Caribbean Business February 18, 2016

W E E K O F F E B R U A R Y 1 8 - 2 4 , 2 0 1 6 | V O L . 2 E D I T I O N 6 | W E E K LY $ 2 . 0 0 | © 2 0 1 6 L A T I N M E D I A H O U S E , L L C | C A R I B B E A N B U S I N E S S . P R

GDB Insolvency Looms Large on Horizon

Scalia Death Shifts Balance in U.S. Supreme Court

Prepa Bill Squeaks by in the House

Venezuela Pounded by Villainous Economy

Co-ops Hang in the Balance PAGE 6

Huge Implications for P.R. Decisions PAGE 7

Vital to Energy Transformation PAGE 9

Drop in Oil Prices Huge Culprit PAGE 32

COVER STORY

TOP STORY

Debt-Restructuring Panel a Glimpse of Road Ahead?

Participants Weigh in on Puerto Rico Moving Forward to Tackle its Fiscal, Economic Crisis Some would argue it would be foolish to talk about debt restructuring during a major investment conference, in which the main goal is to attract investment capital. Yet that is exactly what happened last week when a panel comprising key players on the commonwealth’s fiscal crisis discussed the matter during the Puerto Rico Investment Summit.

of what could lie ahead in the island’s debt-restructuring saga. Also joining them was AlixPartners’ Lisa Donahue, who has led yearlong restructuring talks between the Puerto Rico Electric Power Authority (Prepa) and a majority of its creditors. The panel was moderated by Caribbean Business Executive Editor Philipe Schoene.

The commonwealth govern-

Puerto Rico’s Lost Decade A Series on Economic Decline

U

nbeknownst to the vast majority of Puerto Rico residents, a two-week partial government shutdown in May 2006 would mark the official beginning of the longrunning economic contraction that hits its 10th anniversary this year, with no signs of letting up.

However, the shutdown —caused by the central government running out of money amid a budget impasse between the Executive and Legislative

branches, each one controlled by a different political party— was just the tip of the iceberg as to the real reasons for the deepest and longest economic contraction the island has ever experienced.

The completion of the 10year phaseout of Section 936 in 2006 coincided with the government shutdown that year, striking a heavy blow to Puerto Rico’s economy, with lasting effects on all economic sectors to this day.

Ten years later, Puerto Rico once again faces the threat of another public sector shutdown—as early as this summer—when the cash-strapped government has more than $1.5 billion in debt-obligation payments due.

Unlike 2006, however, the situation today is much more dire, as the island faces a fiscal crisis amid a fast-declining population.

BY JOSÉ L. CARMONA PAGES 14-19

Lisa Donahue, Jim Millstein and Nader Tavakoli Jim Millstein, lead restructuring adviser for the commonwealth government, and Nader Tavakoli, CEO of Ambac, a bond insurer with roughly $2.2 billion in net par exposure to Puerto Rico debt, discussed the best path forward for the island and provided attendees with a first-row glimpse

ment advisers led the charge on Puerto Rico’s need for a debt restructuring mechanism. Millstein noted how “Plan A” is aimed at reaching a consensual, voluntary transaction with creditors—although a broad restructuring regime is still needed.

BY LUIS J. VALENTÍN CONTINUES ON PAGE 4

THURSDAY, FEBRUARY 18, 2016

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Editorial

Contents PICTURE OF THE WEEK PAGE 23 Act 185 Acts 20/22 Panel

By Philipe Schoene Roura EXECUTIVE EDITOR

Time to Rebound From Puerto Rico’s Lost Decade Advertising ...........................................................................................................46 Advertising Calendar............................................................................................46 Autos ....................................................................................................................45 Banking.......................................................................................................... 10-11 Candidate Profile............................................................................................ 30-31 Cars 101 ..............................................................................................................44 Column.................................................................................................................20 Economy ......................................................................................................... 12-13 Editorial .................................................................................................................2 Front Page ...................................................................................................... 14-19 Government ..........................................................................................................23 Labor ....................................................................................................................34 Latin American Affairs ................................................................................... 32-33 Law/Courts ..................................................................................................... 26-27 Lead Stories ....................................................................................................... 6-9 Politics .................................................................................................................29 Poll .......................................................................................................................21 Top Story............................................................................................................ 1, 4

FINANCIAL DATA: Stock Comment ....................................................................................................12 Winners & Losers..................................................................................................12

SPECIAL FEATURES: North America International Auto Show ................................................................43 Salespersons Week ......................................................................................... 35-42

caribbeanbusiness.pr Volume 2, No. 6 • Thursday, February 18, 2016 PO Box 12130, San Juan PR 00914-0130 CARIBBEAN BUSINESS ® (USPS 313150) is published weekly, except the first two weeks of January, by Latin Media House, LLC, 1700 Ave. Fernández Juncos, San Juan, P.R. 00909-2938. Subscription rates: $45 a year + $4.73 state tax +.45 municipality tax = $50.18; $58 for two years + $6.09 state tax +.87 municipality tax = $64.96; $108 a year for foreign + applicable tax and shipping & handling. Customer Service/Subscription telephone: (787)728-8280, toll free 1-844-723-2351. Fax: (787)728-0195.

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This edition’s Front-Page cover story marks the first installment in a series that outlines the unrelenting decline of Puerto Rico’s economy, which commenced in 2006 and has yet to subside.

The death knell was actually struck in 1996 when Section 936 of the Internal Revenue Code was targeted for phaseout by the Republican majority in the U.S. Congress because the tax break had the stench of corporate welfare and failed to create jobs on par with the tax decrees that were being awarded.

Sure enough, 10 years on, Puerto Rico’s economy began a free fall prompted by a confluence of events—the end of Section 936 without a suitable replacement. Puerto Rico never got Section 933-A wage credits in the tax break’s stead, leaving the island’s job-creation engine throttled. Along with that came the flight of massive capital—more than 40% of the capital in Puerto Rico’s banks were 936 funds. Then came the vortex spun by the closing of Puerto Rico’s government tied to a budget impasse between the Executive and Legislative branches and a fracas over the implementation of a sales & use tax.

The 2006 closing of the government sent shock waves through Puerto Rico’s economy and proved to be the catalyst for a severe economic contraction that continues to this day.

All told, Puerto Rico’s economy has shrunk by some 16% in the past decade, more than 290,000 jobs have been lost and 12,000 businesses have shuttered.

There was a time when the spiral of decline was masked by a government that became a refuge for jobs that were being lost in the private sector, with some 325,000 reported jobs in government in 2003. The charade is over.

Fast forward to 2016. Net jobs lost

in 2015 amounted to 48,000 islandwide, prompting the continued outmigration of Puerto Rico’s residents— many young adults with families—to the United States. The statistics are disturbing—the net population decline in 2015 amounted to some 64,000 taxpayers packing their bags to seek work elsewhere. This is pressure that a paper-thin tax base cannot withstand.

If the outmigration continues at that pace, economists project the island’s population could be around 2.8 million in 2030, far below the 3.45 million of today. The numbers tell a devastating story. Manufacturing employment is down to 74,000 from a peak of 165,000 in 1996. Investment in construction— one of the island’s economic pillars during the 1990s—is down to $4.3 billion in 2015 from a high of $6.6 billion in 2004. Home foreclosures reached a record high of 4,000 in 2015. Aside from that Mrs. Lincoln, how did you like the play?

More than just a devastating indictment of failed policies, Caribbean Business’ Lost Decade series will chronicle socioeconomic trends over the past decade. The idea is to outline exactly where the island stands on several fronts as a precursor to a plan for economic recovery.

The truth is that there is no credible plan for job creation in Puerto Rico anywhere to be found. It is time for the government to put a premium on job creation tied to economic incentive packages that are very attractive to generate capital and investment, but it must be tied to huge net job creation. Without economic development—there is no brand of orderly debt relief that can put Puerto Rico on a path to sustainable growth.

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THURSDAY, FEBRUARY 18, 2016

Top Story Debt panel

Continued from cover

Perhaps Tavakoli put it best when he said, “[I] see things quite differently.” His company recently filed a lawsuit against the local government over the so-called “clawbacks,” or the use of previously pledged monies to pay for other government obligations.

“I’m not sure where this notion of bankruptcy being a good thing came from, but I have had 35 years of experience in bankruptcy, and I will tell you with most surety it is a terrible idea,” he said, while warning how it could wipe out confidence in Puerto Rico.

Millstein then mentioned how Ambac itself benefited from restructuring its debt when it filed for Chapter 11 back in 2010. “The fact is sometimes companies get out over their skis,” he said, as quoted by Reuters. “They underwrite exotic derivatives, for example, when in fact they were a bond insurer, so they need the help of state-supervised restructuring.”

While some would argue that the bankruptcy process Ambac went through is a different animal than what the commonwealth is seeking, “the notion of bringing debt service in line with payment capacity—is done traditionally within a court process,” Millstein added.

BINDING HOLDOUTS Following the commonwealth government’s latest debt-restructuring proposal to creditors, Millstein feels confident a voluntary deal can be reached with a majority of Puerto Rico’s creditors. Still, he added that a debt-restructuring mechanism would help to bind minority creditors, or “holdouts.”

“I think we will achieve consensual offer with the majority of creditors. But we need a mechanism to bind holdouts,” he said.

Donahue noted that with such a regime in place, like Chapter 9 of the U.S. Bankruptcy Code, Prepa could work around a “prearranged-type deal” with a majority of its creditors before entering the court.

This would, in turn, help

Advisers and creditor air philosophical differences over restructuring tactics.

the utility bring holdout creditors on board the prearranged deal.

But Ambac’s Tavakoli believes the issue with minority creditors is not as bad as in other cases, while calling Chapter 9 “a massive excuse for not making decisions.”

He warned how the debtrestructuring-regime debate could delay winning back market confidence, and called for long-lasting fixes if Puerto Rico is to truly tackle its underlying problems and return to sustainable growth.

What’s more, the fact bankruptcy was being discussed at an investor conference was “surreal,” he said, and it seemed some among the crowd felt the same way, including New Progressive Party resident commissionership hopeful Carlos Pesquera.

“How the island treats existing creditors is very telling on how you are going to treat future [creditors],” Ambac’s CEO added.

For Millstein, the government’s initiatives to deal with its crisis, including its debt-exchange offer and long-term fiscal and

Caribbean Business Executive Editor Philipe Schoene moderates panel discussion.

economic plan, are something potential investors want before putting new money into Puerto Rico.

PREPA’S PATH Despite feeling optimistic about closing the deal, it has certainly been a bumpy road for Donahue and Prepa’s restructuring talks with creditors.

Moments before the Investment Summit kicked off, members of Prepa’s main employee union, the Irrigation & Electrical Workers Union, as well as the Puerto Rican Independence Party and Working People Party, protested outside the Convention Center in Miramar, where

the event was being held.

Meanwhile, legislation necessary to begin the implementation of a restructuring deal struck by Prepa and a majority of its creditors had been stuck in the Puerto Rico Legislature for weeks, but was approved at the last minute by the House on Monday evening, but with a number of amendments.

The approved measure has now been sent back to the Senate as of this writing.

Millstein noted how legislative leaders have constituencies to represent, but still believes that at the end of the day, they will understand why it must be done.

“It’s unfortunate we are sitting here in the middle of an election year,” Tavakoli said, adding that there were concerns among creditor groups about what would happen during the next 18 months in Puerto Rico and how the government will move forward on carrying out the fiscal adjustments it must make.

Nevertheless, he conceded that so far, Donahue has done a good job at Prepa and he remains hopeful the utility’s deal would be finally achieved.

“The costs of utilities will be the last of your concerns,” Gov. Alejandro García Padilla told attendees at the investment conference during his keynote speech. But several obstacles still lie ahead for Prepa and the government as they seek to restructure their debt obligations, while efforts in Washington, D.C., continue to focus on the commonwealth achieving access to a bankruptcy regime.

In the electric utility’s case, if minority creditors fail to come on board the deal, “we are back at the table,” Donahue said.

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THURSDAY, FEBRUARY 18, 2016

Lead

Government ‘ignoring’ looming crisis at the GDB and local co-ops

Hedge Funds: GDB Insolvency to Affect Coop Health

BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

While practically all the attention has been paid to Puerto Rico’s debt restructuring process, a group of lawyers and economists has complained that the commonwealth government has failed to deal with a looming crisis in the Government Development Bank (GDB) and the local financial system.

Thomas Moers Mayer of Kramer Levin, which represents holders of $10 billion of Puerto Rico debt, highlighted that insufficient attention has been given to the GDB’s upcoming $420 million payment, due on May 1. Failure to make the payment will prevent the government from meeting the payroll for public workers and could lead to the debacle of the GDB as well as that of the cooperativas, or local credit unions.

“That is the real crisis, if there is one. Why

is nobody talking about that?” said Moers Mayer, a bankruptcy lawyer, whose firm represents more than 600,000 investors of local mutual funds.

Moers Mayers said the GDB holds $4 billion in deposits that are not insured by the Federal Deposit Insurance Corp., which is money the government is using to make the public sector payroll. If the GDB fails to make its $420 million payment in May— that the government says it does not have—workers will not get their checks on payday.

He said the government should be concerned about the deposits it has in the GDB and the consequences of failing to make payroll because those are problems that bankruptcy protection, if it were given to Puerto Rico by Congress, will not resolve.

Moers Mayer made his remarks at a recent discussion of Puerto Rico’s $70 billion debt crisis

sponsored by the American Enterprise Institute (AEI), a conservative think tank based in Washington, D.C. During the event, the panel of experts discussed the Puerto Rico debt crisis: how it occurred, what the pressing issues are and how Congress should react.

‘A TICKING TIME BOMB’ Daniel Hanson of Height Securities said the government is trying to keep the GDB, which has serious liquidity problems, alive not only to meet payroll, but also to keep cooperatives from becoming insolvent.

The co-ops are highly exposed to the government’s fiscal crisis because they hold 18% of their assets in central government debt, of which 47% is GDB bonds. Many cooperatives have also been hit hard by the Aug. 2015 default of nearly $58 million in Public Finance Corp. bonds, which many of them also hold.

“This is a ticking time bomb,” Hanson said.

Last year, the commonwealth government enacted a law that allows the local credit unions, or cooperatives, not to have to mark those losses to the market, he said.

Hanson also noted that the government needs to liquefy deposits to meet payroll. That is the reason, in part, why the GDB

“That [looming insolvency at the GDB and local co-ops] is the real crisis, if there is one. Why is nobody talking about that?”

—Thomas Moers Mayer, a bankruptcy lawyer

declined to negotiate restructuring its bonds, he said.

He was referring to the GDB’s decision last year not to move forward with an exchange offer for GDB notes that had been proposed with the so-called “Ad Hoc Group” of bondholders. The GDB bondholder group consists of investment funds Brigade, Fir Tree, Solus, Fore Research & Management, Avenue Capital, Candlewood and Claren Road, according to reports.

PUERTO RICO CAN DO MORE Meanwhile, Moers Mayers said Puerto Rico can do more to increase revenues, including increasing tax collection rates and updating property tax rates that date back to the 1950s.

Anne Krueger, an economist and former International Monetary Fund deputy director, who researched and prepared a fiscal plan for Puerto Rico, analyzed how a dysfunctional government, inefficient welfare system and overregulation significantly exacerbated Puerto Rico’s financial problems.

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She said Puerto Rico not only needs to restructure its debt, but also needs an oversight board and follow an economic growth plan, all at the same time.

Brad Setser, of the Council on Foreign Relations, noted that although Puerto Rico needs access to Chapter 9 of the U.S Bankruptcy Code, Chapter 9 by itself would be insufficient, given the complex nature of the island’s crisis.

Hanson argued that the crisis is a direct result of poor governance and mismanagement, and he stressed the importance of creating an external control board to manage Puerto Rico’s finances.

AEI’s Desmond Lachman compared Puerto Rico’s fiscal crisis to that of Greece, pointing out that major fiscal adjustments in a monetary union, such as Greece with the European Union, or in Puerto Rico’s case, the U.S., is not counterproductive. He suggested revising the minimum wage on the island, reducing transport costs by amending the Jones Act, reforming public administration and reintroducing tax preferences. 䡲

THURSDAY, FEBRUARY 18, 2016

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Lead

Another battle looming between U.S. Senate and White House

Scalia’s Death Affects U.S. Supreme Court Decisions on Puerto Rico

BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

The death of U.S. Supreme Court Justice Antonin Scalia affects the cases now before the top court, including two very important cases involving Puerto Rico, one on double jeopardy and the other on the validity of the local bankruptcy law.

The U.S. Supreme Court is evaluating whether the Debt Enforcement & Recovery Act, a local bankruptcy law, is preempted by federal law. Justices also have before them another case from Puerto Rico, the Sánchez Valle case, in which they must determine if the local Justice Department can try people in court for the same crimes for which

they were already convicted in federal court.

Former Popular Democratic Party Sen. Eudaldo Báez Galib, who is a constitutional lawyer and former president of the P.R. Bar Association, said he believes Scalia’s death will impact Puerto Rico favorably.

Báez Galib said in the case of the constitutionality of the local bankruptcy law, he is inclined to believe that Scalia, who was a “strict constructionist,” or a justice who believes the U.S. Constitution should be applied as it is written, would have voted against Puerto Rico. “[Scalia] would have tried to protect the powers of Congress…He is also a conservative and traditionally, the right

wing movements in the U.S. protect Wall Street investors,” he said.

With Scalia’s passing and Justice Samuel Alito recusing himself from that case because he holds investments in Wall Street, Puerto Rico has a higher chance of validating the local bankruptcy law because the so-called liberal judges will be in the majority, he indicated.

Báez Galib also believes Scalia would have ruled that Puerto Rico is a territory subject to the plenary powers of the U.S. and that the commonwealth cannot prosecute people convicted in federal court because it would violate the double jeopardy clause of the U.S. Constitution.

The former senator, however, believes that based on remarks made by the justices in the Sánchez Valle hearing, they will rule against Puerto Rico, even though Justice

Stephen Breyer as First Circuit Judge ruled in favor of the existence of the commonwealth.

While most Supreme Court decisions are unanimous, before Scalia’s

death, the top court was divided 5-4 along ideological lines, in favor of conservatives. Now, the top court is evenly split 4-4 between conservatives and liberals.

It should be noted that in a 4-4 split decision, the lower court ruling would be upheld. At the same time, the court may also decide to re-argue a case when the court is back to a full nine-justice bench.

Scalia died over the weekend in Texas of natural causes, apparently a heart attack, according to various reports.

President Barack Obama, who is in his last year of office, has said he will nominate a possible successor and try to get the U.S. Senate to approve the nomination. However, leaders of the Republican-controlled Senate have said they will block any nominee, as they believe the nomination should be made by the next president, whoever that may be.

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THURSDAY, FEBRUARY 18, 2016

Lead

Entry into selling to end-users severely questioned by telecom industry, lawmakers

Bill Blocking PrepaNet from Stepping into Telecom Market Gains Traction

José Casillas, general manager of PrepaNet

Telecom Industry Comes Out With Guns Blazing in House Hearings; PrepaNet and Government Clients on the Defensive

BY DENNIS COSTA d.costa@cb.pr

A Senate bill that seeks to stop Prepa Networks LLC (PrepaNet)—a telecom company owned by Puerto Rico’s government-run electric utility—from selling broadband services to end-users, is gaining traction in the House of Representatives, with various lawmakers, including New Progressive Party (NPP) Minority Leader Jenniffer González, saying they support approving the measure “as is.”

Senate Bill 1370 specifically amends the Telecommunications Act of 1996 to keep any government entity from selling telecommunications services on a retail basis.

Such entities would only have permission to sell services wholesale to certified telecom companies.

The bill would also allow nonprofit organizations to sell telecom services if they pay income taxes.

The bill partly stems from a controversy that has pitted PrepaNet against most of the big players in local telecom, among them Claro, AT&T and Liberty. The Puerto Rico Electric Power Authority (Prepa) spun off PrepaNet in 2004 to commercialize the utility’s

own fiber-optic network.

PrepaNet began leasing parts of its fiber-optic network to other telecom providers on a wholesale basis, but in mid-2013, PrepaNet formed a subsidiary, OnNet, to sell directly to clients. When a big government client, the Office of Management & Budget, signed with PrepaNet without an open bidding process, the controversy intensified.

House hearings on the bill, which the Senate approved last November, took place Feb. 9-10.

PrepaNet officials, the P.R. Justice Department, the Puerto Rico Sewer & Aqueduct Authority and the Telecommunications Regulatory Board (TRB) testified on the first day, mostly against the bill.

PREPANET, JUSTICE AGAINST THE BILL José Casillas, general manager of PrepaNet, questioned why the bill would prohibit government entities from selling telecom services, while allowing nonprofits to do so. He also refuted allegations that PrepaNet operates from an unfairly advantageous position because the company does not pay taxes and thus distorts the market.

“The tax exemption exists because the

government entity that owns the company [Prepa] receives all revenues and profits as dividends,” he explained. Prepa also receives dividends from leasing PrepaNet’s fiber network, while PrepaNet hires Prepa personnel as contractors for construction and installation work, another revenue source for the financially ailing utility; the exec did not specify figures in this regard.

Casillas said industry fears about PrepaNet/ OnNet taking over as a monopoly are unfounded because the company barely has a 1% market share. He also said the bill would go against the federal telecommunications law, which prohibits barriers to any company that wishes to enter the market.

The exec took issue with allegations that the firm operates under a “crosssubsidy” scheme that allows PrepaNet to offer telecom services at prices far below market rates.

“PrepaNet has operated for 11 years,” Casillas said. “If there had been any sort of crossedsubsidy scheme during that time, the TRB and the Comptroller’s Office would have intervened, but that has not happened because there is no

cross subsidy.”

Justice Secretary César Miranda argued that neither federal nor local laws exclude government entities from participating in the telecom market.

Miranda added that telecom services are defined as a “public service,” in which case the government has jurisdiction.

Miranda’s testimony included a cost analysis of the agency’s contract with PrepaNet/OnNet for broadband internet versus a similar offering from Claro; PrepaNet/ OnNet’s monthly fee was cheaper than Claro’s by about half. “Apart from generating revenues to public corporations… it allows the different components of the commonwealth government better economies during a period of fiscal fragility,” Miranda said.

To this, NPP’s González responded, “I have never seen an opinion from the Justice Department that features an economic analysis included with its legal advice; I find that really odd.” Popular

Democratic Party Rep. Javier Aponte Dalmau, who chairs the House’s Small and Midsize Business, Commerce, Industry & Telecommunications Committee, echoed González’s words.

THOSE WHO SUPPORT THE MEASURE During the Feb. 10 hearing, the Puerto Rico Telecommunications Alliance (APT by its Spanish acronym) and several of its members, including Claro and AT&T, said they support the bill. Felipe Hernández, owner of VPNet, a small telecom provider based in Cidra, gave an incendiary testimony on behalf of Pedro André, owner of Neptuno Networks and president of APT. Hernández took Justice to task, first in its definition of telecom services as a utility (“it is 18 years behind in its analysis”) and for not recusing itself from the hearing, especially since it has a client/ provider relationship with PrepaNet/OnNet. “[Justice] confirms that the

intention of government agencies signing with PrepaNet is not to pay for telecom services because it’s a government-togovernment dynamic, as has taken place with Prepa, in which its biggest debtor is the government itself,” Hernández said.

“In Prepa’s case, we end up paying through our monthly bills.”

The VPNet exec questioned the construction of PrepaNet/OnNet’s headquarters in Carolina’s Isla Verde area at an alleged cost of $40 million, and the purchase of five floors in a building in San Juan’s business district in Hato Rey at an estimated cost of $3 million. “Prepa has subsidized this with public funds, and has contributed an additional $52.5 million in total to the company,” Hernández said. “That is $97.5 million Prepa could have spent lowering costs and modernizing its grid.”

Moreover, financial reports state that Prepa has only been repaid $4 million from this transaction, he added. 䡲

THURSDAY, FEBRUARY 18, 2016

15% haircut for uninsured bonds; 0% haircut for insured bonds

House Passes Prepa Revitalization Act Prepa Clients May Still be Held Liable for Debt

BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

The Puerto Rico Electric Power Authority (Prepa) Revitalization Act, which was passed in the House late Monday by a vote of 26 to 22, contained amendments that sought to prevent utility clients from being held liable for Prepa debt and would allow Prepa to file for Chapter 9 bankruptcy, if it became available.

The bill, slated to become law at presstime, also contained a disposition that would prevent debt that may be declared illegal from being part of a proposed securitization of the bonds, noted Popular Democratic Party (PDP) Sen. Ramón Luis Nieves.

Nieves said that as far as he knows, bondholders were in agreement with the proposal.

The Prepa Revitalization Act was passed by both legislative chambers in a divided vote. Lawmakers were hoping to send it to La Fortaleza as soon as possible so it could be enacted into law.

The legislation would create a separate corporation, the Prepa Revitalization Corp., which will issue new bonds that will be exchanged for Prepa bonds that are currently on the market through a new securitization that will also be used to finance the $2.4 billion Aguirre liquefied natural gas facility. It will

overhaul Prepa’s board, create a new structure for tax contribution with municipalities, in lieu of taxes, and promote a hike in utility rates through the Energy Commission. Some economists say the hike could be as much as 30%.

The restructuring will be financed through a socalled transition charge to consumers, which can be adjusted to reflect any changes in restructuring costs. As part of the deal, bondholders are accepting a 15% cut in their investment. However, this 15% haircut only applies to uninsured bonds. Insured bonds, such as those with the monoline bond insurers, will be paid in full, which means a 0% haircut.

Initially, there were concerns on whether the bill would have the needed votes for approval in the lower chamber. House Speaker Jaime Perelló gathered the votes he needed after he swore in Luis Eli Torres Monseguir as the new representative for District 23 to replace former PDP Rep. Nelson Torres Yordan, who resigned to become Guayanilla mayor.

However, PDP Rep. Javier Aponte Dalmau, who voted in favor of the bill, initially said he wanted the vote to be postponed. He also insisted that bondholders and Prepa should negotiate further cuts to the utility’s $9 billion debt. 䡲

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Lead

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THURSDAY, FEBRUARY 18, 2016

Banking/Finance

Oriental president & CEO doesn’t see more bank consolidations right now

José R. Fernández: Complicated, Challenging Times for Puerto Rico’s Economy Oriental’s Top Exec Insists Local Banks Have Strong Capital to Weather Storm

BY JOSÉ L. CARMONA j.carmona@cb.pr

For José Rafael Fernández, president, CEO & vice chairman of OFG Bancorp—the bank holding company of Oriental—the uncertainty over the resolution of Puerto Rico’s fiscal woes has affected all sectors of the economy, including financial institutions.

However, he believes local banks have enough resources to weather the storm.

“Certainly, these are complicated and challenging times for the island’s economy. However, Puerto Rico banks have a very solid and robust capital base and over the past 10 years and following the 2010 bank consolidations [when three local banks were closed by U.S. regulators], local financial institutions are more solid and stronger, and much more focused than ever before,” Fernández told Caribbean Business during an exclusive interview.

Puerto Rico banks, he added, are prepared and ready to face the impending challenges—whether they happen or not—but everything depends on actions from the commonwealth government and politicians in the Legislature and their solutions to tackle the island’s problems.

STRONG CAPITAL As for Oriental’s capital strength, the bank president, CEO & vice chairman said it is very strong and robust, with more than 14% of regulatory capital.

“In reality, we control what we can control, and what we cannot control we work it out with our financial strength and the differentiation of our clients,” he said.

From Oriental’s perspective, Fernández said that, excluding the additional $30.4 million provisioning needed for a Puerto Rico Electric Power Authority (Prepa) loan, the bank had an excellent fourth quarter in 2015.

“We generated nearly 21 cents per share in available income to stockholders, we increased our customer base with 15,500 net new clients and generated $1 billion in loans as part of our contribution to Puerto Rico’s economy,” he said.

“We have been reducing our exposure to government loans, with the only exposure left being Prepa, which we adequately provisioned during the quarter.”

CUSTOMER FOCUSED For Oriental, being focused on their customers has been the differentiating factor that has allowed the bank’s core business to perform well, despite the difficult operating

environment, Fernández indicated.

“As an institution, we have focused mainly on our individual and commercial clients, leveraged on three words—fast, easy and done,” said Oriental’s top executive.

Last year, Oriental invested 40,000 hours to train its staff, which Fernández labeled as investing in the future.

“There’s no time to waste; it’s time to build

and prepare us for whatever lies ahead,” he commented.

NO MORE CONSOLIDATIONS, FOR NOW While there may be some space left for additional bank consolidations on the island, Fernández does not see it happening in the short term.

“Not immediately; I see it happening over the next five years because there’s still too much uncertainty.

In the same way that uncertainty affects the different industries in which to invest, uncertainty does affect the banking industry as well,” he said. “As an industry, we are much more cautious when it comes to transactions and implementing strategy plans.” 䡲

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THURSDAY, FEBRUARY 18, 2016 Only remaining Spanish bank in Puerto Rico is not closing its doors

11

Banking/Finance

Santander Securities, Banco Santander Trim Staff in Puerto Rico Source: Move is to Make Bank Leaner, More Profitable for Possible Sale

BY JOSÉ L. CARMONA j.carmona@cb.pr

The operations of Santander Securities and Banco Santander in Puerto Rico were a bit shaken again last week, when staff from both divisions were laid off, people with knowledge of the matter told Caribbean Business.

At Santander Securities—an affiliate of Santander BanCorp, the Spanish bank’s wholly owned holding company of Banco Santander Puerto Rico— some 10 employees were let go Feb. 5, while at the banking subsidiary, Banco Santander, an indeterminate number of employees, including management staff, were laid off as well.

“They aren’t closing the bank in Puerto Rico. What they are doing is making their operations more efficient for a possible sale.

While no one is buying right now, it would be a great time to buy their operations and assets in Puerto Rico,” the source said. “They also hiked their fees, which were already the highest among Puerto Rico banks.”

According to the source, Santander wants to exploit its Puerto Rico franchise and make as much money as they can. Banks in the mainland U.S., Central and South America charge much higher fees for transactions than banks in

Puerto Rico, and what the Spanish bank is doing is pairing its Puerto Rico fees with the rest of the region.

“With the hike in fees, the bank is bound to lose a lot of clients,” the source warned.

SANTANDER SECURITIES At the end of 2014, Santander Securities moved out of its San Patricio offices in Guaynabo after their lease expired, and moved to Banco Santander’s main building on Ponce de León Avenue in San Juan’s Hato Rey area.

As has been the case in other securities brokerage firms in Puerto Rico, the source said the business volume at Santander Securities over the past few years has been reduced by the mounting losses in the value of investments in Puerto Rico bonds and closed-end mutual funds

by Puerto Rico-based investors.

This, the source added,

forced Santander to reduce its staff.

“Bear in mind that as much as $20 billion of the $70 billion the government owes in bonds is owned by Puerto Rico investors, who have taken a big hit since the credit-rating agencies downgraded local government bonds to junk, or noninvestment grade, in 2014,” the source said.

The staff reduction at Santander Securities follows that of UBS Financial Services Inc. of Puerto Rico, which in December eliminated some staff from its Wealth Management Consulting, Closed-End Funds, Personal & Corporate Trust and Fiscal Planning divisions, plus some brokers— affecting fewer than 20 employees—as the local office continues to trim its already diminished operations on the island.

Despite several attempts, Caribbean Business was unable to obtain a reaction from executives from either institution. 䡲

12

THURSDAY, FEBRUARY 18, 2016

WINNERS & LOSERS WEEKLY PERFORMANCE OF PUERTO RICO STOCKS

Sin Comillas is a Spanish-language digital media website that specializes in business news in such areas as economics, banking, planning and tourism. Sin Comillas was founded in 2010 by economist and journalist Luisa García Pelatti.

WINNERS FOR THE WEEK STOCK Popular Inc.

52-wk HIGH 35.83

PRICE 2/5 25.08

PRICE 2/12 25.46

SYMBOL GTS

52-wk LOW 17.34

52-wk HIGH 27.07

PRICE 2/5 20.95

PRICE 2/12 19.99

CHANGE -0.96

EVTC OFG FBP

11.71 4.56 2.06

23.12 17.61 6.76

12.58 5.46 2.45

11.93 5.20 2.43

-0.65 -0.26 -0.02

SYMBOL BPOP

52-wk LOW 22.40

CHANGE 0.38

LOSERS FOR THE WEEK STOCK Triple-S Management Corp.

Evertec Inc. OFG Bancorp First BanCorp

Weekly Comment on Puerto Rico Stocks A strong rally in energy shares and financial stocks last Friday snapped a five-day losing streak, propelled by investors buying beaten down stocks. However, the rally was not enough to lift the top three stock indexes for the week. U.S. oil prices settled 12.3% higher, boosting energy shares 2.6%. Meanwhile, the materials sector jumped 2.9%. Investors also snapped battered financial shares.

U.S.-listed shares of Deutsche Bank were up 12% at $17.38. Shares of JPMorgan jumped 8.3% to $57.49, after its CEO bought more than $25 million of the bank’s stock. Financials have been the weakestperforming sector so far this year. Recession fears have compounded concerns about their exposure to the energy sector and expectations that global interest rates are likely to rise quickly. The Standard & Poor’s (S&P) Financials Index rallied 4%, its largest daily percentage gain since November 2011. Concerns over global and U.S. growth have dragged down stocks in 2016. Since Dec. 31, the S&P 500 has been down 8.8%. Last week’s selloff saw the S&P 500 touch a two-year low on Feb.9, but closed at its high for the season last Friday ahead of the three-day U.S. holiday weekend. For the week, the Dow Jones Industrial Average fell 1.4% to 15,973.84. The S&P 500 lost 0.8% to 1,864.78, while the Nasdaq Composite Index dropped 0.6% to 4,337.51.

The Government Development Bank’s Puerto Rico Stock Index (PRSI) was dragged down again last week, with only one component in the black. For the week, the PRSI lost 15.41, or 1.06%, to close at 1,438.83. Last week’s sole gainer was Popular Inc., which rose 38 cents, or 1.52%, to close at $25.46. Topping last week’s list of nongainers was Evertec Inc, which erased 65 cents, or 5.17%, to close at $11.93. It was followed by OFG Bancorp, which lost 26 cents, or 4.76%, to close at $5.20. Shares of Triple-S Management Corp. fell 96 cents, or 4.58%, to close at $19.99. FirstBanCorp edged down 2 cents, or 0.82%, to close at $2.43.

BY JOSÉ L. CARMONA SENIOR REPORTER, BANKING & FINANCE CARIBBEAN BUSINESS

Puerto Rico’s Debt Crisis: Why There’s No Quick Fix Editor’s Note: The following article is an excerpt from an original posting from the website, Knowledge@Wharton, by the University of Pennsylvania.

BY KNOWLEDGE@WHARTON/SIN COMILLAS

Experts caution that there is no quick fix to get Puerto Rico back on solid footing to allow it to emerge from its debt crisis on a more sustainable path.

David Lewis, a former assistant secretary of the Puerto Rico State Department, says: “Puerto Rico’s problem is that the rest of the world has changed to what we call ‘open market competition’ in all industries and sectors, but Puerto Rico has not.”

Open market competition makes economies more efficient, more productive and more competitive, Lewis adds.

“We’ve seen [elsewhere] in the Caribbean and Latin America [countries], whose economies are structurally closer to Puerto Rico, that the [processes of creating open market economies] take 10 to 15 years. And they are very difficult and contradictory processes. So there is no quick solution and, during that period, there are a lot of winners and a lot of losers.”

But Puerto Rico will be unable to muddle through without restructuring its debt, according

David Lewis

David Arthur Skeel

to University of Pennsylvania law Prof. David Arthur Skeel.

“The commonwealth is probably going to have to restructure its debt, in addition to whatever else is done to help it out. Puerto Rico’s governor and [resident commisioner] congressional representative have been pushing for access to bankruptcy, at least for its municipalities, maybe for Puerto Rico itself.”

Puerto Rico does not have either option now because the island’s municipalities were excluded from Chapter 9, the municipal provisions of the bankruptcy laws, in 1984. “There has been discussion about some sort of federal funding— some kind of bailout,” Skeel adds. “There’s also been discussion about other legislative changes such as relaxing the minimum-wage requirement,

which many economists on both sides of the aisle think is too high for Puerto Rico.”

CONTROL BOARD, CHAPTER 9 ARE

NECESSARY In Skeel’s view, “the most plausible—almost the only plausible—strategy starts with some kind of control board to oversee Puerto Rico’s finances, as was done with New York City back in the 1970s. It’s been done with Washington, D.C., and other cities since then.

In addition, I think Congress needs to give Puerto Rico’s municipalities, at least—and probably Puerto Rico itself— access to bankruptcy.”

Skeel notes that “if bankruptcy isn’t made available, Continues on next page

13

THURSDAY, FEBRUARY 18, 2016

Continues from previous page

it’s going to be a mess. It’s already turning into a mess now.

Several bond funds have sued because of defaults, so there’s already litigation against Puerto Rico. There’s really no clear process for deciding who gets what if there’s no bankruptcy option.”

Lewis, now vice president of Manchester Trade, a Washington, D.C.-based consultancy, says the only solution that people seem to agree on is a piecemeal one. In such a scenario, the government may agree to do better on tax collections, or increase some taxes to raise more money or attempt to receive bankruptcy protection, as have U.S. states under their Chapter 9 provisions. “Such a statute would enable Puerto Rico to set up a procedure for doing the payments.”

In terms of the restructuring, there are two main pieces, Skeel says. “First, there needs to be a control board and it needs to be set up by Congress, but with significant Puerto

Rimco to Become Caterpillar’s Distributor in Cuba

BY SIN COMILLAS STAFF

Secretary of Treasury Jack Lew flexibility in what they can do unilaterally, but for it to work, Puerto Rico has to be convinced that it’s right.”

A major political challenge, according to Lewis, is that even under normal situations, “that’s an uphill battle in Congress, but when you’re doing it when you’ve got some water right at your nose, and there is urgency and there are so many vested interests, everyone with a vested interest is arguing pro or con.

And in an election year, I do not see that there will be a consensus

“Congress has a great deal of flexibility in what they can do unilaterally, but for it to work, Puerto Rico has to be convinced that it’s right.”

—David Arthur Skeel, University of Pennsylvania law professor Rico involvement. And second, I think there needs to be some bankruptcy or restructuring option. In my view, if you don’t have both of those pieces—if you try to do just one of those things—what you are doing, in essence, is building half of a bridge.”

He adds that Puerto Rico has to conclude that whatever is put in place is a good idea, and has to agree to it as a political matter. “They don’t have to agree to it as a legal matter.

Congress has a great deal of

in Congress to grant Puerto Rico Chapter 9 as a way out of this.”

It is not a high enough priority, he notes, and there are too many contradictory positions within the Republican and the Democratic delegations in Congress. “And within the administration, [Treasury Secretary Jack] Lew is putting the whole onus on Congress. He’s saying that if Congress helps you out, we’ll help you out the way we helped Detroit, but it’s not that simple” to get Congress to help out. 䡲

Caterpillar, the largest manufacturer of construction machinery, selected Rimco, a Puerto Rican company, as its official distributor in Cuba.

Caterpillar considers Cuba needs this type of machinery and, with the elimination of commercial restrictions between the U.S. and Cuba, the company hopes to contribute to the development of that

island’s infrastructure.

“This announcement is part of the preparations in anticipation of the lifting of 55 years of commercial embargo against Cuba,” said Philip Kelliher, vice president of Caterpillar, in a press release.

“There is great affinity between Cuba and Puerto Rico because we share language, culture and traditions,” said Richard McConnie, president of Rimco, who said he felt honored

to serve the Cuban market.

President Barack Obama announced on Dec. 17, 2014, that the U.S. would move to normalize relations with Cuba. Since then, both nations have opened embassies in each other’s country, and gradual steps are being taken to open diplomatic and economic ties as well.

While there are additional hurdles until relations are fully normalized, including lifting the embargo, Rimco and Caterpillar will prepare to serve the Cuban marketplace with construction and mining equipment, power systems, and marine and industrial engines. 䡲

Rimco, a Puerto Rican company, is Caterpillar’s official distributor in Cuba.

Business in Puerto Rico

BY LUISA GARCÍA PELATTI SIN COMILLAS

Recent years have seen increased investment from China in Latin America and the Caribbean. To take advantage of this trend, Puerto Rico needs to focus on producing more goods and services for the Chinese market, including in the tourism sector, said Heidie Calero, president of H. Calero Consulting.

In the latest edition of the firm’s “Economic Pulse” publication, Calero analyzes Chinese foreign investment,

which in 2014 reached $119.2 billion and represented 9.7% of the total foreign investment at a global level. While countries in Asia have been the main receivers of this investment, Latin America follows in second place with $7.7 billion. China’s investment in the region has included infrastructure, energy and mining, focusing on countries such as Brazil, Venezuela, Argentina and Peru. Brazil leads in exports of agricultural products to China and is the fourthlargest recipient of Chinese investment.

“Just think how Puerto Rico’s economic growth would change if it could attract such investments,” Calero said.

Why would China invest in Puerto Rico? Calero explained

Heidie Calero, president of H. Calero Consulting that what makes Puerto Rico attractive for investment is its infrastructure, which many countries in Latin America and the Caribbean lack.

“But we need to learn from the latest Chinese reforms,” she said. “What holds Puerto Rico back is not the lack of infrastructure but the need for governmental reforms and a final solution to the fiscal crisis.” 䡲

14

THURSDAY, FEBRUARY 18, 2016 FRONT PAGE

Puerto Rico’s Lost Decade PART 1 IN A SERIES

Debt Restructuring, Economic Development Plan Urgently Needed for Turnaround

BY JOSÉ L. CARMONA j.carmona@cb.pr

U

nbeknownst to the vast majority of Puerto Rico residents, a two-week partial government shut-

down in May 2006 would mark the official beginning of the long-running economic contraction that hits its 10th anniversary this year, with no signs of letting up.

However, the shutdown

—caused by the central government running out of money amid a budget impasse between the Executive and Legislative branches, each one controlled by a different political party—was just the

tip of the iceberg as to the real reasons for the deepest and longest economic contraction the island has ever experienced.

The completion of the 10-year phaseout of Section 936 in 2006 coincided

with the government shutdown that year striking a heavy blow to Puerto Rico’s economy, with lasting effects on all economic sectors to this day.

Ten years later, Puerto Rico once again faces the

threat of another public sector shutdown—as early as this summer—when the cash-strapped government has more than $1.5 billion in debt-obligation Continues on next page

15

FRONT PAGE THURSDAY, FEBRUARY 18, 2016

Continues from previous page

“What has happened in the economy over the past five decades is a collapse of the capacity to generate growth.”

—José Joaquín Villamil, president Estudios Técnicos Inc.

Continues from previous page

payments due.

Unlike 2006, however, the situation today is much more dire, as the island faces a fiscal crisis amid a fast-declining

population and a much smaller and weaker economy.

EVOLUTION OF PUERTO RICO’S ECONOMIC

DEVELOPMENT MODEL For José Joaquín Villamil,

chairman of Estudios Técnicos, to really understand the reasons behind the island’s 10-year depression, one must look back at how Puerto Rico’s economic development evolved through the years up to 2006.

During the 1930s, Puerto Rico benefited from investments of the New Deal program, propelled

by U.S. President Franklin D. Roosevelt.

The three key figures who were pushing for the New Deal in Puerto Rico were: Rexford Tugwell, an American economist appointed to be governor of Puerto Rico between 1941 and 1946; Luis Muñoz Marín, founder of the Popular Democratic Party and first elected governor of Puerto Rico; and Carlos Chardón, a well-known educator and scientist who largely penned the reconstruction plan.

“Early efforts of industrialization on the island weren’t very successful.

Muñoz Marín and his team realized that to attract a large number of firms to Puerto Rico, the incentives provided needed to be irresistible,” Villamil said.

Section 931 of the U.S. Internal Revenue Service (IRS), in place since the 1920s and until the mid-1970s, allowed

subsidiaries of U.S. corporations to establish themselves in U.S. territories without paying federal taxes on the income derived from their Puerto Rico operations—unless the money earned was repatriated to the U.S. The Puerto Rico Industrial Development Co. (Pridco), which was created in the 1940s to promote the island as an industrial paradise, would ultimately be successful in attracting manufacturing firms to Puerto Rico.

During the first stage in Pridco’s strategy, dubbed Operation Bootstrap’s “sweatshop” phase, the agency was focused primarily on attracting labor-intensive industries (e.g. clothing, textiles and food processing).

Since wages under the first stage were low, Pridco then decided to attract capital-intensive firms that could generally provide higher wages, among other reasons. However, the benefits obtained

by Puerto Rico from this strategy were limited because these nonlocal firms made no attempt to forge linkages within the island’s economy and they were not motivated to do so by the government or its incentive package.

Section 936 of the Internal Revenue Code, which substituted Section 931, would usher in a new era for Puerto Rico’s economic development. It provided greater benefits to U.S. firms operating in Puerto Rico since they would be able to repatriate profits earned without paying federal income taxes.

“Although Section 936 was ultimately completely eliminated in 2006, after a 10-year phaseout, many firms that were so-called ‘936 corporations’ were able to be incorporated as controlled foreign corporations [CFCs] and continue to benefit from low taxes, income shifting and hefty profits,” Villamil said.

After the full repeal of Section 936 in 2006, he noted Puerto Rico has been largely unable to develop and execute an economic strategy that raises its level of development to converge with U.S. incomes and standards of living.

AFTER SECTION 936: POPULATION AND

ECONOMY SHRINK Since the demise of Section 936, the population and the economy of Puerto Rico have both become smaller. By 2030, the island’s population could

be around 2.8 million, far below the 3.45 million of today, and even more so from the 2000 projection of nearly 4 million by 2020.

Some data illustrates the magnitude of what has happened in Puerto Rico’s economy in recent years: upwards of 250,000 jobs lost since 2006, and manufacturing employment down to 74,000 from a peak of 165,000 in 1996.

Investment in construction—one of the island’s economic pillars during the 1990s—is down to $4.3 billion in 2015 from a high of $6.6 billion in 2004. Home foreclosures reached a record high of 4,000 in 2015.

“What has happened in the economy over the past five decades is a collapse of the capacity to generate growth. The recent experience beginning in 2006 is clearly not a recession, but rather the culmination of a long piece of weak performance,” Villamil explained.

For the Estudios Técnicos chairman, it is important to understand that Puerto Rico’s economic malaise refers to production, since consumption has held up fairly well Continues on page 16

16

THURSDAY, FEBRUARY 18, 2016 FRONT PAGE

Continues from page 15

over the years.

The reasons include federal transfer payments to residents that comprise over 20% of personal income; government employment that, although reduced recently, still represents more than 20% of total employment; and a very large informal economy, estimated at 28% of the formal economy.

“These three factors sustain consumption, isolate part of the population from economic volatility, but on the other hand, do little to stimulate investment

and production, since consumption is mostly imported,” Villamil said.

According to the Puerto Rico Planning Board’s 2014 Economic Statistical Appendix (the most recent edition available) the island’s gross national product (GNP) decreased in real terms during 2006 (-1.2%), 2007 (-1.2%), 2008 (-2.9%), 2009 (-3.8%) 2010 (-3.6%) and 2011 (-1.7%).

In fiscal 2012, the local economy grew a mere 0.9%, assisted by nearly $7 billion in American Recovery Continues on next page

FRONT PAGE THURSDAY, FEBRUARY 18, 2016

Continued from previous page

& Reinvestment Act funds.

This was followed by negative growth in fiscal 2013 (-0.2%), fiscal 2014 (-0.9%) and projected declines in fiscal 2015 (-0.9%) and fiscal 2016 (-1.2%).

The economy is not expected to reach 2006 real GNP levels until the late 2020s if present trends continue. Assuming growth rates of 1.8% in real GNP

and even the spatial distribution of economic activities.

“Even culture, understood as the set of norms that regulates everyday life, including economic aspects, will have been impacted,” the Estudios Técnicos chairman said.

For Villamil, returning to a population age structure that characterizes a growing economy, after the major changes in age com-

“Many social programs and agencies were planned and implemented for a very different social structure than what characterizes the island at the moment.”

—José Joaquín Villamil, president Estudios Técnicos Inc. beginning in fiscal 2015, it will reach the 2006 level in 2023.

“Forecasts are for at least three more years of zero growth or contraction, so 2023 is an extremely optimistic projection. What this tells us is that the economy will have lost close to 20 years of economic revolution,” Villamil indicated.

THE CONSEQUENCES He said the implications of a smaller population and economy will generate major structural ruptures in the island’s demographics (including age composition and geographic distribution), and its economic structure, labor markets, government

position that have already occurred, is an intractable problem. Likewise, reconstituting the supply of certain skilled occupations will be very difficult, particularly in areas that have seen an exodus to jurisdictions with higher salaries.

“Weakened local economic sectors, either because of the said processes or because of the introduction of new actors intent on securing market share, will mean that breaking the vicious cycle and reconstructing the economy along lines that will generate stability and social equity will be more difficult. This is a major structural issue that needs Continues on page 18

17

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THURSDAY, FEBRUARY 18, 2016 FRONT PAGE

Continues from previous page

to be dealt with,” Villamil indicated.

Having competitive conditions is a key component of the institutional framework essential for sustainable economic development, he added.

The market has changed in such a way that conditions defining a competitive-market economy are no longer present in some sectors, specifically retail and wholesale, and perhaps in others.

“Competition must not be confused with laissezfaire. Major markets such as banking, housing, food, health services and other consumer goods and service markets will have been impacted and the industries involved substantially transformed,” Villamil warned.

No one, he added, expects housing to reach the same level of sales that it enjoyed in 2006 of 13,000 new units. Likely levels will be nearer the 2014 level of some 2,200 units a year for the foreseeable future.

“Much of the construction industry, for example, is not only smaller, but also has disappeared completely. Reviving the industry will require major structural measures, not marginal ones such as improving the permitting process or dealing with the Land Use Plan,” Villamil noted.

LESS POPULATION,

MORE EXCESS CAPACITY One major impact of a shrinking population and economy is on physical infrastructure planning, with excess capacity developing in some of the major infrastructures, a condition already

noticeable in the Puerto Rico Electric Power Authority, for example.

But this, Villamil added, is also true of social infrastructure, as Education Department figures illustrate. Public school enrollment has declined from 613,019 students in 2000, to just 410,950 in 2015. As a result, total employment at the department fell from 72,005 in 2000 to 55,912 in 2015.

Likewise, healthcare services, another component of the social infrastructure, will require major shifts in delivery systems and on the priorities presently in place. “[Healthcare] will have to serve a very different population, one with greater and very different needs, and with fewer resources,” Villamil said. “The worst impact of what has transpired in Puerto Rico is the erosion in human capital that has taken place. The lack of social mobility and an increase in inequality, amply documented, due to the shrinkage of the economy are other major consequences.”

The Estudios Técnicos executive said many social programs and agencies were planned and implemented for a very different social structure than what characterizes the island at the moment.

Changes in the age composition of the population, the structure of families, the manner in which poverty manifests itself and the lack of social mobility make agencies such as the Family Department and a number of antipoverty programs obsolete,” Villamil said. “Institutional innovation assumes an urgent character, given the rapid and profound changes in social conditions.” 䡲

19

FRONT PAGE THURSDAY, FEBRUARY 18, 2016

Puerto Rico Urgently Needs an Economic Development Platform Government Agencies, Utilities Must Transform their Operations

BY JOSÉ L. CARMONA j.carmona@cb.pr

W

hile Puerto Rico’s fiscal crisis has been a main topic of discussion in both San Juan and Washington, D.C., for the past year or so, the urgent need to establish and implement an economic-development plan to jumpstart the island’s stagnant economy was seldom mentioned by local government officials, according to economist Gustavo Vélez, president of Inteligencia Económica.

“No one talks about an economic-development platform. Part of the focus should be on how to build an agenda prior to rehabilitating our production infrastructure.

We have lost $60 billion in wealth and a long list of companies, as well as people who have migrated, and there’s no production footprint in sight,” he told Caribbean Business.

For Vélez, the real challenge is how to once again enjoy real gross national product (GNP) growth of 3% or 4%, when the economy has actually shrunk.

“For us to catch up with the rest of the hemisphere, Puerto Rico would have to grow 4%, 5% annually for the next 10 years. The structural problems we have require us to reform all our systems, but there’s no political will,” Vélez said.

“What we need is political legislative action, which is lacking right now, to really change this from the bottom up, but we lost it. That’s where

the fiscal control board comes in.”

However, it should be noted that when the socalled Krueger report was released in June 2015, former International Monetary Fund (IMF) Deputy Director Anne Krueger (she pronounces it Kreeger) and her colleagues came to the inevitable conclusion that there is no way to grow the economy without restructuring the island’s $70 billion debt, as reported in a Caribbean Business Front-Page story (July 9, 2015).

The true value of the Krueger report, certifying that Puerto Rico’s debt is unsustainable, is that it brought together all the fiscal challenges and obstacles to economic development and job creation in one roadmap that offers recommendations to help Puerto Rico chart a course back to recovery. The credit-rating agencies and local economists also have long been pointing to a lack of job creation that has contributed to a shrinking population, dwindling tax base and lack of tax revenue.

“Puerto Rico ranks way up in the list of destinations where it is most difficult to do business. On some things, the difficulties are huge and businesses are discouraged.

There are many factors that make it less attractive to be in business,” Krueger said at the time. For example, among the barriers to Puerto Rico’s growth are local labor laws and regulations that restrict competition and investment, the Krueger report stated.

Gustavo Vélez, president of Inteligencia Económica

FISCAL CONTROL

BOARD A 90-page document about the fiscal control board that was established in Washington, D.C., explains in detail how the board works.

D.C.’s problems, Vélez added, sounded very similar to those afflicting Puerto Rico, because just like the island, the District of Columbia is not a state, according to the U.S. Constitution.

“Politicians sell the idea that we are different, and D.C. sounds like us, as we are associated with the U.S. Washington, D.C. also had internal political opposition in many of these matters,” he indicated. “It took D.C. about a-year-and-a-half to see real progress.”

Puerto Rico, Vélez pointed out, has two dire needs: debt restructuring and an economicdevelopment program.

“The fiscal control board should provide the space so that the private sector can be part of the process. In the short term, a lot of time and effort will be spent by the board dealing with all the government restructuring topics and financial

matters,” he said. “Why not let the private sector get involved in the economic-development plan that will be executed. Most of the time ideas get approved, but no one executes them.”

The fiscal control board, Vélez added, is empowered by Congress to do things to allow the private sector to be their ally in the process. In fact, Congress has commented that the fiscal control board cannot do it all.

“I believe the space for that to happen is there, but we need to go to Congress with a coherent plan for them to glance at it,” added Vélez, who is also the economic adviser of José Vázquez, president of the Puerto Rico Chamber of Commerce (CofC).

On Feb. 17, the CofC was scheduled to hold its annual economic outlook event, featuring the island’s top economists who were to present their analyses and recommendations regarding the island’s fiscal and economic problems.

The recommendations would be part of a working document that the CofC expects to deliver to members of Congress who are dealing with Puerto Rico issues.

DEBT RESTRUCTURING In Vélez’s view, the most critical government entities that need debt restructuring are the Puerto Rico Electric Power Authority (Prepa), the Puerto Rico Highways & Transportation Authority (HTA), and the Government Development Bank for Puerto Rico (GDB).

The Puerto Rico Aqueduct & Sewer Authority (Prasa) is last on his list.

“You can restructure these utilities individually, but you primarily need to restructure their operations, to transform them,” he said. “These public corporations already gave their useful lives to Puerto Rico.”

During Puerto Rico’s industrialization era in the 1960s, the public corporation—monopolies— helped modernize Puerto Rico, but their purpose was somehow derailed along the way, said the Inteligencia Económica president.

“Public corporations spearheaded Puerto Rico’s modernization at the time because these [entities] were capital (i.e. assets and resources) of the state. We continue with the current outdated model or we utilize the public-private partnerships model because that’s the final destination of these public corporations, to become facilitating agents,” Vélez said. “Then you bring in private capital, restructure their debt and then you reinvest the savings from the restructuring in infrastructure. And that’s what is being intended with Prepa.”

For Vélez, the public corporations can no longer be the distribution and production apparatus they once were, as they must be transformed.

UNFUNDED RETIREMENT SYSTEMS Vélez also believes the government debt can be restructured by

not having to touch the government-obligation (GO) bonds, which carry a constitutional payment guarantee.

However, with the unfunded liability in the island’s public employees’ retirement systems, this could be a very uphill task he said.

“I believe GOs should be paid with the government’s recurring income.

But given the fact there’s a $40 billion unfunded liability in the retirement system, I doubt it can be done,” Vélez said. “However, you can make the central government more efficient. We haven’t taken all the 131 government agencies and inspected these one by one and seen how much efficiency I can get from these.”

With five agencies making payments to the retirement systems, of which 60% is repaid to the general fund, he believes that with a re-engineering process, the government could save $500 million to recapitalize the retirement system.

“It’s a matter of injecting capital to win some extra time to continue the retirement system’s reform as legislated. The government hasn’t made the contributions it was supposed to do to the retirement system. Prepa alone has [an obligation of] $39 million a month in retirement pensions, and that’s one of the transformations they need to make,” Vélez said. 䡲

—Editor Rosario Fajardo and Executive Editor Philipe Schoene contributed to this story.

20

THURSDAY, FEBRUARY 18, 2016

20

Column Why Bush Could Defend Islam More Easily Than Obama Can

BY CLARENCE PAGE

Both President Barack Obama and former President George W. Bush can say they have visited a mosque as president. Can you guess which one has gotten slammed for it by today’s presidential candidates? Need a hint?

“Maybe he feels comfortable there,” said Republican presidential candidate Donald Trump.

Ha. Ha. Yes, The Donald is implying that the president is a Muslim, a myth that is so absurd—yet so widely believed—that even the president pokes fun at it. Humor can be an effective rejoinder to such idiocy, except to those who suffer from irony deficit disorder, a common malady on the extreme edges of politics. They can’t take a joke.

Throughout his presidency Obama, a Christian, has pushed back against that Muslim myth and the equally false claim that he is not a naturally born American citizen. That claim was famously advanced without evidence by Trump, among others.

Obama acknowledged that tangle of lies in good humor during his speech at the Islamic Center of Baltimore, a major house of worship and community service center in the town that calls itself “Charm City.”

Even Thomas Jefferson, Obama noted, had also been accused of being a Muslim back in the polarized political atmosphere of his day.

Obama can relate. Calling Obama a Muslim has become a lifestyle choice for many folks, a way of announcing where you stand on today’s political spectrum.

We have come to expect that sort of cynical birther fraud from Trump, who seldom allows facts to get in the way of his cheap shots.

But it was deeply disappointing to hear Sen. Marco Rubio, who usually is a classier act, deliver a blow just as low as Trump’s with higher-minded language. Without going full birther, Rubio on the evening after Obama spoke simply misrepresented what Obama said.

“He gave a speech at a mosque,” Rubio said during a town hall meeting in Dover, N.H., “basically implying that America is discriminating against Muslims. Of

course there’s discrimination in America, of every kind. But the bigger issue is radical Islam.... This constant pitting people against each other, I can’t stand that. It’s hurting our country badly.”

Say what? That wasn’t what Obama said at all. Quite the opposite. Only in today’s goofy political atmosphere can the president’s call for unity be viewed as an instrument for division.

Yet, as much as Obama has been criticized by some for doing too much for Muslims, he has been slammed by others for doing too little.

The hashtag #TooLateObama streams with accusations of hypocrisy against Obama for “anti-Muslim policies” including his escalation of drone strikes in Pakistan, Yemen and Somalia, even though media reports describe the identification of drone targets as “an imperfect best guess.”

Still it is striking to compare the blowback President Obama has received for visiting a mosque in his eighth year of office with the visit President Bush paid to a Washington mosque six days after the Sept. 11 terror attacks in 2001.

Standing with Islamic holy men, Bush spoke passionately against the harassment of Arabs, Muslims and Sikhs, who often are mistaken for Muslims. He also spoke about the need to respect Islam and fight those who try to hijack Islam for violent purposes.

Many Muslims and others have called on Obama to make a similarly public act of leadership and statesmanship. But Bush’s speech came during a moment of unusual national unity, the aftermath of the biggest attack on U.S. soil since Pearl Harbor.

Members of both parties in Congress stood together that week and sang “God Bless America” on the Capitol steps. A similar attack today would probably bring an impeachment bill from the president’s right wing opponents.

Sure, Obama should have stood up sooner against anti-Muslim discrimination. Still his voice of reason is welcome, even when it’s late. 䡲

©2016 Distributed by Tribune Content Agency LLC

THURSDAY, FEBRUARY 18, 2016

21

Poll

30% widowed, living alone

P.R. Elderly Profile: Mostly Female; 85% Receive Social Security

BY ROSARIO FAJARDO r.fajardo@cb.pr

It is no secret that Puerto Rico’s elderly population is growing at a much faster rate than other age segments. Now, Gaither International has developed a profile of the island’s 65-plus age segment and found that most are women, receiving Social Security income and living in the middle or low lifestyle tiers, which correspond to socioeconomic factors.

Puerto Rico’s elderly population has increased from 546,000 in 2010 to 617,000 in 2014, according to Gaither, citing U.S. Census Bureau data.

“It’s safe to say that this growth is due to a combination of lower birth rates, lower death rates and higher life expectancy, but we must also take into account those who are leaving the island, whose age ranges tend to fall into younger groups than those in the 65 and older segment,” said Melanie Dederick, a client service associate at Gaither International.

“Taking that into account, we can see the direct impact the 65-plus age segment has on Puerto Rico’s demographic profile: The island’s population is seemingly aging,” she added. “For this same reason, it’s important that we evaluate this segment and its growth.”

About 46% of Puerto

Rico’s elderly population corresponds to the male gender, while 54% is female; 31% of this group reported being a “housewife” as their employment.

Among the 65-plus age group, 46% reported being retired, 23% have a pension, 4% reported being disabled and only 2% reported being selfemployed.

On the other hand, when it comes to sources of income, 85% reported receiving Social Security, 38% said they receive government aid, 16% receive a pension, 7% are salaried with benefits and 4% stated they receive financial help from family members.

Taking a look at the average lifestyle of older adults in Puerto Rico, Gaither said most fall in the middle-low tier with 48%, followed by 38% who fall in the low tier.

Only 12% classify themselves in the middle tier and 2% in the high lifestyle category.

On average, 61% have had three or more children, and 61% reported living in a household of two or three people, while 30% reported living alone. Coincidentally, 30% reported being widowed as their marital status, 45% are married, 12% are divorced and 7% were never married.

Some favorite pastimes among the elderly age segment include: watching television, spending time with family, listening to music, cleaning and doing household chores, going to church and reading.

Regarding media exposure, 46% reported having paid TV, such as cable or satellite, in their households, but only 15% reported watching paid

“Local businesses could attract this group by offering regular discounts or ‘exclusive’ senior discounts on products and services.”

—Melanie Dederick, a client service associate at Gaither International

TV on a regular basis. On the other hand, local TV is clearly the favorite among elderly people, as a whopping 80% report watching local-TV channels on a regular basis.

Other media outlets that the 65-plus age segment are regularly exposed to are radio (39%), newspapers (34%), outdoor media, such as billboards (23%) and internet, which falls far behind with 5%.

Elderly people not using the internet on a regular basis should not come as a surprise, since only 17% reported having internet service in their households. This is in stark contrast to younger age groups (18-64), whereby a total 36% state having internet service in their homes.

“As we can see, the 65 and older age group is one to monitor, not only because of its growth, but also because its demographic profile and behavior tend to differ greatly from that of younger age segments,” Dederick said.

Considering that most

of the elderly categorize themselves in the middle and low lifestyle tiers, local businesses could attract this group by offering regular discounts or “exclusive” senior discounts on products and services, she indicated.

“We have noticed an increase [in terms of] visits to businesses that offer those discounts, such as casual dining restaurants, supermarkets and fastfood establishments. By doing so, businesses may

become more accessible and therefore, more feasible to visit on a regular basis.”

The results are from Gaither International’s Media Brand Profiles tracking survey, which interviewed 5,909 people, age 65 and older, during 2015. 䡲

Polling is conducted by Gaither International and the results are reported exclusively by Caribbean Business.

THURSDAY, FEBRUARY 18, 2016

23

Government

Puerto Rico’s unparalleled tax incentives laws discussed at P.R. Investmen Summit

Expert Panel Lauds Benefits of Combining Puerto Rico’s Tax Incentives Laws With Acts 20 & 22 Spearheading Efforts, Act 185 Offers Private Equity Incentives

BY LUIS J. VALENTÍN l.valentin@cb.pr

Just before lunchtime, a crowd of investors carefully listened to how they could wisely use a series of Puerto Rico tax laws that were called “the most powerful incentives that God has created.”

As part of the Puerto Rico Investment Summit held last week, a panel comprising Latin Media House Chairman & Caribbean Business Publisher Miguel Ferrer; Berkeley Research Group’s Latin

foreign investors to the island, respectively—are certainly at the forefront of these efforts. But in 2014, Act 185 also came into play, seeking to spur private equity funds on the island with significant tax benefits. The Private Equity Funds Act provides “the same benefits that millionaire investors get under Act 22,” Economic Development & Commerce Secretary Alberto Bacó Bagué recently told Caribbean Business.

“Anyone who has money to invest can benefit,”

“[Act 185] broadens the scope of investments that can be incentivized on the island to create additional economic activity and job creation.”

—Miguel Ferrer America Managing Director Frank Holder; O’Neill & Borges’ Corporate Department member Ismael Vincenty; and BDO Puerto Rico Shareholder Gabriel Hernández discussed some of the island’s unparalleled tax incentives laws, particularly when used in tandem.

Acts 20 and 22—which incentivize the export of services and relocation of

he stressed.

For their part, panelists noted how Act 185 has leveled the playing field for local investors and how returns could be maximized using the law, particularly when paired with Act 20. To date, five of these funds are operational, with others in the making.

Hernández and Vincenty explained some of

the benefits and requirements of Acts 20 and 185, both of which are available to local residents. In short, Act 185 investors benefit from deductions for net capital losses and gain additional benefits with their investments in an eligible private equity fund.

“This is rocking,” Ferrer said in reference to the enormous potential of Puerto Rico’s tax incentives laws. He urged investors to make use of the tax incentives package and convert the island into a powerhouse in exporting services and using local resources.

He recently told Caribbean Business how Act 185 also gives Puerto Rico companies, with no access to public capital markets, the opportunity to obtain financing through these funds. “[Act 185] broadens the scope of investments that can be incentivized on the island to create additional economic activity and job creation,” Ferrer said.

‘THIS WORKS’ Critics of the tax incentives laws have questioned its job-creation ability on the island, particularly as there are no such requirements under the programs, with an average 11 full-time jobs created so far by each decree

Above, from left: panelists Frank Holder, managing director at BRG Latin America; BDO Puerto Rico Shareholder Gabriel Hernández; Latin Media House Chairman & CB Publisher Miguel Ferrer; and Ismael Vincenty, member of the corporate department at O’Neill & Borges. Right: participants en route to the panel discussion at the P.R. Investment Summit.

awarded. They have also argued there is preferential treatment to those from abroad over Puerto Rico residents.

The Economic Development & Commerce Department (DDEC by its Spanish acronym), led by Bacó, believes that with only three years in place, it could be too soon to truly gauge the tax incentives’ overall impact on Puerto Rico’s economy.

A recent governmentcommissioned study conducted by Estudios Técnicos found the program has good prospects when it comes to economic development—including job creation.

Ferrer talked about a

familiar example of how the island’s tax incentives have already created economic development opportunities. He noted how these helped him and his partner, Caribbean Business Editor in Chief Heiko Faass, in acquiring the former Casiano Communications with private equity. The operation has been transformed into what is now Latin Media House (LMH), paving the way for the company to become an exporter of media, expanding its reach and targeting markets not only in Puerto Rico, but also in the U.S. and Latin America. Recently, LMH announced it

is engaged in acquisition talks with NotiCel, a local digital-media company.

The preliminary agreement would integrate NotiCel with LMH’s growing media portfolio.

“All this couldn’t have happened without Acts 20 and 185,” Ferrer stressed.

For Holder, the commonwealth’s tax incentive offerings have also proven positive. “This works,” he told attendees, while noting how he moved offices from Miami to the island and how the operation is expanding.

“Let’s use these laws,” Ferrer added. “Get rocking and start your [Act] 185 fund.” 䡲

26

THURSDAY, FEBRUARY 18, 2016

Law/Courts UPR Forum: Chapter 9 Bankruptcy Protection is not the Holy Grail That Will Reverse Fiscal Decline

BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

Even if Puerto Rico were to be included, Chapter 9 bankruptcy protection is not the “Holy Grail” that will fiscally save distressed Puerto Rico because a significant portion of the $70 billion debt does not qualify and bankruptcy judges cannot intervene to reverse structural deficit problems.

That was the consensus of a group of economists and lawyers, two of whom worked directly with the bankruptcies of Detroit and Jefferson County, Ala., at a forum titled “Public Debt & the Future of Puerto Rico,” organized by the University of Puerto Rico’s (UPR) Law Journal.

Because of changes made to the Bankruptcy Law in 1984, for reasons that are unclear, Puerto Rico cannot use Chapter 9 to address the fiscal problems of its municipalities, which the law defines as government instrumentalities, cities and counties. However, even if Puerto Rico were allowed to file for Chapter 9 bankruptcy protection, the island’s problems will not be resolved because of the island’s debt levels, including the $70 billion total debt and $40 billion in unfunded pension liabilities, which

are unsustainable, meaning Puerto Rico will need to put its entire debt under bankruptcy protection that the law does not allow. Puerto Rico will probably not be able to restructure $30 billion to

that are paid for by users rather than by general taxes, such as the Electric Power Authority.

Another reason state governments are not allowed to declare bankruptcy is that the con-

John Pottow, a professor of law at the University of Michigan Law School, said Puerto Rico has territorial debt and cannot file for Chapter 9 bankruptcy protection. $40 billion of its debt.

John Pottow, a professor of law at the University of Michigan Law School, said Puerto Rico has territorial debt and cannot file for Chapter 9 bankruptcy protection for the same reason Illinois, which is currently in distress, cannot declare bankruptcy.

State governments currently cannot use the federal bankruptcy system to reorganize their debt because Chapter 9 law only allows “municipalities” to declare bankruptcy.

The term “municipality” is defined in the law as a “political subdivision or public agency or instrumentality of a state.”

The definition includes revenue-producing bodies that provide services

tracts clause of the U.S. Constitution prohibits state governments from “impairing the obligation of contracts.” If Congress were to amend the federal bankruptcy code to authorize states to repudiate debt, the U.S. Supreme Court would then need to decide the novel constitutional question of whether such debt repudiation would nonetheless violate the contracts clause.

In part, Congress has resisted the idea of changing the law to allow Puerto Rico to benefit from bankruptcy protection because if the federal law were to allow states to declare bankruptcy, it could increase interest rates, rattle investors, raise the costs to run state government,

create more volatility in financial markets and erode state sovereignty under the constitution.

Right now, as fiscal pressures are mounting over states, some are proposing a change in the law.

“They would have to allow Illinois to file for bankruptcy,” Pottow said.

He supported the idea put forward by the U.S. Treasury Department for a “super chapter 9” bill just for territories that would cover debt.

On the other hand, the island will still have to continue to pay debt service for certain revenue bonds, even if it declares bankruptcy because they are protected under the code, precisely because they are guaranteed by revenues.

A revenue bond is a special type of municipal bond distinguished by its guarantee of repayment solely from revenues generated by a specified revenue-generating entity associated with the purpose of the bonds, rather than from a tax. These include revenues from toll roads and bridges, which means certain debt from the Highways Authority may not qualify for bankruptcy protection.

Accordingly, under Chapter 9, special revenue bonds retain their lien on the revenue generated by the project, and payments during the course of the Chapter 9 bankruptcy are not interrupted by the automatic stay, which generally prohibits payments during a bankruptcy on debt incurred.

Pottow explained that a “municipality” may only use Chapter 9 of the

Jorge San Miguel of Ferraiuoli LLC

Bankruptcy Code if it is specifically authorized by state law to be a debtor, if it is insolvent; if it wants to have a plan to adjust its debts and if it has engaged in certain prefiling efforts to work out its financial difficulties. The debtor must have reached agreement toward a plan or must have failed to do so despite good-faith negotiations.

Declaring bankruptcy will also not solve the island’s woes because studies have shown that Chapter 9 works better for municipalities whose fiscal problems are caused by one-time events, and not because of systemic budget problems.

SUCCESS DEPENDS ON VARIOUS FACTORS During the activity at UPR, there was discussion about a study that showed the success of a restructuring depends on the underlying causes of the financial distress. The study, which analyzed several Chapter 9 filings, suggests that the bankruptcy code works better with municipalities that have experienced onetime events; for example, Orange County’s use of strategic investments and Westfall Township’s liability for a legal judgment to a property developer.

Continues on next page

27

THURSDAY, FEBRUARY 18, 2016 Experts talk about the pros and cons of bankruptcy protection for Puerto Rico

Continued from previous page

The Chapter 9 process seems to have been effective in these cases by providing a mechanism for debt adjustment and protection from legal proceedings. These municipalities have exited from Chapter 9. Orange County has since accessed the credit markets and currently enjoys an “AA” credit rating.

In contrast, the city of Vallejo, Calif., whose financial distress was the result of a systemic budget distress, and notwithstanding concessions made by some of its creditors, remained in Chapter 9 for more than three years as its fiscal condition continued to deteriorate and it incurred substantial administrative and legal costs.

In addition, the study showed that municipalities that have filed for Chapter 9 more than once did so as a result of systemic budget problems.

For example, the city of Mack’s Creek, Mo., filed for Chapter 9 in 1998, then for a second time in 2000, and contemplated bankruptcy again in

2004. The city of Prichard, Ala., filed for Chapter 9 in 1999, exited from Chapter 9 in 2007, and filed for Chapter 9 again in 2009.

Without addressing the cities’ core problems, the Chapter 9 process seems to have little impact on reversing the structural fiscal decline.

Chapter 9 procedures do not operate in such a manner as to be able to

“Chapter 9 is a process not a solution,” said Jorge San Miguel of Ferraiuoli LLC. The process, he added, needs to be accompanied by government efforts to become more efficient and “press the metal to the pedal” in trying to promote economic development.

Patrick Redmond, a bankruptcy lawyer, who worked with the Jeffer-

Puerto Rico will also have to put out millions of dollars in legal services to go through the process. force reform, facilitate reorganization, impose taxes, cut expenditures or enable other interventions that may interfere with state sovereignty.

The role of state intervention procedures and the active participation of market players may have more authority to impose such changes than Chapter 9, the study says.

son County bankruptcy to resolve the overindebtedness of the county’s sewer system, said: “No bankruptcy will do you good, unless there is a willingness to do what needs to be done to address structural problems.”

Pottow, on the other hand, said that allowing a fiscal control board to take over the island’s finances

will help move along the process of getting Puerto Rico out of bankruptcy.

He noted that it took the city of Detroit one year to complete the bankruptcy process because the bankruptcy judge, Steven Rhodes, was pushing things along and the city’s financial manager operated “like a dictator” by making decisions that would have routinely gone to the City Council.

Pottow said a bankruptcy process will lead to cancellation of the debt and external oversight but that the latter would not be permanent. He also said that just as happened in Detroit, Puerto Rico’s creditors and pensioners will take cuts.

Labor rights will also get altered, he said.

Puerto Rico will also have to put out millions of dollars in legal services to go through the process, because the island’s debt structure, which has 18 different issuers, is complicated.

Restructuring the $20 billion debt in Detroit cost about $180 million, but Puerto Rico’s is much larger.

San Miguel, however,

John Pottow, professor of law at University of Michigan Law School.

estimated that Puerto Rico will have to spend $1 million to $2 million a day just to deal with issues in the bankruptcy court.

“We are talking about $365 million to $600 million. Puerto Rico should not have to allocate that amount,” he said.

ACADEMIA DEL PERPETUO SOCORRO

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FEBRUARY 23, 2016 8:30 A.M. AUDITORIUM

THURSDAY, FEBRUARY 18, 2016

29

Politics

Company owed $7 million

Electronic Vote Count for the Primaries up in the air due to Lack of Funds Dávila: The Money has to Appear Things are to far Away

BY ISMAEL TORRES i.torres@cb.pr

The electronic vote count, which would debut in the general primaries on June 5, is up in the air because the Puerto Rico government’s fiscal woes have prevented payments to Dominion Voting Systems, the company in charge of the initiative.

The Treasury Department has said it does not know when it would be able to carry out the payments, which are estimated at $7 million.

Treasury Secretary Juan Zaragoza said the agency has disbursed a check for $800,000 and that the rest of the money owed would be paid in accordance with the agency’s cash-flow limitations.

“It seems to me a commitment of the government itself, but just as with other commitments, this one has to be tempered to the economic reality and [the agency’s] cash flow,” he said.

Due to a major cash crunch, Treasury has been forced to delay payment of millions of dollars for many government suppliers, as well as refunds for taxpayers.

For her part, State Elections Commission (CEE by its acronym in Spanish) President Liza García warned that if the situation is not resolved in the

coming weeks, having the electronic voting system ready in time would be endangered.

García said the CEE has about $8 million earmarked for paying the debt with Dominion, but Treasury has yet to carry out the disbursement.

“If this isn’t solved in the coming weeks, it could generate a problem,” she said. “We are almost in mid-February and we need those payments to our suppliers to be made.”

García spoke about the importance of making those payments because the electoral process is at a stage when there are decisions that cannot be backtracked or rescinded due to the lack of time.

CEE: NO TURNING BACK “It’s important to know that at this moment in time, it isn’t an option to say that we won’t have the electronic vote count and then do it manually. We have arrived at a point in the calendar where there is no turning back,” she said.

She noted that opting for a manual system, which has been the usual case in elections, requires printing ballots, laws, regulations and other electoral material that leaves

one to think if they will be ready in time for the primaries.

“If we have the vote manually, we would have had to already be working on [printing] a series of the laws and regulations, making copies, going through the bids and training. Another thing would be to rethink if the primaries can really be carried out,” she said.

García said the problem of insufficient funds for the electronic vote is compounded by the lack of funds for the primaries, since as recently as on Feb. 2, the Office of Management & Budget (OMB) disbursed $3 million for a total of $7.2 million thus far, of the

entire $10 million that had been approved for the primaries. The CEE had requested $15 million for that process.

She added that estimates are currently being worked on to establish the minimum of funds needed to hold the primaries because out of the $3.5 million set apart for the ballots, another $600,000 from the Electoral Fund was used for the Working People’s Party.

She explained that the rest of the money is used for materials such as ballot boxes, voting booths and briefcases for officials.

After a bidding process, Dominion was selected last year to oversee and manage the thousands of machines needed for the electronic vote count for both the June primaries and the November general elections.

According to the arrangement reached with Dominion, the CEE has to pay $38.8 million—in installments—and after a year, the machines become CEE property.

For his part, Zaragoza said he would soon meet with García to “establish clear expectations and when they will be paid.

“I hope by [this] week to have a clearer picture [on what is to be done]. When it isn’t [an agency claiming payments], it’s the transportation companies, the therapists,” he said, as he dramatized the fragile situation of the government’s cash flow problems.

Meanwhile, the Elec-

“If we have the vote manually, we would have had to already be working on [printing] a series of the laws and regulations, making copies, going through the bids and training.”

—State Elections Commission President Liza García toral Commissioner of the New Progressive Party, Jorge Dávila Torres, suggested that the CEE should go to court to ensure that the payments to Dominion are made. He claimed that at least $3 million of the $8 million that are held in an account are federal funds.

“The money has to appear. Things are too far

ahead. There are already nearly 2,000 machines in Puerto Rico,” Dávila said.

Zaragoza referred questions regarding those federal funds to the OMB. However, when asked by Caribbean Business, an OMB official stressed that “at the moment, the issue of payment to Dominion corresponds with Treasury.” 䡲

30

THURSDAY, FEBRUARY 18, 2016

Candidate Profile Ricardo Rosselló Regarded as Agent of Change; Bets on Technology for Campaign, Government

BY ISMAEL TORRES I.TORRES@CB.PR

During the 2004 general elections, when his father, Pedro Rosselló, unsuccessfully ran for governor for the New Progressive Party (NPP), a young college student set up a sophisticated online communications network that included a TV channel broadcasting live coverage of campaign events.

This young student was Ricardo Rosselló, who alternated his studies at the Massachusetts Institute of Technology (MIT) with the political campaign of his father, who was governor from 1993 to 2001 and sought a new term from 2004 to 2008.

From Pedro Rosselló González and Maga Nevárez’s three children (Juan Oscar, Luis Roberto and Ricardo Antonio), it was Ricardo, the youngest, who was most interested in politics since an early age.

Four years ago, the now scientist and 36-year-old university professor with degrees in biomedical engineering, chemistry and economics from MIT and a Ph.D. in biomedical engineering from University of Michigan began actively campaigning to become governor of Puerto Rico.

Ricardo Rosselló acknowledged that the electoral campaign is tough, but is confident he will win

the June 5 primary against the other contender for the NPP gubernatorial nomination: Pedro Pierluisi, Puerto Rico’s current resident commissioner in Washington, D.C. Thanks to his professional training, he has developed his campaign in a scientific manner where no detail is overlooked and technology is used

resources, and utilizing innovation, science and technology as tools to improve governance and quality of life.

His main messages focus on critical points in terms of fiscal and economic issues and, in his opinion, deal with fiscal responsibility and government effectiveness.

He also believes Puerto

His main messages focus on critical points in terms of fiscal and economic issues. extensively. That is why he believes he is a modern candidate who looks to the future.

“We have established a campaign plan that we call ‘Plan for Puerto Rico (100x35)’, visiting spots in every town throughout Puerto Rico and having direct contact with our people to talk about the more than 35 proposals we have created,” Rosselló said when talking about his political activism. His team includes former mayor of Bayamón, Ramón Luis Rivera, as campaign manager and Elías Sánchez as executive director.

His campaign revolves around a model of socioeconomic transformation based on several pillars such as developing and protecting human

Rico’s political status and equality issues constitute an important pillar for the island’s development and opportunities to create an economy that adds value and encourages production.

To address the government’s current situation, he is working on the Plan for Puerto Rico, for which a group of experts from all levels and disciplines have assessed the situation and bills are being prepared to implement recommended measures in a joint executive and legislative effort.

ADDRESSING GOVERNMENT CREDIBILITY ISSUE Rosselló believes one of the government’s severest problems is its lack of credibility—which has

Ricardo Rosselló, NPP primary candidate for Puerto Rico govenor

worsened over the past few days and became even more evident when Orrin Hatch, chairman of the U.S. Senate’s Finance Committee, asked Gov. Alejandro García Padilla to submit a detailed report on the finances of the Puerto Rico government, which must cover a wide range of concerns.

Rosselló, who is sure of his victory in the NPP internal primaries and the general elections in November, is concerned about the existing imbalance between the government’s revenues and how much it spends.

In addition, Rosselló said we must also be concerned about the government’s inability to issue debt in a responsible and sensible manner. “Markets have closed for this administration, but before that happened, they made some bond issues that were negligent,” he said.

This government’s effectiveness is another issue that must be addressed with urgency because “we have a government that is not only spending a lot, but it is also an ineffective government,” he said.

Everything gets worse,

Rosselló said, because of a lack of vision for Puerto Rico’s economic growth.

“All our work and proposals are aimed at addressing these problems, some that have existed for a long time and others that were created by this administration,” he said. “The idea is to have a quick response when we take office,” he said.

Regarding his differences with Pedro Pierluisi’s candidacy, he said that while his campaign team presented specific proposals to address specific issues, the resident commissioner talks about a path to progress. “I have chosen to look into how to activate Puerto Rico’s productive sector, in terms of instruments and incentives, to remove the burden on them and allow them to prosper,” he said.

He feels ready. “I have the education, I have the energy, I created the proposals and I have a full work team with the ability to innovate and execute,” he added.

“I do not like to get into comparisons, but I think those are the elements that make me the ideal candidate for Puerto Rico. I represent a new

alternative for Puerto Rico; I do not represent what has been done in the past. And voters must decide,” he said.

With regard to himself and his team, he pointed out that “we have the leadership and ability, we know how to innovate and work together. We’ve done it for more than four years in the Plan for Puerto Rico, which is not a random proposal, but we’ll work on it in-depth to be able to implement it from day one.”

TEAM OF NPP STALWARTS Although various NPP candidates aspire to preside the House and the Senate, his team includes Yauco Mayor Abel Nazario, who seeks to preside over the Senate, and Johnny Méndez, who aspires to head the House of Representatives.

Noting that this decision is up to the elected legislators, he believes those occupying legislative leadership positions “have to be people who are in tune with our Plan for Puerto Rico’s vision for change Continues on next page

31

THURSDAY, FEBRUARY 18, 2016 Youngest RossellĂł has eyes set on winning La Fortaleza

Continues from previous page

that we are proposing.

There is no point in having the proposals and then encountering legislative obstacles,� he said.

In addition to Nazario, and if the NPP obtains a majority in that legislative body, Sens. Thomas Rivera Schatz, Larry Seilhamer, Margarita Nolazco and Carmelo RĂ­os also aspire to become Senate president.

As for the House of Representatives, in addition to Johnny MĂŠndez, those also looking to chair that body are Gabriel RodrĂ­guez AguilĂł and former House president and current NPP Secretary General JosĂŠ Aponte HernĂĄndez.

In the race for the NPP nomination for resident commissioner, RossellĂł has no qualms supporting Jennier GonzĂĄlez’s candidacy against engineer Carlos Pesquera. “Jennier GonzĂĄlez certainly has the ability, has been able to create important relationships in Washington,

is committed to solving problems and has had very good results. I believe this more than qualifies her to be the next resident commissioner. She and I work as a team, and I definitely hope she will not only become the first female resident commissioner as well as the youngest one, but also Puerto Rico’s last resident commissioner, making the transition toward statehood,� he said.

Ricardo RossellĂł is concerned about the fiscal situation and its impact on the election cycle— the primaries and general elections—and believes funds must be identified wherever they are needed. “You cannot skimp on what democracy is. This is definitely a serious and democratic process, and we cannot leave it on its own, without direction,â€? he said.

Regarding his chances for victory in the primaries and then during the general elections, RossellĂł said: “I feel [confident] I will win the primary and I will win the general

elections. I feel this way because I worked the process in a scientific way over the past four years, together with the people to hear their proposals and outlining strategies.

I have been the only candidate who has made 35 specific proposals aimed at social and economic development,� he said.

In a final reflection on his political work and what he believes he can accomplish, the scientist and university professor, immersed in the world of technology, tells us: “I am confident I have the ability, that I can innovate, that I have the attributes and leadership to implement and perform, and I have the team to do so. “Our eorts represent a new alternative, a new path. That’s what Puerto Rico is looking for. I think the people do not want more of the same and, therefore, our team has been able to see openness, clarity and the new alternatives for the people of Puerto Rico,â€? he said. 䥲

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32

THURSDAY, FEBRUARY 18, 2016

Latin American Affairs Venezuela on the Brink of Default

BY JUAN A. HERNÁNDEZ j.hernandez@cb.pr

Argentina, Greece, Detroit, Puerto Rico and now it looks like Venezuela may be next in line.

As oil prices continue to drop and Venezuela’s gross domestic product (GDP) also drops to historic lows, the Venezu-

and basic needs.

Venezuela’s national debt is about $123 billion, according to various reports.

While Venezuelan President Nicolas Maduro declared in January that the country was in the midst of an “economic emergency” that “forced” him to enact a special emergency

However, while some observers believe Maduro’s words were meant to soothe worries and concerns about Venezuela’s commitment to pay its debt load, creditors and financial analysts understood his message differently.

Months before his economic-emergency decree, credit-rating agency Stan-

further, Venezuela’s bonds dropped to “distressed levels” last month after the government admitted the economy had shrunk 7.1% in the third quarter of 2015.

For Alejandro Arreaza, a Barclays Capital analyst, a default, or “credit event,” is becoming “increasingly difficult to avoid.” For him, the main question seems to be when will Venezuela default?

The fact that the Venezuelan government must make a $1.5 billion debt

payment by the end of February has prompted some analysts to forecast a default next month. Others are more optimistic and have identified October as the month for default in light of the additional $9.5 billion in payments the country must make throughout the year.

“The government could still make the February payment using its available assets. However, they are insufficient to finance the gap of nearly $30 billion Venezuela

could face in 2016,” Arreaza said, noting that his assessment is based on Barclay’s estimates on oil prices.

“The decline in oil prices is bringing Venezuela’s 2016 financing gap to levels that are difficult to fund,” Arreaza added.

For Brian Dean, a partner at independent investment-research firm ACG Analytics, there is a slim possibility that Venezuela can make the February payment, but other scheduled payments

Venezuelans line up in front of a supermarket in Caracas hoping to buy some of the basic goods they need.

elan government is now facing almost the same prospects as Puerto Rico in terms of guaranteeing essential government services or defaulting on its debt obligations.

Oil accounts for 96% of Venezuela’s export revenues, so low oil prices mean less in the government’s coffers and less money to pay for imports

decree, he also reaffirmed Venezuela’s commitment to pay its debts.

“Venezuela has ethics, morals and commitments, first with the people and the fatherland. [We] also have the commitment the republic has honored and will continue honoring,” Maduro said, referring to the country’s creditors.

dard & Poor’s had downgraded the country’s credit to a CCC rating. At the time, oil prices were higher than what they are now; so, for analysts, Venezuela’s default is not a matter of whether it will happen or not, but when. Many analysts and economists have come to the same conclusion about Puerto Rico.

To compound matters

According to Reuters news agency, Venezuela’s Banco Central is already in the process of exchanging a part of its gold reserves for cash.

Continues on page 33

THURSDAY, FEBRUARY 18, 2016

33

Hit hard by drop in oil prices

of $9.5 billion do not put the country out of the woods.

“October is the risk point… If this thing lasts that long, that’s when I see this shaping up, in terms of default,” Dean said.

According to Reuters news agency, Venezuela’s Banco Central is already in the process of exchanging a part of its gold reserves for cash. Venezuela has a reserve of about $15 billion, of which about 64% is in gold bullion.

But while the government has been able to pay

meet its debt obligations to local and foreign creditors, which run the whole gamut from international investment brokers to ranchers in Uruguay.

The road to recovery for Venezuela, according to many analysts, lies in further cuts on government spending, restructuring the debt and the government to find some common ground to work constructively with the opposition-controlled National Assembly.

“As long as the government refuses to ease its

government services and risking more social discontent, as the drop in oil prices has severely limited government spending and its ability to direct oil revenues to social programs and services.

Fewer government services and more shortages of basic goods mean more social discontent and political instability, elements against which analysts have warned.

Apparently, the only way out for Venezuela is to increase taxes to foreign companies and busi-

its debt on time so far by selling assets, securitizing oil debts and ransacking its reserves, default seems inevitable—considering the huge drop in oil prices in recent years.

According to Forbes magazine, with the price of oil under $30 a barrel, Venezuelans would need to use 90% of the stateowned oil company to

spending policies and as long as oil prices stay low with a downward bias, the government is depleting foreign assets,” said Paul Christopher, head globalmarket strategist of the Wells Fargo Investment Institute.

Some observers are wondering how much can the Maduro administration cut without affecting

nesses to try to offset the impact of declining oil revenues, or as Forbes put it last month, “tax the living hell out of foreigners.” However, this does not seem to be a practical answer when companies like Ford and Pepsi-Cola have written off almost all of their investments in Venezuela, and more could follow suit. 䡲

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THURSDAY, FEBRUARY 18, 2016

Labor

Senate bill would apply to companies with more than 250 employees

Part-Timers Will be Able to Accrue Vacation, Sick Leave

BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

Part-time workers who are employed by companies that have more than 250 employees will be able to accrue vacation time and sick days if Puerto Rico Senate legislation to that effect becomes law.

Sen. Luis Daniel Rivera, chairman of the Senate Labor Relations, Consumer Affairs & Job Creation Committee, said that while part-time jobs are needed, there are too many companies, such as the big national retailers, that have a disproportionate number of parttimers on their payroll for no other reason than to avoid paying benefits.

“I think there has to be part-time jobs. There are people who need to have more than one job to be able to get more money….

But we have the situation of employers whose entire payroll is comprised of part-timers and, when you look closely, they are

trying to avoid paying certain benefits. This occurs in the megastores….

They have a huge number of part-timers compared to full-timers,” he said.

Nonetheless, economist Anne Krueger said during a panel on Puerto Rico’s debt, sponsored by the American Enterprise Institute, that the island needs to reduce labor costs, including a reduction of the minimum wage because these factors are hindering economic growth.

She said debt restructuring is not going to help Puerto Rico “unless there is also economic growth.”

Senate Bill 1239 would amend the Minimum Wage, Vacation & Sick Leave Act of 1998 so all employees in companies that have more than 250 workers will have the right to accrue vacation and sick days. The act overhauled the current job market but failed to do a complete overhaul because it

left thousands of families without the right to sick leave or vacation.

The proposed law seeks to strengthen the income of hundreds of workers and the economy’s business sector. Full-time workers who are employed for 115 hours or more currently accrue 1.25 days per month for vacations and one day a month for sick leave. The legislation will allow employees who work between 90 hours

to 114 hours per month to accrue one day of vacation per month and three-fourths of a day per month for sick leave.

If the employee works 67 hours to 89 hours per month, he or she will accrue three-fourths of a day per month for vacation and a half-day per month in sick leave. Employees who work up to 66 hours per month will accrue a half-day per month for vacation and one-quarter of a day per month in sick leave.

Ernesto Middelhof Ayala, who works as a waiter at the Condado Plaza Hil-

“While some might see this bill as a burden for employers, they will obtain more advantages because their employees will be more motivated and committed to the work, which increases productivity.”

—Ernesto Middlehof Ayala, waiter

ton, urged Rivera to give the green light to the bill.

“There is a trend by many employers to recruit more and more part-timers through contracts, instead of full-timers, especially in the tourism industry,” he said.

He said many part-timers not only have to have a second job to make a decent monthly wage but they do not have the right to vacations or sick leave.

“While some might see this bill as a burden for

Sen. Luis Daniel Rivera, chairman of the Senate Labor Relations, Consumer Affairs & Job Creation Committee.

employers, they will obtain more advantages because their employees will be more motivated and committed to the work, which increases productivity. They will not have employees working while they are sick, which will reduce the spread of illnesses like influenza,” he said.

People who work part time but would prefer to work full time comprise a small but important part of the labor force. The prevalence of such involuntary parttime work has remained unusually high because of the recession, according to Economic Research.

One interpretation is that this is a cyclical phenomenon associated with general weakness in the labor market. From this perspective, involuntary part-time employment represents idle labor resources, or labor market slack. Alternatively, the high level of involuntary part-time work may reflect structural changes in the labor market that have caused

employers to shift away from full-time workers on a more permanent basis.

The U.S. Bureau of Labor Statistics (BLS) distinguishes between two broad groups of part-time workers. The first is those working part-time for “noneconomic” reasons, or voluntarily. These are workers whose part-time status represents a laborsupply decision. They prefer a part-time job for personal reasons such as family obligations, school or partial retirement.

By contrast, the share of people employed part time for economic reasons, or involuntarily, has risen substantially, not only in Puerto Rico but also in the U.S. This includes workers who report that they would like a full-time job but cannot find one due to constraints on the employer side of the labor market, such as a cutback in hours at their current job or a lack of available fulltime jobs. As such, involuntary part-time work primarily reflects labor demand.

SPECIAL FEATURE February 18, 2016 Pages 35-42

SALESPERSONS WEEK

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THURSDAY, FEBRUARY 18, 2016

Congratulations on Sales Professionals’ Week!

Sixty-five years ago, “nothing happens until somebody sells something” was the first slogan of the Puerto Rico Sales & Marketing Executives Association (SME).

The phrase embodies the sales team’s key role in a product’s creation and distribution chain. Although sales executives’ duties have been changing over time, no one questions the importance of salespeople’s work within the island’s economy. It is for this reason that the SME is proud to highlight this sector’s relevance as we celebrate Sales Professionals’ Week Feb. 14-20, 2016.

For 50-consecutive years, we have joined companies from various industries to reward a select group of professionals whose efforts, dedication, commitment and focus on meeting their goals make them worthy of the Distinguished Salesperson Award. At the awards ceremony,

our educational focus will center on the motivation required to face current economic challenges and show prospects the benefits of purchasing our products or services.

Today, more than ever, having a skilled and motivated salesperson is the best investment a company can make to stand out from the competition and grow its bottom line. Since continuing education is one of our association’s main focuses, we will hold the SME Sales Summit in June.

I want to acknowledge the support of the companies sponsoring the distinguished salespeople’s awards event. They are: Latin Media House, Welch’s, Retail Group, Expressway, Pan Pepín, Reciclaje del Norte, Kreative Ad, El Nuevo Día, AVCO, Metro, Infopáginas, El Vocero, Uno Radio Group, DonQ and Naimko. In addition, I wish to acknowledge the work done by

the volunteer members of the organizing committee—which was headed by Luis de Jesús, sales, marketing and promotions manager at Pan Pepín and a member of the SME board.

Before signing off, I want to congratulate all the people involved in the beautiful and creative endeavor of selling something to make something positive happen.

Congratulations, and best of luck in 2016!

Roberto Trigos 2015-16 President SME Puerto Rico

THURSDAY, FEBRUARY 18, 2016

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History of the SME in Puerto Rico

BY CB STAFF

The Puerto Rico Sales & Marketing Executives Association (SME) was founded in 1951 with an initial roster of 25 members. Its first president was Francisco Freiría. The Puerto Rico Chapter is an affiliate of SME International.

The Top Management Awards (TMA) were first given in 1966, in recognition of the achievements and careers of outstanding executives in the field. The Guanín Award was also established in recognition of individuals who had successfully promoted Puerto Rico’s image, both locally and internationally. In 1969, the first SME office was inaugurated with its first full-time employee, Waleska Olivencia. It was also during this decade that SME’s professional relationship with the Puerto Rico Chamber

of Commerce was established.

SME’s Vision: To provide the environment and the necessary tools for the professional development of sales and marketing executives in Puerto Rico.

SME’s Mission: To strengthen its leadership by increasing membership and taking its development to a global level through innovation in its services, highly technological tools, relationship building and expanding services to areas related to sales and marketing.

SME’s Objectives: • Develop in its members a serious commitment toward compliance with the highest ethical, quality, collaboration and professional standards.

• Develop research studies in the different areas of sales and marketing for the benefit of its members and

the entrepreneurial community.

• Promote among college students a career in sales and marketing through educational activities, student chapters and the creation of a scholarship fund.

• Exalt the sales and marketing professions by publicly recognizing the professional quality of businesses in areas defined by the SME through proclamations and awards.

• Maintain professional alliances and exchanges in Puerto Rico as well as off the island.

• Develop educational, sports and social activities of interest and benefit to its members, as well as to the sales and marketing segment in Puerto Rico.

The Puerto Rico Sales & Marketing

Executives Association has as its ongoing mission to provide the adequate atmosphere and the tools for the professional development of sales and marketing executives on the island. Since its foundation in 1951 by a group of business leaders, the SME provides its members with current information on sales and marketing strategies and techniques, and hosts meetings and workshops with the purpose of enhancing the professional abilities of its members. The SME also works to develop among young people an interest in the sales and marketing profession; improve the comprehension of current concepts of the competitive system; and stimulate in educators a greater interest in the development of the sales and marketing professional at all levels, providing materials that promote the vocation among students. 䡲

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THURSDAY, FEBRUARY 18, 2016

Autos Vega Group’s Salespeople Driven by the Need to Serve

BY MARIO BELAVAL DÍAZ

The Autos Vega Group’s sales teams know their cars, but most important of all, they know people, according to Eduardo Vázquez Karma, general manager of Autos Vega Group, which is comprised of Autos Vega Ford, Volkswagen Kennedy and San Juan Lincoln.

“We are a bit different from others in our sales approach, which you may call pressure-free when it comes to clients,” Vázquez Karma said. “We want clients to have a comfortable experience when they go to one of our dealers in search of vehicles, to know that they are being listened to and that our sales personnel are there to do much more than just make a sale.

We want to help clients

find the right vehicles that fulfill their needs and requirements.”

Each of the dealers that comprise Autos Vega Group has its own sales team.

“In 50 years, things have changed, but one thing that is constant with us is that the client has to feel welcome and at ease during the whole process, from the moment he or she steps into one of our dealers,” Vázquez Karma added. “That is why our sales teams are essential in the success of the company because they are the ones who initiate that first contact with the client, and if it leads to a sale, it also means the start of a business relationship with the client.”

And while many may think that a good car

salesperson requires someone endowed with the power to convince, Vázquez Karma said that in reality, a good car salesperson is one who listens to the client.

“I believe it all begins with listening, truly paying attention to what the client is saying, in terms of what he or she is looking for in a car; only then can you guide them in the process which will lead to the best option that fits their needs,” he said. “With us, if a client’s needs suggest a family car is best for them, there is no reason why he or she should leave in a pickup truck.”

Asked if car salespeople are born or made, Vázquez Karma said he believes there are people with a natural talent for sales.

“We’ve hired salespeople

“That is why our sales teams are essential in the success of the company because they are the ones who initiate that first contact with the client, and if it leads to a sale, it also means the start of a business relationship with the client.” from other lines of businesses, for example, people who have sold furniture, and we take them on and train them so that they become knowledgeable about our products,” he explained. “As a salesperson, you have to really care about people, and at least in our case, we always keep in mind that the vehicle the client is looking for is

a significant investment in something that will be an essential part of their lives, that will allow them to go about their daily lives, from picking up kids at school and taking a loved one to a doctor, to just enjoying a nice drive.”

Vázquez Karma credits Autos Vega Group’s philosophy to the fact that the company began and is still

a family business. While it has been a constant, if not one of the signature car dealers on Kennedy Avenue in the Puerto Nuevo sector of San Juan, Autos Vega Group began in Guayama in 1965, as a Ford, Lincoln Mercury dealership, which makes the company the oldest Ford Lincoln Mercury dealership in Puerto Rico. The late Don Ramón Vega Pérez, who emigrated from Cuba to Puerto Rico, founded the business with some 12 employees, consisting of mostly friends and family.

“That family spirit is still present today, not only among those of us who work here, but also with customers from the moment they walk in the door of any of our dealers,” Vázquez Karma said. 䡲

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F E A T U R E

Interboro Sales Team Always Puts Time on the Client’s Side

BY MARIO BELAVAL DÍAZ

For more than 45 years, Interboro Systems Corp.

(Interboro) has transformed their clients’ operations in Puerto Rico by providing the most advanced and relevant human workforce-management solutions.

Essential in this endeavor is a dedicated and experienced sales team that works side by side with clients to identify and implement the resources that best fits their needs with tools to control labor costs, minimize compliance risks and improve workforce productivity, such as their exclusive

Kronos Workforce Central 8, the latest version of the company’s signature solution.

“The sales team is essential for our company’s success; they meet with the client firsthand to identify their needs and prepare an action plan taking those needs into account,” said Juan Ignacio Gómez, Interboro director of sales.

“Also, our sales team is integrated with our implementation and services departments to offer our customers the best experience from the very beginning and assist them every step of the way.”

Gómez explained that Interboro’s sales team

works to create a bond with the client from the very first meeting, which is strengthened throughout the process of implementing the required solutions. Afterwards, the team remains in constant contact with the client.

“Our sales team has extensive experience and expertise in technology.

They are experts in the fields of human resources and payroll, time and attendance, cloud services and everything related to workforce laws and regulations,” Gómez pointed out. “Interboro’s sales team is distinguished by its capability to understand the client’s needs

and make them a priority.

We are continually learning about new technology and applications that will improve our customers’ needs.”

Among challenges currently faced by clients is the fact that technology is always changing and new and improved ways to do

things emerge every day.

Thus, it is essential for clients to keep abreast of these changes, especially when it comes to workforce management. Luckily, at Interboro, clients have a partner that is always on top of things when it comes to identifying and developing solutions in

tune with the changing demands in this field.

“In our case, we are continuously updating our solutions to incorporate our customers’ needs and changing requirements,” Gómez said. “These updates help the software maintain its compatibility and compliance with new server and desktop operating systems.”

Among these solutions provided by Interboro is Kronos Workforce Central 8, which allows the customer, its managers and employees, to access via mobile apps and tablets all the information required to approve and close a payroll cycle, among others. 䡲

THURSDAY, FEBRUARY 18, 2016

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F E A T U R E

Distinguished Sales Professionals Recognized by their supervisor as excellent sales professionals, the people on these pages reached their yearly targets by demonstrating goal orientation, dedication and employment professionalism. The Sales & Marketing Executives Association of Puerto Rico is honored to unite its efforts with those of the industry in order to, year after year,

Eddie Delgado Santana

Leticia Santiago Delgado

Technical Sales Representative 3M Puerto Rico Inc.

Mortgage Consultant Popular Mortgage Division Banco Popular de Puerto Rico

Wanda Lebrón

Idalisse Serrano Menéndez

Sales Executive Advanced Graphic Printing

Wanda Reyes

Mortgage Consultant Popular Mortgage Division Banco Popular de Puerto Rico

José N. Ríos Ramírez

Sales Executive Advanced Graphic Printing

Sales Executive Popular Mortgage Division Banco Popular de Puerto Rico

Claudia R. Rosario Torres

Anabelle Báez Cazzino

Sales Executive Popular Mortgage Division Banco Popular de Puerto Rico

Sales Executive Popular Mortgage Division Banco Popular de Puerto Rico

recognize its distinguished salespeople. This award is given in honor of Ernesto A. Castillo, SME president, who marked the beginning of various initiatives that contributed to lay the groundwork for a solid proficient and prestigious association.

Luz Z. Morales Cruz

Maritza Rodríguez

Humberto Martín

Ámbar Rodríguez

Mortgage Consultant Popular Mortgage Division Banco Popular de Puerto Rico

Sales Manager Borinquen Memorial

Account Manager EVERTEC

Marketing Coordinator FHC of Puerto Rico

Omayra George Ríos

Roberto González

John Silvestrini

Javier Cedeño Acosta

Sales Executive Popular Mortgage Division Banco Popular de Puerto Rico

Sales Manager Borinquen Memorial

Sales Officer EVERTEC

Account Executive FHC of Puerto Rico

Yanzel A. Pérez Merced

Serbella Tejeda

Rodolfo Nazario

Rafaela Miranda

Sales Executive Borinquen Memorial

Sales Officer EVERTEC

Account Executive FHC of Puerto Ric

Jorge Naranjo

Eddie Ortiz

Liza Betacourt Zayas

Sonya Colón

Sales Executive Borinquen Memorial

Account Manager EVERTEC

Sales Executive Expressway ECOPrinting Solutions

Account Executive FHC of Puerto Rico

Mortgage Consultant Popular Mortgage Division Banco Popular de Puerto Rico

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Ivonette Castro

Wilmarie Calderón

Clarivel Almonte

Susana Ramos

Lizzette López

Account Executive FHC of Puerto Rico

Key Account GMT Corp. | General Mills

Senior Media Consultant Infopáginas

Senior Media Consultant Infopáginas

Account Manager Latin Media House

José Antonio Ocasio

José Sánchez

Michelle González

Elena Díaz

Michelle Ortiz

Key Account Representative V. Suárez & Co. | General Mills

Retail Sales Supervisor Ballester Hermanos Inc. | General Mills

Senior Media Consultant Infopáginas

Account Executive Latin Media House

Account Executive Latin Media House

Luis Emmanuelli

Adriana Monique Vega Matos

Millie Román

Jackeline Matos

Yoiky Fernández

Senior Media Consultant Infopáginas

Account Executive Latin Media House

Senior Account Executive Latin Media House

Paola Rivero

Lilly Pérez

Media Consultant Infopáginas

Senior Account Executive Latin Media House

Daliluz Martínez Seda

Key Account Manager Méndez & Co. | General Mills

Mercy Velar Key Account Manager Payco Foods Corp. | General Mills

Daysi Girl Scout First Executive Girl Scouts

Natalia Isabel Acosta Laboy First Executive Club 600 + Girl Scout

MedSales Product Expert Medical Biotronics

Eliezer Espinosa Rivera MedSales Product Expert Medical Biotronics

Iris A. Negrón Rodríguez MedSales Product Expert Medical Biotronics

Jorge A. Cuevas Padilla Sales V.P. Medical Biotronics

Yara Y. Rivera Ramos Customer Service Medical Biotronics

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F E A T U R E

Eudes Hernández

Omar Ortiz

Johnny III Rodríguez

Wilfredo Feliciano

Rafael Ortiz

Direct Sales Executive Metro Puerto Rico

Largest Sales in Outsourcing 2015 Reciclaje del Norte

Rookie of the Year 2015 Reciclaje del Norte

Salesperson - Bayer Retail Group

Salesperson Colgate-Palmolive Retail Group

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Sandra Rodríguez

Johanny Padilla

Engelbert Fuentes

Noel Rodríguez

Sales Comeback of the Year 2015 Reciclaje del Norte

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Gilberto Cordero

Diego Vázquez Espejo

Marilyn De La Cruz

Félix Barrero

Radamés Ocasio

Rachel Román

Sales Executive Metro Puerto Rico

Odalis Chevere

Direct Sales Executive Metro Puerto Rico

Osvaldo Rodríguez Sales Executive Quality Water Service

Gerente de Cuentas Claves V. Suárez & Co. | Welch’s

Norma Ferré

Largest Sales Volume 2015 Reciclaje del Norte

Salesperson Colombina Retail Group

Salesperson - P&G Retail Group

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Marjorie Vincenti

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Salesperson - Revlon Retail Group

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Pedro Vázquez Ramos Salesperson Vaquería Tres Monjitas | Welch’s

43

THURSDAY, FEBRUARY 18, 2016

The 2017 Infiniti G60 reinforces leadership in premium sports-coupe segment

Infiniti’s Third-Generation Sports Coupe Important in Global Growth Strategy

BY JOSÉ L. CARMONA j.carmona@cb.pr

First unveiled during the 2016 North American International Auto Show (NAIAS) in Detroit last month, the all-new 2017 Infiniti G60 offers what the Japanese automaker claims is a compelling combination of daring design and exhilarating performance and dynamics.

“As the third-generation version of Infiniti’s iconic sports coupe, the new G60 builds on Infiniti’s brand heritage and history of technology leadership. It reinforces Infiniti’s reputation for performance, elegance and driver-focused design,” said Carlos Ghosn, president & CEO of Nissan Motor Co. Ltd.—Infiniti’s parent company—during the vehicle’s unveiling.

Infiniti says the G60’s bold exterior, which is lower and wider than predecessors, is designed to express powerful elegance through its daring proportions and taut, muscular lines.

ENGINEERED TO PERFORM Dynamic enhancements, including an all-new lightweight and sophisticated V6 engine, along with new adaptive steering and digital suspension systems, result in a premium sports coupe designed and engineered to perform.

The high-performance 3.0-liter V6 twin-turbo engine from Infiniti’s new and exclusive “VR” powertrain family is born out of the brand’s extensive inhouse experience of six-cylinder powertrain developments.

Infiniti said the new engine has been created to empower the driver and offer increased power and torque with high levels of efficiency. The new VR30 engine comes in two power ratings: 300

Carlos Ghosn, president & CEO of Nissan Motor Co. Ltd.

horsepower or 400 horsepower, with the latter offering what the Japanese automaker said is one of the best power-to-efficiency ratios in the premium sports coupe class.

A four-cylinder, 2.0liter gasoline engine, turbocharged to 208 horsepower, will also be available in the new Q60, which will be on sale in select markets in late summer.

AVAILABLE ALL-WHEEL-DRIVE As standard, power is channeled through the G60’s rear wheels for optimal dynamic response to benefit steering feel.

Infiniti said an optional rearbiased intelligent All-WheelDrive system provides enhanced stability and road holding in low-grip conditions.

Infiniti’s second-generation Direct Adaptive Steering offers high levels of steering feel and feedback, while the Drive Mode Selector gives drivers the option to personalize and tailor the steering’s precise levels of response and feel to suit their own preferences.

Roland Krueger, president of Infiniti, said the world premier of the G60 premium sports coupe in Detroit last month comes at a time of rapid growth for Infiniti, released amid an intense global launch period.

Thanks to the G35 and G37, launched in 2002 and 2008, respectively, Infiniti has been at a forefront of the sports coupe class, he pointed out. The firstgeneration G35 presented a blend of class-leading dynamics and eye-catching looks.

Infiniti’s development teams, Krueger added, have designed and engineered the third-generation Q60 sports coupe according to those same principles.

“The Q60 will affirm Infiniti’s leadership in the global premium sports-coupe class.”

–Roland Krueger, president of Infiniti

44

THURSDAY, FEBRUARY 18, 2016

Cars 101 Little Things That Drive us to Distraction

BY JUAN A. HERNÁNDEZ j.hernandez@cb.pr

Welcome to class!

Today’s subject is the cigarette lighter. Yes, you read that right; the cigarette lighter, or rather the absence of it in newer car models.

You see, the smallest of accessories, the car’s cigarette lighter may very well be the most neglected of all car features (for nonsmokers, at least) and the precursor of a newer and fancier generation of accessories. You have to remember that back when Henry Ford was still alive, there was very little else to do in a car besides driving and talking to each other.

Or one could smoke, however politically and socially incorrect the mere thought of this personal habit may be today. At the time, smoking was certainly widely accepted in society. So, in all probability, someone came up with the idea of making it easier for drivers who smoke “to light one up” during their journeys.

Today, smoking in enclosed public areas such as stores, cafes and restaurants, has been made an offense punishable by social exile (I must say now that I am not a smoker). Moreover, fewer people smoke nowadays than in the past years; in fact, about 18% of U.S. adults were smokers in 2013, according to the U.S. Centers for Disease Control & Prevention.

Therefore, with fewer smokers in general, fewer

and fewer people need to use the once handy cigarette lighters in their cars.

This development, part of healthier lifestyle trends in many countries, likely played a part in the auto industry’s decision not to include cigarette lighters as part of the regular package in its newer car models.

Instead, in many models, the cigarette lighter is now “optional.” This means that you have to pay extra for “the smokers’ package,” which also includes an ashtray, depending on the make and model you are buying.

This phenomenon is global; every car manufacturer seems to be doing it on account of market trends.

There are places where smoking in a car has also been declared an offense.

In Arkansas, California and New York, to name just a few states, smoking while driving has been banned. In Great Britain, for instance, smoking while driving is now considered a “distraction” by the country’s Highway Code.

In Puerto Rico, smoking while driving with a child is illegal; this is part of health efforts to prevent kids from breathing secondhand smoke.

It goes without saying that regardless of how long you’ve been driving or the kind of vehicle you are capable (and authorized) to drive, the truth is that driving requires concentration. While smoking in itself is not a breach

in road safety, driving without paying proper attention to safety rules is, which could lead to accidents. Nobody wants a driver cruising at 65 miles per hour on De Diego Expressway to be fidgeting with a cigarette lighter or being blinded by the cigarette ash flying into his/ her eyes.

Hey, but is smoking the only circumstance when a driver fidgets around?

Of course not.

Texting and talking on a cell phone without the aid of a hands-free device while driving are now also illegal in Puerto Rico; but how about changing radio stations? Selecting a new album in your MP3 player? Or getting directions from a GPS device? Let’s not forget that car manufacturers—both domestic and foreign—are now doing away with car lighters and using its socket as a power outlet for you to recharge your cell phone, PDA, MP3 player, GPS device or any other electronic equipment modern life has forced you to have.

Car manufacturers have even had to put the GPS on the dashboard, along with the radio/CD player, climate controls and some other nifty gadgets that are suppose to enhance your driving experience and make your journey easier and more enjoyable. But the truth is it all amounts to a huge distraction.

Of course, it isn’t the intention of car manufacturers to put anyone at a greater risk when driving;

quite the contrary, they strive to make your car safer. So, it is your responsibility as a driver to avoid unnecessary distractions and be aware of the road’s hazards. In the end, how much more enjoyable could your driving experience really be if you don’t arrive safely at your destination?

As often said, “The journey is just as important as the destination.” 䡲

—Editor Rosario Fajardo contributed to this story.

Texting and talking on a cellphone without the aid of a hands-free device while driving are now also illegal in Puerto Rico.

THURSDAY, FEBRUARY 18, 2016

45

Some 32,000 people work directly or indirectly in the local auto industry

Autos

Puerto Rico’s Auto Industry Concerned After Worst January on Record

36.6% and 1.2%, respectively, versus the same month last year. However, market leader Toyota fell 15.9% in January.

New-Auto Sales Fell 12.1% Last Month After Slumping 7.8% in 2015

BY JOSÉ L. CARMONA j.carmona@cb.pr

After closing 2015 with new-auto sales down 7.8%—marking the third straight year of negative sales—Puerto Rico’s auto distributors reported a mere 5,582 new units sold last month—their worst January on record.

According to the United Automobile Importers Group (GUIA by its Spanish acronym) January’s dismal sales were down 12.1%, representing 772 fewer units, from the same month in 2015.

For Ricardo García, GUIA president, January figures reflect a worrisome negative trend that is worse than the sales slump experienced by the industry in all of 2015.

“The situation is grave.

Up until now, we hadn’t experienced a January as bad as this one. It represents the 24th month out of the last 26 months that we have experienced a sales contraction versus the same month the year prior,” he commented.

For 2016, García said GUIA is still forecasting the sale of 77,000 newauto units, a number similar to the industry’s worst year on record set in 2009, when only 76,477 new units were sold on the island.

“The 2016 forecast was calculated based on a drop in sales of 7.8% against 2015. Now we are facing the worst month of January we’ve had on record,” he added.

The GUIA president pointed out that some 32,000 people work

directly or indirectly in the local auto industry, and the group’s concern includes all of them, as well as local consumers who have delayed or postponed their decisions to change their existing vehicles for newer and more efficient models, indicating that many residents are going through tough times.

JAPANESE BRANDS FALL 14% Japanese automakers, the dominant group in the local market, reported 3,220 total units sold in January, a 14% or 523-unit decrease from the same month last year, with an overall 57.7% share of the market.

Sales of Honda, Nissan, Scion and Lexus last month were up 2.1%, 10%,

Puerto Rico’s Top-Selling Vehicles in January 2016 Brand

Model

Segment

Units

Toyota

Yaris Sedan

Sub Compact

451

Toyota

Corolla Sedan

Compact

308

Toyota

RAV4 SUV

Compact

271

Hyundai

Tucson SUV

Compact

218

Nissan

Sentra Sedan

Compact

212

Toyota

Tacoma Pickup

Compact

193

Nissan

Rouge SUV

Compact

173

Jeep

Wrangler SUV

Compact

155

Kia

Soul SUV

Sub Compact

149

Toyota

Hylander SUV

Midsize

128

Kia

Rio Sedan

Sub Compact

119

Mitsubishi

Mirage Hatchback

Sub Compact

108

Kia

Sportage SUV

Compact

Source: United Automobile Importers Group

77

DOMESTICS DOWN 12.8% Cumulative sales by domestic automakers FCA Group (Chrysler, Dodge, Jeep and Ram), General Motors (GMC, Chevrolet, Buick and Cadillac) and Ford (Ford and Lincoln) in January reached 1,040 units, down 12.8% from the same month in 2015, with an 18.6% share of the market.

Of the three domestic automakers, only FCA reported positive sales in January, up a mere 0.2% from the same month last year.

KOREANS DOWN 6.2% Korean carmakers Hyundai and Kia together sold 978 units last month, down 6.2% from the same month last year, with a combined 17.5% market share.

EUROPEANS DOWN 8.5% European brands sold a combined 344 units during the first month of the year, down 8.5% from January 2015, with a 6.2% share of the market.

Audi, Fiat and Porsche

Ricardo García, president of the United Automobile Importers Group (GUIA)

reported higher sales in January than the same month last year, up 17.6%, 6.3% and 5.9%, respectively.

Some 303 new-fleet units were sold in Puerto Rico in January, an 8.7% or 29-unit decrease from the 332 units sold in January 2015. Fleet sales usually peak twice a year, in the winter and summer, during the local tourism’s high seasons.

Retail sales were also down, experiencing a 12.3% decrease last month, when 5,279 new-

For 2016, GUIA is still forecasting the sale of 77,000 new-auto units, a number similar to the industry’s worst year on record set in 2009.

units were sold—a 743unit difference from January of last year.

Demand for fuel-efficient vehicle offerings in the mini, subcompact and compact segments remained subdued during January, as they commanded a 25.2%, 17.1% and 30.6% share of the local market, respectively. The compact segment includes sedans and sport utility vehicles (SUVs).

Combined, these three segments represented 72.9% of all new vehicles sold in Puerto Rico last month.

The mini, subcompact and compact segments experienced decreases of 15.5%, 24.4% and 45.2%, respectively, while the compact SUV segment grew 9.5% in January versus the same month last year, the GUIA report shows.

The best-selling vehicle last month was the Toyota Yaris sedan, a compact, with 451 new units sold. 䡲

46

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Your directory listing and display ad on the new CARIBBEANBUSINESS.PR website allows you to keep your product or service in front of potential users

24 / 7 / 365.

If you’re advertising in this weekly print edition, you’ll enjoy great “combo” rates!

FEBRUARY 25 Puerto Rico’s Fastest-Growing Companies Do you know what it takes to be one of the island’s fastestgrowing companies? Many say it’s all about being innovative and open to embracing new concepts and tools, while others believe the key is staying true to your core business. Turn to this special feature and our list of success stories for good news about doing business in this economy and information on how to make things happen for your company.

CLOSING DATE: FEBRUARY 19 BIG BUSINESS PROFILE: ENGINEERING & ARCHITECTS For all their valuable work in areas such as surveying, mapping, planning and interior design, engineers and architects play a critical role in ensuring the safety and structural integrity of Puerto Rico’s infrastructure. This special report presents the companies and teams of professionals who work hard at creating the island’s commercial, residential and industrial complexes. Advertise your product, service or firm here.

CLOSING DATE: FEBRUARY 19 INNOVATIONS IN HEALTHCARE This informative report will focus on the different improvements and expansions—such as new departments and new services—within our island’s hospitals and the companies that offer advanced services such as digital medical recordkeeping, advanced diagnostics and much more. For increased profits, make sure to advertise your company’s healthcare-related products or services in this specialinterest feature!

CLOSING DATE: FEBRUARY 19

Call 787-728-8415 today!

THURSDAY, FEBRUARY 18, 2016

Advertising

Where students are empowered

ICPR Junior College Launches New Ad Campaign

BY MARIO BELAVAL DÍAZ m.belaval@cb.pr

It seems the early months of the year is the season for academic institutions to revamp or show a new face through advertising and marketing efforts that both appeal to new students during the enrollment period and strengthen a school’s presence in the market.

One such institution, ICPR Junior College, launched a campaign in January, developed by local advertising agency erc group, and based on the slogan “Aquí yo voy a mí,” which may be roughly translated as, “Here I root for myself.” Lili Madera, creative director at the agency, explained that the task at hand is to find a way to make the brand even more relevant to the market or target.

“To achieve this, we wanted the students themselves, not the institution, to be the source of the message,” Madera said. “We wanted the message to convey the idea that they have the capacity and the desire to achieve their goals

and that ICPR is the vehicle where they can achieve that; we wanted a line, an approach that suggested empowerment.”

The TV spot features young peo-

ple in various settings that range from hanging out at the beach to studying in a group under a tree.

In each case, one of the students

is singled out in a close up and a voiceover is heard whereby the young person states that he or she will soon have a profession.

All the talent starring in the commercial were either students who were soon to graduate from ICPR or graduates of the institution.

“At ICPR, we work hard every day to be the ideal place with the right human resources to bring the necessary support [to students], and thus help them achieve their goals and dreams,” said Dr. Olga E. Rivera Velazco, president of ICPR. “This year, 2016, should be the year of change and making those dreams a reality.”

ICPR has campuses in San Juan, Mayagüez, Arecibo, Bayamón and Manatí and offers associate degrees and professional certifications, with supervised work experience.

Some of the areas of study with the most demand are medical ultrasound, culinary arts, gastronomy, nursing, criminal investigation and forensic sciences, preschool center assistant and medical billing, among others. 䡲

Creative Corner Client: ICPR Junior College Agency: erc group Concept: “Aquí yo voy a mí” Creative Director: Lili Madera Copywriter: Lili Madera Art Director: Liliana Rojas Mondini / Elisamuel Meléndez

Account Executive: Lourdes Flores Production House: era films Producer: Nanny Pacheco Director: Luis Enrique Rodríguez Editor: Hernán Ramos Media used: TV, Print, Billboard, Digital Date campaign began: Jan. 13, 2016

WE ARE THIS CLOSE TO ENDING POLIO Now is our chance to change the world. To make sure no child is disabled by polio ever again.

Join in. Speak out. Donate. Be a part of history.

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Archie Panjabi