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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.

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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
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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
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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.

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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.

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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.

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Q32017: PR’s Infrastructure: A House of Cards?

During 3Q 2017, two Category 5 hurricanes hit the Island causing unprecedented damages to the economy. Damages which could conservatively surpass $115 bn. The Island’s power grid was practically destroyed with massive damages, in roads, bridges, ports, airports, buildings, equipment, housing, and telecommunications, among others. All economic sectors depend on infrastructure to thrive; some sectors rely more than others but a good and consistent infrastructure is a must to be competitive in this global economy. Hurricanes Irma and Maria demonstrated that much of the PR alleged robust infrastructure was only a house of cards and when the winds blew out the electrical grid, all the house collapsed. This issue analyzes the repercussions of a broken infrastructure and how this impacts HCCG’s six quarterly economic indices in 3rd Q 2017.

Hurricane María over Puerto Rico
Source: NOAA
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1Q-2017 Leading Us into a Disaster?

Analysis of Puerto Rico’s Q1-2017 Economic Indices

The PR Oversight Board started to put pressure on the PR government. It is in search of results related to savings, cuts, and efficiencies in the PR government. The Administration has both hands full dealing with budget, reports, and measures with deadlines imposed by the Board. Perhaps for this reason, it seems the PR government has not engaged in a proactive role to restore growth. Instead, it appears Governor Rosselló and all the heads of agencies and public corporations are reacting to the Board’s increasing requirements. Whatever the magnitude of the measures, i.e. $120 mn or more than $500 mn cuts to the UPR budget, it is clear those are recessionary fiscal policies. The external sector, specially oil prices and interest rates, is changing rapidly, heading to a more challenging environment. This issue analyzes some risks in the future and why the Board and the PR government should take bold actions to spur growth instead of following an accountant approach to reach the Fiscal Plan targets.

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4Q-2016 Industry Leaders React to New Policies

4Q-2016 industry analysis and PR Administration policies
This edition of Puerto Rico Economic Compass, analyzes the 4Q-2016 economic indices and includes an industry analysis of the PR economy plus economic policies proposed by the new Administration. The elected governor, Ricardo Roselló and the PROMESA Fiscal Oversight Board have certainly altered expectations for 2017. New executive orders, approval of sweeping labor legislation, and continued dialogue with the PROMESA Board regarding key recommendations to be implemented in the near term, have raised both praise and criticism by several industry sectors. For instance, the recently approved Labor Reform Act has been praised and promoted by several industry and retail employers but has met a backlash from many in the labor movement. No doubt, the new government has been very busy trying to adopt and implement the fiscal and economic plan demanded by the PROMESA board since last December. What’s the rest of the story?
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Q3 2016 – Is Election 2016 Different for Puerto Rico?

Does the upcoming race change anything?
With elections just around the corner, do Puerto Ricans think the next Governor will have a profound impact on the economy? This issue of Compass analyzes the performance of HCCG’s six quarterly indices during the past non-election years compared with historical election years from 2000 thru 2012 and this year’s results. Find out if the consumer index tracks Puerto Ricans’ sense of financial security in their spending patterns. However, banking, construction, and manufacturing as well as the coincident index suggest the results of this election could prolong the lengthy economic recession of the past 11 years. Any election year brings uncertainty and many business owners could be hesitant to make long-term decisions. To complicate matters, the recently US Congress mandated Fiscal Control Board has absolute powers over the administration of the Island until fiscal discipline is restored, public debt is serviced, and there is access to financial markets. What is certain is that all of this will take years in the making.