of 2017, PR exhibits a shattered economy with a broken infrastructure due the devastation of hurricane Maria on September 20, 2017. As of January 2018, more than 400,000 clients or 30% of PREPA’s clients still had no electricity. As analyzed in our previous Q3 issue, a fast recovery of electricity is a key factor in the island’s economic recovery. Other basic infrastructure, such as, water, communications, and roads continue to have problems. The lack of a fully operational and reliable infrastructure is hitting businesses as well as households. With lower demand and rising operational costs, many businesses have reached the point of no return and have closed or filed for bankruptcy. Families have chosen the option of mass migration, particularly to the USA. HCCG’s six quarterly economic indices highlight the effects of the broken infrastructure and a weak economy in the post Maria era.