Caribbean Business February 25, 2016

W E E K O F F E B R U A R Y 2 5 - M A R C H 2 , 2 0 1 6 | V O L . 2 E D I T I O N 7 | 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

Prepa’s Restructuring Brigades on the Clock

Giuliani Sees Trump Tapping Into American Anger

Legisla Legislature Fast-Tracks Orono Oronoz Confirmation

Rafael Hernández Colón and Pedro Rosselló in Mano A Mano

HOLDOUT CREDITORS KEY TARGET PAGE 6

Former NYC Mayor Lauds Business Tycoon PAGE 8

Becomes Chief Justice of P.R. Supreme Court PAGE 21

Is Status Key To Economic Development?

PAGE 22

COVER STORY

TOP STORY

Commonwealth Shuffles Options As Summer Debt Cliff Looms :fcc\Zk`m\ 8Zk`fe :cXlj\j Gi\j\ek X e\n 8ck\ieXk`m\ The clock continues to tick on a Puerto Rico government that is quickly approaching its fiscal “D-Day” early this summer.

The debate remains open on what exactly the “D” stands for in the context of World War II, but for Puerto Rico, it could very well stand for debt or default, beginning on May 2, when roughly $422 million are owed by the fi-

The administration continues to push for congressional action over access to a debt-restructuring mechanism, preferably a regime broader than Chapter 9 of the U.S. Bankruptcy Code, which would only cover public corporations’ debt. Yet, intense lobbying by competing interests has resulted so far in a stalemate on Capitol Hill, as

nancially battered Government Development Bank (GDB).

The Alejandro García Padilla administration has already anticipated that additional emergency measures, which could affect creditors’ rights, are in the cards, as the island hits a $2 billion-plus debt-service wall this summer. There is simply not enough cash to pay this amount in full and there are no more fiscal tricks to pull out of the hat, according to the commonwealth government.

Congress continues to be divided on how to act over the Puerto Rico issue.

Nevertheless, two sources confirmed to Caribbean Business that another possibility— the use of collection action clauses (CACs) to bind holdout creditors—has been brought to the table and is being discussed in Washington, D.C., as another alternative to solve the island’s debt crisis.

Prasa’s Labyrinth

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very December 15, the governing board of the Puerto Rico Aqueduct & Sewer Authority (Prasa) revises its financial projections for the following year, and if needed, comes up with a plan to cover any operational deficits that may show up.

However, this was not the case last December. “Given how many pieces are moving at the same time, we haven’t been able to complete that process, which in a normal

situation would have been already done with relative easiness,” Prasa Executive President Alberto Lázaro conceded to a handful of reporters, just after a meeting of the utility’s board last week. Kenneth Rivera, Prasa’s board chairman, and Mariana Bartok, deputy finance manager, joined him at the roundtable discussion.

Puerto Rico’s water utility, with almost $4 billion in debt, is no stranger to the island’s larger fiscal crisis. Prasa owes roughly

$150 million to its suppliers and contractors, many of which are local companies struggling to stay afloat amid the island’s decade-long economic freefall. With no money to pay for much-needed upgrades, Prasa has stopped its capital improvement program—the utility’s five-year plan to invest in its infrastructure—which was approved in 2015 to the tune of more than $1 billion.

BY LUIS J. VALENTÍN PAGES 14-18

BY LUIS J. VALENTÍN CONTINUES ON PAGE 4

2

THURSDAY, FEBRUARY 25, 2016

Editorial

Contents PICTURE OF THE WEEK PAGE 22

By Philipe Schoene Roura EXECUTIVE EDITOR

Mano a Mano

Advertising ...........................................................................................................62 Advertising Calendar............................................................................................62 Cars 101 ..............................................................................................................59 Economy ......................................................................................................... 12-13 Editorial .................................................................................................................2 Federal Affairs......................................................................................................19 Front Page ...................................................................................................... 14-18 General Business .................................................................................................34 Insurance .............................................................................................................27 Latin American Affairs .........................................................................................30 Law/Courts ...........................................................................................................21 Lead Stories ....................................................................................................... 6-9 Mano a Mano.................................................................................................. 22-25 Politics .................................................................................................................26 Poll .......................................................................................................................20 Sin Comillas ................................................................................................... 12-13 Smart Money .................................................................................................. 28-29 Top Story............................................................................................................ 1, 4 Tourism ................................................................................................................31

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

SPECIAL FEATURES: Car Review ..................................................................................................... 60-61 Big Business Profiles: Engineering & Architects ............................................ 35-42 Fastest Growing Companies ........................................................................... 47-56 Innovations in Healthcare .............................................................................. 43-46 North American International Auto Show ..............................................................58 caribbeanbusiness.pr Volume 2, No. 7 • Thursday, February 25, 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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Hispanic Voter Turnout Looms Large During an exclusive interview with this newspaper’s editorial board, which took place during the Puerto Rico Investment Summit recently held inside the Puerto Rico Convention Center, Caribbean Business Editor in Chief Heiko Faass asked former New York City Mayor Rudolph “Rudy” Giuliani to comment on presidential hopeful Donald Trunp. In no uncertain terms, Giuliani expressed his support for Trump, pointing to the realestate tycoon’s successful track record in business as a virtue that would likely make Trump an effective president.

“He has tapped into the anger of the American people just as Bernie Sanders has done,” said Giuliani.

Although this newspaper strongly disagrees with that assessment—we believe Trump is more likely to set the world aflame than to spark economic growth— it will be up to the voting public in the United States to decide whether they believe it is healthy for democracy to back such divisive rhetoric. Whether “the people are mad as Hell and not going to take it anymore,” to borrow a phrase from the Oscar-winning movie “Network,” is soon to be seen. The answer to that question will commence to be articulated on Super Tuesday (March 1) when 12 states hold primaries. All told, some 632 delegates will be at stake in both parties. By the time the dust settles, we will know whether we are in for a dogfight in both parties. With the threshold at 1,257 delegates for the nomination, strong showings by Cruz and Rubio could present the possibility of an open convention for the first time since 1948.

A most important subtext to that plot will also be defined on March 1—the strength of the Hispanic vote. There are some 26 districts in five of the states that have seen Hispanic populations nearly double. Will that necessarily translate

into votes?

According to a recent poll by the Pew Research Center, “one potential bright spot for turnout efforts is the fact that a growing segment of eligible Hispanic voters comes from immigrants who have become naturalized citizens. That demographic tends to have higher voterturnout rates. In 2012, nearly 54% of immigrant Latinos voted, compared to just over 46% of U.S.-born Latinos.”

By the time CNN breaks down the results of those 12 contests in the late evening of March 1, we will all have a better idea of voter turnout in Hispanic bastions. It will help to establish whether second-generation Hispanic voters, who are highly absorbed into the dominant culture, are open to the exclusionary rhetoric being spewed by Trump. So, too, will we know whether an increasingly bicultural U.S. citizenry will be a force to be reckoned with come Nov. 9, 2016, when the general election is held.

A huge Latino turnout will weigh the strength of the Hispanic vote. That test of muscle looms large in the context of key battleground states, with few bigger than Florida where Puerto Ricans who have fled the island’s economic depression could play a huge role in delivering the state’s 99 delegates. Since 2006, nearly 290,000 of our people have outmigrated to the United States. The number of Puerto Ricans, who largely favor Democrats, is almost equal the number of Cubans, who have traditionally favored Republicans.

As Trump, Rubio and Cruz vie for delegates, Republicans will likely be asking themselves who has the best shot at winning the general election. Is it Trump, who has inflamed passions with antiimmigrant rhetoric? Hispanic turnout on Tuesday will play a big part in answering that question. We will be vigilant. 䡲

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THURSDAY, FEBRUARY 25, 2016 Push for broad restructuring regime continues on the Hill, as impossible debt payment schedule begins May 2.

Top Story Debt crisis

Continued from cover

House Speaker Paul Ryan (R-Wis.) has said the lower chamber aims to come up with a solution to the Puerto Rico issue before the end of March, but Republicans in the upper chamber have yet to commit to a similar deadline, although some majority senators have said they are moving forward on several initiatives. The majority GOP in Congress continues to lean toward greater federal fiscal oversight and less debt-restructuring powers, if any.

COLLECTIVE ACTION CLAUSES CACs allow majority creditors to agree to a debt-restructuring plan that would become binding on all creditors, eliminating potential “holdouts.”

While sources added that sides are willing to entertain the idea, legislation would be required to retroactively place CACs into existing Puerto Rico bond documents.

Puerto Rico has already presented creditors with a comprehensive debtrestructuring proposal—a

voluntary debt-exchange offer that impacts roughly $49 billion of the island’s $70 billion debt, and initially calls for “haircuts,” or reductions to principal, in the vicinity of 45%, depending on the credit.

“I think we will achieve a consensual offer with the majority of creditors.

But we need a mechanism to bind holdouts,” Jim Millstein, the commonwealth’s lead restructuring adviser, recently said during a panel discussion at the Puerto Rico Investment Summit.

The implementation of CACs could allow the government to bind holdouts if it reaches a voluntary debt-restructuring deal with a majority of its creditors. Moreover, the Puerto Rico Electric Power Authority would be able to bring the 30% of its creditors that are still not part of the utility’s debt-restructuring deal.

One of the sources added that the government’s Plan A continues to be achieving a broad restructuring regime from Congress, although commonwealth advisers have been presented with the possibility of using CACs, which

Additional emergency measures, which could affect creditors’ rights, are in the cards, as the island hits a $2 billion-plus debtservice wall this summer. already enjoy support from some creditor groups, in a bid to avoid the possibility of providing Puerto Rico with greater bankruptcy powers.

POTENTIAL DEBT MORATORIUM Declaring a debt moratorium and even seeking relief under existing receivership laws for some public entities have been mentioned among the range of emergency measures that the government could implement if the island fails to promptly solve its fiscal woes.

For instance, La Fortaleza confirmed last week that local legislation to declare a moratorium on the payment of future debt service is already in the works, and would be presented if needed.

Following the GDB’s

$422 million payment in May, the commonwealth faces a $780 million payment on its general obligations (GOs) on July 1.

Back in December, García Padilla ordered the use of clawback clauses, which allowed the government to redirect previously pledged revenues to pay for its GO debt. But even with the clawbacks, the commonwealth expects it will not have sufficient funds to meet this payment, according to a recently released draft of fiscal 2014 financial statements.

Meanwhile, payments under the Highways & Transportation, Infrastructure Financing and Convention Center District authorities could also be facing potential defaults on their debt service payments due July 1.

Revenues pledged to these

entities were subject to the governor’s clawback order.

GDB ON BRINK OF INSOLVENCY The GDB continues to see its fiscal health quickly deteriorating, while it is dangerously running out of liquidity, hindering its day-to-day operations.

What’s more, liquidity levels during the final stretch of fiscal 2016, which ends June 30, “may be insufficient to operate in the ordinary course and honor its depositary and financial obligations in full,” according to the draft of the financial report.

“If [the] GDB were to be placed in receivership or if its liquidity falls below a level necessary to operate in the ordinary course, the Commonwealth and its instrumentalities may have limited access to their funds deposited at [the] GDB, which could in turn affect the provision of essential government services,” the document notes.

Because of the importance of the bank for the commonwealth government, the administration

said it “may amend the Organic Act of [the] GDB or enact new emergency legislation (subject to applicable constitutional limitations), which could include a moratorium” on its future debt payments.

The recently released 370-page draft of Puerto Rico’s financial statements for fiscal year 2014 reiterates the doomsday scenario for the island if it fails to promptly restructure a large chunk of its $70 billion debt. The latter figure tops more than $110 billion when taking into consideration the estimated $40 billion in unfunded liabilities of the commonwealth’s pension systems.

Amid a severe cash crunch, the bank could be unable to comply with its legal reserves before the end of the fiscal year.

The GDB must maintain reserves equal to 20% of its demand deposits. This scenario could prompt a request to the Puerto Rico Treasury secretary for a three-month waiver to these requirements. On Dec. 1, 2015, the GDB board had authorized management to request the waiver, if needed. 䡲

6

THURSDAY, FEBRUARY 25, 2016 Restructuring must still follow important steps such as getting credit-rating approval before becoming a reality

Lead Prepa’s Restructuring Faces Tough Sledding Ahead

BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

The enactment of the Puerto Rico Electric Power Authority (Prepa) Revitalization Act is just the beginning of the restructuring of the utility’s $9 billion debt since the “fragile” process still has to comply with several important steps before becoming reality.

The new law calls for the creation of the Prepa Revitalization Corp., which will be separate from the power utility, and would be in charge of issuing restructuring bonds, through a process known as securitization, which will be exchanged for current Prepa bonds.

“This is just starting. We have a long process ahead of us,” a source within Prepa said.

The initial issuance of Restructuring Bonds must receive an investmentgrade rating from any rating agency that rates the Restructuring Bonds. Prepa must diligently pursue

ratings from Moody’s and Standard & Poor’s, according to the Restructuring Support Agreement (RSA) enabled by the new law.

Before any future issuance of the Restructuring Bonds or incurrence of any other debt, the corporation must provide confirmation to the Prepa Trustee that each rating agency that maintains a rating on the outstanding Restructuring Bonds at that time has confirmed the proposed action will not result in a suspension, reduction or withdrawal of the thencurrent rating by such rating agency or agencies.

At least one rating agency will maintain the same or higher rating as it originally assigned to the initial series of Restructuring Bonds, the RSA says.

The securitization shall have a debt-service reserve of up to 10% as required to receive an investmentgrade rating. The size of the reserve shall be determined by Prepa in consultation with the rating

agencies and the Ad Hoc Group, and shall be sized such that, together with the net-interest cost on the Restructuring Bonds, Prepa minimizes its funding costs.

The securitization of Prepa’s debt will not only reduce the utility’s $9 billion debt but also finance $400 million needed for construction of the Aguirre liquefied natural gas plant.

The act says the scheduled maturity of the securitization cannot be for more than 35 years.

The costs of the restructuring will be passed on to consumers through a “transition charge,” whose amount is unknown but by law will have to recuperate the costs to restructure the debt. The transition charge can be adjusted to reflect any changes in restructuring costs.

Prepa reached a restructuring deal in December with about 70% of its creditors, which agreed to a 15% haircut on their bonds. The restructuring agreement

also grants the power company five-year debtservice relief of more than $700 million on its $8.3 billion debt and up to $462 million of surety capacity to be provided at the close of the transaction.

According to the legislation, the costs of the restructuring, which will be paid through the transition charge, includes legal and accounting costs, management fees and all expenses to design the so-called restructuring bonds for a bond exchange.

“It also includes any other amount paid to the United States to preserve the triple tax exemption of the bonds and to protect and preserve the deposits of the revenues generated through the restructuring bonds,” the law says.

The restructuring does not include additional costs from those contemplated in the restructuring agreement except for the debt incurred in 2016, which does not exceed $535 million.

The corporation created by the bill will be allowed to adjust the transition charge to pay for financing of the restructuring bonds but the adjustment will

Lisa Donahue, Prepa’s chief restructuring officer

not need legislative revision. The Energy Commission will only be able to revise that charge to correct mathematical errors.

PREPA TO PITCH ITS RATE CASE The proposed corporation will be led by a board appointed by the governor and selected from a roster of 10 candidates proposed by a headhunter. The Senate must confirm the board members. Board members

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will receive a salary of not more than $50,000 a year and will have immunity from liability.

However, during its initial stages, the president of the Government Development Bank, the Treasury secretary and secretary of State will be ex-officio members until the board is appointed. They will not receive pay for this role.

The Revitalization Corp. will be in charge of creating Continues on next page

THURSDAY, FEBRUARY 25, 2016

7

Lead Continued from page 6

new bonds to refinance as well as cancelled Prepa bonds issued before Dec. 31, 2015, but the corporation will not be allowed to issue new debt.

The Energy Commission will review the proposed restructuring resolution or structure to ensure it is not capricious or arbitrary.

After the Energy Commission gives the green light to the restructuring resolution and before issuing the bonds, the Revitalization Corp. will issue a notice to invite people to challenge the validity of the restructuring resolution.

The commonwealth commits itself to ensure that the bonds or any of the property used as guarantee will be exempted from taxes. While the RSA states that the debt will be “legally enforceable” on Prepa, the corporation and customers, the act states that customers will not be responsible for the debt.

Rep. Luis Vega Ramos, who helped draft the wording of the clause, said the disposition in the law is valid because customers are not party to the agreement and cannot be held legally responsible for the debt. Vega Ramos confirmed that Stephen Spencer of Houlihan Lokey, who advises bondholders, was concerned about the debt’s disposition. So far, however, none of the bondholders as of presstime has walked out of the agreement.

PREPA CAN REPORT DELINQUENT CLIENTS TO CREDIT BUREAUS As part of its restructuring, Prepa must submit to the Energy Commission approval of a new utility-

rate structure.

A rate-making mechanism provided to Prepa by Navigant takes into account the upcoming year’s revenue requirements.

They comprise all operating costs, including fuel, purchased power, operations and maintenance expenses, revenue-funded capital expenditures, contributions in lieu of taxes (CILT), subsidies, taxes paid, debt service and any other costs expected to be incurred.

Debt service includes principal, interest and debt-service reserves but excludes any debt service recovered through the transition charge. The resulting revenue requirement is compared against revenues calculated using existing rates to determine if rates are sufficient to cover the full costs to provide services.

The design of customers’ billing statement will be transparent and must at least include the transition charge; the base rate charge; the fuel and purchased power cost adjustment (true-up); and CILT and subsidies.

Consumers will be able to challenge their bills except for the transition charge. While Prepa is forbidden from reporting delinquent residential clients to credit bureaus, it will be able to make those referrals when the client has not objected to the amount of the bill.

The legislation also overhauls the Prepa Board, which would be composed of nine members appointed by the governor from a 10-person list of candidates prepared according to objective criteria by a search firm.

8

THURSDAY, FEBRUARY 25, 2016

Lead Giuliani: Trump Has Tapped Into Frustration of Americans Former NYC Mayor Praises Controversial Candidate on Eve of Super Tuesday

BY DENNIS COSTA d.costa@cb.pr

Throughout his campaign to secure the Republican Party nomination for U.S. President, Donald Trump has gained many detractors for his politically incorrect remarks about illegal immigration, national security and the use of torture, among other cases of public faux pas, with some Republican leaders and none other than Pope Francis among the latest to criticize the realestate mogul and realityTV star.

Rudolph “Rudy” Giuliani is not part of that club.

The former New York City mayor and pre-candidate for the GOP’s 2008 presidential nomination was recently in San Juan giving a keynote speech at the latest Puerto Rico Investment Summit, and talked exclusively to Caribbean

Business about what has made “the Donald” such an irresistible force among conservative voters in the U.S. mainland.

“Trump is an exceptionally talented guy, a brilliant developer, a doer, he gets things done,” Giuliani said. “Politically, he has probably tapped into an anger and frustration that the American people are feeling, the same way that Bernie Sanders is also doing, although Sanders has tapped into those emotions from the left side of the political spectrum and Trump has kind of tapped them from the right.”

Sure enough, as the Republican and Democratic primaries head into Super Tuesday on March 1, Trump and Sanders are carrying a lot of momentum in their respective parties.

Sanders, a longtime senator from Vermont and self-declared democratic

socialist, recently came out of the New Hampshire primaries with a landslide win against Hillary Clinton, who was once considered a shoo-in for the Democratic nomination, but since then has seen her poll numbers take a hit against the advance of “the Bern.”

By the same token, Trump has transcended previous perceptions regarding his campaign as a sideshow attraction, instead becoming a frontrunner in almost all of the previous Republican contests. As of late February, it appears that only Ted Cruz and Marco Rubio stand a chance of prevailing against Trump during Super Tuesday, a landmark event in which 11 states will hold simultaneous primaries for both parties.

“Trump and Sanders are both a reflection of American frustration with the

Former NYC Mayor Rudy Giuliani

government not working because both want to fundamentally change government, although each in different directions,” Giuliani said.

The former politician, who has remained in the business sector during the past couple of years and makes the rounds mostly as a public speaker, gave a salient example of what sets Trump apart from the rest of the Republican pack. “When

Trump is saying ‘we made stupid deals’ [under the Obama administration, mostly with regard to the 2015 Iran nuclear deal], nobody else would say it that way, but he’s right,” Giuliani noted.

“They have killed thousands of our troops and want to kill us, and we’re giving them billions of dollars and getting nothing in return. If I’m going to let them get nuclear material, I want to get

something back: give me all those prisoners back, stop saying you’re in favor of destroying America and stop threatening our strongest ally Israel; otherwise, we have no deal,” he said.

“Ordinary politicians say ‘I agree with that deal,’ like John Kerry, or ‘I disagree with it,’ like John McCain,” Giuliani added.

“When Trump says ‘that’s Continues on next page 9

9

THURSDAY, FEBRUARY 25, 2016

Giuliani believes Trump is right on Obama foreign policy decisions

Seated from left to right: Economic Development & Commerce Secretary Alberto Bacó, former New York City Mayor Rudolph Giuliani, Senior Reporter Dennis Costa, Caribbean Business Editor-in-Chief Heiko Faass, and CB Executive Editor Philipe Schoene Roura

stupid,’ he is pointing out that we have a history in the past few years of making these kinds of deals.”

Another instance in which the Obama administration has failed on foreign policy, according to Giuliani, is when it scuttled plans to build a long-range missiledefense system in Poland and the Czech Republic, a former source of contention between Russia and the U.S. during the George W. Bush administration.

“Hillary Clinton was the Secretary of State at the time, and I consider that action as the downfall of that administration,” he said. “You have an amoral but smart guy called Vladimir Putin sitting in Russia, and he realizes he can basically take our pants off and we’re not going to say a thing.

“Putin got from us what Gorbachev couldn’t get from Reagan, which is giving up nuclear defense,” Giuliani went on. “You don’t think that played a big role in his army

moving into the Ukraine?

Putin, a former KGB head and strategic thinker, is up against a community organizer [referring to Obama]. What Trump is saying is if these guys were running our business, we would be bankrupt. And he’s making a very powerful point.”

Finally, echoing words

from prominent Republican leaders such as John Boehner and John McCain, Giuliani made a clear statement about the one person he does not want on the party ballot. “I should note for the record that I like all the other Republican candidates,” he said. “That is, except Ted Cruz.”

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Banking/Finance

Goal is to conclude most of new strategic-plan projects this fiscal year

Cossec’s New Strategic Plan Strengthens Risk Prevention, Oversight of P.R. Co-ops Revising Bylaws, Automating Co-ops’ Quarterly Reports, Financial Analysis & Risk Prevention Department

BY JOSÉ L. CARMONA j.carmona@cb.pr

As Puerto Rico’s savings & loan cooperatives (co-ops) continue to gain ground as a lending source for home, auto and even commercial loans, the Cooperatives Supervision & Insurance Corp. (Cossec by its Spanish acronym) announced last week a new strategic plan aimed at strengthening the prevention and oversight at these financial institutions in Puerto Rico.

Cossec is the regulator and insurer for the island’s savings & loans co-ops.

Each account is insured up to $250,000.

Executive President Daniel Rodríguez Collazo pointed out that Cossec’s work plan for fiscal 20152016 is en route to completing the majority of the new strategic plan’s main objectives and projects.

REVISION OF BYLAWS As explained by Rodríguez Collazo, Cossec began a thorough revision of the regulation and bylaws that govern the co-ops’ operations on the island to update them to the current global economic reality.

“In a historical process, the revision of the current regulations has had the participation of representatives from all sectors

Daniel Rodríguez Collazo, executive president of Cossec

of the cooperative movement, and we will continue to do so until we complete the process. Updating the current regulation to the economic and financial reality of the local and international markets is a must if Cossec wants to remain just, effective and efficient,” he commented.

GREATER OVERSIGHT While Cossec has been working closely during the past fiscal year with local and federal law enforcement agencies in the intervention of those individuals who have violated the law, Rodríguez Collazo said the corporation is in the process of implementing a project for automating co-ops’ quarterly reports and their actuarial systems directly to Cossec.

Known as AITSA by its Spanish acronym, the system electronically trans-

fers the co-ops’ financial information to Cossec, minimizing the chances of human errors and assuring the quality and certainty of the information.

“We just culminated the first phase and 48 co-ops are in the process of installing the system. This is part of Cossec’s effort to ensure fair and just supervision and oversight, with

emphasis on prevention,” Rodríguez Collazo said.

This year, Cossec also announced the creation of the Financial Analysis & Risk Prevention Department for the island’s savings & loan cooperatives.

This unit, the Cossec executive president added, will develop processes to analyze each co-op on a case-by-case basis— looking at the financial condition of each institution, he said.

In addition, Cossec began the legal mechanism to create a grantor trust to manage—aside from the corporation—the reserved funds to cover Cossec’s insured deposits, up to $250,000 each, with the local cooperatives as the trust’s only beneficiaries. 䡲

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THURSDAY, FEBRUARY 25, 2016

11

Banking/Finance

Triple-S reports successful 2015 earnings

Repositioning Triple-S to Succeed in a Rapidly Changing Environment Transforming From Healthcare Insurance Company to Healthcare Solutions Firm

BY JOSÉ L. CARMONA j.carmona@cb.pr

After reporting last week a net income of $11.2 million for the fourth quarter (4Q) and $38.2 million for full-year 2015, Roberto García, Triple-S Management Corp. president & CEO, said the company is embracing change in order to succeed in a rapidly changing environment.

García, who officially took the helm of TripleS at the start of this year after Ramón Ruiz-Comas retired, said the firm is closely monitoring recent developments regarding the Puerto Rico government’s fiscal and liquidity challenges, as well as participating in industry efforts to maintain and increase federal funds for healthcare in Puerto

Rico, and taking action to mitigate any potential impact on the company’s business.

“Meanwhile, the healthcare landscape continues to change dramatically across the nation. Over the next three to five years, we expect to see accelerated growth in value-based payment models, greater demand for integrated healthcare solutions and

more empowered and tax savvy consumers, all powered by advanced healthcare analytics and IT [information technology] capabilities,” García commented during the earnings call webcast following the Feb. 18 release of financial results.

REPOSITIONING TRIPLE-S Against this backdrop, García indicated the Triple-S management team understands that what made them historically a market leader will not be enough for the firm to lead in the future.

“We are embracing change, repositioning the company to succeed in a rapidly-changing

environment and investing for sustained growth in the mid to long term.

We believe Triple-S has a unique opportunity to reaffirm its leadership in a fragile environment. We can play a significant role in reshaping healthcare delivery in Puerto Rico and we’re determined to transform Triple-S, from a healthcare insurance company to a healthcare solutions company,” Roberto García, Triple-S García said. “We have the Management Corp. president & CEO financial strength, brand recognition, provider network, market presence and executive leadership of Madeline Hernández to do this successfully.” to preside over Triple-S’ Shortly after García took entire managed care platthe helm of the comform, and the return of pany in January, he anJuan José Román as the nounced the appointment firm’s CFO.

12

THURSDAY, FEBRUARY 25, 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 Triple-S Management Corp.

Popular Inc. OFG Bancorp First BanCorp

SYMBOL GTS BPOP OFG FBP

52-wk 52-wk PRICE PRICE LOW HIGH 2/12 2/19 CHANGE 17.34 27.14 19.99 25.32 5.33 22.40 35.83 25.46 25.86 0.40 4.56 17.61 5.20 5.41 0.21 2.06 6.76 2.43 2.44 0.01

BY LUISA GARCÍA PELATTI SIN COMILLAS

LOSERS FOR THE WEEK STOCK Evertec Inc.

SYMBOL EVTC

52-wk LOW 11.27

52-wk HIGH 23.12

PRICE 2/12 11.93

PRICE 2/19 CHANGE 11.40 -0.53

Weekly Comment on Puerto Rico Stocks Spearheaded by a rally that lifted technology stocks, Wall Street was able to close flat for the day last Friday, with major indexes capping their best week of the year. The Nasdaq Composite Index rose 0.38%, aided by a 7% jump in Applied Materials shares, after the chip equipment provider gave a strong profit and revenue forecast for the current quarter, lifting the technology sector. Hurt by the prolonged slide in the price of oil and fears of a global economic slowdown led by China, the Standard & Poor’s (S&P) 500 Index remains down 6.2% for the year. Shares of store chain Nordstrom dropped 6.7% after its quarterly profit missed expectations. Investors were also hit by data that showed rising rents and healthcare costs lifted underlying U.S. inflation in January, which could allow the Federal Reserve to still gradually raise interest rates this year. For the week, the Dow Jones Industrial Average rose 418.15, or 2.55%, to 16,391.99.

The S&P 500 jumped 52.92, or 2.76%, to 1,917.78, while the Nasdaq Composite Index edged up 166.92, or 3.71%, to 4,504.43.

After two-consecutive weeks in the red, the Government Development Bank’s Puerto Rico Stock Index (PRSI) finished last week in the black, with only one component reporting a weekly loss. For the week, the PRSI added 43.29, or 3.01%, to close at 1,482.12. Topping last week’s list of gainers was Triple-S Management Corp., which jumped $5.33, or 26.66%, to close at $25.32 after reporting net income of $11.2 million in the fourth quarter and $38.2 million for 2015. It was followed by OFG Bancorp, which advanced 21 cents, or 4.04%, to close at $5.41. Shares of Popular Inc. added 40 cents, or 1.57%, to close at $25.86 after announcing a quarterly cash dividend.

First BanCorp inched up one cent, or 0.41%, to close at $2.44. Last week’s sole nongainer was Evertec Inc., which erased 53 cents, or 4.44%, to close at $11.40.

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

‘You Have to Convince Congress to Legislate a Special Incentive’ Against those who argue that the debt is not the problem, that it can and should be paid, economist Juan Lara is betting on restructuring, and even debt relief. The goal is not only to make debt service payments sustainable in the long term, but also to have markets regain their confidence and lend Puerto Rico [money] again.

Lara, who is a professor at the University of Puerto Rico, said the U.S. Congress must be convinced to once again legislate for Puerto Rico—and now in the context of the revised international tax legislation for American companies—some special incentive that encourages U.S. companies to make greater investments on the island.

“We’re not talking about going back to Section 936, but rather about an incentive specifically defined for Puerto Rico. And if this would allow us to recover some of the manufacturing jobs that have been lost over the past 15 years, we estimate that this, in itself, could allow the economy to grow by 1.5% a year,” Lara said.

“And if you add what might come from the reform program as per Anne Krueger’s team’s estimates, we are talking about an economy that could grow between 3% and 3.5% a year. So now we’re talking about a very different world.

Lara was among a group of economists who spoke during a recent conference on Puerto Rico’s economic prospects, which was organized by the P.R. Chamber of Commerce.

If Puerto Rico does nothing, what the future holds is not only another decade of stagnation, but also a continued decline in economic activity. Krueger’s report predicted a 1% drop in the economy per year, which over a 10-year period constitutes “a true economic catastrophe,”

“Let’s just not renegotiate the debt and [allow] the economy to continue on the same path.”

—Juan Lara, economist he indicated. This scenario assumes that the debt is not negotiated and no economic reforms are made.

But the picture could change radically if the debt is renegotiated and the necessary reforms are made. The economy could achieve growth rates of 2.5% per year if debt is renegotiated, if funds committed to the debt are redirected toward productive investment and assuming

Juan Lara, economist & member of Governor’s Economic Council that all reforms contained in the Krueger report are implemented. A key reform is tax reform, which is still pending.

There is another scenario: The one depicted by KPMG in its report intended for tax reform, which projects far lower growth rates. “If I had to choose between this base scenario and Krueger’s [scenario], I think Krueger’s scenario is much more realistic in showing that our economy, without a radical change of course, is condemned to a state of secular decline for the foreseeable future,” Lara said. “You won’t see chances Continues on next page

13

THURSDAY, FEBRUARY 25, 2016 Continues from previous page

for growth unless a radical change is made, which includes a severe reforms program and I definitely insist on renegotiating the debt.

“What will happen depends on what you do. It is not written. What is quite well written is what will happen if we do nothing,” said Lara, who is also the chief economist at Advantage Business Consulting.

“One of the possible strategies is to continue on the path in which we currently are: not making decisions and letting other people make them for us.

Let’s just not renegotiate the debt and [allow] the economy to continue on the same path.

This is a possible scenario—and obviously a totally undesirable scenario,” he added.

Lara believes that it is necessary for the central government to take control of the situation to steer the economy in a different direction.

Regarding debt negotiations, he pointed out that Puerto Rico should provide assurance, and that it was wrong for the government to say that the debt cannot be paid. One thing is to talk about debt service as being unsustainable, but saying that you cannot pay closes up markets.

Lara also argued that debt renegotiation should include a cut in principal. “In stories about debt negotiation that have taken place in the world, in all cases debt cuts have been made, I don’t see why our case should be [any] different,” he said. But he clarified that such restructuring should be done in a sensible manner so that Puerto Rico’s investors are the least affected.

He opposes a federal fiscal control board because “it would be shameful,” and because it will entail adjustments that are “extremely hard within a very tight timeframe.” But Lara believes this is inevitable, as “it is almost a done deal” and that in such a case, the control board must consider Puerto Rico’s political status. 䡲

The Social Cost of the Economic Crisis

BY LUISA GARCÍA PELATTI SIN COMILLAS

The social cost of Puerto Rico’s economic crisis—in other words, the damage it has caused to individuals and institutions—are partly caused by the crisis itself and on the other hand, constitutes an inevitable consequence of the macroeconomic adjustment program.

The rich get richer and the poor become poorer and the middle class is reduced.

Puerto Rico’s gross domestic product (GDP) has dropped by 20%, a figure that could increase to 25% or 30% because the economy will continue to contract.

It is estimated that the loss of wealth is $60 billion, which is equivalent to nearly a year of production. In addition, a wave of migration has placed Puerto Rico among the 10 countries worldwide that have experienced population loss.

In this context, speaking of a humanitarian crisis is no exaggeration.

Economist Juan Lara and sociologist Emilio Pantojas, two professors from the University of Puerto Rico’s Río Piedras campus, analyzed the economic crisis’ costs on society at a recent conference called, “Crisis, What Crisis? Debt and Everyday Life.”

Lara warned that renegotiating the

debt requires sacrifices from all sectors of society and warned that adjustments will be even tougher with [the presence of] a federal financial-control board for Puerto Rico. “[In] a crisis of such magnitude as ours, there is no way that one section of society remains exempt,” Lara said. The high-income population has lost much of the money they had in bank shares and most of the savings they had invested in government bonds. Meanwhile,

the middle class has suffered even more with the drastic reduction in home values, while the low-income population is the most affected segment.

“Wealth has been lost due to the bonds’ collapse, the decline in stocks and the drop in home prices. We have all lost 30% of the wealth,” Pantojas said.

It has been two years of record foreclosure levels in Puerto Rico and several more years that new homes are not being built—which is unheard of. 䡲

‘Crass Negligence in Fiduciary Duty, but No One Has Been Charged’

BY LUISA GARCÍA PELATTI SIN COMILLAS

The dire situation in which Puerto Rico finds itself is the responsibility of various government administrations, but no one has assumed responsibility, according to Antonio J. Fernós Sagebién, an economist and professor at the Inter American University of Puerto Rico.

“There has been crass negligence in fiduciary duty, but no one has been charged,” he

said, adding that “many people could be found guilty of prevarication,” and responsible for making the wrong decisions for years.

Fernós Sagebién participated, alongside other economists, in a recent panel on economic perspectives organized by the Puerto Rico Chamber of Commerce. He said that Chapter 9 bankruptcy protection for the island is not necessary, and he opposes a federal fiscal control board, saying “they would

come [to Puerto Rico] to do what and with what powers?” Fernós Sagebién believes that the island’s $70 billion public debt is payable.

While there will be restructuring, it is not necessary to carry out a reduction in principal, he said.

The situation is so grave that the government would not have any money to even pay the transaction costs were it to issue debt, and the worst part is that there is nothing on the horizon to indicate things

are going to improve. “There is no emblematic program for growth,” he said.

Fernós Sagebién also talked about what he termed destrabatología, which may be roughly translated as “the act of untangling,” meaning consolidating the public apparatus in the three branches of government because “we are making decisions like a Mexican piñata.”

The economist concluded his presentation with a phrase

by Mafalda, the famous Argentinean comic strip that asked, “When a country is spent, where do you throw it away?” and added that he supports social network initiatives such as #yonomequito. 䡲

14

THURSDAY, FEBRUARY 25, 2016

Prasa Maneuvers Through Revitalization Maze Management Touts Securitization as Essential to Avoid Rate Hike in July

BY LUIS J. VALENTÍN L.VALENTIN@CB.PR

E

very Dec. 15, the governing board of the Puerto Rico Aqueduct & Sewer Authority (Prasa) revises its

financial projections for the following year, and if needed, comes up with a plan to cover any operational deficits that may show up.

However, this was not the case last December.

“Given how many pieces are moving at the same time, we haven’t been able to complete that process, which in a normal situation would have been already done with relative easiness,” Prasa

Executive President Alberto Lázaro conceded to a handful of reporters, just after a meeting of the utility’s board last week.

Kenneth Rivera, Prasa’s board chairman, and Mariana Bartok, deputy

finance manager, joined him in the roundtable discussion.

Puerto Rico’s water utility, with almost $4 billion in debt, is no stranger to the island’s larger fiscal crisis. Prasa owes roughly

$150 million to its suppliers and contractors, many of which are local companies struggling to stay afloat amid the island’s decade-long economic Continues on next page

15

THURSDAY, FEBRUARY 25, 2016 Continues from previous page

“If we approve the bill and get the financing, whether interim or with the final securitization, the outlook is good…. There would be no need to increase water bills, maybe even after [fiscal] 2018—it would all depend on the refinancing scenario resulting from the [securitization] legislation.”

—Alberto Lázaro, Prasa executive president

Continues from previous page

free-fall. With no money to pay for much-needed upgrades, Prasa has stopped its capital improvement program—the utility’s five-year plan to

invest in its infrastructure—which was approved in 2015 to the tune of more than $1 billion.

The utility will finish the fiscal year, which ends June 30, with a $45 million to $50 million

deficit. “Why? We had a drought worth $70 million,” Lázaro explained, adding that Prasa has reduced its spending by about $20 million to ease the red ink.

During last week’s meeting, the utility’s board approved an action plan that establishes how Prasa would act under several different scenarios that could lie ahead.

“We need help,” said Lázaro, while making reference to a one-page flow chart that outlines the plan, and perhaps more importantly, the timing of a water-rate hike that could come as soon as this summer or as late as 2018 under the best-case scenario.

In fact, Prasa needs help from the central government, which would have to pay roughly $35 million of the $60 million it owes the utility, while also staying current with its water bills. Prasa also needs help from the Government Development Bank (GDB) to extend a muchneeded line of credit set to expire this summer, which would support Prasa’s plans to avoid a rate hike this year. The utility also needs a hand from credit-rating agencies, bondholders and even federal agencies.

And they need help from the local Legislature, which after narrowly approving the Puerto Rico Electric Power Authority (Prepa) Revitalization Act, is now evaluating the Prasa Revitalization Act— a bill that would pledge a portion of the water rate charged to clients to pay for servicing new debt through a process known as securitization.

Despite not being initially requested by Prasa, the proposed legislation now presents the best way forward for the utility, according to its management, particularly to avoid a rate hike in July, which could very well reach double digits.

GOT TO BE STARTIN’ SOMETHIN’ Right off the bat, Prasa will no longer set aside money to service about $1.1 billion of its junior debt, most of which is guaranteed by the central government and includes federal loans made by the U.S. Department of Agriculture’s (USDA) Rural Development, which is owed $390 million, and the Environmental Protection Agency (EPA), owed $550 million.

“That doesn’t mean we aren’t going to pay,” Lázaro quickly pointed

out about the suspended set-asides.

As for the cashstrapped central government, Prasa is asking it to stay current with at least 96% of its billing, in addition to paying within the next few months about $35 million of the $60 million it owes the utility, a debt that does not include municipalities.

Prasa’s management will reconvene by April to see what has happened with the central government and the securitization bill. If the latter is approved by that time, the utility would have about three months to find money that could avoid a rate hike come July 1. That cash would also allow Prasa to pay its suppliers, reactivate the infrastructure program and meet existing debt service as scheduled.

Getting the bill approved and, along with it, obtaining external financing could push the rate hike to at least the summer of 2017, when fiscal 2018 kicks off and right about the time Prasa had originally anticipated a review of its rate.

Last revised in 2013, the utility had projected a 4.5% increase to its current rate during fiscal 2018.

LOOMING DEBT

OBLIGATIONS On the other side of the coin, without the bill or financing, Prasa would not pay about $35 million of the roughly $166 million due July 1 on its debt service. What’s more, the central government could end up with an $18 million tab in its lap since it guarantees a portion of this debt payment— unless Prasa convinces two federal agencies, the USDA and the EPA, to agree to “a different payment plan,” Lázaro said.

Remember the monthly set-asides the utility is not doing as part of its action plan? Under this scenario, that is the money that would have been used to cover the July 1 payment on its socalled junior debt, but the utility would rather use these funds to cover other obligations, such as beginning to pay its suppliers. So, the plan is to have Prasa sit down and negotiate with these agencies, while avoiding slapping the commonwealth with an $18 million bill on July 1.

Junior debt includes loans with the USDA, EPA and GDB, as well as debt corresponding to Continues on page 16

16

THURSDAY, FEBRUARY 25, 2016

From left, Prasa Finance Manager Efraín Acosta, Lázaro and Prasa legal counsel Juan Ramón Cancio, during a recent public hearing at the House Finance Committee over HB 2786, which seeks to establish a securitization mechanism at the water utility.

Continues from page 15

the Superaqueduct water system. Unlike the island’s electric utility, Prasa operates under a “gross revenue pledge”—meaning revenues go first to a trust, from which senior bonds are paid first, followed by operational costs and then the juniors.

The utility’s management has already held informal talks with the two federal agencies, in an effort to negotiate the July 1 payment. Has this ever been done before?

Lázaro briefly recalled a precedent in New York with the EPA, while adding they are still working on the USDA’s Rural

Development case.

Prasa also has a $90 million payment due Feb. 29 on short-term loans, of which it was able to prepay $15 million that were owed to Banco Popular. “The other investors—their lawyers, really—decided they would rather wait [to get paid],” Prasa’s chief said. Patiently waiting until the end of the month would give these investors an additional $600,000 in interest.

To pay the $90 million, Prasa is siphoning its Rate Stabilization Fund (RSF), which was established to prevent a sooner-than-projected rate hike. “Since next fiscal year’s budget has

Despite not being initially requested by Prasa, the legislation to establish a securitization mechanism now presents the best way forward for the utility, according to its management, particularly to avoid a rate hike this summer. no deficit, the rate covenant [that calls for a rate hike] is not triggered. So, if I have the money in the RSF to pay this debt, I would rather pay it and not keep paying interests

of $600,000 a month,” Lázaro explained.

Meanwhile, the rest of the July 1 debt-service tab, or $135 million corresponding to senior and refunding bonds, should

be met without much trouble given Prasa’s gross revenue pledge.

This debt includes roughly $1.5 billion in refunding bonds the utility issued in 2008, which established a reserve that requires three months’ worth of operational spending, or about $180 million. A line of credit has covered this obligation, and when asked who provides it, Lázaro said the GDB.

CREDIT (LIFE)LINE “You may think what is its worth, but we have it…we have the signed paper,” Prasa’s chief quickly added about the GDB’s $180 million line of credit.

However, there’s a bit

of a problem. The credit line expires June 30 and the financially battered bank has already said it would not extend it, according to Lázaro. “But let’s see how this goes until then,” he added, showing some optimism.

However, it is wellknown that the GDB has been running dangerously low on cash for months and its liquidity issues are already threatening its ability to pay for its debt service and keep operations afloat if its fiscal health does not improve in the immediate future.

(See Top Story on Cover).

In a written statement to Caribbean Business, Continues on next page

17

THURSDAY, FEBRUARY 25, 2016

Continued from previous page

the GDB said that at this moment, it is “in no position to evaluate an extension to the operational reserve’s $180 million line of credit.” The bank added it seeks to continue working with Prasa to evaluate the different options available.

What happens if the reserve is not covered? “If that line is not extended, we would have to fund the $180 million on July 1, and that would trigger a rate hike,” Bartok said. Lázaro acknowledged the utility will not be able to fund the reserve at once, so they will ask credit-rating agencies in New York to amend bond documents to allow Prasa to fund the reserve gradually, over a five-year period.

In a nutshell, if Prasa needs to immediately fund the $180 million operational reserve, either because the GDB does not extend the line of credit or credit-rating agencies do not agree with the five-year gradual funding, a rate hike would follow—unless Prasa finally achieves external financing that would help it cover this reserve.

SEARCHING EVERY NOOK & CRANNY FOR

FINANCING During past years, the utility’s board has decided to finance most of its infrastructure projects by issuing debt, rather than using its revenues.

However, for the past 18 months, Prasa has been unable to go to market.

Lázaro surely has a host of “external reasons” why this has not been possible: the priority the GDB has placed on Prasa to go to market, the discussion over Puerto Rico’s access to Chapter 9 of the

U.S. Bankruptcy Code and the legal dispute over the Puerto Rico Public Corporation Debt Compliance & Recovery Act. The truth of the matter is that the utility has been unable to finance its capital improvement program with its current revenue. After all, it was never meant to foot the improvement bill.

Since 2014, no stone has been left unturned in Prasa’s quest for financing: from traditional investors and private banks, to hedge funds and even municipalities. San Sebastián just loaned the utility some money—at a 6% interest rate—so Prasa could finish an upgrade to one of its plants in this town, after the contractor stopped showing up because the utility was not paying him.

Most recently, talks resumed once again between Prasa and a group of hedge funds, the same group who was willing to come on board the utility’s failed transaction last August.

“We were very close,” said Lázaro, in reference to Prasa’s previous attempt to access capital markets in August. The utility was able to issue a preliminary offering statement, but the deal quickly went south amid onerous terms being asked by potential investors. These terms were called by the GDB as “unprecedented,” and it would have made it the most expensive bond issue ever at pricing.

As for potential demand if Prasa is able to return to the market following the approval of the securitization mechanism, Lázaro believes this will not be a problem. “I believe there will be a market for Prasa.

Obviously, this would all Continues on page 18

GDB President & Chairwoman Melba Acosta

With Prasa mulling options to deal with a $180 million operational reserve covered by a GDB line of credit set to expire June 30, the financially troubled bank stated that at this moment, it is in no position to evaluate an extension to the line of credit.

Looming Scenarios During the final stretch of the fiscal year, which ends June 30, Prasa’s board will evaluate if the central government has paid its outstanding bills, and whether the securitization legislation has been achieved, along with external financing.

NO SECURITIZATION BILL AND/OR FINANCING BEFORE JUNE 30

WITH SECURITIZATION BILL AND FINANCING BY JUNE 30

Prasa won’t pay roughly $35 million of its $166 million in debt service due July 1.

Prasa will seek to negotiate with GDB an extension to its $180 million line of credit that covers its operational reserve, or a gradual funding of the reserve with credit-rating agencies.

Prasa will be able to pay suppliers/ contractors; reactivate infrastructure plan; and meet debt service payments.

IF NO EXTENSION OR GRADUAL FUNDING IS ACHIEVED TO COVER THE $180M OPERATIONAL RESERVE:

Rate hike would be needed as soon as this summer.

This, in turn would allow it to pay suppliers/contractors, reactivate infrastructure program to a minimum level, and meet existing debt service.

Rate hike will take place when required by securitization mechanism.

Prasa projects rate hike could be pushed up to the summer of 2018, depending on external financing achieved.

18

Continues from page 17

depend on credit-rating agencies giving a good grade, and it remains to be seen how they see a securitization within the Puerto Rico context. That grade will determine the type of investor and at what cost,” he said.

North Carolina-based Raftelis Financial Consultants, which specializes in water utilities, has been retained for almost $1 million to conduct an evaluation of Prasa’s operations, including its long-term infrastructure plan. Raftelis is expected to deliver its report within the next weeks, according to Prasa’s chief.

Bringing in the external consultants, at the recommendation of the GDB, is part of efforts to provide more security to potential investors, if Prasa is able to regain access to capital markets.

A VERY IMPORTANT

BILL Having extinguished all possibilities to achieve external financing to date, Lázaro said that in addition to the rate hike, the only remaining option is the Prasa securitization bill.

House Bill 2786 would establish the Prasa Revitalization Act, whereby a new corporation would be created with the sole purpose of issuing new debt for the utility, backed by a portion of water bills that would be pledged to cover this new debt service. It basically seeks to provide investors with more security than they will be repaid.

“It is a very, very important bill,” board chairman Rivera said.

“I think the market is waiting for this [bill],

THURSDAY, FEBRUARY 25, 2016

they already know this is coming,” Lázaro added.

While it can take up to four months to establish the mechanism following the bill’s enactment into law, it still puts the utility in a better position at achieving interim financing that avoids a rate hike this year, according to Prasa’s chief.

Popular Democratic Party Rep. Rafael Hernández, co-author of the bill and chair of the House Treasury Committee, has placed high priority on the matter, aiming to move the measure as quickly as possible. But although the GDB supports establishing a securitization mechanism at Prasa, it has called for changes to the bill to ensure the utility’s clients are not the only ones footing the bill.

What’s more, the island’s fiscal agent believes a long-term strategic plan should first be reached with stakeholders to develop infrastructure projects, implement operational improve-

House Finance Committee chairman, Rep. Rafael Hernández during a recently held public hearing on proposed Prasa legislation. Second from left, Rep. Jesús Santa, chair of the House Energy Committee, who led the legislative process on the recently enacted Prepa Revitalization Act. the stabilization and financial sustainability of the utility, both in the short and long term.”

For the bank, this needs to include future discussions among Prasa’s

the money that would be sought, once the securitization is in place, would be invested in the utility’s infrastructure, and not as part of a larger debt restructuring process like

and get the financing, whether interim or with the final securitization, the outlook is good,” said Lázaro, while going back to the one-page flow chart. “We end up here,

“We are just looking for how to give certainty, mitigate the transaction risk, and avoid a rate hike,” said Hernández, following a House hearing on the Prasa bill.

“This is priority for me…. It would be ideal if we could approve this bill even with votes from the [opposition] New Progressive Party.” ments and elevate service standards. This plan should serve as the starting point toward Prasa’s securitization.

When asked by this newspaper about Prasa’s securitization bill, the GDB stated it continues to support the utility “in the structuring of a strategy that achieves

stakeholders, including its management, consultants, lawmakers and creditors.

While Lázaro acknowledged Prasa would need to eventually sit down with creditors, the utility is perhaps following a different path than Prepa, the electric utility. For instance, most of

Prepa’s, he explained.

“In our case, as in any bond issue, it would allow for refinancing—you can call it restructuring.

At the end of the day, you are taking existing debt and transforming it into new debt, under different terms,” Prasa’s chief conceded.

“If we approve the bill

in this box that reads, ‘Prasa Revitalization.’

We can pay contractors, reactivate the infrastructure program, pay the [junior] guaranteed debt and Prasa heads toward financial sustainability.

There would be no need to increase water bills, maybe even after 2018, it would all depend on the

refinancing scenario resulting from the [securitization] bill.”

One could talk numbers all day, but the reality is that some people who are paying their monthly water bills are not receiving the service because Prasa simply does not have the cash to pay for the repairs needed, and some of this could have been avoided if the infrastructure program were running smoothly.

Moreover, given the island’s current state of affairs and Prasa’s long “help” list, it would be no small feat to accomplish what officials are banking on to avoid a rate hike this year.

For his part, Lázaro feels “more optimistic today than how I felt yesterday.”

One must also ask how optimistic Prasa’s most important stakeholders—Puerto Rico residents—are feeling. 䡲

THURSDAY, FEBRUARY 25, 2016

19

Federal Affairs

Latest U.S. House hearings on Puerto Rico’s debt crisis and solutions

Concerns that Congressional Medicine for Fiscal Crisis Could be Worse Than the Disease Strong Puerto Rico Opposition to Federal Fiscal-Control Board

BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

Puerto Rico is the subject yet again of two U.S. House of Representatives committee hearings on Thursday, Feb. 25, that would pave the way for the Republican-dominated Congress to find solutions to deal with the island’s fiscal and debt crisis.

Local officials are not very happy about some of the proposals that have been put forward so far, particularly the proposed federal fiscal-control board because it would hinder the island’s selfgoverning powers.

Gov. Alejandro García Padilla has rejected the idea of a federal oversight board that would strip Puerto Rico of its autonomy

because it would also prevent the commonwealth government from taking the needed steps to advance the local economy.

One of the scheduled hearings, by the U.S. House Natural Resources Committee, will feature U.S. Treasury Secretary Adviser Antonio Weiss, who will provide an analysis of Puerto Rico’s fiscal situation.

The second hearing is organized by a subcommittee of the U.S. House Committee on Financial Services that is chaired

by Republican Rep. Sean Duffy of Wisconsin, who authored a bill that would create a federal oversight board for Puerto Rico and extend Chapter 9 bankruptcy protections to the island.

The witnesses appearing at the subcommittee hearing are Anne Krueger, senior research professor of International Economics at Johns Hopkins University School of Advanced International Studies. Last year, Krueger headed a group of economists that conducted a fiscal report on

Puerto Rico. Also testifying are Juan Carlos Batlle, senior managing director at CPG Island Servicing LLC and a former Government Development Bank (GDB) president, as well as William M. Isaac, senior managing director & global head of financial institutions at FTI Consulting, the firm hired by the GDB to help local agencies become selfsufficient.

With around $70 billion in public debt, Puerto Rico has been trying to solve a fiscal crisis before substantial debt payments come due in May and July that could lead to the government’s insolvency and the possible shutdown of the GDB. If the GDB

becomes insolvent, the government will not be able to meet its many obligations, including paying public workers.

Following the scheduled hearings, Resident Commissioner Pedro Pierluisi said he expects legislation on the island’s fiscal crisis to be drafted quickly, since House Speaker Paul Ryan has said he wants a solution to be put to a vote on the House floor by the end of March.

The Obama administration and U.S. Treasury Department have proposed a so-called “Super Chapter 9” that would restructure Puerto Rico’s entire debt, an alternative that has little support in Congress. 䡲

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THURSDAY, FEBRUARY 25, 2016

REGLAS OFICIALES DEL CONCURSO LA CARA DE IMAGEN 2016 1. El certamen comienza el 1 de febrero de 2016 y termina el 2 de junio de 2016.

2. Pueden participar féminas naturales entre las edades de 14 y 22, que sean solteras y con residencia permanente en Puerto Rico; excepto los empleados de la Revista IMAGEN y Latin Media House y demás auspiciadores incluídos en el cupón, sus agencias de publicidad, promociones y relaciones públicas y cualquier otra persona, agente o entidad relacionada con el desarrollo, promoción y/o supervisión de este concurso. De ser elegida entre las participantes y si eres menor de 18 años, debes llenar una autorización firmada por tus padres y/o tutor legal. Nada que comprar para >participar.

3. Se requiere que las candidatas cumplimenten el cupón de participación que se publica en las revistas IMAGEN y Buenavida o lacaradeimagen.com. El cupón de participación además estará disponible en las oficinas de Latin Media House, ubicadas en la Avda.

Fernández Juncos 1700, Parada 26 1/2, Santurce, P. R. Deben detallar en el cupón su nombre, apellidos, dirección postal y teléfono, así como edad, estatura, color de ojos y de cabello y acompañarlo con dos (2) fotos recientes a color, una de rostro y una de cuerpo completo en traje de baño.

4. Pueden traer personalmente su participación antes del 2 de junio de 2016 y depositarla en el buzón del concurso en las oficinas de Latin Media House, ubicadas en la Avda.

Fernández Juncos 1700, Parada 26 1/2, Santurce, P. R. También pueden enviar su participación por correo a la siguiente dirección: CERTAMEN “LA CARA DE IMAGEN 2016”, P.O. Box 12130, San Juan, P.R. 00914-0130.

5. Las solicitudes recibidas después del 2 de junio de 2016 no podrán participar en el certamen. No se aceptarán fotos en blanco y negro ni alteradas. Todas las fotografías pasarán a ser propiedad de Latin Media House y de la revista IMAGEN y no serán devueltas a las concursantes.

6. Un jurado compuesto por ejecutivos de la revista IMAGEN y de Latin Media House, evaluará todas las solicitudes enviadas por las participantes y se elegirá un grupo selecto.

Para escoger las 25 semifinalistas y las 12 finalistas, el jurado estará compuesto por los auspiciadores del certamen, entre ellos el auspiciador principal, y evaluarán criterios como figura, piel, rostro, porte, elegancia y proyección.

7. Las candidatas seleccionadas como semifinalistas serán notificadas por correo electrónico y/o teléfono no más tarde del 10 de junio de 2016. Las fotos de las veinticinco (25) semifinalistas se publicarán en la edición de IMAGEN de septiembre de 2016. Se escogerán doce (12) finalistas, entre las cuales se elegirá la ganadora y tres (3) finalistas.

Las fotografías de las doce (12) finalistas se publicarán en la edición de IMAGEN de octubre de 2016.

8. La ganadora del certamen aparecerá en la portada de la revista IMAGEN en su edición de noviembre de 2016 y será entrevistada en esta.

9. El certamen es propiedad de la revista IMAGEN y de Latin Media House.

10. Entre los compromisos de las participantes que lleguen a la final y semifinal, están participar en actividades promocionales de la Revista IMAGEN, a realizarse entre los meses de septiembre y octubre de 2016.

Poll

60% regularly visit bank branches

Puerto Rico Residents Still Prefer Brick-&-Mortar Bank Branches Only 1% Use Online, Mobile Banking Services

BY ROSARIO FAJARDO r.fajardo@cb.pr

An estimated 60% of Puerto Rico residents (six out of 10 people) physically visit brick-andmortar bank branches on a regular basis, according to this week’s Gaither International survey. So far in 2016, the visit incidence has increased 5% in

is] a very low incidence.

In 2015, it was even less with mobile banking at 0.3% and online banking at 0.5%,” she added.

Through the years, bank branch visits have remained on top, and the reason is that people need a physical bank they can go to, she indicated.

“When it comes to dealing with their finances,

the third option would be a telephone banking service,” Dederick noted.

“Having a representative they can personally talk to or a physical location they can actually see and visit seems to make people feel more at ease when dealing with any monetary transaction; whether…applying for loans, withdrawing/de-

11. Cada candidata se compromete en conceder una sesión de fotografía de una hora de duración, más una entrevista exclusiva a Latin Media House y a la Revista IMAGEN si llegara a ganar cualquier otro concurso de belleza. Esta entrevista se concederá no más tarde de 5 días después de ganar dicho concurso.

12. Toda obligación de los auspiciadores con relación a este certamen, cesará con la elección de la ganadora.

13. Latin Media House, IMAGEN, y los demás auspiciadores incluidos en el cupón, sus agencias de publicidad, promociones y relaciones públicas, no se hacen responsables por garantías expresas o implícitas o por daños o pérdidas, directas o indirectas, causados a los ganadores, familiares o cualquier persona o propiedad relacionada con estos como resultado de la otorgación, el uso y/o disfrute de su premio.

14. La participación en el certamen y el recibo del premio constituirán una autorización para que IMAGEN, Latin Media House, su agencia de publicidad, promociones y relaciones públicas puedan utilizar únicamente las fotos publicadas en la revista IMAGEN durante el proceso del certamen sin compensación adicional alguna, el nombre, la voz y/o una representación visual de la ganadora en IMAGEN. 15. Las reglas e información de este certamen estarán disponibles en las oficinas de la revista IMAGEN, ubicadas en la Avda. Fernández Juncos 1700, Parada 26 1/2, Santurce, Puerto Rico.

16. Las fotos de las concursantes de LA CARA DE IMAGEN 2016 se publicarán en la página de Facebook de IMAGEN Nuestra Revista para elegir el “People’s Choice”. Las personas tendrán del 1 al 31 de julio de 2016 para votar. Solo se permitirá un voto por día. Solo se aceptarán votos con Ip’s de PR. La ganadora por voto popular recibirá como premio una entrevista de dos páginas a publicarse en la edición de noviembre 2016. La promoción no es de ninguna manera patrocinada, aprobada o administrada por, o asociada con Facebook.

17. Latin Media House y a la Revista IMAGEN se reservan el derecho de suspender y/o cancelar el sorteo, de conformidad con las disposiciones del “Reglamento Sobre Sorteos” de DACO. Además, Latin Media House y a la Revista IMAGEN se reservan el derecho de variar las reglas, fechas de comienzo y finalización del sorteo, términos y condiciones del mismo y los premios ofrecidos (por otro de igual o superior valor), cuando a su juicio y criterio así lo considere necesario, sujeto a las disposiciones del “Reglamento de Sorteos” de DACO. Latin Media House y a la Revista IMAGEN no serán responsables por cancelaciones, posposiciones de servicio, ni por circunstancias que puedan afectar el desarrollo o celebración del mismo, que sean fuera del control de Latin Media House y a la Revista IMAGEN. 18. Latin Media House y a la Revista IMAGEN no recopilará, usará o divulgará Información Personal de un participante que conozca es menor de trece (13) años de edad. Si Latin Media House y a la Revista IMAGEN adviene en conocimiento que ha recibido inadvertidamente información de un menor de trece (13) años de edad, Latin Media House y a la Revista IMAGEN procederá a eliminar dicha información de sus records. Latin Media House y a la Revista IMAGEN tomará todas las medidas de seguridad razonables para proteger la Información Personal contra perdida, destrucción, falsificación, manipulación y acceso y/o divulgación no autorizada. Latin Media House y a la Revista IMAGEN no garantiza que la Información Personal pueda ser perdida, destruida, falsificada, manipulada, accedida y/o divulgada por terceras personas o por razones fuera de su control. El participante releva a Latin Media House y a la Revista IMAGEN sus agencias publicitarias, su compañía promotora, matrices, afiliadas, agencias, o cualquiera otra entidad relacionada directamente con la operación de la compañía promotora de y contra toda responsabilidad por la perdida, destrucción, falsificación, manipulación y acceso y/o divulgación no autorizada de su Información Personal que suceda por causas fuera del control de Latin Media House y a la Revista IMAGEN.

Source: David Goehring

comparison to 2015.

However, online and mobile banking services are lagging far, far behind, experiencing only a 1% incidence among local residents.

“This may come as a surprise, considering that internet use is steadily increasing among the population,” said Melanie Dederick, a client service associate at Gaither International. “[This 1%

we notice people don’t like to take risks, and the population has a general perception that anything online seems to be less secure than an actual faceto-face interaction.”

This is proven when taking a look at the local population’s banking behavior; “if we take away physical bank branches, their second option would be automobile banking services and

positing money or making payments for their home, phone, water and electricity bills.”

Cooperatives are using this niche market to their advantage, Gaither reported, with a total 13% of respondents reporting a cooperative as their main financial institution. “Many of these coops do not even have a web presence or any sort of online service, simply

because they do not need it,” Dederick said.

Another main factor is that, as stated in a previous poll, the 65-plus age segment is increasing at a much faster rate than other age groups on the island (CB Feb. 18, 2016), and this age group mainly tends to physically visit branches and has a very low incidence of internet use in general, she indicated.

Millennials, however, seem to have fewer problems with online banking, as 33% reported using online banking services among those ages 18-34.

However, the millennial age group is not large enough on the island to have a significant impact on the online banking incidence, Dederick noted.

Another factor could be that 78% of the local population said they own a personal mobile phone, but only 45% use their mobile phones as a smartphone. Since mobile phone companies are making these smartphones more accessible, people often do not recognize that they own a smartphone or that they are using the internet when accessing applications on their phones, Dederick indicated.

The results are from Gaither International’s Media Brand Profiles tracking survey, which interviews more than 80 people daily from among a representative sample of Puerto Rico’s population 12 years and older. 䡲

Polling is conducted by Gaither International and the results are reported exclusively by CARIBBEAN BUSINESS.

THURSDAY, FEBRUARY 25, 2016

21

Law/Courts

P.R. Senate and judiciary wrestle over confirmation

Oronoz’s Confirmation to Puerto Rico’s Top Court Exacerbates Judicial Power Struggle

BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

The confirmation of Puerto Rico Supreme Court Associate Justice Maité Oronoz as chief justice has exacerbated a power struggle within the judicial branch.

The scenario is set for a showdown in the commonwealth’s top court, according to some observers.

A group of associate justices in the P.R. Supreme Court that were nominated by previous New Progressive Party (NPP) governors constitutes a majority in the top court and is trying to impose its control on the courts.

Her nomination was confirmed by the Senate without public hearings because a group of lawyers was headed to court to challenge it, contending the justices should select the Chief Justice, Sen. Ángel Rosa said.

Despite a 2014 law that broadened the powers of the chief justice to appoint officials to the different judicial branch offices, the NPP top court majority decided to appoint Juan Ernesto Dávila as Supreme Court secretary, effective March 1. The appointment came because current secretary Aida Ileana Oquendo Graulau resigned, effective Feb. 29, to take a position as Superior Court judge.

Supreme Court Associate Justice Anabelle Rodríguez blasted the new secretary’s designation, contending

that the new chief justice should be the one making the selection. The majority of the justices contend that they wanted to ensure an orderly transition once Oquendo Graulau leaves.

The power struggle to deter the PDP’s control of the judicial branch is apparently receiving help from the Legislature. NPP Reps.

Carlos “Johnny” Méndez and María Milagros Charbonier filed proposed amendments to the Puerto Rico Constitution that will allow the associate justices to select the chief justice.

Ramón Rosario Torres, executive director of the Lawyers Association, said that in 22 U.S. states, the chief justice is selected by the justices and not the governor. In seven states, the governor selects the chief justice, while in the rest, they are either voted upon in an election or selected in some other way.

Still, Rosario Torres said Oronoz has an outstanding academic record and has been associate justice for more than a year.

On Feb. 15, Gov. Alejandro García Padilla nominated Oronoz to lead the island’s top court. The chief justice nominee earned her bachelor’s degree at Villanova University, then went on to study law at the University of Puerto Rico. She also holds an L.L.M. from Columbia University.

Oronoz’s nomination was rejected by minority lawmakers in the Senate, but had the support of the

majority PDP senators.

As the first openly gay chief justice, Oronoz faced the rejection of certain religious organizations.

QUESTIONS ABOUT ORONOZ’S EXPERIENCE Not all legal organizations are happy with the appointment of Oronoz as chief justice. Puerto Rico Bar Association President Mark Anthony Bimbela criticized the governor for failing to use the association’s judicial appointment committees to analyze the nomination. The committee is composed of lawyers from small and large law firms who can analyze the nominee in an objective manner, rather than use partisan politics, Bimbela claimed.

“I cannot give an opinion about her performance because we have not analyzed it,” he said.

Nonetheless, Bimbela lauded Oronoz for being accessible and participating in activities involving lawyers. “That is important because we don’t want someone who believes [he or she] is a god on Olympus,” he said.

While he noted that Oronoz headed the “very complicated” San Juan Legal Affairs Office and has been associate justice for over a year, “we should be asking, is that enough” to be chief justice?

Nelson González, of the College of Notary Public Lawyers, supported Oronoz’s confirmation

because of her sensitivity to the problems faced by lawyers who are notaries. Oronoz, he said, was the dissenting opinion in a ruling involving a case that the Humacao Property Registry had not reviewed a document for its accuracy in 15 years and that the document had not been recorded. The top court declined to review the case because it said the Property Registry had to review the matter first.

“Oronoz is not only aware of the delays in recording documents, but also is sensitive to the situation,” González said.

FEW WRITTEN OPINIONS WHILE ON THE TOP COURT During the year and a half she has been in the top court, a sample of the opinions issued by the court shows that Oronoz, for the most part, has written very few opinions, opting instead to join opinions written by other justices.

Oronoz, for instance, joined the opinion written by then-Chief Justice Liana Fiol Matta who concurred with the majority opinion in the Sánchez Valle case now before the U.S. Supreme Court. The case involves two individuals who were convicted of gun violations by a federal court and want to prevent the local Justice Department from trying them in court for the same crimes.

Fiol Matta wrote that the local courts could not try individuals for crimes for which they were convicted by a federal court. However, Fiol Matta justified her opinion by saying that this would violate the double jeopardy clause of the commonwealth constitution

Puerto Rico Supreme Court Associate Justice Maité Oronoz

and not because it violated the double jeopardy clause in the U.S. constitution, as the majority opinion had ruled.

Oronoz also joined the opinion written by Associate Justice Rodríguez in the case of the Catholic Church Bishop vs. Justice Secretary on whether the church had to turn over to the Justice secretary documents involving cases of child abuse committed by priests.

The dissenting opinion written by Rodríguez stated that the Catholic Church had to turn over the documents, while the majority returned the case to the Superior Court for the judge to decide which documents were to be turned over to the Justice chief. The top court sided with the church, which had raised its right to privacy and religious freedom.

Oronoz dissented but did not write an opinion on another case that declared unconstitutional the law that required lawyers to join the Puerto Rico Bar Association as members.

On the other hand, Oronoz abstained from participating in Watch Tower vs.

Municipality of Dorado, which decided whether Jehovah Witnesses could access public streets in gated communities. The top court was asked by a judge in federal court whether it was possible under local law to have private streets and the top court ruled in the affirmative.

Oronoz also joined a dissenting opinion written by Rodríguez in Sara Cortés vs. Wesleyan Academy, when the majority opted not to intervene in the case in which the parents sued a school after their son was punished by the school— and his name was made public—for putting urine in the locker of another classmate. The parents sued for damages, contending their son’s privacy had been violated. The majority ruled the school was exercising its right to discipline students and that it has no jurisdiction in the case because there is a separation between church and state. 䡲

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THURSDAY, FEBRUARY 25, 2016

Mano a Mano Rafael Hernández Colón

Dr. Pedro Rosselló

FORMER GOVERNOR OF PUERTO RICO

FORMER GOVERNOR OF PUERTO RICO

Surpassing the Sovereign State Oxford University Press published last year Prof. David Rezvani’s book titled, “Surpassing the Sovereign State,” a study of 45 partially independent states (PITs)—Puerto Rico included—and their relationships with the core state. These PITs serve as solutions for some of the world’s most intractable nationalistic disputes and provide important capabilities to both their population and the core states. As a rule, the PITs optimize the capabilities of their population in wealth, security and self-determination.

In the globalized world we live in, the PITs have capitalized their range of sovereign powers and the synergies of partial integration with a larger sovereign state to become significant factors in international affairs. They are also adding to the diversity of polities within the international system as they increasingly proliferate at a rate that exceeds the emergence of sovereign states.

Puerto Rico’s relationship to the U.S., as a PIT under Rezvani’s definition, not only makes it possible to achieve economic development, but also optimizes our capabilities to attain it when we compare this arrangement with that of independence or statehood. The sovereign powers that we would gain through independence—full control over our economic variables, currency, foreign trade, etc.—are no substitute for the $22 billion annual flow of funds from the federal government, for the privileges, rights and immunities of American citizenship, or for our position as a regional economy within the broader market of the U.S. Under statehood, the present economic structural relationship with the U.S. would remain the same except for an increase of around 12% in the flow of

federal funds for social purposes—not for economic development—and a devastating decrease in our capabilities for self government by the fiscal presence of the federal government, which would suffocate our taxpayers through the outflow to the federal government of 70% of the tax dollars we now utilize to provide for the commonwealth’s budget. In addition, it would cripple and disable the tax incentives we now provide to induce economic development.

Statehood is not an option for Puerto Rico’s economic development. It is an illusion, a fantasy that ignores the farreaching structural variance in the level of economic development between the island and the mainland [U.S.]. Statehood economics is an exercise in denial at best, and in self-destruction at worse.

Statehood fundamentalism brought about the demise of Section 936 under the Pedro Rosselló administration. Instead of defending it against the habitual challenge from the U.S. Treasury, it chose to join the crowd of ideological naysayers rather than stand against them as my administration did successfully in 1985. More than 100,000 direct and indirect jobs were lost in Puerto Rico over the 10-year period under which the section was phased out. At the end of that period—2006—a recession set in. It has not abated.

The PIT arrangement with the U.S. provides the constitutional flexibility that statehood lacks. It allows Congress to redress its unreasoned repeal of Section 936 by providing Puerto Rico with the measures that once again will get Puerto Rico’s economy moving.

—Rafael Hernández Colón is a threeterm (12-year) former governor of Puerto Rico (1973-1976 and 1985-1992). He served as Justice secretary (1965-1967) and Senate president (1969-1972). He was president of the Popular Democratic Party for 19 years. 䡲

Is Economic Development Possible in a Partially Independent Territory?

To answer this question, we must first define our terms. A partially independent territory (PIT) is defined by author David Rezvani as a jurisdiction that has a distinct national identity but shares some of its sovereign powers with a sovereign core state. Based on this definition, I must state unequivocally that this does not describe the current political status of Puerto Rico: the so-called Commonwealth (Estado Libre Asociado).

Puerto Rico’s status, both under national and international concepts, is a classic colony (or an unincorporated territory in the federal lingo). Our island is now, and has always been, a colony, one that has remained subject to the plenary powers of the two metropolises that have ruled over us for more than 500 years: Spain and the United States of America. Currently, under accepted constitutional doctrines, Puerto Rico is a possession, belonging to, but not a part of the United States. A colony by any other name is still a colony.

Indeed, Puerto Rico represents the last enclave of modern colonialism remaining in the 21st century.

Therefore, if the question posed is whether economic development in our current dependent territory is possible in the long run, the answer is a resounding NO. The overwhelming evidence is dramatically obvious as we currently experience the fiscal, economic and

social bankruptcy of the colonial reality. Our colonial condition has created a limiting asymmetrical playing field regarding other states and citizens of the U.S. federation.

Rezvani’s description involving a “jurisdiction” that shares sovereign powers with a “sovereign core state” could more aptly be applied to the definition under international law of free association (república asociada). This is a valid option. But the answer to the question of whether economic development under this arrangement is possible remains uncertain. Certainly, there is no evidence in practice that this arrangement permits vigorous economic development when we examine the experiences of this relationship between the U.S. and the Republic of Palau, the Federated States of Micronesia and the Republic of the Marshall Islands.

So, if the question becomes under which options can significant development potentially occur, the body of evidence points to two models: an independent state or a federated state of the U.S. union. Which is better for the socioeconomic progress of our people?

That is the question!

—Dr. Pedro Rosselló is a two-term former governor of Puerto Rico (19922000). He was president of the New Progressive Party for 12 years. He holds a Master’s degree in Public Health, a Doctorate in Medicine, plus a Doctorate in Education, and is currently a lecturer and scholar at Universidad del Turabo. 䡲

Mano a Mano

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THURSDAY, FEBRUARY 25, 2016

David Rezvani, author of “Surpassing the Sovereign State: the Wealth, Self-rule and Security Advantages of Partially-Independent Territories” posits the concept of the partially independent territory (PIT) as one that has a distinct national identity but shares some sovereign powers with a sovereign core state. Two former governors— pro-commonwealth Rafael Hernández Colón and prostatehood Pedro Rosselló— debate the legitimacy of the PIT and ponder the implications of status in Puerto Rico’s economic development.

—The Editors

Rafael Hernández Colón’s View

Dr. Pedro Rosselló’s View

INTERVIEW CONDUCTED BY ISMAEL TORRES

INTERVIEW CONDUCTED BY PHILIPE SCHOENE ROURA

CB: SOME SUPPORTERS OF STATEHOOD POSIT THAT PUERTO RICO IS NOT A PARTIALLY INDEPENDENT TERRITORY. WOULD YOU SAY THAT PUERTO RICO IS A PARTIALLY INDEPENDENT TERRITORY AND THAT ECONOMIC DEVELOPMENT IS POSSIBLE UNDER THE COMMONWEALTH STATUS? RHC: David Rezvani developed the concept of partially independent territories in order to encompass the wide variety of associations that distinct peoples have with core countries throughout the world. Puerto Rico is one of the 45 countries he studied that met his criteria; this being Rezvani’s concept, we must abide by his determination. There is no doubt that commonwealth—with its self-government, fiscal autonomy, free trade with the U.S., plus American citizenship by birth—makes possible economic development under this status.

CB: YOU POSIT IN YOUR COLUMN THAT PUERTO RICO IS NOT A PARTIALLY INDEPENDENT TERRITORY [PIT]. COMMONWEALTH SUPPORTERS POSIT THAT IT IS AND THAT ECONOMIC DEVELOPMENT IS POSSIBLE AS A PIT. WHAT DO YOU SAY TO THAT NOTION? PR: I think it is time that we realize that so-called autonomy is an illusion. The relationship of Puerto Rico with the United States is clearly defined in Public Law 600, which essentially is a delegation of powers that reside in Congress—that Congress can delegate. On the other hand, Congress giveth, but also Congress may take away. This was noted in the proposal made by Sen. [Orrin] Hatch and other senators to the effect of establishing a control board in Puerto Rico, which would have definitely taken away some of the powers that Congress has delegated. So, essentially, I think we have to recognize that people are laboring under a longstanding illusion that there is something about intrinsic powers to the territory, which is not correct.

And not the reality.

CB: UNDER REZVANI’S THEOREM, A CORE STATE WITH A LARGER ECONOMY, POPULATION AND MILITARY SURRENDERS SOVEREIGNTY TO A NATIONALISTICALLY DISTINCT PEOPLE. NOW THAT THE NAVY HAS EXITED PUERTO RICO, HAS THE ISLAND LOST ITS GEOPOLITICAL VALUE TO THE CORE STATE? RHC: The geopolitical value of Puerto Rico to the United States stands from the geographical location of the island at the heart of the Caribbean, inhabited by almost four million Puerto Ricans who are culturally part of Latin America, but politically are citizens of the United States. The Navy’s exit does not change that situation.

RAFAEL HERNÁNDEZ COLÓN Continues on page 24

CB: UNDER REZVANI’S THEOREM, YOU HAVE A CORE STATE WITH A LARGER ECONOMY, POPULATION, MILITARY SURRENDERING SOVEREIGNTY TO A NATIONALISTICALLY DISTINCT PEOPLE. NOW THAT THE NAVY HAS EXITED PUERTO RICO, HAS THE ISLAND LOST ITS GEOPOLITICAL VALUE TO THE CORE STATE? PR: That is a theme that I tried to develop extensively in my book—“The Last DR. PEDRO ROSSELLÓ Continues on page 24

24

RAFAEL HERNÁNDEZ COLÓN Continues from previous page

THURSDAY, FEBRUARY 25, 2016

DR. PEDRO ROSSELLÓ Continues from previous page

Enclave of Colonialism.” Among a very definite element that a metropolis seeks in its colony is the advantage—military and geopolitical—that a colony can provide.

That was the overriding importance of Puerto Rico when the United States acquired the island from Spain. That has changed, as has the geopolitical importance of Puerto Rico. At one point, there was a significant military establishment here in Puerto Rico because it was important to have that as a base of operations. But I must say that the nature of conflicts and war has changed dramatically. Some of the things that were practiced here in Puerto Rico were the amphibious landings, which were last implemented in Korea. Today, war is not the same. So now we have the drones and we have the conflicts through the terrorists who are embedded in the civilian population. It is a completely different thing—the military importance of Puerto Rico for the metropolis, for the United States, has diminished remarkably. Also the geopolitical importance. Puerto Rico during the height of the Cold War had an important role in this chessboard of geopolitics. That has also been greatly diminished with the implosion of the Soviet Union, with the triumph of the ideal of capitalism over the ideal of communism. So again, that factor has been diminished in Puerto Rico. There is no doubt, therefore, that the colony as such, as a territory, is less valuable from the standpoint of those two factors—in addition to other factors, such as the fact that the colony is not as economically profitable as it used to be and that it is in the midst of a crisis of governability.

So, all elements that were important in maintaining a colonial relationship for the metropolis have been diminished and therefore it [the metropolis] is less valuable under the current status of a colony.

CB: ECONOMIC DEVELOPMENT WAS POSSIBLE UNDER OPERATION BOOTSTRAP AND SUSTAINABLE ECONOMIC DEVELOPMENT WAS ALSO ACHIEVED UNDER YOUR TENURES AS GOVERNOR—HOW WAS THIS POSSIBLE? RHC: Economic development was possible during Operation Bootstrap and my various administrations because economic development was the top priority during that time in order to generate the wealth necessary for education, social justice and the general welfare. Given that priority—totally distinct from the statehood priority of the opposing party—competent administrators such as Teodoro Moscoso vigorously and creatively used the tools such as Sections 931 and 936 of the Internal Revenue Code to promote industrial development in Puerto Rico. The results of these untiring efforts day in and day out over time yielded dramatic results.

CB: SOME OBSERVERS POINT TO SECTION 936 AS A KEY DRIVER OF ECONOMIC DEVELOPMENT MADE POSSIBLE PRECISELY BECAUSE OF TERRITORIAL STATUS. DO YOU SEE ANY DRIVERS OF ECONOMIC DEVELOPMENT POSSIBLE UNDER THE CURRENT STATUS? RHC: Territorial status is an ambiguous, politically disparaging concept used by the opponents of commonwealth. In order to avoid ambiguity, I will refer to Puerto Rico by the name it bears our Constitution: Estado Libre Asociado, which in English has been translated to “commonwealth.”

The drivers of economic development, as pertains to the Puerto Rican economy, are investments. Consumer demand can stimulate growth to move mature economies out of a recession, but this is not the answer to economic development in Puerto Rico, which is a regional part of the mature U.S. economy. The answer for economic development in our economy, with its 39% labor-force participation rate and 12% rate of unemployment, is major investments in productive activities that can create thousands of jobs. Such investments must come from corporate America. The current status is the only one that provides the location-based advantages necessary for these

CB: EVEN IF PUERTO RICO WERE NOT A PARTIALLY INDEPENDENT TERRITORY, AS YOU POSIT—ECONOMIC DEVELOPMENT WAS POSSIBLE UNDER OPERATION BOOTSTRAP AND WE HAD SUSTAINABLE ECONOMIC DEVELOPMENT UNDER YOUR TENURE. HOW DO YOU EXPLAIN THAT? PR: Well, because the world at that time was very different from the world currently. The current scenario is one of globalization. In the previous scenario—in the mid-20th century—the model that was established with us as a colony had some components that gave us an advantage. Under that model, that world, which still had very high barriers to international trade, made attractive Puerto Rico’s access to the very large U.S. market. Products made here in Puerto Rico could have entrance into a very large market. That has essentially been erased by the free-trade agreements— starting with Nafta [the North American Free Trade Act] at one point, which gave the same opening to others. A second factor was low wages, which were a significant factor in production. Now, even though Puerto Rico has lower wages and there is not an abysmal gap, the competitive advantage of low labor costs is also being erased. Finally, there were also some federal tax concessions—most importantly, the Section 936 tax dispositions, which basically were instituted only for possessions.

CB: DURING THE MANY INTERVIEWS WE HAVE DONE ACROSS THE YEARS, YOU TOLD ME THAT YOU HAD ORIGINALLY SUPPORTED SECTION 936—40% OF THE MONEY IN PUERTO RICO’S BANKS WAS FROM SECTION 936 FUNDS—BUT IT BECAME UNTENABLE FOR YOU TO DEFEND IT.

“It is impossible to labor under the premise that under a political relationship where you are submitted, where the power equation is asymmetrical, that you will have the ability or the possibility to have sustained economic development.”

DR. PEDRO ROSSELLÓ Continues on next page

25

THURSDAY, FEBRUARY 25, 2016

RAFAEL HERNÁNDEZ COLÓN Continues from previous page

DR. PEDRO ROSSELLÓ Continues from previous page

corporations to establish in Puerto Rico because of the flexibility commonwealth provides under the U.S. Constitution.

PR: Well, it becomes untenable when the benefits are great for the banks, the benefits were great for the pharmaceuticals, but not for the people. So, if you are coming from the perspective of the banks—sure it is great. If you are coming from the perspective of the large multinational corporations, who would argue against it. And, in fact, they were the major resistance to the change in political status of Puerto Rico.

CB: IS IT ESSENTIAL TO HAVE A CHANGE IN STATUS TO ACHIEVE ECONOMIC DEVELOPMENT OR CAN IT BE OBTAINED BY MAKING AMENDMENTS THAT WOULD PROVIDE ESSENTIAL MECHANISMS IN THE U.S. CONGRESS THAT WOULD LEAD TO ECONOMIC DEVELOPMENT? RHC: This question, as to the need for a change of status to statehood or independence in order to resolve a current problem, demonstrates the dysfunction of our political system. For more than a century, the statehood and independence parties have urged this argument upon us with no positive results. The only consequences have been to sink our politics into the quagmire of sterile debate.

Our fiscal, financial and economic problems are real and immediate. Fantasizing about a change of status in order to solve these problems belongs to Gabriel García Márquez’s Macondo [in reference to the small town in the magical realist novel “One Hundred Years of Solitude”]. Strategic daydreaming under such premises will only sink us deeper into the swamp of our predicament.

Neither statehood nor independence provides better structural environments in our economic development. But this matter is not even worth debating because these options are unreal. Independence lacks meaningful political support in Puerto Rico, so this option is unreal. Statehood is also unreal because it is gridlocked with commonwealth when it comes to political support, and the economic and cultural differences between Puerto Rico and the states will command and prolong an uncertain process in Congress that makes a change to statehood not only improbable, but also impossible as a solution to our present problems. 䡲

“Our fiscal, financial and economic problems are real and immediate.

Fantasizing about a change of status in order to solve these problems belongs to Gabriel García Márquez’s Macondo [in reference to the small town in the magical realist novel ‘One Hundred Years of Solitude’].”

CB: IT WOULDN’T BE POSSIBLE TO HAVE SECTION 936 IF WE WERE A STATE. PR: Because it only applies to possessions. In other words, if you are independent, it doesn’t apply, if you are a state, it doesn’t apply. It only applies to territories, and that is why there was such a strong sector supporting Section 936 because of the extraordinary benefits that they received.

CB: WOULDN’T IT HAVE MADE SENSE NOT TO THROW OUT THE BABY WITH THE BATHWATER, BECAUSE YOU WERE TRYING TO OBTAIN SECTION 30-A WAGE CREDITS TO REPLACE SECTION 936 OR PARITY UNDER HILLARYCARE AS A QUID PRO QUO, BUT WE GOT NEITHER? PR: First of all, the last point that you bring up, the healthcare reform under former President Clinton, never occurred. It never happened. It was way before the midterms.

In addition to that, the other point that you make—we tried to get some benefits that were for the people. Section 936 was based on the concept of a tax credit against your earnings—your earnings would be tax-free. We tried to change the definition of those credits so they would be based on the costs of labor—of the salaries that they provided; that benefit would have gone to the workers directly, not to the corporations. That was one of the benefits we were trying to tie the benefits to. So it was different from Section 936. The other element that we tried to tie down was the element of research and innovation and that there would be credits for whatever research and innovation was conducted here in Puerto Rico.

So 30-A was an attempt to redefine what the credits were granted for. Before, with Section 936, it was open benefits based on whatever earnings you made. We sought to tie it to salaries, labor costs, to training of the labor force and to research and development.

CB: DO YOU SEE ANY DRIVERS OF ECONOMIC DEVELOPMENT UNDER THE CURRENT STATUS THROUGH CONGRESSIONAL AMENDMENTS THAT WOULD OFFER A VEHICLE SIMILAR TO SECTION 936, OR IS THERE A CATEGORICAL IMPEDIMENT TO GROWTH UNDER THE CURRENT STATUS? PR: It is impossible to labor under the premise that under a political relationship where you are submitted, where the power equation is asymmetrical, that you will have the ability or the possibility to have sustained economic development. So, therefore, the current territorial status is an impediment to any hope of economic development under the current status. We have been building Puerto Rico solely as a tax haven. Puerto Rico’s only worth is tax breaks. We had Section 936, but the benefits did not trickle down to the general population. We now have [Acts] 20 and 22; they are a morphing of those tax havens, which leave very little trickle down of tax benefits to the people.

This new definition of Puerto Rico as a tax haven posits that our only worth is to give tax breaks. I suggest we are doing things upside down. We have to invest in people first—in their education, in training, in health. And once we do that, and we develop a society that is well-educated, that is healthy, where law and order is respected, then economic progress will follow. Under the current situation, under the current model—as we have seen today with this full-blown crisis—you can have no hope that you can achieve significant economic development.

CB: IS IT ESSENTIAL TO HAVE A CHANGE OF STATUS TO ACHIEVE ECONOMIC DEVELOPMENT THEN? PR: Absolutely, the colonial model is irretrievably flawed; it limits the potential, and those who don’t believe it must only look at some of the solutions presented to deal with the crisis—parity in Medicaid, parity in Medicare, equal treatment in federal government programs. All of these are constitutional and legal determinants and apply to all states. So the solution is very simple—if that is what you want and those are the powers that we seek, then statehood provides those powers because they apply by law and not by concession of Congress. 䡲

26

THURSDAY, FEBRUARY 25, 2016

Politics

P.R. Republicans prepare for local primaries March 6

Low Turnout Expected at GOP Primaries in Puerto Rico

BY ISMAEL TORRES i.torres@cb.pr

Due to a significant reduction in the number of polling stations—from 3,206 to 110—in addition to the change in the date for Puerto Rico’s primaries, participation in the island’s GOP primary will be quite low.

The number of polling stations have been significantly cut because of the Puerto Rico government’s

cash crunch. Local Republican officials had requested nearly $1 million for their primaries, but only about $300,000 was assigned by the government. However, it should be noted, in terms of U.S. politics, that most residents in Puerto Rico are Democrats.

This was announced by Edwin Mundo, the local Republican Party’s electoral commissioner, who said it will be difficult to get

voters who live in more remote neighborhoods, such as Ángeles and Guajana in Utuado, to come down and vote at the sole voting center that will be open in the downtown area.

“There is no doubt that participation in these primaries will be significantly lower than in the 2012 primaries when some 126,000 people voted in the local Republican primary, where there were 3,206 open voting centers and we also had

2016 U.S. Presidential Primary Schedule Feb. 23-March 6, 2016 DATE

STATE

DELEGATES

TYPE

Tuesday, Feb. 23

Nevada

30

Closed R Caucus

Saturday, Feb. 27

South Carolina

59

Open D

Tuesday, Mar. 1 (Super Tuesday)

Alabama Alaska American Samoa Arkansas Colorado Democrats Abroad (Vote March 1-8) Georgia Massachusetts Minnesota Oklahoma Tennessee Texas Vermont Virginia Wyoming

60 D*, 50 R** 28 10 37 D, 40 R 79 D, 37 R

Open R Caucus Open D Open Closed Caucus

17 116 D, 76 R 116 D, 42 R 93 D, 38 R 42 D, 43 R 76 D, 58 R 252 D, 155 R 26 D, 16 R 110 D, 49 R 29

Open Mixed Open Caucus Closed Open Open Open Open Closed R Caucus

Saturday, Mar. 5

Kansas Kentucky Louisiana Maine Nebraska

37 D, 40 R 45 58 D, 47 R 23 30

Closed Caucus Closed R Caucus Closed Closed R Caucus Closed D Caucus

Sunday,

Maine Puerto Rico

30 23

Closed D Caucus Open R

Mar. 6

*D Democrat **R Republican Source: Websites of the Democratic and Republican parties

Out of the 12 candidates who started in the race, only three will be left as a real option for the Puerto Rico primaries: Donald Trump, Marco Rubio and Ted Cruz.

—Edwin Mundo, Puerto Rico Republican Party electoral commissioner primaries for all political parties,” Mundo said.

The Puerto Rico Republican Party will hold its precinct caucus primaries on March 6 to choose 20 delegates, who will join the three superdelegates attending the Republican National Convention July 18-21 at Quicken Loans Arena in Cleveland.

JEB BUSH LEAVES THE RACE AFTER COMING IN FOURTH IN SOUTH CAROLINA The exit of Jeb Bush, the former governor of Florida, from the Republican presidential race represents a new scenario for voters in Puerto Rico who will participate in the Republican Party primaries next March, as Bush was one of the favorites in the local race.

Jenniffer González, chairwoman of the Republican Party in Puerto Rico, lamented Bush’s decision, who she described as a great ally in causes related to Puerto Rico.

“Definitely for us in Puerto Rico, it is a sad decision because it involves a friend of Puerto Rico. We will see what we will do,” said González, adding that in the coming days, she will announce which candidate she will support in the local primaries.

Earlier, Mundo had anticipated that support among local Republican voters was concentrated on basically three contenders: Jeb Bush, Ted Cruz and Marco Rubio. Mundo predicted that Rubio would win the race in Puerto Rico.

Mundo said that after Super Tuesday on March

1 and additional primaries on March 5, the scenario for candidates will be clearer. On Super Tuesday, some 632 delegates will be chosen in 12 states: Texas primary (155 delegates); Georgia primary (76 delegates); Massachusetts primary (42 delegates); Alabama (50 delegates); Alaska (28 delegates); Arkansas primary (40 delegates); Colorado caucus (37 delegates); Minnesota caucus (38 delegates); Oklahoma primary (43 delegates); Tennessee primary (58 delegates); Vermont primary (16 delegates); and Virginia primary (49 delegates).

On March 1, 155 delegates will be chosen in four other state caucuses: Kansas (40 delegates); Kentucky (46 delegates); Louisiana primary (46 delegates); and Maine (23 delegates). 䡲

THURSDAY, FEBRUARY 25, 2016

27

Insurance

No taxes on exporting professional services

New Law Provides Tax Exemptions for International Insurers, Financial Entities

BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

International financial entities and insurance companies will not be required to pay sales tax for exporting their professional services after Gov. Alejandro García Padilla signed into law Act 1 of 2016, which contains amendments to the Puerto Rico Internal Revenue Code.

With the enactment of Act 72 of 2015, Puerto Rico is slated to change its current 11.5% sales & use tax to an 11.5% valueadded tax in April 2016.

Act 72 was amended through Act 159 of 2015; one of the amendments was to clarify that international financial entities and insurance companies organized under Act 20 of 2012, the Law to Promote the Export of Services, would be exempt from the tax since they are local and/or foreign firms that export services.

The amendments seek to promote local exports and attract foreign companies seeking to export their services from Puerto Rico because foreign capital brought by these companies helps activate the local economy.

While Act 159 states that services that are exported will be exempt from the tax—including those of professional services— there was no mention that exported services provided by international

financial services and insurance companies would also be exempt.

The change to include these entities was made through Act 1.

“This happened even though the goal of the legal framework allowing for the organization of international insurers and financial entities is to attract foreign capital to export and activate the economy,” according to the text of Act 1.

Insurance companies operating under Act 399 of 2004, known as the International Insurers & Reinsurers Act of Puerto Rico, which is aimed at attracting foreign investors, currently benefit from a number of tax exemptions. These include exemptions from premium taxes; exemptions on dividends and other profit distributions made by the international insurer and international insurer holding company; exemptions on municipal franchise, real and personal property taxes; exemptions from withholding taxes on payments of dividends and other profit distributions made to third parties; exemptions from filing tax returns with the Puerto Rico Internal Revenue Service; and a $1.2 million tax exemption on net income.

International financial entities, meanwhile, also benefit from tax incentives that include a 4% fixed income-tax rate;

total tax exemptions from real and personal property taxes on assets; and total tax exemptions from the gross receipts tax assessed by municipalities on the sales volume of their businesses.

Because of the interaction among Act 20, Act 399 and Act 273 of 2012, known as the International Financial Center Regulatory Act, in the effort to attract foreign investors to Puerto Rico, the central government sought to amend the local revenue code to ensure uniformity in the law.

All professional services for entities that do business with other entities or persons outside of Puerto Rico, or to yield income outside of Puerto Rico, were already exempt from the sales tax.

Those exemptions not

Gov. Alejandro García Padilla

only cover professional services, but also the socalled taxable services, as well as services rendered to other merchants. Also exempt from the tax are all services provided to entities that operate under the Economic Incentives Act, the Green Energy Incentives, the National Bank Act and the Export Services Law. Through Act 72, the tax reform is being implemented in a three-

While Act 159 states that services that are exported will be exempt from the tax, no mention was made of services exported by international financial services and insurance companies.

The change to include these entities was made through Act 1.

phase process. On July 1, 2015, the total rate for the sales & use tax (IVU by its Spanish acronym) was increased from 7% to 11.5%. On Oct. 1, 2015, the base for the IVU was expanded to include a new designated professionalservices tax and a business-to-business (B2B) tax. Finally, on April 1, 2016, the value-added tax will be implemented at a rate of 10.5%. These major changes were enacted in an effort to address Puerto Rico’s budget deficit.

As opposed to the rules in a number of other value-added jurisdictions, in Puerto Rico it is required for the tax to be shown separately on the retail receipt. Some transactions will be subject to tax, albeit at 0%. For example, goods for export and certain sales to manufacturers will receive the 0% treatment.

There are also some transactions types outside the value-added tax (VAT, or IVA by its Spanish acronym). For example, intangibles (excluding computer programs),

electricity and property of the Puerto Rico government are not subject to the IVA. Additional exclusions include articles introduced into foreigntrade zones, alcoholic beverages deposited in a bonded warehouse, certain promotional materials, services provided between affiliated entities, services rendered to the Puerto Rico government and delivery of donated goods.

Exemptions from the value-added tax include sales of prescription medicines, unprepared food and food ingredients, real property, commercial real property leases, nonprofit sales of items acquired through donation, printed books, certain hotel-room charges, petroleum derivatives, and services that qualify for Medicare, Medicaid or the Puerto Rico government’s Health Insurance Plan. To the extent a transaction is subject to the IVA, the person who introduces the article or service to Puerto Rico is responsible for the tax. 䡲

28

THURSDAY, FEBRUARY 25, 2016

Smart Money

Acts 20/22 spurring investment in tourism properties throughout Puerto Rico

Acts 20/22 Initiative Stands to Benefit Puerto Rico Tourism and Real Estate Bevy of Investments in High-End Properties Signal Continued Confidence Despite Economic Doldrums

BY DENNIS COSTA d.costa@cb.pr

Amid Puerto Rico’s economic and fiscal crisis, one of the few shining stars in the island’s business environment has been tourism. Seemingly bucking every downward trend found in other economic sectors, tourism numbers in Puerto Rico have improved in recent years, partly by riding the wave of a general upsurge in the industry worldwide and particularly in the Caribbean, but also due to noteworthy developments on the island itself.

Although much has been discussed about the benefits, or lack thereof, that Act 20 [Export Services Promotion Act] and Act 22 [Individual Investors Incentives Act] provide to the island when it comes to economic development and job creation, a seldom discussed aspect of these incentives involves the acquisition and redevelopment of many hospitality properties by Acts 20/22 recipients.

By the same token, real estate, one of the sectors that has been hit the hardest during the island’s economic quagmire, has seen a rebound in some key niches, again due in part to the

acquisitions that Acts 20/22 recipients have carried out.

Noteworthy examples in this regard include investors such as John

Condado Vanderbilt and La Concha Renaissance Hotel, as well as the adjoining Condado Vanderbilt condominiums, in San Juan’s upscale Condado

of Acts 20/22 incentives was the topic of a panel held during the latest Puerto Rico Investment Summit, during which several local real-estate players discussed the ongoing rebirth of real estate in tourism-heavy areas.

Moderating the panel was Margaret Pena Juvelier, president of Sotheby’s International Realty Puerto Rico. “I have been here for three and a half years and have seen tremendous growth in this period of time,” she said.

RIGHT TIME TO BUY OR LEASE The panelists who participated included Ryan G. Christiansen, president & broker at Christiansen Commercial Real Estate, who said “the value of commercial and industrial properties has decreased over the past few years and, if you have the liquidity and are ready to act quickly, this is the right time to buy or lease in Puerto Rico.

“Certain properties are being repositioned, as

From left: Richard Meruelo, president of USA Capital Management; Brian Tennenbaum, regional director of Morgan Reed Puerto Rico; Federico Stubbe, chairman & CEO of PRISA Group; Sam Kirschner, partner & COO at CPG Real Estate; Ryan G. Christiansen, president of Christiansen Commercial Real Estate; and Margaret Pena Juvelier, president of Sotheby’s International Realty Puerto Rico

Paulson, who acquired a majority stake in St. Regis Bahía Beach Resort & Golf Club in late 2013 and intends to invest another $500 million in lots and residences over a 10-year period. Paulson has also invested $260 million in the redevelopment of the

district. Another highprofile investor, Nicholas Prouty, has invested more than $450 million in Marina Puerto del Rey in Fajardo, the largest marina in the Caribbean.

Fittingly enough, the confluence of real estate and tourism in the wake

“The current market climate is perfect and attractive to sophisticated buyers who will recognize the great opportunity Puerto Rico has to offer and can maximize their investments with even more competitive pricing.”

lending institutions are disposing of large loan portfolios and pushing for an improved credit market,” he added. Christiansen also noted that Puerto Rico is transitioning away from the stagnant real-estate market it has experienced in past

years, as commercial and industrial real-estate opportunities, particularly with regard to tourism, are now more readily available.

Meanwhile, Sam Kirschner, partner & COO at CPG Real Estate, highlighted the success of one of the firm’s emblematic projects, the Paseo Caribe housing/commercial complex in San Juan’s Puerta de Tierra area.

Last October, CPG completed residential construction at Paseo Caribe’s drawn-out development project, which has been conducted on and off for more than decade.

The complex consists of three residential towers—Bahía Plaza, Caribe Plaza and Laguna Plaza, with 82, 50 and 33 units, respectively—and a commercial area.

When it comes to the waterfront lofts at Bahía Plaza, billed as unique to Paseo Caribe and San Juan overall, demand has been strong from the outset: 11 of 21 were optioned prior to the completion of construction, said Kirschner.

“Sales of Bahía Plaza’s more traditional flat-style residences have also been strong, and new owners have already begun to move in to their homes,” he added.

Federico Stubbe, chairman & CEO of local development firm PRISA Group, gave his views from the perspective of one of the most active developers currently working, having had a hand in the construction of highend hospitality properties such as Dorado Beach Ritz-Carlton Reserve, Continues on page 29

THURSDAY, FEBRUARY 25, 2016

29

Smart Money which was developed with CPG. Alongside his son Federico Stubbe Jr., the developer has also built several other hotels in the San Juan metro area, most notable the Hyatt Place and Hyatt House hotels in the Puerto Rico Convention Center District.

“There are great opportunities in San Juan, which needs a lot of tourism structure to be competitive,” Stubbe said. “As builders, we are working on something to create a better San Juan experience. We must think globally, as

our competition isn’t the hotels in Puerto Rico but [those around] the world, especially Florida.”

The Morgan Reed Group entered Puerto Rico in April 2014 and immediately began to focus its investment portfolio in the districts of Old San Juan, Santurce, Miramar, Isla Verde, Ocean Park and Condado, said Brian Tenenbaum, the firm’s regional director for Puerto Rico.

The company, which also has invested in downtown areas in Chicago, Cleveland and Hartford,

Paseo Caribe

Conn., sees great promise in the San Juan metro area and as a result, has been particularly aggressive in snatching up properties and lots for

redevelopment. Currently, its portfolio is divided as follows: 64% commercial, 15% residential, 10% retail and 11% industrial properties.

Real estate, one of the sectors that has been hit the hardest during the island’s economic quagmire, has seen a rebound in some key niches.

Dorado Beach Ritz-Carlton Reserve

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THURSDAY, FEBRUARY 25, 2016

Latin American Affairs The New Frontier: Latin America Poised to be the Next E-commerce Powerhouse

BY JUAN A. HERNĂ NDEZ j.hernandez@cb.pr

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E-commerce retail sales, both online and mobile, are estimated to reach $1.67 trillion worldwide in 2015, according to independent market researcher eMarketer. com. Latin America represents 4.2% of that total and while its share of the global market is estimated to decrease slightly in the near future, its e-commerce sales are expected to increase by more than $16 billion between 2015 and 2018.

The website eMarketer.com identifies Latin America as the fourthlargest retail market in the world, with a retail growth rate that dipped slightly from 5.5 % in 2014 to an even 5% in 2015. But on the other hand, growth in retail e-commerce sales in Latin America was estimated to reach almost 23% for 2015. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re in the midst of a profound structural shift from physical to digital retailâ&#x20AC;Ś Itâ&#x20AC;&#x2122;s clear that a growing share of the retail pie in the specialty retail categories is being captured by e-commerce,â&#x20AC;? said JeďŹ&#x20AC; Jordan, of the venture capital firm Andreessen Horowitz, in 2014.

Of course, Jordan was referring specifically to the digital retail market in the U.S., after assessing the behavior of both physical and digital retail

markets during the 2013 holiday season. But a similar situation is happening in Latin America today.

Since digital retail sales are but a fraction of total retail sales in the region and the fact that, according to the World Bank, 30% of the population is considered middle class, there is great potential for significant growth, according to some analysts.

Still, growth in e-commerce sales has its challenges in Latin America.

According to practicalecommerce.com, most consumers and potential e-customers in the region are particularly skeptical about delivery and the quality of products available. Also, more than half of the population does not make use of banking services, preferring cash transactions instead. But these challenges are not insurmountable.

MercadoLibre.com is an Argentine online marketplace dedicated to e-commerce and online auctions, and is by far the largest e-commerce retailer in the region with 45.22 million unique visitors a year. The concept of MercadoLibre.com is similar to eBay.com; in fact, eBay is the largest common stocks owner in MercadoLibre, with 18.4% of total common stocks.

MercadoLibre is a marketplace where merchants and customers

sell and buy merchandise from diďŹ&#x20AC;erent countries, avoiding the usual difficulties of international commerce (such as taxes, fees, duties, shipping charges, etc.). These matters are taken care of by the marketplace, usually by using alternative payment methods for people without credit or debit cards, or no checking accounts, and resorting to private independent mail delivery services (i.e., FedEx, UPS, DHL, etc.) to guarantee delivery of the goods.

According to eMarketer. com, digital sales will go beyond $3.5 trillion by 2019 and Latin America is estimated to buy $87.28 billion, or 4.1%, of that total. This is a relatively small market share, but represents a significant growth when compared to current digital sales.

Still, some analysts believe the surge in ecommerce transactions in Latin America may not necessarily happen in the near future since the region had the second lowest digital sales worldwide in 2014, with only the Middle East and Africa selling less. But as with all emerging markets, however small the need for foreign quality goods, there is a clear tendency for the need to increase.

Success is then for those who can find solutions to the challenges and oďŹ&#x20AC;er their goods to a market on the rise. 䥲

THURSDAY, FEBRUARY 25, 2016

31

Tourism

Luxury private-island resorts can also fall on hard times

Scrub Island Bounces Back After Being Hit by Economic Crisis Private Island Resort Refinances and Carries out $18M Capital Improvement Project After Emerging from Bankruptcy

BY DENNIS COSTA d.costa@cb.pr

It was poised to become a little piece of paradise.

A 230-acre private island

member of Marriott’s exclusive Autograph Collection in the Caribbean.

Apart from the resort, several villas, each ranging from two to four bed-

during two events in San Juan and Mayagüez. The whole price tag for the project hovered around the $150 million mark.

Then reality knocked on

Business. “In some cases, they even had to walk out on their deposits.”

Many of the units were left half-built for several years, and Collier’s firm had to renegotiate with the banks. “It was a really difficult time for everyone involved,” he said.

The hotel itself, dubbed Marriott International Autograph Collection Scrub Island Resort, Spa & Marina, opened in 2010 despite the economic

also features a 55-slip marina and a spa dubbed Ixora.

However, the awards did not stop the hotel from getting into serious debt trouble. In November 2013, the resort filed for Chapter 11 bankruptcy in Tampa, Fla. This led to a lengthy battle with the resort’s senior lender, FirstBank Puerto Rico, which tried to have the case thrown out so it could foreclose on the property and get back some of the development’s $120 million debt.

Negotiations with the bank went on, and the resort eventually restructured its debts and emerged from Chapter 11 in November of last year.

and gave them their money back, and the rest of the funds are going toward finishing those villas.” Of note is that nearly 80% of the original buyers of the project are Puerto Ricans, Collier added.

The hillside villa homes feature master suites, gourmet kitchens, spacious living and dining areas with custom furnishings, works by local artists, natural stone and wood floors, private pools and outdoor terraces with views of the Caribbean and surrounding islands.

As for the hotel itself, upgrades and renovation of the resort pool were recently completed, along with the addition of

“Of note is that nearly 80% of the original buyers of the project are Puerto Ricans.”

— Joe Collier, president of Mainsail

Marriott International Autograph Collection Scrub Island Resort, Spa & Marina

a few miles off the east coast of Tortola in the British Virgin Islands, Scrub Island was touted as the first luxury resort development in the destination in more than 15 years, and as the first

rooms, were being built with the aim of becoming vacation homes. When construction began on the resort in 2004, the developer, Mainsail Lodging & Development, pre-sold more than 20 of the villas

the door. When the global financial crisis hit in 2007, the building progress at the villas was affected.

“People started backing out of their contracts,” Joe Collier, president of Mainsail, told Caribbean

doldrums, and shortly after won various industry accolades, among them Travel + Leisure’s 500 World’s Best Hotels for 2015 and an induction into Trip Advisor’s Hall of Fame. The 53-room hotel

The event signaled a second life of sorts for the property, especially after the owners were able to secure an additional $18 million from private funds.

Nowadays, the private island resort is in full recovery mode, with the new funding to be used to complete a number of key development projects and other obligations, Collier said. “We acquired the half-built villas from their respective owners

a VIP sun deck and cabana on Pavilion Beach overlooking the marina. Ixora Spa was also relocated to a luxury villa in closer proximity to Marina Village.

The resort’s capital improvement plan will also encompass building and finishing roadways, increasing on-island transportation and completely redeveloping the irrigation system while enhancing landscaping around the entire resort. 䡲

(From Left) Cynthia Ruiz, Human Resources Director, Yasel Morales, Director of Technology, José Morales Laboy, Director of Quality, José Vega, Director of Operations, Evelyn Rivera, Head of Finance.

Genesis Security Services Garners ISO 9001 Certification for its World-class Quality Management System

BY LAURA RENTASGIUSTI

innovation and provide solutions to global challenges.

Maintaining the highest posGenesis Security Services, sible standards of quality and Inc.’s (GSS) commitment to the excellence is embedded into highest quality standards recent- GSS’s corporate DNA, reflected ly afforded this leading integrat- in the company’s core values of ed security solutions company trust, integrity and excellence the ISO 9001 certification by the and put into practice by manInternational Standards Orga- agement and employees alike. nization. ISO is an independent, It is also the top priority of non-governmental international José Morales Laboy, director of organization that brings together quality at GSS. “Measuring quality objectives experts to share knowledge and develop voluntary, consensus- is important in any industry, and based, market-relevant Interna- especially in the security industional Standards that support try where there is enormous

competition for our services,” he said. “At GSS, we measure and report on quality objectives monthly, and throughout the year we analyze parameters to develop continuous improvement strategies and, thus, improve client service.”

In order to maintain such strict standards and comply with ISO 9001, GSS conducted more than 500 internal post audits in 2015 and plans on conducting more than 700 during 2016, said Morales Laboy.

GSS Director of Operations José Vega Nieves added,

“we have a solid infrastructure and countless very qualified resources with a high degree of commitment. Our company also encourages the continuous improvement and growth of our personnel in order to provide a quality service to all our clients.”

The company stands out in the extremely competitive security industry by constantly integrating the latest technological resources to its everyday operations. A vast inventory of technological solutions includes security cameras, which allow

personnel to remotely monitor clients’ facilities and make virtual security patrols; intrusion and fire alarms installed following best practices to minimize false alarms and deploy assistance in case of imminent danger; nurse-call alarm monitoring to protect and assist elderly clients in case of an emergency; on-site and remote access control; Global Positioning Systems to trace vehicles and people, and realtime patrol reporting that allows security guards to save and send alerts, notifications, location,

photos and other relevant information that is shared internally and with clients.

“The integration of all of these technological tools is what allows us to offer our greatest product, comprehensive security solutions,” said Yasel Morales García, director of Technology at GSS. She pointed out that, unlike some companies in the security industry, GSS’ technology Yasel Morales García, infrastructure is supported by director of Technology at GSS. a locally-based, state-of-the-art Monitoring Center in the municipality of Carolina and oper- our ISO-certified protocols and sure the safety of our clients,” ated by highly trained local staff. standards allow us to deploy a she added.

“In the case of an emergency, response team quickly to enTo uphold such great stan-

“The integration of all of these technological tools is what allows us to offer our greatest product, comprehensive security solutions.”

dards, employees undergo continuous capacity building and the management team receives leadership and management training regularly.

“Our employees are highly qualified and committed to their work, and demonstrate their capabilities daily by surpassing our clients’ expectations,” said Vega Nieves.

Meanwhile, Cynthia Ruiz, GSS’s human resources director and ISO representative reflects on the value that the certification adds to the company. “The ISO system compels us to improve the operation continuously, which helps us establish and attain internal and external goals, and achieve teamwork in each department, with the key participation of managers and directors,” she said.

Evelyn Rivera, GSS’s head of finance, agrees. She said that the high standards and technological

resources that the company invests in continuously “add a lot of value in terms of centralizing information and making accessible to us wherever we are so that we may provide a fast response to our clients,” she said.

787.599.1700 787.902.8620 (Sales) www.genesissecuritypr.com •contact@genesissecuritypr.com

ADVERTISEMENT

34

THURSDAY, FEBRUARY 25, 2016

General Business

What’s new with the Real Property Registry Act?

New Real Property Registry Act Goes Into Effect in March

BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

The new Real Property Registry Act goes into effect March 8, which will replace the 1979 Mortgage Law & Property Registry Act, and will create a digital registry that will make it easier to do business in Puerto Rico.

Chamber of Commerce President José Vázquez welcomed the new act because it is expected to help with the island’s economic development.

A novelty of the new law allows for the registration

of areas that are considered public domain, such as beaches, in an effort to halt construction in maritimeland zones. It will also allow for the registration of public-private alliances involving public properties, as well as the socalled “legal mortgages” related to payment plans for delinquent taxes owed to the Treasury Department when the amount is more than $10,000.

Through the Digital Registry, users will be able to consult the registry seven days a week to determine a property’s status.

“We are going to be able to see the state of the property from home…. We are bringing the system to modern times,” said Notaries Association President Nelson William González.

The college is training and educating notary public lawyers about the new law.

The purpose of the Property Registry is to provide citizens, businesspeople and bankers with a public and reliable registry of transactions related to real-estate properties, wills and certain types of business transactions. When deeds or other

Puerto Rico Bar Association in San Juan’s Miramar community

documents are submitted to the registry, they remain pending until the Property Registrar reviews them for correctness. For decades, this process has taken the registrar months, and often years, to complete.

Because of the problems created from these delays, the World Bank publication “Doing Business 2014” rated Puerto Rico 164 out of 189 in the property registry category.

Since September 2013, the government has been modifying the antiquated Property Registry by incorporating new technologies and putting property deeds in electronic form.

Enacted in December, the new law will help accelerate the recording of property deeds in the registry to ensure property rights are protected.

The new statute also overhauls mortgage laws and provides a clearer reading of its contents, which lawyers often find confusing. For instance, the process to file and register the various property transactions is divided in a more coherent manner than in the current law.

The Real Property Registry Act also eases requirements to file certain property deeds and other documents in the registry, including communal property that is divided through a divorce and new urban developments.

The public will be able to register all matters related to titles of ownership of real property, or any other real rights or deeds that may modify the rights of domain over real property; mortgages or the right to use the property; leases of properties when they are for a period of six years or more; a purchase option; ecological easements; hereditary rights; certain judicial decisions; and notarial documents to process the matters and proceedings established in the “Noncontentious Notarial Matters Act.” The law change the types of property rights that can be registered, allowing for “registration of properties in the public domain or that are of public or general use.”

It also simplifies the processes for foreclosure by reducing the number of documents the notary

public must have to prepare the deeds authorizing the judicial sale.

The 1979 law increased foreclosure costs and often delayed the process because of all of the required documents. Critics of the new law say it facilitates foreclosures at a time when some 20,000 homes were in the process of foreclosure as of December, and some 57,000 homes are 30 days to 90 days behind with their payments.

The Legislature is analyzing separate legislation that would provide certain assistance to homeowners by preventing banks from foreclosing properties that are in loss mitigation. Often banks do not accept partial payments when a property is more than three months behind with payments.

Puerto Rico Bar Association President Mark Anthony Bimbela says they are analyzing the measure amid concerns it may be pre-empted by federal law.

He says the local Legislature can pass a law in areas that are not regulated by federal law.

The new act creates a new registry for embargoes. 䡲

ENGINEERING AND ARCHITECTS

Special Feature February 25, 2016 Pages 35-42

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THURSDAY, FEBRUARY 25, 2016

ENGINEERING AND ARCHITECTS

Barroso Pumps Pumps it up with Advanced Pumping Solutions

BY MARIO BELAVAL DÍAZ

Barroso Pumps keeps clients in the flow with the most advanced pumping solutions and unmatchable service anywhere.

“For every pumping application, we have the best selection of equipment and the most knowledge staff available to design and implement the best solution,” said Barroso Pumps President Enrique Barroso. “We identified market leaders in the pumping industry and have aligned with them to offer our customers topquality equipment and technical know-how.”

With headquarters in Carolina’s Sabana Gardens Industrial Park, Barroso Pumps sells and rents centrifugal pumps for temporarily pumping water and other liquids. The company’s products include diesel engine-

driven pumps from 4 inches to 12 inches, electric submersibles from 2 inches to 8 inches, and a vast assortment of pipes, plugs, hoses and fittings to complement the pumps. The company also designs and installs dewatering, bypass and well-point pumping systems.

Barroso Pumps serves clients throughout Puerto Rico as well as the U.S. Virgin Islands.

“Our product offering will continue to grow, but it is always focused on pumping,” Barroso said. “Our hoses and couplings were upgraded last year, and our fleet is also being upgraded with new Global Pumps, which offer higher efficiency and reliability.”

He added that during 2015, Barroso Pumps carried out additions to its roster of products for sale and rental, including electric

submersible pumps for permanent installation in residential and commercial applications.

These pumps can be used in applications related to freshwater boosters for buildings, sumps [a low space that collects water and other liquids] and effluent pumping.

Barroso said he is optimistic about the future, and even though the residential construction market may not be that active right now, there are other sources for business. “Hotels and infrastructure remain active, and we expect more demand for wastewater bypass pumping as our aqueduct system is updated,” he said. “Growth in tourism also will create a need for more hotel rooms, which are usually built along coastal areas, where there is a need for well-point and other dewatering systems.

Barroso Pumps continues to offer the widest selection of pumps for rent in Puerto Rico, which not only include gasoline and diesel engine pumps, but also submersible electric pumps, process pumps and pumps for sanitary waters. The company complements this offering with a wide inventory of hoses, tubes and couplings.

Barroso Pumps’ sales division offers top pump brands such as Cornell, Grindex, Goulds and Keen, among many others, covering markets that include industrial government, refrigeration, construction, commercial and residential sectors. As with Barroso Pumps’ rent service, when it comes to sales, the company provides support with technical knowledge for the stages of design, installation and service, including maintenance packages

for all pumps that are sold.

Barroso noted the company also has available pumps for green areas as well as lagoons and ponds. Besides pumps, for the lagoon and pond segments, Barroso Pumps also offers aerators and recirculators, bacteria additives and other equipment to help keep these bodies of water in healthy condition. Furthermore, the Barroso Pumps team includes a biologist to design, evaluate and monitor bodies of water. The company has sales and rental operations in Santo Domingo in the Dominican Republic and a rental operation in Orlando, Fla. 䡲

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BY MARIO BELAVAL DÍAZ

Founded in 1966, Universidad Politécnica de Puerto Rico (Politécnica) is celebrating its 50th anniversary by continuing its mission of shaping professionals in the engineering and architectural fields through innovative and unique academic programs in tune with the demands and realities of the industry.

“I think that one of the things that sets us apart from the rest is that in the first two years, our students study theory, but by the third and fourth year, they can find themselves in a real work scenario,” said Ernesto Vázquez Barquet, Politécnica president, adding that the university has a placement

office for this purpose.

“Companies call us looking, let’s say for someone for an internship in chemical or industrial engineering, and our students have the benefit of those last two years to get real work experience, and since we have the flexibility of offering classes throughout the day, night and on weekends, they can continue with their studies.”

Thus, in recruiting Politécnica graduates, companies in Puerto Rico are not only recruiting people who have a well-rounded education that is relevant to the needs of the market, but may also have knowledge and experience in the workplace. Not to mention the fact that Puerto Rico retains a valuable talent pool

THURSDAY, FEBRUARY 25, 2016

38

Politécnica Continues to Set the Trends in Engineering, Architectural Education

in fields that are essential for the island’s social and economic development.

Nearly 90% of Politécnica graduates already have a job in Puerto Rico by the time they graduate.

Politécnica’s nontraditional and innovative approach is also reflected in that, besides preparing students with relevant knowledge they will need in their profession, the university also fosters interdepartmental work and interactions within the university that represent what they may experience in the real world.

“This is best represented in the fact that the Engineering School and Architecture School are on the same campus, and that students from these schools

have to work together on projects,” said Vázquez Barquet, adding that such projects are a requirement for graduation. “This experience gives them the opportunity to learn how to work together in scenarios they will find themselves in once they graduate and begin to work.”

Politécnica’s School of Architecture is another showcase of the institution’s position at the vanguard of education with a five-year program that immerses students in architectural studies from the first year. This differs from other institutions where students first have to complete a bachelor’s degree in art and then go on to complete studies for two years in architecture.

The School of Architecture also features unique offerings such as a bachelors’ degree in interior design, which is the only one in Puerto Rico with an architectural focus, a master’s degree in landscape architecture, also the only one of its kind in Puerto Rico, and the only architectural conservation laboratory in Puerto Rico.

Politécnica’s standing as an institution of academic excellence, which prepares students in the most relevant and comprehensive education for the demands of the market, has garnered recognition by renowned scholarship and grants programs. The most recent was when the National Science Foundation and Department of Homeland

Security certified Politécnica this month as part of CyberCorps: Scholarship for Service Community, which grants scholarships in areas of studies related to cyber and information security. The university is also the only recipient in Puerto Rico of scholarships from the National Action Council for Minorities in Engineering (NACME).

Besides the School of Engineering, Land Surveying & Geospatial Sciences, and the School of Architecture, Politécnica has two other schools: the School of Management & Entrepreneurship and School of Education, with total enrollment of about 4,370 students in all programs.

These include engineering (with eight programs),

THURSDAY, FEBRUARY 25, 2016

39

From left, Ernesto Vázquez Barquet, Politécnica President; founder Ernesto Vázquez Torres (in painting); and Ernesto Vázquez Martínez, Politécnica vice president. geospatial science, architecture, computer sciences and business administration (with five majors).

In 2001 and 2003, the university opened new campuses in Miami and Orlando, Fl., respectively.

Politécnica is the largest private engineering school in Puerto Rico, the only one in the San Juan area, and the largest private Hispanic-serving engineering school in the U.S. and its territories.

Politécnica is accredited, licensed by or affiliated with renowned entities and institutions such as the Engineering & Applied Science Accreditation Commission (ABET); National Architectural Accrediting Board (NAAB); and the International Assembly for Collegiate Business Education (IACBE).

Politécnica is also the

first and only local institution to be granted special distinction from the National Security Agency and Department of Homeland Security as a Center of Academic Excellence in Cyber Defense Education, placing it among 100 centers of this kind in the nation, and as a recipient of scholarships that are awarded to just 60 academic institutions.

“Ourschoolofengineering

graduates the largest number of engineering degrees in Puerto Rico, but our focus is on quality not quantity,” Vázquez Barquet said. “We will continue to search for resources and develop programs that aim to prepare our students with the most complete education in their fields of study, which also responds to and meets the needs and trends of the job market.” 䡲

Type of business: University Year founded: 1966 Top executive: Ernesto Vázquez Barquet, president Headquarters: San Juan’s Hato Rey district Website: www.pupr.edu

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THURSDAY, FEBRUARY 25, 2016

CRB Caribe Will Maintain a Strong Local Office in Puerto Rico

ENGINEERING AND ARCHITECTS

From Left, CRB’s José Sánchez,Ricardo Jesús, Francisco Pérez, Thomas Forester, Harold Vidal, Rosa Pérez, Orlando Rodríguez, Virgen Lugo and Miguel Pérez

BY B.G. DOYLE

Primarily serving the high-tech manufacturing and biopharmaceutical sector, CRB Caribe LLP has been providing a full spectrum of engineering and architectural services to Puerto Rico for more than a decade. “Our purpose is to help our clients meet or exceed their goals and objectives so they retain their competitive advantage,” said

Thomas Forester, general manager of CRB Caribe LLP. “To do this, we must maintain a strong presence in Puerto Rico and remain committed to helping our clients in any way we can.”

In addition to providing civil engineering, structural, mechanical, electrical, chemical, process, instrumentation and controls, the firm’s professionals are also experts in conceptual design development and cost

estimating for capital planning, along with long-lead equipment specifications, detailed designand construction-document development, bidding support, construction and use permitting, construction inspections and support during construction—including onsite resources as needed.

“Our 3D BIM technology [Building Information Modeling using Revit software], which we

use to develop our design documents at no additional cost to clients, adds exceptional value over the use of regular 2D CAD [computer-aided design], which we also provide if the client chooses this,” he added.

To keep a strong foothold in the region, despite the island’s current economic crisis, Forester and his team have mapped out an aggressive strategy that includes exporting services from its Puerto

Rico office and expanding from that base.

“We have developed the Puerto Rico market quite well, so now we are also interested in developing other areas of our territory in the Caribbean, Central America and Mexico,” he said, and added that his company has its sights set specifically on Mexico at this time. “This strategy will not only allow us to sustain our office size in Puerto Rico, but also enforces

THURSDAY, FEBRUARY 25, 2016

our commitment to continue to have a strong office to serve our local and current clients,” he added.

Another facet of CRB Caribe’s strategy involves expanding services to current clients and embracing the latest technologies in structural, electrical, mechanical and process design development software. “In addition to more than 30 current Revit 3D licenses and a fully trained staff, our team had become highly knowledgeable in the application of the most current USGBC LEED [U.S. Green Building Council Leadership in Energy & Environmental Design] technology,” he said. “We currently have several LEED-accredited professionals at our firm, including me.”

While he admits there is no question regarding the decreases in the manufacturing sector, Forester is proud of his firm’s ability to succeed and hold strong despite the sector’s decline. “I

Forester and his team have mapped out an aggressive strategy. can proudly say that 2015 was our best year, and we will be here and continue to succeed year after year,” he said. “Not only do we continue to be the best so clients prefer us over any other firm, but our clients, who we are a part of, have achieved outstanding levels of technical excellence in all areas that can be measured— including a solid record in regulatory compliance of worldwide requirements.”

Given these milestones—both for CRB Caribe and the clients the firm serves, Forester also believes Puerto Rico has strong possibilities of retaining and

41 attracting more high technology and manufacturing operations.

“Given our clients’ technical competitiveness, all that is needed is a more consistent and stable political and tax law environment toward manufacturing,” he said. “If Puerto Rico had new, consistent and permanent tax incentives at the federal and local levels, as well as an improved permitting process and stabilized electrical costs, it would be able to promote manufacturing more effectively.”

He also sees this primary economic activity as a way to put an end to the economic crisis. “This would generate more government revenue than under our current policies,” he said. “Given that tax hikes and lack of attention to the manufacturing sector have only reduced the economic activities and overall government revenues, I believe some leaders are finally coming together and accepting this,” he added. 䡲

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ENGINEERING AND ARCHITECTS

Type of Business: Engineering, Architectural and Construction Support Services Name of the business: CRB Caribe LLP Executive Director/President/CEO: Thomas Forester, Managing Partner/General Manager Year the company was founded: 2004 Number of employees: 62 (Puerto Rico); 875 (Global Affiliated Company) Headquarters: Oriental Bank Center; Cupey, San Juan Company website: www.crbusa.com

42

THURSDAY, FEBRUARY 25, 2016

®

As Ranked by

PUERTO RICO’S TOP ENGINEERING FIRMS (Listed According to 2014 Engineering Services Revenue) Current/ Previous Ranking

Company Name Telephone/Fax Internet/Email Address

Physical Address

2014 Engineering Services Revenue $

No. of Full-Time Employees

No. of Licensed Engineers

1/5

CRB Caribe LLP (787) 622-2720 / (787) 622-2725 www.crbusa.com

2/2

Oriental Center 1738 Amarillo St., Suite 314 Río Piedras 00926

6,611,960

58

22

Architecture

2004

Thomas Forester General Manager

CDM Caribbean Engineers PSC (787) 722-4000 / (787) 722-6607 www.cdmsmith.com

VIG Tower Bldg.

1225 Ponce de León Ave., Suite 603 San Juan 00907

6,600,000

30

15

Construction & program management

2002

Libby Goyco de Vera General Manager

3/1

CH Caribe Engineers PSC (787) 781-9050 / (787) 781-0177 www.ch2m.com

Metro Office Park 17 2nd. St., Suite 400 Guaynabo 00968

6,483,200

134

42

Architecture, construction management, environmental compliance

1989

Jorge Álvarez President/ General Manager

4/4

CMA Architects & Engineers LLP (787) 792-1509 / (787) 782-0687 www.cmapr.com

1509 F.D. Roosevelt Ave. Guaynabo 00968

5,915,800

103

52

Architecture, construction management, permitting

1959

Jordi Bofill Managing Partner

5/8

URS Caribe LLP (787) 723-3332 / (787) 723-3283 www.urs.com

Ochoa Bldg.

500 Tanca St., Suite 40 San Juan 00901

5,400,000

20

13

Construction management, architecture, validation, environmental & planning

1963

René Purcell Gatell Vice President/ Resident Partner

6/7

Caribbean Architects & Engineers (787) 783-5500 / (787) 782-3424 www.flour.com

Metro Office Park 14 2nd St., Suite 500 Guaynabo 00968

5,283,715

38

18

-

1989

Bolívar Guzmán Operations Manager

7/6

MP Engineers of Puerto Rico PSC (787) 755-1919 / (787) 755-1922 www.arcadis-us.com

300 Felisa Rincón de Gautier Ave. Suite 23 Río Piedras 00926

5,000,000

23

16*

Consulting

2005

Melissa L. Pomales President

8/9

GeoConsult Inc. (787) 783-3585 / (787) 793-0410 www.geoconsult.us

Monterrey Ind. Park Lot 6 Puerto Nuevo 00920

3,700,000

15

3

Geotechnical engineering consulting

1983

Patricia A. Crumley President

* CARIBBEAN BUSINESS estimate Number of full-time employees includes part-time employees where applicable (every two part-time employees = one full-time employee).

Unless otherwise noted, all information was provided by the companies.

Research by Francis E. López Copyright © 2016 CARIBBEAN BUSINESS

Other Services Provided

Year Established in P.R.

Top Executive Title

SPECIAL FEATURE FEBRUARY 25, 2016 PAGES 43-46

Innovations In Healthcare

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THURSDAY, FEBRUARY 25, 2016

Excellent Healthcare in Puerto Rico

BY CB STAFF

Medical services available in Puerto Rico have done away with the notion that you have to travel to the mainland U.S. to receive quality healthcare.

Excellent physicians, facilities and technology have transformed Puerto Rico during the past 20 years into a place that possesses high-quality health resources run by some of the world’s best doctors, who are overseeing the development of top-notch medical teams performing highly complex procedures with tremendous success rates.

Liver, kidney and heart transplants are being routinely performed with high precision, and oncology treatment is on the cutting edge, with new equipment to help more effectively diagnose and treat cancer.

One of the best examples of the growing level of medical sophistication in Puerto

Medical care in Puerto Rico in the past two decades has made it unnecessary to travel to the mainland U.S. for healthcare and has even created a large medical tourism industry.

Rico over the past decade is that surgical procedures such as cardiovascular and transplant operations have become commonplace. Various institutions in Puerto Rico carry out bypass surgery and cardiac catheterization and angioplasties.

Puerto Rico’s hospitals have also established top-quality services when it comes to children, from birth to the first years of life. Neonatologists are available 24 hours a day—and if necessary, may assist in deliveries—as well as advanced telemetry technology that allows the staff to monitor the mothers’ health status.

The practice of medicine in Puerto Rico has kept up with modern trends and discoveries. Highly advanced robotic devices carry out delicate and complex head and neck surgeries. Among the benefits of these units are shorter hospital stays, minimal invasive procedures, less pain and blood loss and, in some cases, better clinical results.

To stay competitive, hospitals have to build their reputation through the quality

of their services and their human and technical resources. In addition, most top doctors with private practices also practice at Puerto Rico’s main hospitals.

Although a vast majority of the island’s hospitals and medical clinics are concentrated in San Juan and the northern area, the southern municipality of Ponce and its surrounding region has seen tremendous healthcare advances and now has many outstanding facilities where advanced medical procedures are carried out and major medical teaching facilities have been established.

Medical care in Puerto Rico in the past two decades has made it unnecessary to travel to the mainland U.S. for healthcare and has even created a large medical tourism industry.

The impressive success rates achieved by the superior medical personnel in Puerto Rico, who oversee local resources, is a testimony of how far the island has come in the field of medicine, while much more is underway. 䡲

THURSDAY, FEBRUARY 25, 2016

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Quality Water Service Helps Maintain Strict Hygiene Standards

BY B.G. DOYLE

Standing out as a pioneer in Puerto Rico’s bottle-less water cooler industry, Quality Water Service (QWS) provides innovative drinking water systems that not only provide 99.9999% pure water at all times, but also eliminate plastic bottles and unsterile conditions.

“Our mission is to provide a costeffective alternative to bottled water, while protecting the environment,” said Wilmer Velázquez, sales & marketing coordinator for Quality Water Service.

“Our dispensers offer the most advanced technologies for filtration, sanitation and water purification, and are as close as you can get to drinking perfect water.”

With offices in Puerto Rico, Chile and Colombia, the company currently serves

a wide range of industries of all sizes.

This includes hospitals and healthcare providers, which are industry sectors that require pure drinking water for recovery and treatment.

“Because patients may have weakened immune systems, and also because patients, visitors and medical personnel are at risk for nosocomial infections, water dispensers must meet strict hygiene

standards,” Velázquez said. “In the case of traditional dispensers and water fountains, they are unprotected from retrocontamination from bacteria in the air, which can be a real and costly problem.”

He pointed out that the systems provided

by QWS act as barriers that prevent the entry of airborne infections.

Established in Puerto Rico in 2008, with 30 people currently working at the

F E A T U R E

local office, QWS boasts years of experience in serving demanding sectors such as the healthcare and pharmaceutical industries, which require strict compliance with various regulations.

“Our filters and dispensers have been subjected to rigorous independent testing and fully comply with numerous certifications,” said Velázquez, adding that QWS is the only POU (Point-of-Use) company in Puerto Rico that can provide the benefits of Firewall and Biocote advanced technologies. He explained that Firewall is a high intensity ultraviolet (UV) purification performed directly at the faucet output level, while Biocote is a silverbased additive that protects against surface germs, killing up to 80% of germs in 15 minutes and more than 99% of germs two hours after contamination.

“Together, Firewall and Biocote are powerfully effective against bacteria like E coli, Salmonella, MRSA, Listeria monocytogenes, Streptococcus faecalis and many others,” he added. 䡲

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®

As Ranked by

PUERTO RICO’S LARGEST CLINICAL LABORATORIES (Listed According to 2014 Gross Revenue) Current/ Previous Ranking

Laboratory Name Telephone/Fax Internet/Email Address

Physical Address

2014 Gross Revenue $

No. of Full-Time Employees

1/1

Laboratorio Clínico Borinquen Inc. (787) 743-0330 / (787) 744-2588 www.laboratoriosborinquen.com

2 Baldorioty St. Caguas 00725

44,055,188

477

2/3

Laboratorio Clínico Toledo Inc. (787) 880-0444 / (787) 880-3122 www.laboratoriotoledo.com

51 Palma St. Arecibo 00612

23,880,020

3/2

Quest Diagnostics of Puerto Rico Inc. (787) 474-2900 / (787) 765-5663 www.questdiagnostics.com

210 Rd. 865 Toa Baja 00949

4/4

A.M.M.V.R. Group Inc. (787) 999-2990 / (787) 281-0783 www.immunopr.com

562 Muñoz Rivera Ave. Hato Rey 00918

5/5

Laboratorio Clínico y Referencia M. Landrón Inc. (787) 858-3835 / (787) 807-1916 www.laboratoriomlandron.com

6/7

Main Services Provided

Top Executive Title

1970

Technological advanced diagnostic testing

Delia M. Whitlock President

170

1988

Microbiology, electrophoresis, serology, immunology, flow citometry & molecular tests, home services

Ilia M. Toledo President

22,906,000

273

2001

Diagnostic testing, occupational health, drug & dengue screening, anatomic, pathology & dermatopathology

Hari Sabnani Managing Director

14,652,206

83

2000

Reference clinical laboratory

Eduardo Artau President

46 José J. Acosta St. Vega Baja 00693

7,500,000

48

1981

Paternity tests, clinical & bacteriology tests

María Pérez Veras President

Laboratorio Clínico y Bacteriológico Génesis Inc. (787) 839-9393 / (787) 839-9344 labgenesis@yahoo.com

2 Guillermo Riefkohl St. Patillas 00723

2,300,000*

30*

1996

Clinical & bacteriology tests, home services

Luis M. Carrasquillo President

7/6

Laboratorio Clínico y Bacteriológico Rodríguez Inc. (787) 733-1404 / (787) 733-7788 www.laboratorioclinicorodriguez.com

100 José Celso Barbosa St. Las Piedras 00771

2,147,549

28

2004

Chemistry, hematology, urinalysis, coagulation, immunology, microbiology, parasitology, bacteriology tests

Reina M. Hernández President

8/9

Laboratorio Clínico Gaudier Inc. (787) 832-0348 /

3 De Diego St. East Mayagüez 00680

425,000*

7*

1962

Clinical & onsite bacteriology tests

Carmen I. Gaudier President

8/10

Post Center Clinical Laboratory Inc. (787) 831-2929 / (787) 834-4045 postclinicallab@gmail.com

Post Center Bldg.

60 N Dr. Ramón Emeterio Betances St., Suite 105 Mayagüez 00680

425,000

4

1993

Clinical & bacteriology tests, paternity & autism tests, home services

Mayra Báez President

* CARIBBEAN BUSINESS estimate Gross revenue and number of employees figures may include affiliates.

Number of full-time employees includes part-time employees where applicable (every two part-time employees = one full-time employee).

Unless otherwise noted, all information was provided by the laboratories or obtained from public records.

Research by Marilda A. Quiñones del Castillo Copyright © 2016 CARIBBEAN BUSINESS

Year Established in P.R.

PUERTO RICO’S FASTEST GROWING COMPANIES

Special Feature February 25, 2016 Pages 47-56

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Packaging Solutions: Bankruptcy for the Better

BY CB STAFF

Filing for bankruptcy in 2008 was something Packaging Solutions had never contemplated. Furthermore, doing business with a bank that eventually had to close, which they have since considered as a “big event,” was something that did not have to happen.

“But, looking back, our business came out stronger from the experience…we are a better enterprise today,” said Packaging Solutions founder & President Carlos A. Casellas. “In reality, we lost no time and we didn’t squander any opportunity. First, we have the confidence and cooperation of other banks that believed in our future.

Second, our labor force was made much leaner, and those who remained with us are the best and most loyal of them.”

Last, but not least, multinational and local clients decided to stay, making it possible to reorganize in less than three years. “To these three forces, we are indebted forever. This year, we celebrate the first five years of the rest of our life,” he said.

Casellas explained that the two companies comprising Flexible Packaging Group have consolidated under the name of Packaging Solutions. This merger is part of a business strategy geared to allow further operational efficiencies, especially the marketing and finance departments. Packaging Solutions has four divisions, mainly dedicated to packaging.

In the company’s Las Piedras plant, paper is made into corrugated carton that then goes to the conversion area to be turned into corrugated boxes and boards.

food industries. In the flexible packaging plant, film multi-laminations in foil, plastic and paper are converted into flexible bags and films, specifically designed to act as barriers to oxygen, humidity, static and other conditions.

“This is a product that has grown a lot on the island. Food pouches and specialty bags are very big in consumer markets,” Casellas said. “However, medical and electronic uses for flexible material are the bigger share.”

The Bayamón facilities are home to a third plant: EPS. This plant was established to produce foam custom molding, of which ice chests have always been in high demand. However, EPS introduced the only non-packaging item to Packaging Solutions’ extensive product list: EPS Insulated Roof and Wall construction panels.

To this effect, the company manufactures

Formaletta Walls and Roofs and also Steel and Foam Sandwich panels.

The extensive list of products Packaging Solutions manufactures is very impressive. The firm’s roster of clients is equally so, including big names in both the local and multinational industries. This year, the company will celebrate 40 years leading the packaging industry on the island.

Certainly, bankruptcy has not dampened the enthusiasm with which Casellas talks about the company.

“We are the one source to supply any and all the packaging needs of clients.

At the same time, our 40 years in the business permits us to impart expertise, quality and commitment to our customers that newcomers cannot provide. We are very proud of what we do,” added the founder of the newly consolidated Packaging Solutions. 䡲

Packaging Solutions founder & President Carlos A. Casellas

“In Las Piedras, we run our own corrugator and we have a design studio and a state-of-the-art lab, whereby the converted boxes and sheets can be tested for anything from compression and stacking, to humidity effect. We also have the capacity to print boxes with up to the colors,” Casellas explained.

In the company’s Bayamón premises, Packaging Solutions has three plants that mainly manufacture plastic packaging products. The thermoforming division manufactures molded plastic trays and parts for the medical, electronic and

The extensive list of products Packaging Solutions manufactures is very impressive.

The firm’s roster of clients is equally so.

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Alproem Engineering: A Win-Win Scenario With Clients

BY LUIS VALLDEJULI

In 1998, Luis Emilio Ramírez and Luis Alberto Ocasio founded Alproem Engineering Contractors after working together in a pharmaceutical company and desiring to offer energy management services to the pharmaceutical industry. Located in Bayamón, the company has 260 employees today.

“Being receptive to changes in the business model for working with construction projects in the industry has given us the opportunity to be more flexible and adjust to our clients’ needs,” Ocasio said. “We also see this economic crisis as an opportunity to streamline the efficiency of our operations and share these savings with our clients in a way to promote a win-win relationship.”

Working closely as partners with their clients, Alproem has been able to provide the most cost-effective projects on schedule, within budget and

with very high standards. Their main competitors have turned out to be from outside Puerto Rico, companies that will attract any project not properly executed on the island. Alproem works directly with its clients from project conception to execution.

“We are a full constructionservices company that can offer turnkey projects, preconstruction work, construction work and project management to guarantee the effective implementation of our projects,” Ocasio stated.

Most clients come to Alproem once and return again for their engineering needs. Every project is an opportunity for the company to establish itself further in the industry and at the same time, help families fulfill their dreams, creating jobs and a better society in general, he indicated. “Transparency is a key element of our culture to establish an environment of trust that results in long lasting

business relationships,” Ocasio said.

The challenging demands placed by the state of the local economy, plus ever-increasing globalization, have led the general contractor company to adjust its vision and performance. Along the way, Alproem has evolved into a full-service company. Where before the company would provide specialized services and subcontract in other areas, it now covers civil/ architectural, mechanical and electrical areas to provide faster and more encompassing service to clients.

While the employees at the company are the most important resource in keeping the business a success, Alproem teams up with clients from the moment a project is conceived until its completion. Professionalism, a strong work ethic, social responsibility, mutual respect and cost-effectiveness are essential components of that partnership.

Uncertain times call for extraordinarily inventive measures. With a vision toward the future in this tough economic era, Alproem has opened offices in Panama and Miami to create

787-995-0309 www.alproem.com

sound alternatives and provide shared services from its office in Puerto Rico. Growing the business locally and beyond means Alproem stays ahead of the curve in creating a better future for the company and the industry in general.

“The commitment of our people is something I really love about our company. We have become a successful company— starting from zero—with hard work, honesty and knowing we are creating a great legacy for the future of our island,” Ocasio said, while emphasizing how hard work and determination have taken Alproem from its humble beginnings to the strong company it is today.

Alproem recently received the “Supplier of the Year” award from the Puerto Rico Minority Supplier Development Council and the “Excellence in Safety” award from the P.R. Manufacturers Association for five-consecutive years of excellent safety records. 䡲

• Full Construction Service Company • Self-Performed capabilities on Civil/Architectural, Mechanical & Electrical • Ability to deliver Turn-Key projects • Pre-Constrution services • Strong Health, Safety and Environmental Program • Certified Minority Business

P.M.B. #419,2135 Carr. 2 / Suite 15 Bayamón, P.R. 00959-5259 P.R.

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Softek Leads the way in Top IT Solutions

BY MARIO BELAVAL DÍAZ

In three decades, Softek Inc. has grown quickly to become a leader in the Puerto Rico and international information technology (IT) field by developing top of the line, homegrown solutions that not only represent the company’s success, but also the success of its clients in Puerto Rico and abroad.

“Growth is a result, not a method,” said Julián Londoño, founder & president of Softek.

“It is the result of focusing on you, what you do best and identifying the opportunities that allow you to maximize those strengths, which include the very important element of the company’s human talent, and develop solutions that are relevant to the market and the client’s needs.”

The company’s latest venture is the development of a Merchant Services unit, whose specific focus is to tend to the

needs of small and midsize businesses in terms of payment processing. Londoño said many of these businesses still do not have the necessary technology, or if do, they are not using it to its fullest potential.

“For example, you may have a business such as a cafeteria or a coffee shop that sells $100,000 a month, which is some $1.2 million a year, but you don’t have the technology that can help you make the most out of that success,” Londoño said.

“For instance, systems that can provide you with data such as what you sell the most, at what times, in other words, essential business intelligence. And believe me, despite the tough economic climate, many businesses are going strong, and through our solutions, we aim to help them make the most out of their operations.”

Among other solutions that Softek is working on to benefit these businesses is what is

known as fiscal terminals that will allow companies to effectively manage the transition from the current 11.5% sales & use tax to a 10.5% value-added tax on April 1. Londoño added that in the future, the trend will be toward the development of even more advanced and efficient processing models and software data systems. Among these, Softek will continue to pursue what he called the “business as service” model.

“Let’s say you have a business such as a clothing store; we will provide and implement the best products that will allow you to carry out operational aspects such as retailing or managing inventory, among others,” said Londoño, adding that Softek’s success as a true pioneer in the field of local and international IT is mostly the result of its ability to adapt to new technologies and align them with clients’ business needs and goals. “We always

work based on innovations and constant improvement, focusing on service and offering our clients commitment, trust and flexibility,” he said. “We also quickly address needs and changes, and understand their line of business.”

Softek specializes in highyield information systems design, development, implementation and integration for the government, education, manufacturing, telecommunications, financial and pharmaceutical sectors, along with consulting and training services.

Founded in 1986, the company has grown to become one of the top leaders in the field, fueled by creative and dynamic work aimed at developing solutions to transform a client’s investment in technology into benefits, such as improving efficiency and productivity in operations and creating a noticeable increase in earnings. 䡲

Julián Londoño, founder & president of Softek

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CDC’s High-Quality and Competitive Pricing Keep Clients Satisfied

BY CB STAFF

Providing a superior array of interior and exterior retail construction, commercial turnkey remodeling, woodworking and lighting fixture services to clients in Puerto Rico, the U.S. Virgin Islands and other parts of the Caribbean, Caribbean Display & Construction (CDC) prides itself on its quality work and the high level of personal attention its staff provides to customers of all sizes.

“Despite the slow economy, we keep growing every year and adding more clients,” said Ralphie Pagán González, president of Caribbean Display & Construction Inc. “Not only do our clients appreciate the quality and precision of our work, but also our commitment to deliver on time and within their budgets.” Located in San Juan’s Mario Julia Industrial Park, CDC currently has 48 employees.

Founded by Pagán in 1989 as a slatwall manufacturer, he pointed out that his company is still the only slatwall panel manufacturer in Puerto Rico and the Caribbean, with slatwall panels recognized as some of the most versatile display options on the market.

Other items produced by CDC’s woodworking division include custom-built cabinetry and a number of other fine millwork pieces. “Many of our employees are precision master crafters, and each has a special skill that goes hand in hand with

the products and services we provide,” he said.

As a leader in retail lighting, the company also offers a huge inventory of lighting options, such as incandescent, fluorescent, high-intensity discharge (HID) metal halide, or a balanced mixture. CDC’s “lighting lab” also gives clients the opportunity to test and compare flexible lighting options as well.

“Our clients know they can always count on the best solutions for their needs,” said Pagán, who added that CDC’s impressive list of clients is the result of CDC’s dedicated staff, which continues to be focused on client satisfaction. Long-term clients include Novus Inc., Empresas Caparra (San Patricio Plaza, Galería San Patricio and Santander Tower), El Mesón, Empresas Fonalledas (Plaza Las Américas and Plaza Del Caribe Mall), Baskin-Robbins/ Dunkin Donuts, Banco Popular de Puerto Rico, T-Mobile P.R., La Gran Vía and Zara.

Pagán is equally proud of CDC’s new high-profile accounts, including McDonald’s, L’Oréal, DirecTV, 3M Puerto Rico, Aereostar and Group M. He also noted that the island’s economic situation has caused larger construction companies to begin bidding on retail-construction projects and they are competing more aggressively with CDC. “Because today’s economy has been very hard on Puerto Rico’s construction industry, competition has increased,” he said.

“Many of our employees are precision master crafters, and each has a special skill that goes hand in hand with the products and services we provide.”

—Ralphie Pagán González, president of Caribbean Display & Construction Inc. “While we believe Puerto Rico will eventually have a strong and healthy future once more, CDC will continue to provide superior service, while bringing in new clients and working on new projects with our existing accounts, despite economic ups and downs.”

Given that one of CDC’s largest accounts is looking to open a retail store in Florida, he added that this could open up new opportunities for his company as well. “We will be working with them up there, which will give us a chance to expand our services elsewhere,” he said. 䡲

• Retail Construction Services • Woodworking Manufacturers Celebrating 26 years in the industry Caribbean Display & Construction has made its mark becoming one of the most efficient retail construction companies in P.R. We only use the best products, techniques and equipment ensuring you a prompt and on budget project. Before you hire a contractor feel free to check our references Our Millwork Division: Manufacturers of custom made millwork, store equipment and light fixtures distributors.

Visit us and we’ll design furniture that will fit your needs.

Main office: Street A Suite 3 Mario Juliá Industrial Park in San Juan, 00920. Phone 787-793-1099 Fax. 787-793-0733.

Email: sales@caribbeandisplay.com Web Page: www.caribbeandisplay.com

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THURSDAY, FEBRUARY 25, 2016

Prime Janitorial Continues to Grow, Keeping the Momentum Going

BY CB STAFF

Located in Ponce, Prime Janitorial is proof that businesses can be started by people of all ages when the entrepreneur has the will to succeed. “I founded the company when I was 19,” said Fernando J. Rodríguez. “Having grown up with hardworking parents and grandparents, I learned we must sacrifice to get what we want from life, which led me to build a very successful business.”

Seventeen years later, the company has continued to grow by providing a wide range of cleaning and maintenance services to manufacturing plants, hotels, hospitals, educational and commercial facilities, malls and private offices. “With a workforce of 850 employees and still growing, we pride ourselves on being one of Puerto Rico’s fastest-growing companies,” he said.

When asked what is his secret to achieving this growth,

Rodríguez said it involves a number of factors.

“We’ve perfected what used to be perfect,” he said. “In other words, our staff not only provides excellent service to our clients every day, but we’ve identified strategies with a high probability of success while taking risks to expand our services to other regions.”

He also noted that client collaboration is another important part of the mix when meeting both client requirements and Prime’s high service standards.

Given that a number of his company’s clients are also highly regulated (medical devices, hospitals, food processing plants, etc.), Prime has also integrated a quality management system into its cleaning and maintenance services.

“Exceptional service constitutes a core value of our business, and rather than viewing ourselves as a vendor, we always aim to become a trusted partner

Fernando J. Rodríguez, founder of Prime Janitorial

with our clients,” he said. “We also routinely step outside our organization to evaluate both our firm and our competitors through the customer’s eyes, mind and heart.”

Rodríguez also noted that Prime Janitorial has succeeded in differentiating itself from the

competition through strong client relationships that include going the extra mile. “Our level of service is one of the reasons clients continue to work with us, and we are confident in the quality of service we offer,” he said.

To maintain the momentum, especially during the island’s difficult financial times, he also keeps a careful watch on his industry as a whole, while ensuring his people receive regular training on regulatory issues and the latest processes. “The greatest challenge I’ve faced to date is keeping the company successful against the current recession,” he said. “While we faced an uphill struggle to keep sales

levels up and costs down while maintaining our customer service standards, the cost-control measures we implemented ultimately resulted in a significantly healthier bottom line than we had before.”

Already offering services to companies in the Dominican Republic, Rodríguez is also eyeing markets in Costa Rica, Panama, Colombia and the U.S. To achieve success in these regions, he is developing the company’s International Markets Division, while also considering the use of consultants and skilled international trade resources. “This is a fastgrowing business, and we aim to conquer the market,” he said. 䡲

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CT Radiology Complex Imaging Center Provides Comprehensive Array of Services

BY CB STAFF

During the early 1960s, Dr. José T. Medina Tollinche, a graduate of University of Puerto Rico’s School of Medicine with a residency in diagnostic radiology from Columbia Presbyterian Hospital in New York, identified a need for specialized radiology services on the island. This led to the creation of CT Radiology Complex Imaging Center, which has since evolved into one of the most comprehensive healthcare providers of its kind.

“We have always invested in the best technology available, with our radiological technologists among the best on the island,” said Dr. Liana R. Medina Pizarro, CEO & board-certified radiologist at CT Radiology Complex Inc. and MRI Center PSC. “As one of the first centers in Puerto Rico to offer mammography , computerized tomography (CT), magnetic resonance imaging (MRI), positron emission tomography (PET/

CT), our focus has always been to provide our patients excellent service.”

With 158 employees working at the center, the medical staff has 10 physicians specializing in radiology, three in nuclear medicine and three in cardiology. The facility also has specialists in neuroradiology, body imaging, sonography, chest and musculoskeletal radiology, breast ultrasounds, high-resolution breast tomosynthesis, nuclear medicine and cardiology. Last summer, the center also began using its newly acquired high-field MRI equipment, which Dr. Medina Pizarro said not only produces outstanding images in a shorter period, but also has a wide bore that maximizes patient comfort.

When asked about the facility’s ongoing popularity and growth, she attributed it to a number of factors. “In addition to having the best equipment and a highly skilled medical staff, we are the only imaging center on the island

“In addition to having the best equipment and a highly skilled medical staff, we are the only imaging center on the island that provides all imaging services in one place, making us the most comprehensive option in Puerto Rico.”

—Dr. Liana R. Medina Pizarro, CEO & board-certified radiologist at CT Radiology Complex Inc. and MRI Center PSC

that provides all imaging services in one place, making us the most comprehensive option in Puerto Rico,” she said. “We are also the only local imaging center that has received eight accreditations from the American College of Radiology, along with accreditation from the American Institute of Ultrasound in Medicine.”

Given the center’s focus on the latest technology, technicians and other staff members are continually provided training in the latest technological advances, along with any other tools they may need to provide patients and physicians with the level of service they deserve.

“This also requires excellent financial planning, as we must maximize our financial resources to keep up with the continuous changes in technology,” she added. “However, like all businesses in Puerto Rico, the island’s economy has affected us as well, but we have managed to make the necessary adjustments

without affecting the quality of our services. We also realize we have a serious social responsibility to serve our patients and the medical community, as well as keep our employees’ jobs.”

Looking ahead, Dr. Medina Pizarro is certain the center will continue to grow and expand its medical services, while maintaining the excellent imagingservice quality it provides. “We will continue to develop shortand long-term financial plans to replace our equipment as new technologies become available, while remaining the most complete imaging center on the island,” she said. n

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THURSDAY, FEBRUARY 25, 2016

E.P.I.C. Strategies Caters to the Needs of Acts 20/22 Clients

BY MARIO BELAVAL DÍAZ

Rico and exempts those residents from commonwealth taxes on investments and passive income, namely interest, dividends and capital gains. Some 700 adopters of Acts 20/22 have already moved to and call Puerto Rico their home.

Besides helping them find the right property, the E.P.I.C. Strategies team can provide clients guidance and consultancy about Acts 20 and 22. This can include information about such details as amendments to the acts that must be considered or features of the acts that people may not be aware of, such as the fact that while after a given date, investors who had rented a property will be required to purchase a property, or as simple as the fact that these tax breaks or relief will be in effect until 2035.

“Interest in [Acts 20 and 22] is picking up, but it is surprising that a lot of people do not know about it or do not have a full picture or education regarding the acts—in the U.S. and even here in Puerto Rico,” said Delgado, who has already assisted clients who have come to the island because of Acts 20 and 22, helping

For people considering moving to Puerto Rico, especially as a result of the incentives available from Acts 20 and 22 of 2012, E.P.I.C. Strategies provides an added value to the real estate, consulting and other services the company provides: Experience.

“I moved to Puerto Rico in 2012, so I went through that experience of settling in a new place,” said Elena Maldonado, founder & president of E.P.I.C. Strategies and an industry veteran with more than 20 years’ experience in real estate. “We know the challenges that such a move entails, and can offer our clients the orientation and solutions that can best fit their needs.”

Acts 20 and 22 feature tax benefits aimed at luring capital to Puerto Rico. Act 20 encourages the establishment of companies that export services from Puerto Rico. The law provides a corporate income-tax rate of 4%, no tax on dividends paid to local residents and no withholding tax on outbound dividends to nonresident owners. Act 22 seeks to attract new residents to Puerto

them search for and find a property for rent or to purchase. “At E.P.I.C. Strategies, we are always there for clients throughout the entire process.”

In a way, E.P.I.C. Strategies is a natural fit for investors attracted to Puerto Rico by Acts 20 and 22.

In the past, Delgado has said she decided to launch E.P.I.C. Strategies, which stands for Extraordinary Properties, Insurance Covered, after recognizing the need for what she terms a “navigator” between U.S.-based businesses, investors and private clients and Puerto Rico. Having worked her entire adult life on the U.S. mainland, she understands the needs, requirements and goals of potential stateside investors better than most, allowing her to position herself as a liaison between clients looking to do business in Puerto Rico and the island itself. 䡲

Its about the client!

At E.P.I.C. STRATEGIES Key Services with the client in mind. We buy, sell, protect and manage assets.

Call us for a free consultation. Feel the difference of Extraordinary Properties, Intelligent Commerce.

E.P.I.C. STRATEGIES

䡲 Buyer & Seller Representation 䡲 Investment Property Consultants 䡲 Leasing & Rental Properties 䡲 Relocation Services US/PR 䡲 Valuations + BPO’s

䡲 REO (Bank Owned Properties) 䡲 Asset & Property Preservation 䡲 Asset & Property Management 䡲 Commercial & Residential Properties 䡲 Experts in Act 20/22

E.P.I.C. Strategies Extraordinary Properties, Inteligent Commerce Real Estate Agent, Realtor® Asset & Property Preservation Office - 800.875.0540 Cell-901.461.9948 epic_strategies@icloud.com Elena Delgado Lic.18114 / NPN.5964687 Member: NAIC; NAR; San Juan Board Of Realtors & NAPW epicstrategies.net

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Undaunted by the Challenge: Puerto Rico Companies Thriving in Many Sectors

BY CB STAFF

In this tough economic climate, it is refreshing to remember that there are companies in Puerto Rico that are thriving in their operations and thus, are playing an essential role in the island’s economy. In the 2015 edition of the Caribbean Business Book of Lists alone, there are 100 such companies, whose

success is helping create the basis of the island’s continuing economic recovery.

Companies such as Alproem, Softek, Caribbean Display, Flexible Packaging, Prime Janitorial, City Radiology and E.P.I.C. Strategies have demonstrated impressive growth in recent years, proving that success is possible, given the right circumstances and perseverance.

In the 2015 edition of the Caribbean Business Book of Lists alone, there are 100 such companies, whose growth rates range from 5% to 290%. growth rates range from 5% to 290%, covering all segments essential to Puerto Rico’s economy, from construction and insurance, to retail, cars and restaurants.

In this current edition of the Fastest Growing Companies special feature, Caribbean Business presents a sampling of companies that are growing fast and strong, and whose present

Working closely as partners with their clients, Alproem has been able to provide the most costeffective projects on schedule, within budget and with very high standards. Caribbean Display & Construction prides itself on its quality work and the high level of personal attention its staff provides to customers of all sizes. The extensive list of products

that Packaging Solutions manufactures is very impressive. The firm’s roster of clients is equally so, including big names in both the local and multinational industries.

Besides helping them find the right property, the E.P.I.C. Strategies team can provide clients guidance and consultancy about Acts 20 and 22. The CT Radiology Complex Imaging Center has evolved into one of the most comprehensive healthcare providers of its kind. Prime Janitorial has succeeded in differentiating itself from the competition through strong client relationships that include going the extra mile. Softek has grown quickly to become a leader in the local and international information technology (IT) field.

Each of these companies is an example of the triumph of hard work and perseverance over a difficult economic environment.

These companies are celebrated in this special feature. It is the spirit of such entrepreneurs and their loyal teams that will help push Puerto Rico past the current turmoil into economic stability and growth. 䡲

United U n States atte Dominican om Republic p

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®

As Ranked by

100 FASTEST-GROWING LOCALLY OWNED COMPANIES (Listed According to Percent Growth) Percent Growth

Company Name

269.64%

Maximo Solar Industries

228.57% 167.21% 85.59%

Dorado Health Inc.

74.24%

Famous Caribe Inc.

70.59%

Truenorth Corp.

2013 Revenue ($ Millions)

Percent Growth

10.35

2.80

10.84%

Lord Electric Company of P.R. Inc.

52.56

47.42

New Energy LLC

6.90

2.10

10.62%

Asociación Hospital del Maestro Inc.

43.01

38.88

Indusa/Indexa Inc.

8.23

3.08

10.39%

Muñoz Holdings Inc.

25.50

23.10

360.97

194.50

10.38%

Serafín Wholesale Distributors Inc.

10.00

9.06

8.05

4.62

10.27%

Empresas de Gas Inc.

28.25

25.62

29.00

17.00

9.85%

Mentor Technical Group Corp.

30.10

27.40

7.95

5.00

9.71%

Maderera Donestevez Inc.

71.31

65.00

18.34

12.78

9.64%

Acha Trading Co.

20.35

18.56

12.67

9.63%

Fulcro Insurance Inc.

10.36

9.45

Los Cidrines (Pastelería Cidrines Inc.)

22.00

20.16

59.00%

Glasstra Aluminum Inc.

43.51%

Marxuach Precast Solutions LLC

41.28%

Brenda Marrero & Associates Inc.

2014 Revenue ($ Millions)

17.90

Company Name

2014 Revenue ($ Millions)

2013 Revenue ($ Millions)

39.17%

Supermercado Agüeybana Inc.

58.94

42.35

9.13%

34.00%

Paciv Inc.

14.70

10.97

9.13%

Advanced Graphic Printing Inc.

22.00

20.16

10.23

8.92%

Del Valle Group & Affiliates

66.44

61.00

107.60

81.58

8.68%

Mech-Tech College LLC

23.41

21.54

34.57

26.47

8.59%

Efraín Núñez Inc.

32.36

29.80

161.40

125.90

8.25%

Drugs Unlimited Inc.

39.36

36.36

33.82%

Engineered Parts & Services Inc.

31.90%

Empire Gas Company Inc.

30.60%

UltraPure Systems Inc.

28.20%

Aireko Companies

13.69

27.55%

Hospital Oriente Inc.

19.49

15.28

8.11%

Olein Recovery Corp.

25.95%

Validation & Engineering Group Inc.

11.99

9.52

8.00%

Grupo HIMA-San Pablo Inc.

25.71%

Centro Médico Wilma N. Vázquez

27.04

21.51

7.90%

Hospital de la Concepción

23.64%

Transporte Rodríguez Asfalto Inc.

11.35

9.18

7.88%

132.00

7.69%

28.46

23.30

6.92%

Electric Service Corp.

9.50

7.80

6.84%

Hospital Español Auxilio Mutuo de P.R. Inc.

11.50

6.67%

Inter-Strap Packaging Systems Inc.

22.73%

Mayagüez Medical Center

22.15%

Alproem Engineering Contractors Corp.

21.79%

Prime Janitorial Service

21.74%

AKM Mfg. Inc.

162.00

14.00

20.00

18.50

482.66

446.90

76.58

70.97

Scanner Overseas of P.R. Inc.

9.99

9.26

Caribbean Display & Construction Inc.

8.40

7.80

10.81

10.11

239.74

224.39

8.00

7.50

21.40%

Marine Express Inc.

16.11

13.27

6.62%

Industria Lechera de P.R. Inc. (Indulac)

53.18

49.88

21.03%

Ferraiuoli LLC

13.58

11.22

6.56%

San Juan Gas

6.50

6.10

72.00

6.50%

Puerto Rico Steel Products Corp.

8.03

7.54

19.99%

Bermúdez, Longo, Díaz-Massó LLC

86.39

19.88%

Guaraguao Truck Sales Inc.

29.19

24.35

6.46%

Allied Car & Truck Rental Inc.

19.55%

Borinquen Container Corp.

48.06

40.20

6.43%

García Trucking Service Inc.

18.75%

Target Human Resources Solutions

9.50

8.00

6.16%

Quintana Hermanos Inc.

18.18%

CasAmerica International Inc.

35.95

30.42

6.09%

8.32

5.95%

Mar-Co Industries Corp.

18.03%

Caguas Mechanical Contractor Inc.

9.82

8.90

8.36

14.90

14.00

7.76

7.31

Ryder Memorial Hospital Inc.

57.70

54.39

Antilles Insurance Co.

42.17

39.80

6.65

6.31

17.39%

Flexible Packaging Group

27.00

23.00

5.39%

17.33%

MultiSystems Restaurants Inc. & Sister Co.

64.04

54.58

5.19%

Farmacias Plaza (José Pérez Fonseca Inc.)

45.23

43.00

14.44

5.16%

Laboratorio Clínico Borinquen Inc.

44.06

41.90

14.00

12.00

5.08%

CT Radiology Complex Inc.

23.58

22.44

479.45

412.36

5.08%

Fraterfood Service Inc.

4.89%

Enigma Investments Inc.

16.97%

The Retail Group Inc.

16.67%

First Pharmacy (Hamed Corp.)

16.27%

Droguería Betances Inc.

16.89

9.10

8.66

47.20

45.00

16.17%

Universidad Central de Bayamón Inc.

13.94

12.00

16.10%

Luis A. Ayala Colón Sucrs. Inc.

27.90

24.03

4.88%

Gómez Hermanos Kennedy LLC

123.70

117.94

15.92%

Laboratorio Clínico Toledo Inc.

23.88

20.60

4.53%

Hospital Hermanos Meléndez Inc.

73.38

70.20

17.08

14.76

4.48%

El Mesón Sandwiches (El Mesón de Felipe Inc.)

70.00

67.00

8.40

7.31

4.38%

BDO Puerto Rico PSC

13.10

12.55

11.39

4.34%

MSSS Inc.

57.91

55.50

Super Farmacia Vanga Inc.

10.09

9.68

15.72%

Softek Inc.

14.91%

Villavicencio & Associates Construction Corp.

14.14%

Apple Caribe Inc.

13.00

13.83%

RSM

12.26

10.77

4.24%

13.76%

Luis Garratón Inc.

89.94

79.06

4.06%

Fuller Group

49.50

47.57

202.30

4.04%

West Corporation

14.69

14.12

36.36

35.00

6.95

6.71

59.83

57.77

13.45%

Mennonite General Hospital Inc.

229.51

13.39%

Hospital Damas Inc.

91.62

80.80

3.89%

Oldach Associates Inc.

13.32%

Danosa Caribbean Inc.

15.57

13.74

3.58%

Cooperativa de Ahorro y Crédito Asociación de Maestros de P.R.

3.57%

Autocentro Toyota (Autokirei Inc.)

13.00%

Puerto Rican Pizza Inc.

11.30

10.00

12.30%

Automeca Technical College Inc.

11.32

10.08

12.25%

Farmacia Ruiz Belvis

17.14

15.27

12.22%

American Agencies Co. Inc.

11.26%

Ana G. Méndez University System

17.73

15.80

316.19

284.18

Compiled from the 2015 Top 400 Locally Owned Companies chart.

Companies with estimated figures are not included in this chart.

Research by Francis E. López Copyright © 2016 CARIBBEAN BUSINESS

THURSDAY, FEBRUARY 25, 2016

58

Some technologies developed for concept will go into production in 2017 Audi A8 luxury sedan

Audi H-Tron Quattro SUV Concept A Future of Performance With Zero Emissions

BY JOSÉ L. CARMONA j.carmona@cb.pr

The Audi h-tron Quattro concept, presented by U.S. Apollo 17 astronaut Eugene Cernan— one of the last men to walk on the moon—during the North American International Auto Show in Detroit last month— is a lively sport utility vehicle (SUV) that uses hydrogen as its energy source.

The concept vehicle combines a highly efficient fuel cell, achieving a maximum output of 110 kilowatts (kW) with a battery that provides a temporary boost of 100 kW. Audi claims its fuel cell technology paves the way for sustainable mobility with the sporty performance for which the brand is known.

The fifth generation of fuel cell technology from Audi and Volkswagen focuses on new materials for the diaphragms and bipolar plates that guide the gases in the stack, while keeping the cells separate. These help to make the entire unit lighter, smaller, stronger and more economical.

The operating life and responsiveness of the fuel cell unit are improved, and hydrogen consumption is reduced. Audi claims the fuel cell achieves an efficiency of 60%, far more than that of an internal combustion engine.

PILOTED DRIVING Some of the new technologies showcased in the Audi concept, such as piloted driving and parking, will go into production in 2017 with the next generation of the Audi A8 luxury sedan.

The Audi h-tron Quattro concept is equipped with all functions for piloted driving and parking that the German automaker is developing for

production use. The combination of radar, camera and surround sensors provide a complete model of the vehicle’s surroundings.

A laser scanner monitors the area in front of the car up to 262.5 feet away. All the data is brought together in the driver

assistance system (zFAS) in real time. The function for piloted driving in congested traffic currently being developed by Audi will—in the future—reduce the driver’s workload in slowmoving traffic on express roads, by taking care of the steering at speeds between zero and 37.2 miles per hour.

The system also accelerates and slows down on its own.

With Audi’s piloted parking, the driver will be able to control the car conveniently from outside, via the remote control key or a smartphone.

NEW LIGHTING TECHNOLOGY The concept car generates all main lighting functions with Matrix laser OLED (organic light emitting diode) technology, considered the next step forward in the development of automotive lighting technology.

Broken down into hundreds of thousands of pixels, the OLED beam can illuminate the road in high resolution and with extreme precision control—without blinding oncoming drivers.

At the front of the car, multiple narrow, individual OLED luminaries are arranged horizontally staggered, one above the other.

The rear lights contain nine upright OLED units that assume the taillight function.

Inside, the cockpit is also illuminated by large OLED displays.

In addition, the rear passengers in the concept vehicle have two Audi tablets with OLED displays at their disposal.

THURSDAY, FEBRUARY 25, 2016

59

Cars 101 The Right Time to Make a Change

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

Welcome to class!

Today’s subject is probably among the most awaited: motor oil. However, this will only be an introduction because with such a slippery subject, things tend to get complicated very quickly. So, for the sake of brevity, we are only going to discuss the basics of motor oil: when to change it. We will elaborate a little more on the subject in future columns.

There has been much debate over this subject, particularly now that automotive technology has made rapid improvements in fuel efficiency and engine performance, while reducing emissions. But before we get all oiled up, let’s talk about what motor oil is supposed to do inside your car’s engine.

Motor oil minimizes friction on all metal surfaces inside the engine, thus preventing the metal from grinding together and tearing itself apart. It also dissipates the heat generated in the

combustion process and acts as a cleaning agent; oil cleans the residue and byproducts of combustion, better known as “engine slush,” or “engine gunk.”

Because of high temperatures and pressure, oil degrades (i.e., loses viscosity) after some time and gets saturated with gunk.

When that happens, it’s time for a change—an oil change, that is.

Purists say motor oil should be changed every 3,000 miles or every three months, whichever happens first. Nevertheless, owner manuals for most new models state that, “under normal driving conditions,” you should change the oil every 7,500 miles or every six months, whichever comes first.

There’s a huge difference between these two positions.

Regular oil changes are definitely an excellent

way of preventing future engine repairs. But you have to decide what best suits you and your pocket.

Unfortunately, the current drop in oil prices isn’t necessarily making motor oil changes less expensive. Of course, if someone comes up to you and asks, “Do you prefer to spend $30 to $50 now in an oil change or $1,000 or $2,000 in engine repairs later?” This is a no brainer. However, consider this: several oil changes for a midsize car (with a six-cylinder engine) could go as high as $200 a year. When you add that to other maintenance costs, the tab can run as high as $1,000. And gas isn’t even included!

So, once again (and to be on the safe side), follow the advice in your owner’s manual. This is the best way to make the most out of your car and save you some money. 䡲

60

THURSDAY, FEBRUARY 25, 2016

SPONSORED BY

2017 Porsche Carrera S Making a Sports Car Legend Even Better

BY JOSÉ L. CARMONA j.carmona@cb.pr

Since its world debut in 1963, the Porsche 911 has been constantly updated and improved from the previous generation, while still retaining the same unmistakable iconic look and design philosophy of the original.

The first major revolutionary change made to the Porsche 911 came in 1998, when air cooling was thrown out and a more modern, water-cooled setup was put in place.

The second biggest change in the history of the Porsche 911, however, has just happened with the 2017 Carrera and Carrera S models, and this one is big.

In a surprising move, Porsche is replacing the free-breathing, naturally aspirated flatsix boxer engine in the 911 lineup with a smaller but more powerful, twin-turbocharged powerplant.

But there’s no need to panic.

The new smaller, forced-induction turbo-charged flat-six boxer engine purrs just fine and makes the new Carrera and Carrera S perform better than ever.

REFINED EXTERIOR, INTERIOR Many exterior features of the 2017 Carrera (codename 991.2) have been visually refined, from new headlights with fourpoint daytime running lights to integrated door handle recess, a redesigned rear deck lid with cool-looking vertical louvers (replacing the horizontal ones), and new rear lights—including the characteristic four-point brake lights.

The sports coupe now boasts a broader stance, which perfectly accommodates the wider tires on the back (P305/30ZR20) versus the ones on the front (P245/25ZR20) for more precise handling and better road grip.

Inside, the 991.2 maintains the same high-quality fit and finish

for which Porsche is famous.

The dashboard now features the newly-developed Porsche Communication Management system (PCM) display screen, including an online navigation module. Now the PCM can be operated by multi-touch gestures on the seven-inch display. Similar to a smartphone, even handwritten user inputs are recognized in the PCM. Mobile phones can now also be connected via Wi-Fi. Another new option is the ability to connect an iPhone to the PCM to use Apple CarPlay.

IMPROVED HANDLING The uniqueness of the new 991.2 stems from its ability to blend refined everyday comfort with exceptional performance.

On the new generation, Porsche increased the dynamic capability further than ever before.

The revised Porsche Active Suspension Management (PASM) chassis, which lowers the ride height a little over

a quarter off an inch, i h is i now a standard feature. This helps improve driver control during cornering.

New shock absorbers enhance ride comfort, thanks to an even more precise response and improved body control during spirited driving.

When equipped with the optional Sport Chrono package, both Carreras now come with a mode switch on the steering wheel’s five o’clock position, derived from the 918 Spyder.

The mode switch is a rotary dial with four positions for the

driving modes: Normal, d i i d N l Sport, S Sport Plus and Individual.

In the middle of the switch, there’s a very special button that when pushed, automatically puts the 911 in the optimal settings for 20 seconds of maximum power thrust.

It’s an immensely satisfying push-to-pass feature for quickly overtaking the slow vehicle that always seems to be in your way.

Continues on page 61

THURSDAY, FEBRUARY 25, 2016

generous torque over a g broad range. b More importantly, the new smaller, turbo-charged n engines deliver more horsee power and torque while p still providing the familiar Porsche sound. Oh, and they P are more fuel efficient too. a On both vehicles, power is rrouted through the revised optional Porsche Doppelko upplung (PDK) seven-speed u automatic transmission a with manual mode. w

Continues from page 60

SMALLER, BUT PEPPIER ENGINE

Porsche is no stranger to turbo-charged technology.

In the development of turbocharged six-cylinder flat engines, Porsche can look back on more than 40 years of experience.

Innovations and developments that have proven themselves under extreme racing conditions have benefitted production models too. The new Carrera and Carrera S are no exceptions.

The completely new engine generation featuring twin-turbo technology enhances the driving experience of the 911 Carrera and Carrera S. The new 3.0liter engine in the standard Carrera now develops 370 horsepower—a 20 horsepower increase over the previous model.

Using turbochargers with modified compressor wheels, a model-specific exhaust system and a different tuning for the engine management system, the new 911 Carrera S delivers 420 horsepower from the same 3.0-liter engine.

The new Porsche 911 Carrera and Carrera S engines are characterized by significantly increased

OUR TAKE

up to ttorque. Offering i t 331 pound-feet (lb.-ft.) and 368 lb.-ft., respectively, from

1,700 revolutions per minl ti i ute (rpm) up to 5,000 rpm, both powertrains supply

After testing both the 2017 Carrera and Carrera S on the new Autódromo Hermanos Rodríguez Formula 1 racetrack in Mexico City and a 240-mile roundtrip between Mexico City and Puebla, we can attest to the new vehicles’ vastly enhanced performance and driving dynamics.

Regardless of model, the 991.2 is sharp, planted, and poised. But the Carrera S is downright dazzling. The turbo-charged enhancements and improved chassis in the S place it higher on the sports car ladder than the outgoing model, which was already great.

The new 2017 Porsche Carrera and Carrera S are slated to arrive at Garage EuropaPorsche Center in Puerto Rico next month. 䡲

VEHICLE SPECS VEHICLE TYPE: Rear engine sports coupe DRIVE TYPE: Rear-wheel drive ENGINE: 3.0-liter, twin-turbo flat 6 TRANSMISSION: Seven-speed PDK automatic with manual shift mode HORSEPOWER: 420 hp @ 6,500 rpm TORQUE: 368 pound-feet @ 1,700 rpm BRAKES: Four ventilated discs with 4-piston calipers, brake assist, Porsche Stability Management, electronic parking brake TIRES/WHEELS: FRONT: P245/25ZR20; REAR: P305/30ZR20; alloy wheels TURNING CIRCLE: N/A SEATING CAPACITY: 2+2 CURB WEIGHT: 3,219 pounds FUEL ECONOMY (MPG): N/A BASE PRICE IN PUERTO RICO (INCLUDING EXCISE TAX): $138,917 PROS: Excellent handling dynamics; responsive and peppy new twin-turbocharged engine and recalibrated PDK transmission; improved infotainment system.

CONS: Low ingress and egress for both driver and passenger; rear seats mostly cosmetic; limited storage area.

BOTTOM LINE: With its smaller displacement, twin-turbocharged engine providing more engaging horsepower while delivering better fuel economy, updated front and rear fascias and an improved infotainment touchscreen, the new 2017 Porsche Carrera S provides performance, driving dynamics, looks and technology that are hard to match in its price level.

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THURSDAY, FEBRUARY 25, 2016

Advertising

Ad aims straight at the heart

New Cosvi Advertising Campaign Aims at the Hearts of Young Parents

BY MARIO BELAVAL DÍAZ m.belaval@cb.pr

The new advertising campaign for Cooperativa de Seguros de Vida (Life Insurance Cooperative, or Cosvi by its Spanish acronym), developed by advertising agency TBWA\San Juan, seems to bet on the idea that nobody can resist a baby, not only in terms of cuteness or adorability, but also on the daunting feelings of duty and responsibility that a baby can evoke from adults, especially their caretakers.

In this case, the campaign wanted to appeal specifically to a new generation of parents that may not feel the need, or see the importance of the need, for insurance because they are still young. The same could be true for grandparents or any family member who has a role in raising a child.

“Not only are we promoting a product through this effort, but we are also communicating key values of the company and the cooperative movement: respect and responsibility,” said Damaris Vera,

director of Business & Communications Intelligence at Cosvi.

The storyline of the TV ad features a young, first-time father who suddenly realizes the enormous responsibility of taking care, raising and protecting his daughter. The commercial opens with the father waking to the sound of his baby crying over the baby monitor.

He goes to the baby to comfort and cuddle her, while his thoughts

that my purpose in life is to protect yours,” states the voiceover.

Through the new campaign, Cosvi appeals to the emotions of parents and reminds them about the importance of acquiring life insurance, said Alberto Cabrer, vice president of Business Development at Cosvi.

“As leaders in the industry, we firmly believe that it is our responsibility to continue to educate the

are heard in a voiceover. “I need to confess that when I first saw you, I felt afraid. I realized that without me you can’t fend for yourself. You can’t get milk, can’t change your diaper and can’t even tell me if you are hurting. You depend entirely on me. At that moment, I realized

audience about the importance of providing insurance for their families” he said.

TBWA\San Juan’s creatives Rafael Otero and Christopher Rodríguez, who will represent Puerto Rico at the Young Lions competition at the Cannes Lions International Festival of Creativity in France this summer, created the campaign. The Young Lions competition is aimed at creatives up to age 28 in such areas as print, cyber, film, design, young marketers and media.

“Cosvi wanted to send a strong, positive message to Puerto Ricans, particularly because Cosvi recently celebrated its 55th anniversary,” said Luzirene Mendoza, TBWA\ San Juan’s partner & CEO. 䡲

Creative Corner Client: Cosvi Agency: TBWA\San Juan Creative Directors: Clarissa Biaggi, José Vallecillo Art Director: Christopher Rodríguez Copywriter: Rafael Otero Account Executive: Susanne Ortiz Production Company: Nostrom Director: Jochi Melero TV spot: “Bebé”