The congressional allocation of more than $97 million to Puerto Rico through several federally funded programs presents the opportunity of turning the local economy into one of sustainable growth, according to Francisco Rodríguez, president and CEO of Birling Capital Advisors.
Nevertheless, Rodríguez also warned about the possibility of everything disappearing if “a plan for the country” is not designed and implemented.
“A new clearer vision of Puerto Rico’s economic future, and its sustainability, is urgent… It is a pressing matter. We cannot accept, as Puerto Ricans, that the future of our financial wellbeing depends exclusively on the amount of federal funds reaching our beaches,” Rodríguez argued.
According to the Birling executive, Puerto Rico urgently needs to distribute more wealth and less poverty, “only then will we have taken the advantage federal funds have provided.”
“Our lives don’t get better by chance. Our lives improve with change and it is time to implement all the necessary changes to become a better country,” he said.
Although the Birling executive considers Puerto Rico’s financial situation have significantly improved with the gradual reopening of the economy since May 2020 and the federal stimulus funds, he emphasized the island must work out the great challenges it still faces for 2022. Among those challenges he mentioned Puerto Rico’s loss of 525,126 of its inhabitants since 2010, which brings into question which economic development model is to be adopted to set the base for a sustainable economy that would job creation and a significant unemployment reduction.
“This is the best formula to bring back the more than half a million fellow Puerto Ricans that have left the country,” Rodríguez argued while pointing out that if reversal to this trend does not take place, businesses would have to readjust their products and services offer for decreasing economy.
“”The impact of this trend is clearly visible when considering that in 2000 there were 14 banks in Puerto Rico, while today there are only three major local banks and a small one from Florida,” he added.
Another challenge would be high inflation rate that, if left unchecked, will continue to impact Puerto Ricans’ purchasing power.
Also to be considered is the possibility of an increase in interest rates authorized by the US Federal Reserve Bank, which would make accessing credit more expensive.
Estimated growth rate
Rodríguez said 2021 started with a mix of challenges and hopes but both Puerto Rico and the US avoided a greater blow to their economies thanks to the support of federal economic assistance programs during the Covid-19 pandemic.
In the US the economic growth rate for 2020 ended with a real Gross Domestic Product (GDP) of -3.40%. Puerto Rico’s GDP for that same year was -4.40%. But as 2021 progresses the economy is expected to rebound. There is consensus the US net economic recovery will be 5.7% and Puerto Rico’s will reach 2.6%.