Proposals for Disaster Recovery and Rebuilding Puerto Rico

 

  • TREAT PUERTO RICO FAIRLY – Puerto Ricans are US citizens by birth. Therefore, Congress should treat Puerto Rico as a state for purposes of allocating disaster recovery and rebuilding funds. Funding provided through FEMA and the Community Development Block Grant-Disaster Recovery program should be allocated to Puerto Rico on terms and conditions no less advantageous than those applicable to the fifty states, including funding for hazard mitigation to ensure we minimize harm from similar events in the future.

  • LEVERAGE PRIVATE SECTOR FUNDS – In addition to providing Puerto Rico with its fair share of disaster recovery funding, Congress should legislate to encourage the private sector to actively participate in the creation of the new Puerto Rico. This could be accomplished by enacting a special private activity disaster recovery bonds program, similar to the Liberty Bonds program enacted after 9/11 and after Hurricane Katrina. These bonds would be exempt from federal taxes on interest, including the Alternative Minimum Tax, which allows issuers to offer the bonds at lower interest rates. Proceeds from these bond offerings have been used in the past to finance broad reconstruction activities, including the rebuilding of utilities, hospitals, hotels, residential housing, and commercial real estate, among other uses. The private entity issuing the bonds is entirely responsible for their repayment.
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The Case for Comprehensive Disaster Relief

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Erika P. Rodriguez for The New York Times

By: Sergio M. Marxuach
Public Policy Director

This hurricane season has been particularly bad with major storms hitting Florida, Texas, Puerto Rico, the United States Virgin Islands, and several Gulf states. Total damages are estimated to exceed $200 billion. The Federal Emergency Management Agency (“FEMA”) is doing the best job it can with the resources it has at its disposal, but it is clearly reaching the limits of its capabilities. Under the American constitutional system, only Congress has the authority to enact a comprehensive relief and reconstruction package to address this situation.

The devastation in Texas, Florida, the United States Virgin Islands, and Puerto Rico has been well documented. The destruction of public infrastructure and the loss of private property affect millions of US citizens. A well-financed, broad-based recovery and reconstruction program would provide a much-needed boost to economic activity in these heavily damaged areas and help many hard-working families get back on their feet. READ MORE

Puerto Rico’s Pension System: Knocking on Heaven’s Door

This post was originally published on January 27, 2011.

Introduction

The Employees Retirement System of the Commonwealth of Puerto Rico (the “ERS”) is a trust created by Act 447 of May 15, 1951 to provide pension and other benefits to retired employees of the government of Puerto Rico and its instrumentalities. According to the Management’s Discussion and Analysis included in the ERS’s most recent financial statements, the system “since its inception lacked proper planning.”1 The problem was (and to a certain extent still is) that the level of both employer and employee contributions was relatively low and was not actuarially determined, while the level of benefits was statutorily defined and bore no relation to employee contributions or to the investment yield of the systems assets.

In 1973 the benefit structure was “enhanced” without enacting a corresponding increase in contribution levels. As government employment increased in the mid-to-late 1970s, partially in response to the general economic slowdown, the gap between the assets available to pay benefits and the actuarial obligation began to widen.

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Restoring Growth: Forging the Road Ahead – 2017 CNE Conference Proceedings

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CNE’s 2017 Conference was unique in many ways. Puerto Rico’s debt crisis provided an exacting but precious backdrop for a much-needed and multifaceted discussion on the current fiscal policies and the prospects for future structural change.

The two-day Conference consisted of seven events designed to bring the conversation about debt, uncertainty, austerity and growth to a wide variety of groups.

The highlight: the launch of the CNE Growth Commission for Puerto Rico and its first convening in San Juan.

Debt, Austerity and Growth – Joseph Stiglitz in San Juan

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A variegated audience of over one thousand people gathered on April 6, 2017 at the San Juan Symphonic Hall to listen and reflect on Nobel Prize winner Joseph Stiglitz’ words of caution and forward-looking advise regarding Puerto Rico’s economic predicament. Stiglitz is one of 17 experts who conform pro-bono the CNE Growth Commission for Puerto Rico.

Click here to access a complete recording of the event.

Watch the following summary videos:

In introducing Stiglitz, CNE’s President and Founder Miguel A. Soto-Class stressed the need for ample involvement in the process of economic recovery and made an urgent call-to-action.

Stiglitz cautioned against the contractionary effects fiscal austerity measures will have on the island’s economy…

…and urged for growth measures as anchors of any fiscal and debt restructuring plans.

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Growth Amidst Uncertainty: A Free Market Perspective – A Conversation with Steven Davis

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“Historically, the Puerto Rican tax code and regulatory system abound with provisions for special business interests…The result is a complicated web of policy-induced financial incentives that helps sustain a rent-seeking business culture and an overly intrusive role for the government.”
Steven Davis

On April 6, 2017, Steven Davis, Professor of Entrepreneurship and Global Economics and Management at the Sloan School of Management of the Massachusetts Institute of Technology, led a conversation with Puerto Rico entrepreneurs and business leaders on how free markets can help Puerto Rico create a healthier economic climate and foster growth. Davis, who is a pro-bono member of the CNE Growth Commission for Puerto Rico, argued in favor of simplifying regulations affecting the island’s business environment.

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Charting a Path Towards Growth – CNE Growth Commission All-Day Convening

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The CNE Growth Commission for Puerto Rico convened for the first time in San Juan and began to craft an agenda focused on helping the island devise economic development opportunities and strengthen execution capabilities.

The Commission’s vision is based on the premise that – given the demands of a rapidly changing knowledge-based economy and heightened global competition – long-term sustained economic growth is a result of a country’s capability to move into higher value-added activities. Therefore, the Commission understands that any new economic strategy for long-term growth in Puerto Rico ought to be focused on:

  1. Speeding up the process of economic structural change by advancing the economy’s insertion in high-value niches, investing in innovation, and adopting new knowledge and technologies.
  2. Creating the institutional framework to promote this structural change; that is, revamping the institutions whose mission is to promote this transformation.
  3. Devising public policies that help raise the wellbeing of society in an inclusive manner, so that most of its members can benefit from the gains of improved economic performance.

Access the CNE’s Growth Commission Workplan

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Prompting a Far-Reaching Dialogue About Economic Recovery

With the objective of prompting a far-reaching dialogue about the process of economic recovery, the CNE 2017 Conference included also a series of workshops, presentations and meetings with Puerto Rico and US media, University of Puerto Rico students and the general public.

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Memo from a Working Group of the CNE Growth Commission to the Congressional Task Force on Economic Growth in Puerto Rico

Devising economic development opportunities should be one of the most pressing goals for both U.S. and local policy makers. In the following memo, a Working Group of the CNE Growth Commission charts a preliminary vision for addressing the deeper, structural constraints to economic advancement and for spurring economic growth.

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Memo to Bipartisan Congressional Task Force on Economic Growth in Puerto Rico

Restoring sanity to the economy of Puerto Rico will require a long-term term approach. CNE is recommending to the U.S. Congress the creation of a permanent working group at the federal level focused on structural and long-term issues related to economic growth in Puerto Rico.

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