Caribbean Business March 3, 2016 by Latin Media House, LLC

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Governor Delivers State of the Commonwealth Address

Science and Technology Trust Pushing Knowledge Economy

TOUTS AUSTERITY MEASURES, DROP IN CRIME PAGE 6

VIGILANT AGAINST THREATS TO R&D FUNDING PAGE 8

Everything You Wanted to Know About Fiscal Control Boards EXPERT DEBUNKS MYTHS ON PATH TO RECOVERY PAGE 22

COVER STORY

Local Republicans Jump on the Rubio Train GOP ISLAND PRIMARY TAKES PLACE MARCH 6 PAGE 28

TOP STORY

DACO Report: LPG Allegedly Being Imported to Puerto Rico in Violation of Jones Act LPG Apparently Originates in Houston, Transported to the Dominican Republic and Labeled as D.R. Product A Consumer Aﬀairs Department (DACO by its Spanish acronym) report on the liquefied petroleum-gas distribution industry in Puerto Rico has found that the product is apparently being imported to Puerto Rico from Houston via the Dominican Republic (D.R.), where it is labeled as a D.R. product, and

“Apparently all the liquefied gas imported from the Dominican Republic to Puerto Rico really comes from Houston, Texas, [where] it is shipped in smaller tankers in Ocoa Bay, in the Dominican Republic, and transferred to Puerto Rico in foreignflagged tankers declaring the import as from the Dominican

then sent on to Puerto Rico, in violation of the Jones Act. “The imports of liquefied gas in Puerto Rico primarily come from two countries. [An estimated] 33% is imported from Trinidad & Tobago, 62% is imported from the Dominican Republic and the remaining 5% is imported from the U.S., Argentina and Colombia. The imports from the Dominican Republic have increased at an accelerated pace since 2007,” states the report, a copy of which was obtained by Caribbean Business.

Republic, when in reality, [the product] is an import from the U.S., [thus] violating the cabotage laws,” the report adds. For the product to be correctly labeled as an import from the Dominican Republic, the liquefied petroleum gas (LPG) must be somehow “processed” in that country, said a Caribbean Business source who reviewed the document. “That is apparently not the case here,” the source said.

My Name Is Bond—SuperBond Steam Building Behind Restructuring Initiatives While the Puerto Rico government has tried mightily, but has so far failed to achieve access to bankruptcy protection, the commonwealth seems to have found an unlikely ally in Nuveen Asset Management, a major fund manager in the municipal bond market. Nuveen’s recently released February report, “Puerto Rico’s Course Forward,” not only comes out in support of an orderly restructuring process, but

also backs a mechanism akin to a Super Chapter 9 in which a broader restructuring regime would encompass the commonwealth’s 18 diﬀerent issuers that represent a complex web of debt obligations. Nuveen’s findings are significant because the Chicago-based company has total assets of $225.7 billion, of which $108.4 billion, or 48%, are municipal (i.e. tax exempt) fixed-income assets,

according to the company’s website. Puerto Rico issues its debt in this tax-exempt market, of which Nuveen is a major player. However, it was unclear as of press time how much exposure Nuveen has in terms of Puerto Rico bonds, but its portfolio includes Sales Tax Financing Corp. (Cofina by its Spanish acronym) bonds, among others . BY ROSARIO FAJARDO & LUIS J. VALENTÍN PAGES 14-18

BY ROSARIO FAJARDO CONTINUES ON PAGE 4

THURSDAY, MARCH 3, 2016

Editorial

Contents PICTURE OF THE WEEK PAGE 26

Candidate Profile

By Philipe Schoene Roura EXECUTIVE EDITOR

Debt Crisis Prompts Skyfall

Advertising ...........................................................................................................46 Advertising Calendar............................................................................................46 Autos ....................................................................................................................35 Column.................................................................................................................19 Economy ......................................................................................................... 12-13 Editorial .................................................................................................................2 Energy ..................................................................................................................20 Environment ................................................................................................... 31-32 Federal Affairs................................................................................................ 22-23 Front Page ...................................................................................................... 14-18 Healthcare............................................................................................................30 Lead Stories ....................................................................................................... 6-8 Politics ........................................................................................................... 26-28 Poll .......................................................................................................................21 Sin Comillas ................................................................................................... 12-13 Technology............................................................................................................33 Top Story........................................................................................................ 1, 4, 6 Tourism ................................................................................................................29 Weekend ...............................................................................................................45

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

SPECIAL FEATURES: North American International Auto Show ..............................................................34 Voices in the Telecommunications & Technology Industry .............................. 37-43 caribbeanbusiness.pr Volume 2, No. 8 • Thursday, March 3, 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. Circulation Department telephone: (787)728-7670. General telephone: (787)728-3000. Fax: (787)268-1626. Periodicals postage paid at San Juan PR 00936-9998. Postmaster: Send address changes to CARIBBEAN BUSINESS, PO Box 12130, San Juan PR 00914-0130, (ISSN 0194-8326). Entire contents: Copyright ©2016 by Latin Media House, LLC

A spiffy image of Gov. Alejandro García Padilla as Agent 007 is a fitting representation of his administration’s attempt to act as an agent of change with the initiative to put together a Super Bond deal as a last resort to provide the cash-strapped government with muchneeded liquidity. The crusade for a Super Bond has now turned to a movement that seeks a broader restructuring regime, or at the very least, some type of restructuring mechanism that would help bind holdouts and avoid “scorched earth” litigation that could cost both the commonwealth government and creditors several hundred million dollars per year. Investors realize that the potential for default is real. Amid the uncertainty of how and when Congress could act—if it decides to—the clock continues to tick on the commonwealth as it hits a $2.5 billion debt-service wall beginning May 2, with $422 million owed by its cashstrapped Government Development Bank. All told, Puerto Rico will be using about 36% of its tax-generated revenue to pay debt service. That is 23% higher than the highest state, Hawaii, which pays some 13% of tax-generated revenue to pay for debt service. So, the García Padilla restructuring brigades, led by former U.S. Treasury Chief Restructuring Officer Jim Millstein, are making an offer they were hoping creditors could not refuse. The commonwealth’s advisers were betting that a majority of creditors would gladly exchange 55% of their notes, which are worth about 37 cents on the dollar, for debt in tradable instruments as part of an exchange that amounted to a 45% haircut. The offer is being scoffed at because it bundles Sales Tax Financing Corp. (Cofina by its Spanish acronym) bonds, which are supported by Puerto Rico’s 11.5% sales & use tax and constitutionally protected general-

obligation debt, and attempts to bundle them in a structure that exchanges their paper for debt composed of investmentgrade “base bonds” and highly speculative “growth bonds”—that deliver dividends only if Puerto Rico’s economy grows on par with the U.S. economy. Creditor groups are none too pleased— slight of hand will probably not do the trick in obtaining consensus among so many competing creditor groups. The consensus on Capitol Hill is that Puerto Rico needs some sort of fiscal oversight board that would help guarantee expenditure remains in line with revenue in the face of budgetary constraints that leave little or no wiggle room over the next decade. Puerto Rico’s debtservice payment over the next five years alone totals some $27 billion. But there is no consensus yet in the hallowed halls of Congress as to the shape of the restructuring to come. At this writing, there was chatter about collective action clauses that allow majority bondholder agreements to impose terms on holdouts, which is starting to pick up steam. However, it does not seem likely that concrete action will take place on the floor prior to March 31. In a related story, economist Deborah Kobes, who received her doctoral degree from the Massachusetts Institute of Technology, told this newspaper that “control boards tend to be established in communities with low median-household incomes; low rates of employment, homeownership and high-school graduation; and high rates of poverty, minority population and female-headed households.” Beyond the debt crisis and the mechanisms employed for recovery of market confidence, the socioeconomic markers cited by Kobes are ultimately the important issues that we must address or we will be left to suﬀer a generation of socioeconomic decay. 䡲

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THURSDAY, MARCH 3, 2016

Top Story

No company is directly implicated

Daco Report

Continued from cover

Trinidad & Tobago is a leading Caribbean producer of oil and gas, while the Dominican Republic is not. D.R. oﬃcials have said they will boost oil and gas exploration in 2016 and the D.R. is building a gas export terminal. The Jones Act, or cabotage laws, requires that maritime transportation of cargo between ports in the U.S. be carried on vessels that are owned by U.S. citizens and registered in the U.S., built at shipyards located in the U.S., and operated with predominantly U.S. citizen crews. Prices for LPG have dropped significantly in recent years, starting with the worldwide recession that began in 2008, while transportation costs have not. The report indicates that this is the economic rationale for why LPG may be allegedly being transported from the U.S. to Puerto Rico, via the Dominican Republic, in violation of the Jones Act. “In the last three years, the price of liquefied gas has decreased from $1.63 in September 2011 to $0.71

in June 2012, and then it maintained for a year and a half an average price of $0.89. The price had increased gradually halfway through 2013 until reaching a monthly average of $1.40 in December 2013. Toward the end of December, the price increased to $1.70 per gallon, but at the beginning of February, it went down a bit to $1.54 per gallon and increased again to $1.70 on Feb. 10,

2014,” the report states. “After this date, the price of liquefied gas has been going down consistently until the actual levels of around $0.45 per gallon. In fact, the price of liquefied gas has decreased so much that the cost of transportation plus taxes is more than the cost of importing the product,” the report adds. Transportation is a large component of the

total cost for LPG, along with the price of LPG and transportation/administrative costs, the source indicated. “The logic is that importers want to save on transportation costs, and foreign-flagged ships are cheaper than U.S.-flagged ships.”

COMPANIES NOT

DIRECTLY IMPLICATED It should be noted that no company is directly

implicated in the DACO report. However, the document states that the two main importers of LPG in Puerto Rico are Empire Gas and Tropigas. Puma is a newcomer, as it did not enter the LPG market until October 2014, the report says. A senior DACO oﬃcial confirmed the report’s findings. Tropigas Vice President Ramón Berríos said he

had seen the report, but clarified that the company receives most of its product from Trinidad & Tobago and Argentina. In the past, product also came from Venezuela and as far away as Africa. “Today, the cheapest [LPG] is from the U.S., but we cannot access that market because it is too expensive and the infrastructure is Continues on page 6

THURSDAY, MARCH 3, 2016

Top Story DACO Report

Continued from page 4

not there,” he said. Berríos indicated that to build a vessel capable of handling LPG would cost about $50 million to $60 million in South Korea, while in the U.S. it would cost “two-and-ahalf times that.” “The Jones Act is really hurting Puerto Rico. We requested a waiver from the Jones Act, but it was not successful. It would definitely help Puerto Rico’s economy if we get that waiver. The U.S. Virgin Islands is Jones Act exempt, but we are not.” Empire Gas oﬃcials could not be reached for comment as of press time. According to the DACO document, the penalty for violating the Jones Act is as follows: “Merchandise transported in violation… is liable to seizure by and forfeiture by the Government. Alternatively, an amount equal to the value of the merchandise (as determined by the Secretary of Homeland Security) or the actual cost of the transportation,

whichever is greater, may be recovered from any person transporting the merchandise or causing the merchandise to be transported.” As reported by Caribbean Business (Dec. 24, 2015) LPG prices haven’t dropped in Puerto Rico, even though oil prices have fallen significantly. DACO issued an order to control gross-profit margins starting Nov. 18, 2015, as a result of the high prices in the LPG market’s consumer segment. “The price of liquefied gas within the consumer level in Puerto Rico is one of the most expensive ones in the world. Among 46 countries in the world, a recent survey found that the average global price is $0.58 per liter, while in Puerto Rico the average price for the consumer was $0.93 per liter, surpassed by only one country in the globe, Sweden, with [a price of] $1.02,” the report states. “The retail price of liquefied gas in the United States is [around] $0.51 per liter, 45% less than on the island.”

Treason, political games, populism, lack of character, among the frustrations expressed by the governor.

Lead Gov. García Padilla Issues a Final Call for Unity BY LUIS J. VALENTÍN l.valentin@cb.pr

In April 25, 2013, Gov. Alejandro García Padilla said he was proud to announce Puerto Rico was on its way to a full recovery, lauding how in 100 days, his administration had ended mismanagement at the water and electric utilities, saved the pension systems and reactivated the economy by creating jobs, among other quick coups. About three years later and delivering his fourth and final State of the Commonwealth address, the governor said, “the path toward a new dawn has not ended,” as Puerto Rico finds itself in the toughest stretch of the road, with critical months ahead for a cash-strapped commonwealth in an economic free fall. As the Puerto Rico government continues its

crusade in Washington, D.C., to achieve an orderly debt restructuring, García Padilla urged the country to join together in one voice and demand immediate action from Congress if the island is to wash away its fiscal and economic misfortunes. “I can understand the gluttony of the Wall Street sector because their interests are diﬀerent. But what I can’t understand is that Puerto Rico politicians join Wall Street against Puerto Rico,” said the governor, while warning once again on the potential defaults this summer if timely congressional action is not achieved. Puerto Rico owes more than $2.5 billion in debt payments between May and July. García Padilla noted during his speech how his administration has reduced spending without layoﬀs; increased

employment; and transformed the Puerto Rico Electric Power Authority. Also highlighted were achievements in civil rights and economic development, particularly those in the tourism, aerospace and service and agriculture industries. He supported the decriminalization of marijuana, while urging a serious public discussion on whether it should be legalized. For Resident Commissioner Pedro Pierluisi, the governor’s address was very disappointing, with “achievements that result from fantasy.” The New Progressive Party president and gubernatorial hopeful said the administration has no credibility and has a confrontational attitude that

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is wrong. “[García Padilla] talked about Wall Street. If anything, they were the ones who lent money to the government of Puerto Rico,” Pierluisi said. Meanwhile, with expectation building up beforehand, García Padilla addressed the looming transition to a value-added tax in April, along with a tax hike on business-tobusiness transactions, but fell short of putting on hold these plans. Instead, García Padilla called on Puerto Rico lawmakers to “correct the mistake” of having a majority of residents still paying taxes on their incomes, as initially proposed under his administration’s failed tax reform. “Eliminate income taxes,” he urged. “In front of Congress and creditors, we can’t be divided,” the governor stressed during his message. Yet, achieving unity moving forward and “not passing the crisis on to the next governor,” as García Padilla stated, could prove particularly challenging as he finishes his fourth and final year before exiting La Fortaleza.

THURSDAY, MARCH 3, 2016

Lead

Ofﬁcials and shareholders are liable for unpaid company taxes

Incorporation and Bankruptcy Do Not Protect Officials From Tax Liability BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

Over the past few months, commonwealth Treasury Department tax collectors have come out in force to shut down shops and seize dozens of businesses for failing to remit millions of dollars in sales & use taxes (IVU by its Spanish acronym) and withholding, or retention, taxes to the agency. Many of the businesses that owed taxes are incorporated entities whose legal identity is separate from that of the owners or shareholders. The law states that corporations can take out loans, sue and be sued, or engage in other legal obligations. Shareholders or oﬃcials in incorporated entities cannot be held liable in their personal capacity for the corporation’s debts. However, that is not the case when the debt consists of delinquent taxes, warns Yasmín Colón Colón, a partner at the Emmanuelli Law Firm in Ponce. “The answer to the question—on whether the corporate veil protects the personal assets of officials who have failed in their obligations to the Treasury Department—is no. They are personally liable for the debt,” she said. The Treasury Department is providing payment plans to businesses so they can pay back the

money they did not retain from their employees’ checks but the agency is demanding full payment of the delinquent IVU taxes, forcing businesses to seek bankruptcy protection.

While a bankruptcy court will give businesses breathing room to restructure their debt, it will not shield them from having to pay commonwealth taxes because they are not dischargeable debt, Colón

Colón warns. “What usually happens is that the person or corporation that files for bankruptcy will have a chance to pay back the amount owed in taxes in installments,” she told Caribbean Business. Colón Colón cited dispositions in the Internal Revenue Code that force businesses to withhold taxes from their employees paychecks, retain 7% in taxes from their checks

paid in contracts for professional services and to also retain money from the IVU and remit it to the Treasury Department. The person who has the responsibility for retaining and remitting the taxes, but fails to do so, will be held liable for delinquent taxes. “And what does the term ‘person who is obligated’ mean? The Internal Revenue Code defines such a

“The Puerto Rico Internal Revenue Code not only allows the Treasury Department to collect taxes from the corporation as principal debtor, but empowers the department to go after oﬃcers or managers who fail to retain or remit payments to Treasury, and also criminalizes the failure to withhold the taxes.” —Attorney Yasmín Colón Colón

person as any individual, association, partnership, trust, corporation or any official, agent or corporation employee or a partner, agent or employee of a partnership or trust that as the individual, official, agent, employee or trustee. It also includes the official, agents or employees of a department or government agency,” she said. The responsibility or liability imposed by the Internal Revenue Code is not only monetary but is also a third-degree felony if the person obligated to pay the taxes, knowingly did not meet that requirement. The code states that the criminal responsibility falls on the chief operating officers, the president, the chief financial official, the accountant or comptrollers, or any person obligated to withhold the tax or remit it to the agency. “The Puerto Rico Internal Revenue Code not only allows the Treasury Department to collect taxes from the corporation as principal debtor, but empowers the department to go after officers or managers who fail to retain or remit payments to Treasury, and also criminalizes the failure to withhold the taxes or the failure to make the payments to the tax authorities,” she said. Nonetheless, she said that based on her experience, the agency pursues criminal charges against employers only when they have owed taxes for several years and have not approached the agency to seek a payment plan or other alternatives.

THURSDAY, MARCH 3, 2016

Lead

Puerto Rico continuing to lag in R&D investments

Change in Tax Laws or Federal Oversight Board Could Hurt Efforts to Grow R&D in Puerto Rico BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

Puerto Rico’s efforts to grow investments in Research & Development (R&D) could be irreparably damaged if the tax laws that finance the Science, Technology & Research Trust are modified by Congress or a federal oversight board is established as part of the efforts to restructure the island’s $70 billion debt to pay bondholders. As the debate to deal with Puerto Rico’s debt crisis focuses on finding money to help pay bondholders, an area that could be affected is R&D, according to trust CEO Lucy Crespo. For example, the federal fiscal board under discussion in Congress could have broad powers to make budget decisions regarding the Puerto Rico government, which might affect the Trust, she indicated. During recent congressional hearings, one U.S. lawmaker asked about using the money from the Acts 20 & 22 incentives to help fund the earned-income tax credit for Puerto Rico. In essence, funds from Acts 20 &22 could be diverted to provide this tax credit. “It is important for people to understand that one of the reasons we are where we are is because we haven’t made the

transformation to an innovation and knowledgebased economy,” Crespo said in an interview with Caribbean Business. The country of Israel, for instance, yields over $2 billion in the area of R&D every year. In contrast, Puerto Rico’s R&D expenditures are sadly lacking. In 2013, estimated gross expenditures in Puerto Rico on R&D totaled $439.3 million, or 0.044% of gross domestic product, an increase of just 3.3% since 2009. For every dollar of investment in innovation and R&D, five direct and indirect jobs are created, according to experts. From 1963 to 2014, Puerto Rico obtained 1,045 patents, but the Trust is hoping to double the number in five years and obtain profits from the commercialization of inventions. The Science, Technology & Research Trust is a nonprofit private entity that is using five diﬀerent incentive laws to help attract and retain scientists and researchers, as it strives to turn the island into a world-class innovation center. These incentives are Act 101 of 2008, which allows qualified researchers to seek tax exemptions for up to $195,000 for income generated from eligible research conducted at a local university or a $250,000 tax exemption if the research activity is

conducted within Puerto Rico’s Science City. Act 214 of 2004, the law that created the Trust, also receives funds from the law that imposes a 4% tax on foreign-controlled corporations. Act 73 of 2008, the Economic Incentives Law, Act 20 of 2012, which grants incentives to companies that promote exports, and Act 22 of 2012, which helps attract millionaire investors, are also important tools promoting R&D. Act 20, for instance, provides a 3% to 4% tax rate and partial exemptions on property and municipal taxes to R&D activities, and a 100% exemption on the distribution of company earnings and profits. Act 22 also provides tax exemptions to its beneficiaries. How to broaden the knowledge based economy? The Trust is developing Science City, a state-ofthe-art, mixed-use, transit-oriented, sciences, technology and research community, with supporting residential, retail and lodging uses on 68 acres of land in San Juan. Science City will be the equivalent of Silicon Valley, but with numerous tax incentives for its residents and businesses. It is located near important research facilities such as the Comprehensive Cancer Care Center, the new Molecular Sciences Research Center,

“It is important for people to understand that one of the reasons we are where we are is because we haven’t made transformation to an innovation and knowledge-based economy.” —Science, Technology & Research Trust CEO Lucy Crespo the University of Puerto Rico Medical School and the University of Puerto Rico Rio Piedras campus. Science City’s first laboratory, the Environmental Research Laboratory, is also in the works. Crespo said that so far, the island has been able to attract some 34 top researchers with the help of local universities. For instance, Dr. Harold Saavedra, a cancer biologist from Emory University, and Dr. Devin Mueller, a neuroscientist from the University of Wisconsin-

Milwaukee, both of whom were awarded prestigious RO1 research grants by the National Institutes of Health, are doing their work at the Ponce Research Institute. In turn, the Institute’s expansion was made possible by a $2 million grant from the Researchers Startup Funds Program, a Trust initiative to propel the island’s knowledge-based economy. Crespo said the Trust’s Technology Transfer Office, which is the entity in charge of fostering the

commercialization of locally developed scientific inventions and discoveries, is finally becoming fully operational after establishing liaisons with local universities. The Trust also oﬀers the scientific and high-tech entrepreneurship community its Small Business Innovation Research/ Small Business Technology Transfer (SBIR/STTR) Matching Grant Program to incentivize local technology-oriented small business firms and researchers to compete for SBIR/STTR grant awards and is providing technical help to those seeking to obtain grants. At the same time, the Trust is expanding into the area of clinical trials. It recently made an alliance with Yale University Center for Clinical Research to do collaborative investigations and has established the Consortium for Clinical Investigation, headed by Dr. Kosmas Kretsos. In September, the trust is slated to hold its first Innovation Summit. 䡲

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THURSDAY, MARCH 3, 2016

Banking/Finance

Only remaining Spanish bank in Puerto Rico still operates 43 bank branches on the island

Santander Securities Puerto Rico Confirms Layoff of 22 Employees Banco Santander Puerto Rico Not Affected; Bank Reafﬁrms Commitment to Clients, Island BY JOSÉ L. CARMONA

$914,241 in capital and 43 branches, Puerto Rico Financial Institutions Commissioner’s Oﬃce records show.

j.carmona@cb.pr

In a written statement, and in response to an article in the Feb. 25 issue of Caribbean Business, a spokesperson from Santander Securities in Puerto Rico confirmed the layoff of 22 employees at the brokerage firm in early February. The spokesperson, however, denied staff from Banco Santander Puerto Rico were also let go as a result of these layoffs. “The layoffs were limited to Santander Securities and did not affect Banco Santander Puerto Rico,” the bank spokesperson said. The staff reduction at Santander Securities, the spokesperson pointed out, responded to the reduction in business volume that the island’s brokerage and investment firms have been experiencing over the past few years. “Santander Securities has adjusted its structure to adapt it to current needs in the island’s investment market. These changes in no way affect the strong commitment the firm maintains with its clients and with Puerto Rico,” the spokesperson said. The spokesperson admitted Banco Santander Puerto Rico, just like other financial institutions on the island, have increased

Banco Santander’s Puerto Rico headquarters in San Juan’s Hato Rey district.

certain fees and commissions for some of its products and services, but denied these were among the highest in the local banking industry. WELL-CAPITALIZED Despite the island’s challenging economic environment, Santander Puerto Rico maintains the strength of its capital, liquidity and assets, the bank spokesperson said, noting it’s a solid institution with an investmentgrade rating from Moody’s and Standard & Poor’s. “Santander Group still maintains its firm commitment with its employees, clients and the community it is a part of,” the spokesperson’s statement further indicates. As of the third quarter ended Sept. 30, 2015, Banco Santander Puerto Rico had $5.45 billion in assets, $3.9 billion in net loans, $4.4 billion in deposits,

SANTANDER USA EXPANDING TO THE ISLAND As a testament to Santander Group’s commitment to Puerto Rico, the bank spokesperson pointed out that Santander Consumer USA Holdings, based in Dallas, announced

last December that it had selected Puerto Rico as one of the jurisdictions where it will expand service operations during 2016. In addition, Banco Santander Puerto Rico recently awarded a $26.7 million loan to the Puerto Rico Industrial Investment Co. (Priico), a division of the P.R. Industrial Development Co. (Pridco), as part of a financial transaction that will allow the public corporation to recover the investment made in the CooperVision project in Juana Díaz. The contact lens manufacturer recently made a $250 million investment to expand its operations on the island, and to that eﬀect extended its lease on the facility with Priico for 30 years.

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THURSDAY, MARCH 3, 2016

Banking/Finance

With a $1 million investment, FirstMortgage launches ‘Tu casa, tu mundo’ ad campaign tonight

Despite Shrinking Mortgage Market, FirstMortgage Strengthens its No. 2 Position Grew Mortgage Production 32%, Market Share Jumped from 14% to 20% in 2015 BY JOSÉ L. CARMONA j.carmona@cb.pr

The past 10 years have been challenging for the Puerto Rico mortgage market. Since 2006, the island has experienced a reduction in the number of mortgage closings and players in the local market. From 13,419 new-housing units sold in 2006, the number has steadily declined to just 1,759 new-housing units sold as of the third quarter of 2015. Likewise, the Puerto Rico mortgage market has grown smaller, with fewer competitors as a result of the ensuing bank consolidations.

On April 30, 2010, Westernbank, R-G Premier Bank and Eurobank were acquired by Popular, Scotiabank and Oriental, respectively, absorbing their mortgage divisions. Then in late 2012, Oriental acquired the assets of Spanish bank Banco Bilbao Vizcaya Argentaria (BBVA) in Puerto Rico. “As recently as last year, we saw the exit of a major competitor, Doral Bank, in the mortgage industry. Despite the continuing reduction of the local mortgage market, FirstMortgage has not only been able to maintain its position in the marketplace but also to increase it share of the

market,” Luzmarie Vélez Miro, senior vice president and sales & production director at FirstMortgage, told Caribbean Business during an exclusive interview. FirstBank’s mortgage division has been steadily growing its market share, from 14% a few years ago to 20% in 2015, which Vélez Miro credits to several factors, but mainly from taking advantage of market opportunities that arose during the time. MORE EFFICIENT OPERATION While the industry’s average cycle to close a mortgage-loan transaction is

between 35 and 45 days, Vélez Miro insisted that FirstMortgage has been able to reduce its average below that range. “We enjoy a 20% share of the island’s retail mortgage market. We strengthened our customer-service efficiency by re-engineering our processes and generating new products, which brought changes and expected improvements in our line of business and the evolution of our work culture,” the FirstMortgage oﬃcial said. With government-sponsored programs that help defray closing costs practically nonexistent, Vélez Miro said FirstMortgage created “Lender Paid,” a program where the mortgage bank contributes a portion of the closing costs. “This gives clients, who do not have the needed funds to pay closing costs, a little extra money to acquire a new home or refinance an existing one,” she said. In addition, the bank also made available

the 203k loan from the Federal Housing Administration, which provides additional money to make repairs or upgrades of repossessed properties. FirstMortgage also recently launched its “Tu Casa” mobile application, which allows users to prequalify for a loan, check listings of new or repossessed homes, and even chat with a bank official, all through a smartphone or mobile device. New ad campaign As part of its ongoing business strategy, FirstMortgage tonight will launch its new “ Tu casa, tu mundo ” (“Your home, your world”) ad campaign. The eﬀort, which represents a $1 million investment in production and media placement, presents relevant solutions to circumstances that people could experience in simple, everyday situations that led them to organize their lives and lifestyles around

their house or apartment, explained Jorge Rosario, marketing manager for FirstBank. The “Tu casa, tu mundo” ad campaign launches with two 30-second television executions each: “Sala” (“Living Room”) and “Cocina” (“Kitchen”). “These days, we have created a very special world at home. The house has become the family activity center where we cook and dine as in a restaurant, work as in an oﬃce. It’s an activities lounge, a movie theater, a gym,” Rosario explained. The new ad campaign was produced entirely on the island, and includes television, cable and digital executions, national and regional print, digital billboards and promotional materials at FirstBank branches and FirstMortgage centers. It was executed by local production house Norstrom, with a team of 85 local talent and production crew. 䡲

THURSDAY, MARCH 3, 2016

WINNERS & LOSERS WEEKLY PERFORMANCE OF PUERTO RICO STOCKS

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

WINNERS FOR THE WEEK STOCK Popular Inc. Triple-S Management Corp. Evertec Inc. OFG Bancorp First BanCorp

52-wk SYMBOL LOW BPOP 22.40 GTS 17.34 EVTC 11.27 OFG 4.56 FBP 2.06

52-wk HIGH 35.83 27.14 23.12 17.61 6.76

PRICE 2/19 25.86 25.32 11.40 5.41 2.44

PRICE 2/26 26.69 25.98 11.85 5.83 2.56

CHANGE 0.83 0.66 0.45 0.42 0.12

Banks’ P.R. Deposits Grow

LOSERS FOR THE WEEK

STOCK -

52-wk 52-wk PRICE PRICE SYMBOL LOW HIGH 2/19 2/26 CHANGE -

Weekly Comment on Puerto Rico Stocks Wall Street finished another week of strong gains despite closing lower last Friday, as concerns over future interest-rate hikes oﬀset gains in materials and energy stocks. The materials index was the biggest winner, up for a third-straight day, with a 1.35% rise. Breaking the trend seen for much of this year, energy shares held to gains after a rally in crude-oil prices faded. Shares of ConocoPhillips edged up 3.21% to close at $34.12. Meanwhile, the U.S. Commerce Department said the nation’s gross domestic product (GDP) expanded at a 1% annual rate in the fourth quarter, an upward revision from its previous estimate of 0.7%. In other U.S. data, consumer spending rose strongly in January, while underlying inflation picked up by the most in four years. The data raised concerns the Federal Reserve could hike rates again, which is sooner than previously expected. Based on federal funds futures, traders see a 36% chance the Fed will raise rates in June and a 53% chance in December. For the week, the Dow Jones Industrial Average gained 1.5% to 16,639.97. The Standard & Poor’s 500 Index rose 1.6% to 1,948.05, while the Nasdaq Composite Index was down 5% to 4,590.47. For the second week in a row, the Government Development Bank’s Puerto Rico Stock Index (PRSI) managed to close in the black, with all components reporting weekly gains. For the week, the PRSI gained 54.30, or 3.66%, to close at 1,536.42. Topping last week’s list of gainers was OFG Bancorp, which added 42 cents, or 7.76%, to close at $5.83 after declaring regular quarterly preferred-stock cash dividends. It was followed by First BanCorp, which inched up 12 cents, or 4.92%, to close at $2.56. Shares of Evertec Inc. advanced 45 cents, or 3.95%, to close at $11.85. Popular Inc. gained 83 cents, or 3.21%, to close at $26.69. Triple-S Management Corp. edged up 66 cents, or 2.61%, to close at $25.98. BY JOSÉ L. CARMONA SENIOR REPORTER, BANKING/FINANCE CARIBBEAN BUSINESS

BY LUISA GARCÍA PELATTI SIN COMILLAS

Deposits in Puerto Rico commercial banks decreased by $2.236 billion in the third quarter (3Q) of 2015, dragged down by a sharp drop in brokered deposits. Commercial banks had $44.490 billion in total deposits, the lowest figure since 2004. Deposits have been continuously decreasing for the past three years, according to the Financial Institutions Commissioner’s Oﬃce (OCIF by its Spanish acronym). A downward trend has been seen ever since deposits reached a record level of $64.697 billion in 2008. Instead, local customer deposits grew by 0.9%, the secondconsecutive increase, bringing in an additional $345 million in

3Q 2015 to reach $39.865 billion. The year 2014 holds the record at $41.358 billion. The data by financial institution are still aﬀected by Doral Bank’s disappearance last year from the market, which sold its deposits to Popular and FirstBank, which reflect increases. The other banks lost deposits from local customers. Popular expanded its local deposits portfolio by $1.844 billion (10.2%), compared to 2014’s 3Q, thanks to Doral’s acquisition (the transaction was in February 2015) and FirstBank added $775 million (19.0%). Santander’s customer deposits saw a 9.8% decrease; Oriental declined 7.6% and Scotiabank 2.5%. The leading bank in local customer deposits is Popular at $19.948 billion. FirstBank follows

with $4.857 billion and Santander ranks third with $4.333 billion. According to OCIF data, in 3Q 2015, commercial banks had $44.490 billion in total deposits, a decrease of 4.8%, or $2.236 billion, when compared to the $46.725 billion in 3Q 2014. Deposits in transaction accounts decreased by 0.8%. Accounts that exclude transactions—which represent about 60% of total deposits—dropped 7.3%, the 10th-consecutive quarterly decline. Deposits in commercial banks also include brokered deposits— which suﬀered a 35.8% decrease. These funds have been experiencing sharp declines since 2009. Brokered deposits, which reached $28 billion by late 2008, Continues on next page

THURSDAY, MARCH 3, 2016 Continues from previous page

now account for a mere $4.625 billion. The 2010 bank consolidation took away almost $9 billion, and Doral’s closing in February 2015 took away another $800 million. The remainder is due to the regulatory requirements that state that these funds should be used less frequently. Brokered deposits are funds that banks buy in U.S. or international markets to finance their lending activity. This type of deposit represents about 10% of the total deposits made in the island’s commercial banks, but in the past they accounted for more than 40% of total deposits. FirstBank is the financial institution that makes most use of these funds, with $2.578 billion in 3Q 2015—which represents more than half of all funds of its kind on the island. Popular ($1.171 billion) and Oriental ($653 million) also have significant amounts. Banco Popular holds the lead in total deposits at $21.119 billion and a 47% market share. FirstBank follows in second place at $7.435 billion and a market share of 17%. Oriental comes in third place at $4.725 billion and an 11% market share. Credit unions had $5.752 billion in deposits in 3Q 2015, or 0.6% less than in 2014. 䡲

Banks Earned $370.7M in 2015 BY LUISA GARCÍA PELATTI SIN COMILLAS

Commercial banks in Puerto Rico had a net income of $370.7 million in the fourth quarter of 2015, according to the Federal Deposit Insurance Corp. (FDIC). The results represent a decrease of 20.6% over the same period in 2014. The year 2015 ended with $955.2 million in profits for banks in Puerto Rico, $315.7 million more than the previous year. Popular obtained the best results, with $263 million in the fourth quarter, 14.8% more than the same period in 2014. These are the best results for Popular in recent years. Santander earned $43.5 million, the year’s highest figure—which nevertheless is 20.7% below the previous year’s earnings. Scotiabank reported $39.9 million in net income, which is 15.9% more than 2014. Meanwhile, FirstBank reported a net income of $28.2 million after having

earned $399.8 million in the fourth quarter of 2014. Oriental had $3.8 million in losses, thus ending the year with losses in all four quarters. In 2014’s fourth quarter, the bank had earned $84.8 million. The Financial Institutions

Commissioner’s Oﬃce (OCIF by its Spanish acronym) also publishes data on bank profits, and the numbers often diﬀer from those of the FDIC. OCIF’s data corresponds to banks, while FDIC numbers include the results of the parent company and its subsidiaries. Financial institutions such as Popular and FirstBank have subsidiaries in the

continental U.S, and the U.S. Virgin Islands. According to OCIF data, banks operating on the island lost $229.4 million in the third quarter of 2015. These are the first losses reported after losing $568 million and $747 million in 2009 and 2010 respectively. Data for the fourth quarter of 2015 was not available as of press time. 䡲

Aeroportuario del Sureste, which operates the Cancún airport and eight other airports in southeastern Mexico. Aerostar was tapped by the Puerto Rico government to run LMM International Airport in San Juan under a 40-year public-private partnership

(P3) deal that took eﬀect in early 2013. The P3 deal calls for Aerostar to invest nearly $1.4 billion over the life of the lease to transform the airport into a world-class gateway. 䡲

Aerostar Pays $22.7 Million Debt with Prepa BY SIN COMILLAS STAFF

The Puerto Rico Electric Power Authority (Prepa) and Aerostar Airport Holdings culminated the claims process of their diﬀerences in electric energy consumption in the Luis Muñoz Marín (LMM) International Airport during the period of February 2013 to December 2015. According to the agreement, Aerostar will immediately pay $22.7 million for the exclusive electricity consumption in areas leased by the company at the international airport, located in Carolina.

Agustín Arellano, president of Aerostar, explained that “after the process with Prepa, to break down and clarify the complex supply of energy that involves the operation of the airport, we reached an agreement that allows us to make the payment. We will immediately emit a check for the consumption [of energy] exclusively in the areas leased to Aerostar.” Arellano also acknowledged the work done by both technical teams and showed appreciation for the achievement, in record time, of identifying, installing [electricity] meters

and validating the consumption in all the areas at the airport. “This action is part of the initiatives we have put forth at Prepa as part of the restructuring process in order to improve our finances. We will continue to work on the collection process with the various sectors—commercial, residential, industrial—and government agencies that are in debt with the authority,” said Prepa Executive Director Javier Quintana in a statement. Aerostar is a Puerto Rico-based joint venture of Highstar Capital and Grupo

—Editor Rosario Fajardo contributed to this story.

THURSDAY, MARCH 3, 2016

Support Building for Puerto Rico Debt Restructuring Nuveen Agrees That Years of ‘Bitter’ Litigation Will Only Stifle Economic Growth

Puerto Rico’s main hired gun, lead restructuring adviser Jim Millstein BY ROSARIO FAJARDO & LUIS J. VALENTÍN r.fajardo@cb.pr; l.valentin@cb.pr

hile the Puerto Rico government has tried mightily, but has so far

failed to achieve access to bankruptcy protection, the commonwealth seems to have found an unlikely ally in Nuveen Asset Management, a major fund manager in the municipal bond market.

Nuveen’s recently released February report, “Puerto Rico’s Course Forward,” not only comes out in support of an orderly restructuring process, but also backs a mechanism akin to a

Super Chapter 9 in which a broader restructuring regime would encompass the commonwealth’s 18 diﬀerent issuers that represent a complex web of debt obligations. Nuveen’s findings are

significant because the Chicago-based company has total assets of $225.7 billion, of which $108.4 billion, or 48%, are municipal (i.e. tax exempt) fixed-income assets, according to the company’s

website. Puerto Rico issues its debt in this taxexempt market, of which Nuveen is a major player. However, it was unclear as of press time how Continues on next page

THURSDAY, MARCH 3, 2016

Continues from previous page

“We believe the final legislation [in Congress] must include a path for Puerto Rico to restructure these liabilities. We don’t advocate for restructuring lightly. As investors, we prefer political solutions that avert restructuring whenever possible.” —Nuveen Asset Management report

Continues from previous page

much exposure Nuveen has in terms of Puerto Rico bonds, but its portfolio includes Sales Tax Financing Corp. (Cofina by its Spanish acronym)

bonds, among others . Congress has been evaluating options for Puerto Rico’s fiscal and economic crisis, exacerbated by a $70 billion public debt load and more than $40 billion in

unfunded liabilities under its pension systems. In recent months, congressional debate has focused on establishing a federal fiscal-control board for Puerto Rico and whether the commonwealth should be given access to bankruptcy protection, particularly under Chapter 9 of the U.S. Bankruptcy Code. For its part, the commonwealth government continues to warn Congress against the consequences of not acting when it comes to access to a broad debt-restructuring regime, with years of litigation ahead that would only delay a return to economic growth. Regardless, Democrats on Capitol Hill are solidly in favor of debt restructuring for Puerto Rico, while Republicans are steadfastly against it. “We believe the final legislation [in Congress] must include a path for Puerto Rico to restructure these liabilities. We don’t advocate for restructuring lightly. As investors, we prefer political solutions that avert restructuring whenever possible,” Nuveen states in its report. “Yet we believe when an issuer reaches the point where debt reduction becomes inevitable, any

delay only serves to engage in value destruction through additional unsustainable borrowings, economic contraction and/or population loss due to reduced government services.” Meanwhile, the U.S. Treasury is also urging Capitol Hill to enact broad debt-restructuring authority for the island, which should be paired with fiscal oversight, a “tried and true combination to resolve debt crises,” Antonio Weiss recently told a handful of Congress members during a House committee hearing. Weiss, a former head of investment at Lazard, is Treasury Secretary Jacob Lew’s lead adviser over Puerto Rico matters. Instead of recommending Chapter 9, or anything under the U.S. Bankruptcy Code for that matter, the Obama administration is pushing for a “tailored solution” under the U.S. Constitution’s territorial clause—broad enough to cover all Puerto Rico debt obligations and safe enough to protect commonwealth pensioners. It also calls for a temporary stay on creditor lawsuits against the commonwealth. Both Treasury and Nuveen have indicated that

restructuring is better for creditors than the status quo, as the commonwealth would be able to focus on such other key issues as lack of economic growth, a loss in population, and a bureaucratic and ineﬃcient government. “Thus the restructuring—painful as it may be—provides greater value to creditors than lobbying for maintaining the status quo… As municipal asset managers and creditors, we are reluctant to support any adjustment of debts by issuers, but we believe it is both inevitable and necessary for Puerto Rico,” Nuveen states. In the event of a commonwealth debt restructuring, contagion risk is low, Nuveen argues, because Puerto Rico’s case is “unique” and restructuring “will not create widespread negative credit implications for other issuers.” The company also notes that the market already diﬀerentiates between Puerto Rico bonds and other high yield municipal bonds. However, the longer Puerto Rico’s crisis is extended and remains in the news, “market contagion is possible in the form of threats to the municipal bond tax exemption.”

COMPETING

INTERESTS The commonwealth has already put forth a voluntary debt-restructuring oﬀer to its creditors, targeting about $49 billion of its “tax-supported debt,” including general obligations (GOs), Cofina and various other public entities. The government is seeking to exchange this chunk of its debt for two new securities, with aﬀected creditors facing initial haircuts, or reductions to principal, in the vicinity of 45%, depending on the credit. The government says these losses could be eventually recovered through so-called “growth bonds,” one of the two new securities which would be paid only if sustained economic growth is achieved in the midterm. But chances to achieve a voluntary agreement without a restructuring regime in place are slim at best, given the complexity of Puerto Rico’s debt web. “Given the wide variety and complexity of Puerto Rico’s debt obligations, the diversity of bondholders and interests involved, and the competing Continues on page 16

THURSDAY, MARCH 3, 2016

“Well, then we will be very creative when we come up with something here.” —House Natural Resources Committee Chairman Rep. Rob Bishop, in reference to how they would tackle the Puerto Rico issue. Continues from page 15

U.S. Rep. Rob Bishop (R-Utah) at last week’s House Natural Resources Committee hearing on Puerto Rico.

security pledges, realists will acknowledge there is little to no hope of a consensual agreement,” Nuveen states in its report. “The debt is unusually complex with 18 diﬀerent issuers and 20 creditor committees with competing claims. There is currently no way to forestall litigation or conclude a voluntary agreement supported by a majority of creditors,” U.S. Treasury’s Weiss stated during last week’s congressional hearing. So far, a group of Cofina senior bondholders has presented a counterproposal to the government, but although it provides much-needed debt relief in the short term, it would protect these bondholders from haircuts and could impair other credits, including subordinate Cofina bondholders. Moreover, it would place Cofina senior bondholders’ claims on top of the priority ladder, even above GOs. “The proposal as delivered by the [Cofina] creditors is likely more of a bargaining chip than anything else, designed to paint creditors as reasonable negotiators in advance of congressional action, potential court cases and the hearings

concerning the [Puerto Rico Public Corporation Debt Compliance & Recovery Act] at the [U.S.] Supreme Court on March 22. We expect additional creditor proposals to emerge in coming days as creditors jockey to position themselves in the queue for repayment,” said Daniel Hanson, an analyst at Washington, D.C.-based Height Securities. “Just as the commonwealth’s proposal has faced a frosty reception with creditors, we expect preliminary proposals from various creditor groups to face long odds for completion with commonwealth oﬃcials.” Competing interests among creditor classes, such as GOs’ constitutional pledge versus Cofina’s lockbox structure, could prove to be a significant challenge to overcome for a restructuring-regime-strapped commonwealth. In its report, Nuveen also laid out a strong argument for why a broader restructuring regime is necessary, as these competing interests will likely result in lawsuits. In their view, GOs and guaranteed debt have “first priority” on repayment, while Cofina, which is backed by revenues from the Continues on next page

THURSDAY, MARCH 3, 2016

Continued from previous page

current 11.5% sales & use tax, has second priority. Meanwhile, the island’s more than 330,000 public pensioners represent yet another competing claim and Nuveen notes that “preserving pension security” is among the top priorities for the Alejandro García Padilla administration. “We believe the government will attempt to keep pensions free from impairment and prioritize these payments above debt service, regardless of current statutes that prioritize debt service ahead of annual pension costs.” In fact, Treasury’s proposed restructuring plan also seeks to protect payments to pensioners, “a notion which is not likely to make many friends in the Republican-controlled Congress,” Hanson said.

BRINGING IN THE

HOLDOUTS For the past few months, both federal and local government oﬃcials have been raising their voices on the need for a restructuring mechanism, not only to have a regime to orderly settle intercreditor claims, but also to bind potential “holdouts,” or minority creditors that fail to agree to terms under a restructuring deal struck with a creditor majority. Meanwhile, another possibility could be the use of collective action clauses (CACs), which have been already brought to the table as yet another alternative to the Puerto Rico debtrestructuring issue, as previously reported by Caribbean Business (Feb. 25). The implementation of CACs could allow

the government to bind holdouts if it reaches a debt-restructuring deal with a majority of its creditors. Sources have said CACs already boost support among various creditor groups, while government oﬃcials agree it could help within the holdout creditors’ context, although Plan A continues to be achieving a broad restructuring regime from Congress. “Without some mechanism to bind holdout creditors, either through some form of bankruptcy or a broader collective action clause that would allow a majority bondholder vote to impose terms on holdouts, Puerto Rico is destined for years of litigation,” Nuveen states in its report. While pushing for the Obama administration’s territorial-clause bankruptcy regime, Treasury’s Weiss said without access to such restructuring authority “that brings all creditors to the table, it is overwhelmingly likely that holdouts will prevent voluntary negotiations from reaching a successful conclusion.” He added Treasury is indeed worried about the compounding eﬀects of litigation and inability to conclude an agreement, which could turn a voluntary solution to a decade-long crisis. Yet, many believe potential congressional action could be far away from granting broad restructuring powers to the commonwealth, amid concerns over the Puerto Rico government’s fiscal practices and a lobbying battle among competing interests on Capitol Hill. “We continue to believe that Puerto Rico gets some bankruptcy

“Puerto Rico and its creditors are on the same ship. We are going to sail safely to shore together, or we are going to sink together.” —Resident Commissioner Pedro Pierluisi protection from Congress, but continued discussions about extraordinary measures—such as collective action clauses, territorial bankruptcy or Super Chapter 9—ought to be viewed as red herrings against the backdrop of what Congress wants to do,” Hanson said. Resident Commissioner Pedro Pierluisi told Caribbean Business that Congress is looking into a board that would have a role in the commonwealth’s debt restructuring. “But it is clear that it would have to be a restructuring that has the support of a majority of creditors,” he said, adding the board would oversee and mediate in the negotiation process of Puerto

Rico and its creditors. “It is the same as a collective action clause, but through a board, achieving an agreement reached with the majority, and then going to court to make it binding,” Pierluisi said. When asked if it would cover all Puerto Rico debt, as the García Padilla administration advocates, the resident commissioner believes this needs to be further discussed. “I’m one of those who think that constitutional debt, particularly GOs, should be treated diﬀerently. This should be [treated] in a consensual manner, purely based on negotiations,” he told this newspaper following the governor’s recent State of the Commonwealth message.

CONGRESSIONAL

ACTION As House Speaker Paul Ryan’s (R-Wis.) March 31 deadline to act on the Puerto Rico issue quickly approaches and a string of hearings takes place, some GOP members are still mulling when action should be taken and what exactly it should include. During last week’s House Natural Resources Committee hearing, Puerto Rican Rep. Raúl Labrador (R-Idaho) told Treasury’s Weiss that he didn’t agree “on every one of your solutions,” while adding Congress was leaning more toward implementing fiscal oversight, and not so much toward debt-restructuring powers. Meanwhile, Chapter

9 won’t cut it for Treasury, as it would only cover public corporations, roughly a third of the island’s $70 billion debt load. While La Fortaleza recently said it still supports Pierluisi’s bill that seeks to include Puerto Rico under Chapter 9, it has been increasingly echoing the broadrestructuring-regime discourse. The commonwealth’s voluntary debt exchange oﬀer also covers GOs, which would fall outside Chapter 9’s scope. In addition to restructuring authority, Treasury believes a strong, independent oversight board could be established, while simultaneously Continues on page 18

THURSDAY, MARCH 3, 2016

Antonio Weiss, the U.S. Treasury Department’s lead adviser on Puerto Rico, testifies last week before Congress. Continues from page 17

preserving Puerto Rico’s self-governance. As for the protection of existing credits’ claims under the Obama administration’s proposed restructuring, Weiss said they “are not advocating a ‘one size fits all’ approach; restructuring legislation can be designed to consider existing priorities and claims.” Moreover, Treasury favors an initial period of voluntary negotiations with creditors,

which would be facilitated by the suggested short-term stay on litigation. If talks go south, a court would then come into play to “assure an orderly resolution.” “The comprehensive restructuring framework proposed by the Treasury Department would be…. considerably more stacked against the creditors than in a normal Chapter 9 process,” Hanson said, adding that “Congress is wellaware of these kinds of concerns and is likely to

avoid acting in a manner that unduly biases the restructuring process.” Meanwhile, Nuveen states that swift action from Congress will avoid years of messy litigation, “force” the Puerto Rico government to implement reforms and fiscal discipline and build confidence. “Years of litigation and intercreditor dispute will only stifle economic growth and accelerate outmigration, further diminishing the tax base available to pay oﬀ creditors. At present,

too many unknowns prevent investors from reaching a reasonable degree of confidence in the territory or any particular security pledge.” “This lack of certainty will keep Puerto Rico locked out of the market until a path to sustainability and economic growth emerges. We believe this will not happen until Congress enters the void and brings with them a sense of order and path forward for Puerto Rico,” the report further notes.

During last week’s hearing, Rep. Rob Bishop (R-Utah), the committee chairman, asked the Treasury oﬃcial to describe the commonwealth’s complex debt structure, to which Weiss answered, “Very creative.” “Well, then we will be very creative when we come up with something here,” Bishop replied, in reference to how they would tackle the Puerto Rico issue. For his part, Pierluisi believes it is highly likely legislation would be

filed soon, which at least should be approved in committees before March 31. As for when it would reach the floor for a vote, “that’s another story. I think we are talking here more toward April,” he said. Amid the uncertainty of how and when Congress could act—if it decides to—the clock continues to tick on the commonwealth as it hits a $2.5 billion debt-service wall beginning May 2, with $422 million owed by its cashstrapped Government Development Bank. 䡲

THURSDAY, MARCH 3, 2016

Column Trump Taps the Rich Vein of White ‘Victimhood’ BY CLARENCE PAGE

Donald Trump has achieved an important milestone. Winning big in the New Hampshire and South Carolina Republican primaries has given him “big mo,” as President George H.W. Bush used to call big momentum. At this rate, Trump could well be the Grand Old Party’s next presidential nominee unless he does something devastatingly offensive to his supporters. Barring that, Bruce Bartlett may well get his wish for a Trump nomination, whether he really wants to or not. Bartlett, 64, is an author, historian, economist and veteran of the Ronald Reagan and George H.W. Bush administrations who describes himself as an endangered species: a “moderate Republican.” Bartlett wants to see the billionaire developer and TV star face the presumptive Democratic nominee, frontrunner Hillary Clinton—and lose. As Bartlett said in the essay “The Moderate Republican’s Case for Donald Trump” in the July Politico magazine, a Trump nomination should be welcomed by moderate Republicans because “It is only after a landslide loss by Trump that the GOP can win the White House again.” Such a loss, Bartlett hopes, would enable the GOP establishment and its donor elites to say “we told you so” to the far right and move the party back toward the sensible political center. I would like to see that happen, if only to wipe Trump’s forever-smug, self-satisfied grin off his face. Yet as I told Bartlett after his Politico piece, be careful what you wish for. I remember how many liberals were convinced in early 1980 that Ronald Reagan, a seemingly “washed-up actor,” would set back the conservative cause by losing. He didn’t. He won. Twice. Now I watch Trump’s supporters stampede ahead, turning out in record numbers with an air of excitement that I have not seen since, well, Barack Obama’s 2008 campaign. But the very real possibility that Trump could pull off a White House win is enough reason, says Bartlett, to take a closer,

more serious look at who is turning out to vote for him. His new paper titled “Donald Trump & ‘Reverse Racism,’” which you can read and download from the Social Science Research Network: http://papers.ssrn.com/ sol3/papers.cfm?abstract_id=2726413. Put simply, “reverse racism” describes discrimination against white people. “Recent research suggests that many more whites believe they suﬀer from reverse racism than one might imagine,” says Bartlett. The view is echoed in studies Bartlett cites. One of them, a 2011 study by Michael I. Norton of Harvard Business School and Samuel R. Sommers at Tufts University, found agreement between white and black Americans that bias against blacks was prevalent in the 1950s and 1960s. But in the decades since, the study says, blacks are more likely to see such racism as a continuing problem while whites tend to see it as a problem that has been more or less “solved,” except when it is bias against whites. In fact, Norton wrote in a later New York Times essay, many whites now believe anti-white bias is even more prevalent than anti-black bias—a sentiment not shared by blacks—and “are now using their sense of marginalization as a rallying cry toward action.” The result, writes Norton, has been a “jockeying for stigma” among various identity groups, a competition for victimhood into which Trump has tapped. It is preposterous to see whites as marginalized and powerless in America after centuries of advantages. Yet is neither wise nor fair to dismiss Trump’s voters as racists. Many see themselves as victims of a system that deliberately has overlooked their concerns about immigration, trade, education costs and other issues that have buffeted their lives. They could choose a better standard bearer than Trump. But for those who feel they have not found better leadership elsewhere, he’ll do.

THURSDAY, MARCH 3, 2016 RUM professors are designing system for people to sell and buy renewable energy through the net.

Energy NSF Funded Project Aims to Sell Clean Energy Through the Internet BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

Professors at the University of Puerto Rico Mayagüez campus (RUM by its Spanish acronym) are trying to break the Puerto Rico Electric Power Authority’s (Prepa) monopoly while also helping residents go green. The National Science Foundation (NSF) recently gave the RUM professors a $1.5 million grant that would allow them to create a system so residents can buy and sell their excess renewable energy, which is similar to when people sell or buy items through eBay, said computer engineering Prof. Manuel Rodríguez. This project champions a transformation of the electric grid, moving it away from centralized powerplants that supply most, if not all, power services. Instead, the professors are designing and developing the basic science and technology for an Open Access Smart Grid to create truly sustainable energy markets. The smart grid would become a marketplace of third-party power-service suppliers, who compete to sell their electric services over the internet. These services include energy block purchases, storage, billing, weather forecasting, energy demand forecasting and other ancillary services. This brings in an

important societal element—it empowers common citizens, whose homes are now renewable-energy generation systems—to become suppliers and key actors in the energy market. “If a person has solar panels, he or she can sell the excess energy,” he said. “This is unrelated to Prepa although the utility can also benefit from it.” Rodríguez explained that RUM is trying to create the system over the next three years. In real terms, Rodríguez said anyone who needs energy will be able to purchase it through the internet by plugging their electric appliances into their home’s electric outlets since the power will be transmitted through Prepa’s powerlines. Asked if Prepa’s powerlines have the capacity to carry out this feat, Rodríguez said he expects the technology to be available. The NSF said, however, that a major challenge

Manuel Rodríguez, computer engineering professor at University of Puerto Rico Mayagüez campus

with microgrid systems is activating them without introducing major power disturbances in the existing system. Another challenge is forecasting the availability of renewable energy. Rodríguez said the system is first slated to be tested by using a computer simulator and, afterward, oﬃcials plan to build a model power grid where “we will start testing this at the same time we are doing the software,” he said. The software will receive information about how

“After completing the computer simulation, we are going to create a laboratory grid that has lightbulbs and other electrical equipment, to implement the software and see how it works.” —Manuel Rodríguez

much power is available, who needs it and the purchasing price. “After completing the computer simulation, we are going to create a laboratory grid that has lightbulbs and other electrical equipment, to implement the software and see how it works,” he said.

He said similar projects are working in such countries as Germany. The individuals who sell their renewable energy will have to have certain equipment that can allow the system to determine the availability of power and transmit it. The project is being conducted by eight RUM

professors in engineering, computers and social sciences. About 10 graduate and undergraduate students are also working on the project. “We have social sciences professors because we want to see the reception that this project is going to get and whether it will be acceptable,” he said. 䡲

Trendsetters y su Impacto en el Mercadeo Qué es un Trendsetter y cuáles son las tendencias globales para el 2016 Por: Andrés Claudio General Manager de Omnicom Media Group Puerto Rico

Perfil de los Trendsetters Boricuas Por: René Figueroa Senior Account Executive de Nielsen Watch Puerto Rico

Conversatorio: Impacto Social y de Consumo de los Trendsetters Prof. María Martínez-Diez Antropóloga y Catedrática de Universidad del Sagrado Corazón

Marnie Marquina Directora de Mercadeo y Patrocinios de The Mall of San Juan

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THURSDAY, MARCH 3, 2016 Unclear how ‘likeability’ translates into votes

Poll

Pierluisi Scores Highest Among Gubernatorial Candidates in Gaither’s ‘Likeability’ Scale Followed by Bernier and Ricky Rosselló BY ROSARIO FAJARDO r.fajardo@cb.pr

Considering the news headlines and the energy on the streets, referring to public debate and the energy that comes with it, Puerto Rico elections are often quite lively and may seem to be closer than they really are. At this early stage of the game, Puerto Ricans are starting to define their preference for some candidates over others, and according to this week’s Gaither International survey, Resident Commissioner Pedro Pierluisi has scored the highest on a “likeability” scale. Gaither International conducted a poll to identify the likeability of each individual who has expressed an interest in running for governor in the November general elections. These are Pierluisi

and Ricardo “Ricky” Rosselló of the New Progressive Party (NPP); former Secretary of State David Bernier, of the Popular Democratic Party; Sen. María de Lourdes Santiago, of the Puerto Rican Independence Party; University of Puerto Rico professor Rafael Bernabe, of the Working People’s Party; and independent candidates Manuel Cidre, a businessman; and attorney Alexandra Lúgaro. Gaither’s study was fielded in February 2016 and interviews were conducted from among 583 adults, 18 years of age and older throughout Puerto Rico. Respondents were not asked to identify themselves as belonging to a specific political party. To obtain a “likeability score,” interviewees were asked to rate each of the candidates on a scale of

1 to 5, whereby 1 means “like the least” and 5 means “like the most.” Each rating was multiplied by the number of

they specifically liked or disliked about the candidates. Luis R. Burset, who is in charge of Gaither International’s Client Service Department in Puerto Rico, clarified that likeability in Spanish was stated as, “cuánto le gusta” (how much do you like) each candidate. The enclosed table shows the likeability scores for each candidate:

CANDIDATE

Scores

Pedro Pierluisi (NPP)

3.22

David Bernier (PDP)

3.06

Ricardo Rosselló (NPP)

2.96

María de Lourdes Santiago (PIP)

2.84

Alexandra Lúgaro (Ind.)

2.68

Manolo Cidre (Ind.)

2.56

Rafael Bernabe (WPP)

2.55 Source:

responses and the result was divided by the number of answers provided. Gaither also said respondents were not asked to elaborate on their responses, such as what

Interestingly, the most frequent rating given to any candidate was a “3”; while the scale did not specify this number to be “neither like nor dislike,” it is in the middle

ground, where neither liking nor disliking is reported, Gaither said. To note, the candidates with the highest frequency of “3” evaluations were Bernabe (54.2% of all ratings received) and Cidre (50.7%). The candidate with the highest frequency of “5,” or most liked, was Pierluisi, with 14.9% of all evaluations received, followed by Bernier (13.3%)

touting the results of their own internal polls in local media. Pierluisi says his team’s internal polls give him an 8% lead over Rosselló; for his part, Rosselló says his internal polls give him a 10% lead over the resident commissioner. The two will go head-to-head in local primary elections that are scheduled for June 5. It should be noted that Pierluisi’s team hired

It remains to be seen how “likeability” may be translated into votes come November. and Rosselló (11.3%). Curiously, the lowest rating of “1” was received by the independent candidates: Bernabe (22.7%), Cidre (22.7%) and Lúgaro (20.8%). It remains to be seen how “likeability” may be translated into votes come November, as Gaither agreed that likeability does not necessarily translate into votes. In recent days, the two NPP candidates for La Fortaleza have been

Gaither to conduct their internal polls. In the coming months, Gaither International will continue to monitor the likeability ratings of the gubernatorial candidates, as well as candidates for resident commissioner, the Legislature and mayors, up to the elections period. 䡲 Polling is conducted by Gaither International and the results are reported exclusively by Caribbean Business.

THURSDAY, MARCH 3, 2016

Federal Affairs

Losing some control is part of the package

Urban Economist: Control Board Should Not Make EconomicDevelopment Policies; Should Focus on Budgets BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

Control boards’ operational powers should be limited to providing technical assistance to governments and approving budgets instead of making economic-development policies, says an urban economist who completed her doctoral dissertation at the Massachusetts Institute of Technology (MIT) on how fiscal control boards address causes of fiscal crises in diﬀerent jurisdictions. “That is not the expertise of control boards. They have lawyers, bankers and some businesspeople who often do not know about local intricacies…. That is the kind of area that stirs controversy,” said Deborah Kobes, who has a Ph.D. in urban political economy & governance from MIT and a bachelor’s degree in civil engineering with architecture from Princeton University. Since New York City’s highly publicized board in 1975, more than 119 municipalities of all sizes have been assigned control boards, in which a stateappointed team oversees the budgetary decisions of a municipality in a fiscal emergency, Kobes indicated. Congress is working on legislation to fix the island’s financial woes as it battles a $70 billion debt

and edges close to insolvency. Puerto Rico wants access to a bankruptcylike mechanism to restructure its debt but the Republican-dominated Congress wants to place the island under strict fiscal oversight. While the shape and form of the proposed federal fiscal-control board is still in the works, Kobes warned that Puerto Rico should be ready to give up some of its control because that is what happened in other jurisdictions. Sen. Orrin Hatch, a Republican from Utah, has proposed a five-member board, including two members from outside Puerto Rico, who will be charged with eliminating the budget deficits, completing financial planning, ensuring delivery of services, enhancing access to markets and paying the commonwealth’s debt. A bill filed by Rep. Sean Duﬀy, a Republican from Wisconsin, on the other hand, states that to restore investor confidence and improve tax collection and budgeting practices, the government of Puerto Rico may choose to accept the establishment of a fivemember Financial Stability Council with the authority to oversee the island’s financial planning and annual budgets. The legislation includes allowing Puerto Rico to have Chapter 9 bankruptcy protection.

FOCUSING ON CONTROL BOARDS’ IMPACT ON SOVEREIGNTY Kobes’ dissertation on control boards in the U.S., which she completed in 2009 to obtain her doctorate degree from MIT, is titled “Out of Control? Local Democracy Failure & Fiscal Control Boards.” She said she became interested in the subject to evaluate precisely how control boards impact local sovereignty. If the experience in other jurisdictions is repeated on the island, Puerto Ricans, she warned, should be ready to give up some control over their local aﬀairs to obtain financial stability. Successful boards were ones that included local members from the jurisdiction and who did not meddle in political or local aﬀairs. While her research did not include jurisdictions that have high debt like Puerto Rico (for instance, Detroit’s debt was $20 billion and it was ruled by an emergency manager not a board), Kobes said a fiscalcontrol board will help fix Puerto Rico’s fiscal woes as long as “it is part of a broader set of solutions” that may include Chapter 9 bankruptcy protection, technical expertise to go into the numbers and help improve tax collections or some form of financial assistance. Her study shows that

Deborah Kobes, who has a Ph.D. in urban political economy & governance from MIT, researched federal control boards.

control boards tend to be established in communities with low median household incomes; low rates of employment, homeownership and highschool graduation; and high rates of poverty, minority population and female-headed households. These characteristics, when combined, are markers of municipal fiscal instability according to many studies. Kobes indicated that there are three causes of fiscal crises, all of which have aﬀected Puerto Rico. The first is a local government’s dependence on the market. “People often assume that a city or jurisdiction in crisis has a problem with its design; when in fact, they operate in a complex political structure and rely on the market to fund what they have to do,” she said. The second cause is what she called a “majoritarian tyranny within

federalism,” which consists of the external factors or constraints that aﬀect a jurisdiction, such as when a city has limitations on the amount of taxes it can impose or when it loses federal spending. Puerto Rico’s finances have been hurt by the loss of Section 936 tax credits, which were used by U.S. subsidiaries operating on the island, and the caps imposed on federal Medicaid funds. The third cause is local democracy failure, which entails the lack of oversight by the government and corruption that results in the loss of public funds, she said. Puerto Rico has had its share of corruption cases over the past 30 or 40 years. More recently, for example, public oﬃcials were arrested who had provided access to the public health-insurance plan in exchange

its entire elected city leadership was arrested on corruption charges. In that regard, she said Miami residents were more welcoming of a federal control board to not only fix the fiscal crisis but also eradicate corruption because they had lost faith in their own government. In other jurisdictions, where there is a mild level of or very little corruption, residents are less accepting of another entity coming in to handle local aﬀairs. Oversight boards, for that reason, must do a lot of work in advance to gain public acceptance and to continue to help raise public support. Miami was more accepting of its control board because there were local residents on its board. “Having local people who are from the jurisdiction and are respected

“The lessons that should come out of control board design are to have local members and to not overstep [its mandate].” —Deborah Kobes

for money to lawyers and other professionals who did not deserve it. She said her analysis of the jurisdictions shows that corruption is at the core of the problem. PUBLIC SUPPORT NEEDED The city of Miami was under a federal control board in the 1990s because

within the jurisdiction goes a long way toward making residents feel that their voices are being represented,” she said. Kobes also stressed the importance of a good and cordial relationship between elected oﬃcials and the oversight board, which “makes it seem” Continues on next page 23

THURSDAY, MARCH 3, 2016

ADVANTAGES OF CONTROL BOARDS Control boards have led to fiscal stability in such cities as Cleveland,

Source: Gage Skidmore

that democracy, “at least in symbolic way,” is continuing. She also stressed that control boards should not overstep their boundaries. These boards have different scopes of authority and the more they get away from approving budgets or fiscal issues and get involved in decisions like closing a hospital, there is going to be more resistance from the population. “The lessons that should come out of control board design are to have local members and to not overstep [its mandate],” she said. However, one of the roles of a control board is often to take the blame for unpopular decisions that elected officials are unwilling to make even if they support them. “Even if a mayor or elected officials behind the scenes support what the board does, they can still say “we don’t have a choice,” she said. What happens if the elected officials and the board do not trust each other or do not get along? Kobes said the control board will still be able to implement the decisions it wants to resolve a crisis in the short term but the process toward fiscal recuperation will not work in the long term if the board does not have the support of local officials to ensure that the safeguards are there to ensure a strong budget is maintained in the future.

Source: Gage Skidmore

Federal Affairs

Rep. Sean Duﬀy, a Republican from Wisconsin

Philadelphia, Miami and Washington, D.C. Kobes’ study shows that many of the control boards, or 64 of them, were assigned to communities with populations of less than 25,000 with mixed results. A control board can install a new governance structure but will not help prevent layoffs, building abandonment or the high social services that lead communities into fiscal problems. They are institutions that can bring technical expertise to ill-equipped governments; offer credibility to governments needing access to resources; and provide a scapegoat for unpopular policies, Kobes said. Before the control board was imposed over Washington, D.C. in the 1990s, then-Mayor Marion Barry tried to identify solutions for the city but Congress disregarded any responsibility and treated the city’s fiscal crisis in the nation’s capital as an internal affair. After a few years of having a control board in charge of the city, board members came out with certain solutions that led

Congress to pass the capital’s Revitalization Act. The law relieved the District of Columbia of major financial and management responsibilities by having the federal government take over certain functions typically funded by state governments, such as prisons, courts and probation/parole supervision. Having Congress assume responsibility over some of the city’s operations helped the District of Columbia climb out of its fiscal crisis. “Congress also raised the powers of the control board at the time, which created more resentment but ultimately the board brought up things that were said from the start,” she said. Control boards have also helped jurisdictions establish trust with private markets. Generally, cities or jurisdictions in fiscal crisis are shut out of the market and do not try to get more funding but simply attempt to overcome their financial troubles. Control boards are generally an alternative to bankruptcy, which has helped speed up the

Sen. Orrin Hatch, a Republican from Utah

process to gain access to the markets. In other jurisdictions that have not lost access to the markets, the control board is the entity that approves the additional borrowing. But the market feels more reassured about its investment because there is a control board keeping a close eye on contracts and spending. These boards also are comprised of individuals who are lawyers, bankers or have some sort of financial background. “So they speak the same language as private investors. That is something investors find comforting,” she said. When some form of financial assistance accompanies the control board, access to the market is not always the top priority and there is more long-term balance. Regarding the composition of control boards, Kobes said that generally they are comprised of at least five individuals who also have full-time jobs. Some members are from outside the district. They usually bring in staﬀers who complete technical analysis of the numbers

even though they make the decisions. Kobes disregarded the fact that Hatch is proposing people from outside Puerto Rico as members of the board because it would give it more credibility. She said the board must have members from Puerto Rico, too. Conversely, Kobes said the disadvantages of a board include diminished sovereignty; giving power to external political actors; favorable concessions to the private market; and uncertain benefits. NO INVOLVEMENT IN POLITICAL DECISIONS Kobes said she did not believe boards should get involved in making political decisions in Puerto Rico. “I don’t know much about Puerto Rico, but I know there has been debate over the minimum wage and tax incentives to draw in companies. These are highly political decisions that need congressional approval. To the extent that those changes lead to long-term financial stability, it is not going to be found through a control board solution,” she said.

She explained that control boards should not have the power to make line-item vetoes of budget items and instead should either accept or reject a budget in its entirety. As to the idea of Puerto Rico having Chapter 9 bankruptcy protection, Kobes expressed doubts that it would resolve the island’s problems unless there is also economic development. She said Chapter 9 worked well in Orange County, Calif., because the area had the means to recover. Orange County is a suburban area south of Los Angeles that filed for bankruptcy after heavy borrowing and risky investments in its investment pool turned into big losers as market interest rates rose. Kobes said areas that have high levels of poverty, which do not have a strong tax base, receive very little state or federal aid, have tax constraints and lack technical expertise should be aware that Chapter 9 is not going to resolve those problems. “You need to pare down with a number of other solutions,” she said. She noted that Phoenix, Tampa, [Fla.,] San Francisco, Boston and many other cities have survived financial crises since 1975 without having to resort to control boards. These municipalities have been able to generate suﬃcient resources in the private market to finance public services for residents. They have reportedly obtained private investment as a result of public-private partnerships and have created jobs and revenue streams.

THURSDAY, MARCH 3, 2016

Politics

PDP gubernatorial candidate emphasizes policy differences with García Padilla

David Bernier: An Agent of Change BY ISMAEL TORRES i.torres@cb.pr

The trajectory of David Bernier, the Popular Democratic Party’s (PDP) candidate for governor, is widely known in Puerto Rico. While he has been in public service for more than 15 years, under various government administrations, he insists he is an agent of change. “The island has to look at its candidates and know what they have done in their lives and where they have gone and what they have achieved. What the island needs now is leadership that uses good ideas and the collaboration of people from all parties to achieve dramatic transformations. That is what I have done in all spaces [where] I have been in command,” he said in an interview with Caribbean Business. Bernier does not compare his candidacy with those of people like New Progressive Party (NPP) gubernatorial candidates Ricardo Rosselló and Resident Commissioner Pedro Pierluisi because he says his candidacy is diﬀerent. “We are moving toward a new majority of people who are tired of the same old political tactics,” he said. Bernier also believes that the dissatisfaction seen on the island is not toward him specifically, but rather toward former Gov. Luis Fortuño and the NPP and toward García

Padilla and the PDP. Therefore, he understands that this election is not about the two political parties, but rather about who has real leadership to guide Puerto Rico to resolve its crisis. “That’s why this candidacy is generating such broad support outside party lines, because we’re looking for a different way of doing things: a different [kind of] leadership that extends beyond parties,” he said. The 39-year-old dentist is the son of two public servants: Luis David Bernier, a public school math teacher who later taught at the University of Puerto Rico’s Ponce campus, and Celia Rivera, a nurse. Both are now retired. Bernier was born in a family from the town of Patillas, located in southeastern Puerto Rico. He attended public schools as a child. He studied at the Olympic Village’s specialized sports school in Salinas, focusing on fencing. He went to the University of Puerto Rico to study natural sciences and was later admitted to the School of Dentistry at the University of Puerto Rico’s Medical Sciences Campus, where he obtained his degree. In 2003, shortly after graduating, he was recruited to be in charge of the Youth Affairs Office during the administration of Gov. Sila María Calderon. In 2004, then-Gov. Aníbal Acevedo Vilá

appointed him to head the Department of Sports & Recreation and when there was a change in government, Bernier became president of the Puerto Rico Olympic Committee. After Gov. Alejandro García Padilla’s victory in 2012, Bernier was once again recruited to become Puerto Rico’s Secretary of State, a position he held until earlier this year when he resigned to seek the gubernatorial nomination for the PDP—which he obtained without opposition. “I have been preparing my whole life for scenarios like this one. As a youngster, I lived in a residential school specializing in sports at the Olympic Village, a specialized public school. From an early age, I began to deal with life’s challenges and it has been a continuous preparation process, always dealing with adverse situations,” he said. DEALING WITH PUERTO RICO’S CRISIS The commonwealth government is immersed in the worst fiscal crisis Puerto Rico has ever known and everyone is keeping an eye on what the gubernatorial candidates are proposing for the November 2016 elections. Bernier spoke about two measures he would implement to address Puerto Rico’s lack of economic development and restructure the island’s $70 billion public debt. “In the short term, we

don’t have to be governor in order to act. [First], I am convinced that the government has to focus all its eﬀorts on achieving an adequate understanding with bondholders to be able to restructure the debt, to pay, because the state has to fulfill its responsibilities, and for this to be an adequate payment,” he said. “Being able to achieve a reasonable agreement whose main element is a moratorium on the payment of principal immediately makes available between $1.5 billion and $2 billion that will enable the government to stabilize its operations and also have the resources— though not all that are needed—to foster the island’s development,” he added. The second measure is aimed at developing an aggressive support program for local entrepreneurs to ensure that the limited resources available to activate Puerto Rico’s economy will be primarily focused on these business owners so that money stays on the island. “And

similarly, that the foreign capital betting on Puerto Rico will see the sense of partnering with local entrepreneurs,” he said. ISSUE OF GOVERNMENT LAYOFFS As for the government measures needed to address the fiscal situation and its impact on the government payroll, Bernier believes that government cannot be restructured without employee layoﬀs. “There are some who say that even without a restructuring tool, the government can lower its debt by cutting expenses without firing public employees. Those who say that know that it is not [true]. What’s honest is to tell [the people of] the island the truth,” he said. His formula to achieve this relies in restructuring the debt and making adjustments in operations, such as what is happening at the Puerto Rico Electric Power Authority. “If we succeed in postponing payments on the debt’s principal for five years and [have] some other savings, we could, in the

short term, avoid government layoffs, which I favor,” he said. Bernier acknowledged that he has many differences with García Padilla, in whose government he was second in command as secretary of State. During that time, Bernier was in charge of dealing with conflict-filled issues that included getting involved in negotiations with public-school teachers regarding their retirement system’s reform. He said that as his campaign for governor progresses, those differences will grow, as will be the case with other candidates. “I think the way I think. I propose something in a specific manner to the island and let people decide if it’s similar or not, and I have no problem if what I propose is similar or not to what has been presented by someone else,” Bernier noted. ALL ABOUT LEADERSHIP He believes, however, Continues on page 27

THURSDAY, MARCH 3, 2016

Politics Continues from previous page

that beyond agreeing or disagreeing with the proposals being presented, it all comes down to the leadership associated with the proposals so they can thrive. â&#x20AC;&#x153;For example, the governor and I now have diďŹ&#x20AC;erences regarding the VAT (value-added tax) on services, because I believe that the economy cannot take it,â&#x20AC;? Bernier said. One of the problems that GarcĂa Padilla has faced during his administration was a lack of leadership in convincing a group of lawmakers from his party to approve important measures, particularly those of a fiscal nature. That breach of certain promises, like the political status issue, has alienated some voters who voted for the PDP during the last general elections, according to political observers. Bernier believes that his way of running a political campaignâ&#x20AC;&#x201D;which he described as diďŹ&#x20AC;erent from what has been done in Puerto Ricoâ&#x20AC;&#x201D;will bring

in those voters and many others who reject the traditional way that political campaigns are run on the island. â&#x20AC;&#x153;Just as I have done throughout my career, I have had to reach places where there has been resistance and opposition. Thatâ&#x20AC;&#x2122;s natural, thatâ&#x20AC;&#x2122;s human behavior. Many times in my life I have had to reach places, and people know the outcome,â&#x20AC;? he said. Bernier believes the key to his success in public service resides in the fact that before implementing something, he first promotes and seeks to legitimize it and once support is obtained, he then implements it. â&#x20AC;&#x153;And now I go to the government to establish my leadership, as I have done all my life, saying things as they are and legitimizing them,â&#x20AC;? he said. â&#x20AC;&#x153;Governors have one problem: the lack of a process for legitimizing their proposals before presenting them. I am very disciplined in that aspect. Every proposal I have

successfully presented during these 12 years has undergone a process of legitimization with the sectors it would aďŹ&#x20AC;ect, and thatâ&#x20AC;&#x2122;s where the diďŹ&#x20AC;erence is,â&#x20AC;? he added. Bernier maintains that he will actively work with the issue of future political relations between Puerto Rico and the United States, but warns that the islandâ&#x20AC;&#x2122;s financial and economic situation issue is a priority. He believes these are matters that have to be dealt with simultaneously. At the same time, he believes more could have been done in this regard during GarcĂa Padillaâ&#x20AC;&#x2122;s four-year term. â&#x20AC;&#x153;We need to urgently address the islandâ&#x20AC;&#x2122;s economic viability problem and the main eďŹ&#x20AC;ort must focus on solving the islandâ&#x20AC;&#x2122;s economic problems and restoring the economic stability necessary to improve our quality of life. Even though I will address the status issue, there is no denying that the economic issue will be crucial,â&#x20AC;? be noted. äĄ˛

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THURSDAY, MARCH 3, 2016

Politics

P.R. Republicans begin to rally around their candidates

Rubio is the Favorite Among Republicans in Puerto Rico BY ISMAEL TORRES i.torres@cb.pr

In the Republican Party primaries in Puerto Rico, to be held Sunday, March 6, after Super Tuesday, presidential hopeful Marco Rubio has the backing of the local leadership of that party for his support on initiatives that have benefited the island. Local Republicans support Rubio’s candidacy because he favors statehood for Puerto Rico, promoting a process culminating with federal legislation that would allow for the matter to be addressed at a legislative level. However, the senator from the state of Florida does not support bankruptcy protection for Puerto Rico. “In the 2012 elections, there was a rejection of the current political status and the elected government has not done anything to move the process forward,” said Luis Fortuño, former governor of Puerto Rico and committeeman of the Republican Party on the island, highlighting that Rubio has the commitment to move that process forward. He added that after Rubio was elected to the U.S. Senate in 2010, he helped Puerto Rico by requesting the federal government strengthen its efforts against drug trafficking, which had an effect on the island with significant drops in criminal activity. He said Rubio was also important in efforts to secure federal funds for

health, and “is the person who has a history with the island.” The former governor said he does not favor Donald Trump’s candidacy because “he has been more Democrat than Republican and his politics are not that defined.” “His expressions worry me because one can’t tell which way he will take the nation,” Fortuño said, calling on people to participate

in the primaries this Sunday because their participation will have benefits for Puerto Rico with the access the process provides Puerto Ricans on a decision-making level. In the Republican Party primaries in Puerto Rico this Sunday, the presidential precandidates accumulate more delegates than in 16 other U.S. jurisdictions. The committeewoman

Sen. Marco Rubio is counting on huge support in Puerto Rico’s GOP primary March 6.

“His [Donald Trump’s] expressions worry me because one can’t tell which way he will take the nation.” —Former Gov. Luis Fortuño, committeeman of the Republican Party in Puerto Rico

of the local Republican Party, Jenniﬀer González, stressed that Puerto Rico is very important for being the first state or territory that it completely Latino, followed by voting in New York, New Jersey, California and Florida, where there is a high concentration of Latinos. In these primaries, the candidates who obtain more than 50% of the votes receives the 20 delegates that are selected, plus the three superdelegates. If they gain less than 50% of the vote, the delegates are divided proportionally. Electoral commissioner of the local chapter of the Republican Party, Edwin Mundo, said the primaries are held immediately after the so-called Super Tuesday, where voting took place simultaneously in 14 states and begins to trace the final direction of that process. Of the leading presidential candidates, Trump, Ted

Cruz and Marco Rubio, Rubio is favored locally. Besides Fortuño and González, Committeewoman Zoraida Fonalledas also supports Rubio. Jeb Bush’s withdrawal from the race, who was the favorite among local Republicans because of his identification with causes related to Puerto Rico, gave local leaders the liberty to support Rubio’s candidacy. María Santiago, second vice president of the State Elections Commission (CEE by its Spanish initials), who coordinates the administrative part of the event, said that in each of the 110 voting centers information will be available that tells voters about the candidates in the race. The 110 voting centers— one for each precinct— represent 7% of the quantity that was available for the local 2012 Republican primary. Due to this reduction, leaders of the

Republican Party in Puerto Rico anticipate that this year some 25,000 voters will take part in the primaries, a fifth of the 126,000 who voted in the previous primaries. The eﬀect this poor access to voting centers will have on electoral participation levels is one of the issues that most concerns the CEE. “The concern is that people may not have the benefit of stepping out of their homes and have a voting center nearby,” Santiago said. She added that she was confident the same situation will not repeat itself during the primaries for the local parties, set for June 5. The Education Department will add 90 employees who will be in charge of opening the voting centers, and will remain there from the beginning of voting at 9 a.m., to the conclusion of the process at 3 p.m.

THURSDAY, MARCH 3, 2016

Tourism

Puerto Rico increasingly becoming the destination where couples tie the knot

Destination Weddings Poised to Shine on Economic Landscape Big Ceremonies Bringing In Tourism Money, Temporary Jobs BY DENNIS COSTA d.costa@cb.pr

As the common saying goes, the only certainties in life are death and taxes. One might as well add another item to the list: marriage. Despite the economic and fiscal troubles buﬀeting Puerto Rico, and amid a well-performing tourism sector, the subsegment of destination weddings is arguably enjoying a healthy amount of activity in recent years, according to various industry experts, although there is still room for growth. “The sector has boomed recently,” said Krizia Díaz, who has been a wedding

and event planner for the past six years. “Puerto Rico is easily among the top destinations for weddings worldwide, and couples frequently mention the island as an alternative.” However, the segment has taken a hit of late, mostly due to the scare surrounding the Zika virus. “I’ve had a lot of cancellations in the past few months, although the past two weeks have eased up a bit in that regard,” Díaz said. “I’ve talked to many other wedding planners and they’ve been going through the same rough patch.” According to the Destination Weddings Travel Group Trend Report for

Wedding planner Krizia Díaz

2015, destination weddings comprise about 24% of all weddings worldwide. The same report states that Puerto Rico ranks No. 2 among emerging wedding destinations, along with Costa Rica, St. Lucia and Grenada. Wellestablished wedding destinations in the region, meanwhile, include Mexico, Jamaica and the Dominican Republic. Statistical data in Puerto Rico regarding destination weddings is scarce, with the latest published numbers from the Demographic Registry dating to mid-2014 at the latest. Still, they oﬀer a heartening picture that points to further improvements in

more recent times, coupled with an overall increase in Puerto Rico tourism activity. The most recent numbers from the Demographic Registry show that 842 destination weddings were held during 2013, each bringing in an average of about 100 guests. “This implies some 84,000 visitors, each with an average daily expenditure of $978,” read a release from the Puerto Rico Tourism Co. “This results in an economic impact of $82 million for Puerto Rico, and the creation of 42 direct and 18 indirect jobs for each wedding.” Several factors have contributed to the continuous activity in destination weddings on the island, starting with Act 127 of 2010. It basically amended the Demographic Registry Law to ease the way for newlyweds to marry in Puerto Rico. Previous to the amendment, nonresidents had to take blood tests on the island; now, the couple can take the tests in their place of origin and only has to submit a medical certificate to that eﬀect. Ruthie Fonseca, a former New York City resident with five years of experience coordinating

Ruthie Fonseca of Bodas del Encanto

Hindu-style weddings, recently moved to Puerto Rico and launched a website dubbed Bodas del Encanto, which partly serves as a information center for local wedding suppliers. “When it comes to Hindu weddings, it’s very important to have a place where no U.S. passport is needed, like in Puerto Rico’s case,” Fonseca told Caribbean Business. “With families in the U.S., getting to the island is much easier than getting visas to go to

“The segment has taken a hit of late, mostly due to the scare surrounding the Zika virus. “I’ve had a lot of cancellations in the past few months.” —Krizia Díaz

Mexico or Jamaica.” When it comes to the preferred locations for a destination wedding, Fonseca said Dorado is quickly becoming one of the most requested. “There is also the Condado area [of San Juan] as well as more remote locations like Rincón and Isabela.” Díaz said that, while local weddings draw about 120 to 150 guests, destination weddings tend to be smaller, bringing in 30 to 60 guests. “However, those groups stay on the island an average of about seven days, which helps inject a lot of money into the local economy.” “Elopments” are another common type of destination wedding,” which basically consists of the couple and two more people, or just the couple, who have a quick and romantic wedding ceremony, Díaz added. 䡲

THURSDAY, MARCH 3, 2016

Healthcare

The global scare and not the virus has dealt a serious blow to the economy of the region

How Much Does the ‘Zika Effect’ Cost? BY JUAN A. HERNÁNDEZ j.hernandez@cb.pr

Since the beginning of the year throughout the Americas, several thousand vacations have been canceled, couples have postponed their plans to have a family, pregnant women have paid for genetic testing of their unborn children and even lovers have desisted from engaging in sex. All of this because of the Zika virus. Practically unknown until last year, Zika, which is transmitted through a bite from the Aedes Aegypti mosquito, was responsible for a few outbreaks in Pacific nations that mainly caused mild dengue-like symptoms. Nevertheless, a global scare, apparently based on less than a handful of possible side-effects, has spread as rapidly as the virus across the Pacific to South and Central America and the southern states of the United States. This global scare, and not necessarily the virus itself, has dealt a serious blow to the economies in the countries where an outbreak has been reported, particularly in the tourism industry. In an effort to offset the “Zika effect” on tourism, U.S. airline carriers flying to and from Puerto Rico have dropped their fares by 22% when compared to last year, according to an article published by Reuters. But airlines have yet to report on their bookings. “Leisure travelers going to Puerto Rico are

This global scare, and not necessarily the virus itself, has dealt a serious blow to the economies in the countries where an outbreak has been reported.

concerned about the state of the economy and the extent to which leisure resort facilities are going to be properly maintained,” said airline industry consultant Robert Mann. But it is not just about “properly maintained facilities.” According to travel consultant Harrell’s Associates, the lowest fares to San Juan from airports on the U.S. East Coast dropped more than 14% at the beginning of February, just a month after the U.S. Centers for Disease Control & Prevention published an advisory for pregnant women planning to travel to Puerto Rico. In February, a group of epidemiologists and researchers specialized in tropical diseases met in San Juan to discuss possible solutions to make faster diagnostics and more eﬀective treatments for diseases such as Zika, dengue and chikungunya. Upon meeting with local media, some participants admitted that at least three of their colleagues had not come to the meeting because they were

worried about the possibility of being exposed to the Zika virus. Researchers are investigating the possibility of a link between Zika in pregnant women and microcephaly, a condition in which the fetus develops an abnormally small head. Nevertheless, at this moment there is no scientific evidence that can corroborate such a link. According to Forbes, tourism represents a combined income of more than $11 billion a year for the Caribbean islands, including Puerto Rico. To approximate Zika’s costs, Donald Shepard, an economist at Brandeis University, concluded that the global cost for the dengue virus in 2013 was $8.9 billion. That is almost all tourism revenue for the Caribbean islands. In Brazil, the Latin American country suffering most from the Zika infection, the cost to care for those infected with dengue in 2013 was $728 million. If the costs for prevention are added to the total, the amount reaches $1.2 billion.

THURSDAY, MARCH 3, 2016 An investigative report by CPI sheds light on real threats to public health from coal ash waste.

Environment

Something Happened in the D.R.’s Arroyo Barril BY OMAR ALFONSO, CENTRO DE PERIODISMO INVESTIGATIVO

This article is the first in the series Toxic Ash: A Caribbean time bomb. Eight years have passed but Amparo Andújar Maldonado does not forget. She lost her first child while she was approaching the fifth month of her pregnancy. Nor does she erase from her mind giving birth to a disfigured fetus, with cranial malformation, something incomprehensible for a healthy 27-year-old woman who had received quality prenatal care. But Andújar Maldonado was not alone. From 2005 to 2008, the rate of miscarriages and premature births suddenly rose in Arroyo Barril’s Encantado neighborhood, a workingclass rural and coastal town in the northern part of the Dominican Republic. The area is rich in natural treasures such as the Bay of Samaná, a global sanctuary for humpback whales. Andújar Maldonado’s friend, Rosa María Andújar, also fell into the statistics. She gave birth to a child with exposed intestines and six fingers and toes. The newborn died not far from birth, in June 2008. Months later, another neighbor, Maribel Mercedes, gave birth to Siamese twins who also died in a short time. Five babies were born with omphalocele, or exposed

intestines, between August and November of that year, in the neighboring districts of Los Róbalos, La Pascuala and Gri-Gri. Only one of them survived. When asking Andújar Maldonado what explanation sanitary authorities gave about her case, and about the unusual repetition of similar cases in the region, her answer was simple: “None.” Andújar Maldonado’s house is less than half a kilometer from the dock, and during her pregnancy she would regularly go to the beach “to get some air.” “I think it was because of that,” she added. By saying “that” she refers to the tons of coal ash that were abandoned at Arroyo Barril’s Juan Pablo Duarte dock for nearly four years. Mounds of more than 27,000 tons of the grayish residue, which arrived at the pier from the Applied Energy Services Corp. (AES) coal-fired plant in Guayama, Puerto Rico, and was unloaded steps from the coast, in the open and without a management plan in October 2003. Since 2002, AES has generated 400 to 1,600 daily tons of this waste while producing the electricity it sells to the Puerto Rico Electric Power Authority (Prepa). With its contract with the Puerto Rico government, AES has bound itself to export the waste for which it has found no commercial use. Neighbors and exemployees from the

Dominican port acknowledged that an undetermined amount of that ash material, identified by locals as “rockash,” ended up in the sea. When this happened, it was common to encounter bands of dead fish along the coast. “The water that came down would kill the fish,” assured Miguel Ángel Paredes Jiménez, security

“exceeding the levels of international standards,” as well as high concentrations of arsenic. Delft University of Technology (Technische Universiteit Delft) in the Netherlands describes beryllium as one of the “most toxic known” elements in the world since “it can be very harmful when inhaled by humans” and may “increase chances of developing cancer and DNA damage.” In addition, it can accumulate in the air, soil and water.

abortions,” recalled Dr. Rosa Domingo Maleno, who since 2004 has occupied the position of provincial director of Health in the Samaná region, to which Arroyo Barril is assigned. Domingo Maleno could not provide figures on registered miscarriages during those years.

chief at the Arroyo Barril port in 2004. Part of the ash, they assured, was also scattered for months by the coastal breeze to nearby communities, agricultural lands and the mountains. A sample analysis conducted by the Chemistry Institute at Universidad Autónoma de Santo Domingo and released in April 2004, certified that the waste brought from Puerto Rico was loaded with heavy metals. Specifically, they identified levels of beryllium, vanadium and cadmium

By 2005, about 1,600 families lived in the village of Arroyo Barril and nearly 40% of them lacked plumbing, so they went to nearby rivers and springs for drinking water and basic needs. Today, a minority continues the same practice. The alert created by the rise in miscarriages in those years was such that regional Ministry of Health leaders adopted an extraordinary measure. “We asked the women of age to prevent any pregnancy for a while because there were many

dirt road leading to Andújar Maldonado’s home, lives Concepción García Bueno, a strong farmer who can no longer do his job. Surrounded by neighbors, he explained that since the arrival of rockash at the Arroyo Barril dock, fruit trees are no longer productive and assured that the plantains, oranges, grapefruit, pigeon peas and avocados no longer grow in his orchard. “Here in our territory, you can ask around if anyone can bring you an orange or a grapefruit. It

‘THE LAND IS CONTAMINATED’ Facing one of the gorges in the Encantado neighborhood and passing the

doesn’t exist; there are none. And that’s because of this epidemic,” he said referring to the mountains of ash. “The leaves have dried and fallen. They are disappearing. The land here in our territory, doesn’t produce them. The soil is aﬀected, it’s polluted,” he said. “Had you noticed a similar problem before?” he was questioned. “Never, never. [We hadn’t had] any epidemics. Thereafter, it has been a disaster,” he said. “But we are already contaminated and there is no way out of this evil.” Since the arrival of rockash, he added, the soil that for decades gave food to his family and neighbors has been transformed. Now they are forced to buy legumes, fruits and vegetables from farmers or sellers from other localities. How could the fields of Arroyo Barril be contaminated with ash waste if the mountains of waste were at the dock? García Bueno gave a quick and clear answer: through the sea breeze. “My mother’s house is half a kilometer from where they deposited that mineral, and they had to clean all the time. It was like a powder, like the one they use for babies,” he said. But the propaganda about the ash had other underpinnings. As described by José Eligio García Jiménez, a religious leader and veteran tourist carrier in Samaná Province, a few months after the arrival Continues on page 32

THURSDAY, MARCH 3, 2016

Environment Continues from page 31

of the rockash, hundreds of people came to the Arroyo Barril dock to unload the coal ash cargo for use in their homes, relying on public notices from the Ministry of Environment & Natural Resources, as well as assertions from port operators. Both sources said the material could be used for construction and flooring. That is why García Jiménez said it was not unusual to see carpets of ash at the entrances and in the courtyards of homes, even in distant locations from the port, such as the municipalities of Sánchez and El Limón, located more than 20 kilometers from the port. “Many people came in trucks to load [the ash] to throw in front of their yard because it was something that looked nice, like a white sand, something pretty. And that was the curse,” he said. “Then all those people became sick. All of them,” he said. Among other symptoms, the driver said, “First, the children and then the adults” began to manifest bone pain, fever, swelling in the body and itching or hives. Unlike diseases such as dengue fever, common in tropical areas, the symptoms persisted and lasted for months. “We were saying ‘but why does the whole family, in one house, have all these symptoms of illness and nobody knew what it was? Nobody. And it was ‘that’ that was killing us. The rockash.” María Andújar Mercedes, another neighbor of the dock, added that families

who used rockash as construction material also used it to cover the floors of their kitchens because it is common in the area to have dirt-floor kitchens separate from the house. EVEN THE COCONUTS WERE AFFECTED Among those who raised their voices in concern were Eugenio Andújar Maldonado, the current president of the Neighbors United for Peace of Arroyo Barril. Standing in front of Nagua Samaná highway, the main artery of the area, Andújar looked at coconut palms and pointed to them as a first indicator that something strange was happening. “Many coconut trees were damaged, that is, they dried up,” he recalled. In Arroyo Barril, as in the rest of Samaná Province, economic activity centers on tourism, fishing and agriculture. In the latter, the main agricultural product was coconuts, as was certified by Samaná’s Ministry of Agriculture. The community leader also warned that since the coal ash arrival, local production of yams, cassava, plantains, grapefruit and avocados inexplicably dwindled by “up to 70%.” Drought is a recent phenomenon and other sources of pollution that can damage soil do not exist near Arroyo Barril. As an example, he stated that the nearest landfill is 15 kilometers from the town; the processing plant of gold Cotuí is 200 kilometers away; and the nearest cement plant is in Santiago Province, which is “260 kilometers from here.”

IN HIS OWN FLESH Dr. Eduardo Ortiz Mejías, at that time assigned to Arroyo Barril’s Primary Care Unit, also precisely remembers these incidents, some of which caught the public’s attention. In fact, the doctor not only certified that the frequency of miscarriages and births of children with deformities was atypical in Arroyo Barril between 2005 and 2008, but also narrated how he was surprised about the news of

As a man of science, it has been challenging to find an explanation about what happened. But he recognizes that something was happening in Arroyo Barril and moved away from there in 2005. “I come from a contaminated town, completely polluted, called San Pedro de Macoris, a province where there are many free trade zones and there is a very broad environmental impact. But when I am there, in San Pedro, I don’t see the diseases that I’ve

Tons of coal ash were abandoned at Arroyo Barril’s Juan Pablo Duarte dock for nearly four years. Mounds of more than 27,000 tons of the grayish residue arrived at the pier from the AES coalfired plant in Guayama, Puerto Rico. the loss of his firstborn on Jan. 26, 2006. “That was the first child. She became pregnant in December, and on Jan. 26, even though we took all preventive measures, she lost the baby,” he said. His wife was eight weeks into gestation. The doctor, now active in Leopoldo Pou Hospital in Samaná Province, explained that this was the first and only time in their family histories that such a tragedy has occurred. He confessed that accepting and assimilating it was diﬃcult.

seen there,” he said. Among the conditions observed in Arroyo Barril, he mentioned rashes, miscarriages, repeated abortions, premature births, malformations “and what was seen only in textbooks: Siamese” twins. “We also had children who were born without their two extremities. This condition is called Amelia,” he added. The problem, however, is complicated because in his opinion the incidence of these cases persists. “We’ve had the bad

luck of not knowing anymore when the pregnant women [in Arroyo Barril] will give birth. What is the cause? We do not know,” he said. “They just say ‘it is God’s destiny,’ ‘it had to happen,’ but if a thorough investigation is done, I think we can come down to the real reasons,” the doctor continued. The study would indicate whether Arroyo Barril has been contaminated by toxics and their origin. In addition, it would shed light on the possible presence of heavy metals in residents’ blood and in the water and agricultural lands of the municipality. This request is supported by Dr. Nabal Ireon Báez Beevers, area manager of Health for Samaná Province, who said that rockash’s landing should never have happened, let alone in such an area that is close to populated communities. “That is a toxic,” he said. Exposure to toxic chemicals, which the International Federation of Gynecology & Obstetrics has said is a problem that threatens human reproduction “disproportionately among the poor.” For example, in 2015 it concluded that “miscarriages, stillbirths, impaired fetal growth, congenital malformations, alteration or reduction of neural development and cognitive function” are some of the eﬀects on reproductive health related to exposure to chemicals and air pollutants. The group representing gynecologists and obstetricians from 125 countries also ruled that negligible exposure to heavy metals

during the prenatal period may interfere with the development of a child, “triggering adverse health consequences that may manifest through the life expectancy.” A thorough investigation of this topic could soon materialize in Arroyo Barril if the claims of a prolonged legal battle against AES Puerto Rico and its parent company, AES Corp., are supported by the court, Báez Beevers said. The civil lawsuit, filed by lawyers representing about 20 residents of Samaná, was presented in 2009 before the Superior Court of Delaware. The case is alive and proposes that the 27,000 tons of coal ash discharged in Arroyo Barril were toxic and sickened people in the area. The Center for Investigative Journalism learned Feb. 6 that AES Corp. attorneys met at a hotel in Santo Domingo with the plaintiffs and their lawyers, and presented an economic proposal to end the trial in an attempt to settle the case. This happened after the center conducted onsite interviews related to the investigation. The plaintiffs rejected AES’ offer, so the case under consideration by the presiding judge of the Superior Court of Delaware, Jan R. Jurden, continues. Manuel Mata, chief executive of AES Puerto Rico, did not agree to be interviewed by the Center for Investigative Journalism. 䡲

—Editor’s Note: To read the rest of the story, go to Centro de Periodismo Investigativo (CPI) www. periodismoinvestigativo. com.

THURSDAY, MARCH 3, 2016

Technology

New tech allows students to manipulate virtual objects in real-world settings

Ponce Medical School Adopts Virtual Reality Technology into Curriculum System Supplied by Calif.-Based Firm zSpace Provides Holographic Anatomy Lessons BY DENNIS COSTA d.costa@cb.pr

Imagine the following: you sit in front of a desktop computer, put on a pair of lightweight three-dimensional (3D) glasses not unlike those you would wear in a movie theater, and pick up a stylus with a laser pointer. An image appears on the screen, a very convincing facsimile of a human heart. The image then seemingly pops out

specifically at the Ponce Health Sciences University (PHSU), which recently became one of a handful of medical schools in the world to teach anatomy with the help of holographic human bodies. “Our new virtual anatomy lab is a very practical choice which, besides cutting costs, oﬀers our students more opportunities for practicing and learning anatomy,” said Dr. David Lenihan, president of

In-Q-Tel, a governmentfunded venture capital fund run by the CIA, was one of the primary backers in the development of the zSpace platform, as well as many other recent technological breakthroughs. of the screen and floats inches in front of you in all its 3D glory. You point at the heart with your stylus and move it, turn it, even slice oﬀ part of the organ so you can better see the various chambers and valves inside. This scenario is not taken out of a science-fiction story, but is instead a reality found in the southern coast of Puerto Rico,

PHSU. “This new technology allows us to stay on the cutting edge for years to come and opens the door to eventually bring similar virtual pedagogical software to other areas, such as surgical training.” The technology in question is provided by zSpace, a company based in Sunnydale, Calif., that specializes in so-called “real world virtual-reality (VR)

systems,” which essentially means interacting with simulated objects within a real environment. Although the potential uses for the technology have been deemed “limitless,” the company has mostly marketed the system for use in STEM (science, technology, engineering and mathematics) education and medical schools. Regarding the latter use, Gregg Yedwab, business

development executive and evangelist for zSpace, told Caribbean Business that the technology serves a key role in medical students’ progress. “Usually, the first step in learning anatomy is through classic books such as Gray’s Anatomy,” Yedwab noted. “After that, students go to an iPad or computer to understand more about relationships between organs; from there, they go straight to a cadaver. What zSpace provides is an extra step before getting to cadaver level; it’s like a virtual cadaver that allows students to become really involved with the nerve structure and muscles in an organ, for instance.” Although the technology may invite comparisons to the concept of augmented reality, Yedwab said that

is not the case. “It is truly immersive VR,” he added. The company, which started life as Infinite Z, began developing the zSpace platform around 2010 under circumstances that are as interesting as the technology itself. A venture capital firm dubbed In-Q-Tel (the “Q” is a reference to the fictional inventor who supplies James Bond with gadgets) was one of the primary backers of the platform’s development and has been an early supporter of many of the technologies that are in vogue today, among them the touchscreen interface found on the Apple iPad. Another fact about In-Q-Tel: it is run by the Central Intelligence Agency. Last June, zSpace sold and installed the virtual

reality platform to the PHSU for an undisclosed amount, although the average price for a hardware and software package is around $4,700. The university currently has 11 zSpace technology units and recently donated one to the Pontificia Universidad Católica’s School of Architecture, which will be used for a unique course on human body engineering, becoming one of the few, if not the only, architecture schools in the world to oﬀer such a course. “We are very happy we could share this new asset with our neighbors at the Pontificia Universidad Católica, with which we hope we can establish a satisfactory relationship for the benefit of our students and faculty,” PSHU’s Lenihan added.

THURSDAY, MARCH 3, 2016

Features four full-size doors, new high-output EcoBoost engine, 10-speed transmission and enhanced suspension

2017 Ford Raptor SuperCrew

More Versatile, Powerful and Efﬁcient for on- and off-Road use BY JOSÉ L. CARMONA j.carmona@cb.pr

More agile, versatile and roomier than previous generations, the all-new 2017 Ford Raptor SuperCrew made its world debut in January during the North American International Auto Show (NAIAS) at Cobo Center in Detroit. With four full-size doors, the F-150 Raptor SuperCrew adds room for passengers and gear, expanding choice and versatility in what Ford describes as the toughest, smartest, most capable Raptor ever. “The new 2017 F-150 Raptor was developed with the DNA of a Baja race truck and is unique among oﬀ-road and performance vehicles. Its purposebuilt engine, chassis and suspension enables it to travel fast over challenging desert landscapes or rocky terrain,” said Joe Hinrichs, Ford president of The Americas, during the vehicle’s unveiling. With a wheelbase that is 12 inches longer than the standard Raptor SuberCab’s 133inch wheelbase, the 2017 Raptor SuperCrew provides rear passengers with more legroom and comfort, plus more space to stow gear. The new Raptor boasts its first-ever dual exhaust and new 17-inch wheels with next-generation BFGoodrich All-Terrain KO2 tires designed for oﬀ-road performance. LIGHTER, MORE EFFICIENT Through the use of advanced materials—including highstrength steel and military grade, high-strength aluminum alloy—the new Raptor is 500 pounds lighter than the previous generation. Combined with all-new EcoBoost engine technology, Ford says the 2017 F-150 Raptor’s power-to-weight ratio has been

improved, making the truck even more agile off-road. The 2017 F-150 Raptor is powered by a new, second-generation, high-output 3.5-liter EcoBoost engine that is a Raptor exclusive in the F-150 lineup. Ford claims the new EcoBoost engine produces more power with greater efficiency than the current 6.2-liter V8 engine, which is rated at 411 horsepower and 434 pound-feet of torque. MORE CAPABLE The all-new four-wheeldrive, torque-on-demand transfer case comes with an advanced, easy-to-use off-road mode driver-assist technology that has evolved into an all-new Terrain Management System. This system enables the driver to select modes to optimize driving dynamics to environmental conditions—from snow to mud, sand, rain, rock and more. An available Torsen front differential, a mechanical device, increases off-road capability further. The system increases grip significantly for the front end of the truck, allowing it to pull itself over obstacles and up steep grades—even when traction is split between the front tires. The F-150 Raptor comes standard with new FOX Racing Shox shock absorbers with custom internal-bypass technology that works to damp and stiffen suspension travel over rough terrain, helping prevent the truck from bottoming out. Front and rear shock canisters have grown from 2.5 inches to 3 inches in diameter for improved performance. They feature more suspension travel than the current Raptor’s 11.2 inches at the front and 12 inches at the rear. The all-new 2017 Ford F-150 Raptor SuperCrew will be built at the Dearborn truck plant in Michigan, and goes on sale in the U.S. and Canada this fall.

Joe Hinrichs, Ford president of The Americas, introduces the all-new 2017 F-150 Raptor SuperCrew at the North American International Auto Show in January.

THURSDAY, MARCH 3, 2016

Autos

FCA is No.1 in Puerto Rico in SUV and pickup segments

P.R. Chrysler Office Changes Name to FCA Caribbean Among Top-10 International Markets for FCA; Automaker Grows Local Market Share Despite Auto Sales Slump BY JOSÉ L. CARMONA j.carmona@cb.pr

Since January of this year, the name of Chrysler Group International Services LLC—the Puerto Rico distributor for the Chrysler, Dodge, Jeep, Ram, Fiat and Alfa Romeo brands—was changed to FCA Caribbean, as automaker Fiat Chrysler Automobiles (FCA) slowly changes its entity worldwide. “In late 2014, we transferred ownership of this oﬃce to what we call FCA International Operations, and the main reason for doing that is because the oﬃce was formally under the Latin American region, reporting to the

Mexico regional oﬃce,” Janet Stark, director of Market Management, Business Integration & Planning at FCA, told Caribbean Business in an exclusive interview. Although the local office sells straight U.S.specification products, Stark pointed out Puerto Rico is still considered very much an international market, given its Latin flavor and culture as well as Spanish- language dominance. “When Fiat and Chrysler created the alliance, they formed several regions, and our international operations group in Auburn Hills, Mich. fell into the North American Free

Trade Agreement [Nafta] region, but we don’t serve any markets. We just didn’t want to roll Puerto Rico into the U.S. region because it’s truly an international market, and this gave us the opportunity to manage it separately,” Stark explained. “We wanted to give them the dedication they deserved.” FCA Caribbean Regional Manager Ricardo García said the international operations group is divided into several regions, including Europe, Asia and Latin America, encompassing a total of 150 markets worldwide. The Latin America region covers Central and South

Spearheaded by Ram pickup and Jeep sales, FCA Caribbean was able to grow its share of the local market despite the general auto-sales slump on the island.

Janet Stark, director of Market Management, Business Integration & Planning at FCA

America, so FCA decided to create a new region especially for Puerto Rico— the Caribbean, he said. As part of being in charge of the Caribbean region, FCA’s Puerto Rico oﬃce also has the responsibility to develop the Dominican Republic market. Stark, who was in Puerto Rico for the automaker’s annual Dealer Awards, also took part in a trip to Santo Domingo with García last month. AMONG THE TOP 10 In Stark’s view, the move to switch Puerto Rico from the Latin America region to the Caribbean was good for the automaker. “In the year since we’ve taken over, especially with the economic conditions in Puerto Rico, FCA was able to grow its market share on the island, which I don’t think many original equipment manufacturers [OEM] can say they’ve done that,” Stark said. “This

oﬃce is important to us. Puerto Rico is among the top 10 of our international business, out of 150 markets.” At one point, Stark said, there was talk about rolling the Puerto Rico office into the company’s southeast business center, and she fought to keep the island separate. “Because I felt it was very important, otherwise it would have been a small fish in a big pond.” Stark said. “I felt there still was uniqueness down here and it still needed that separate dedication. We’re happy it stayed that way.” The head of FCA’s international business development & integration noted that part of growing the automaker’s share of the local market was driven by the Ram pickup truck, which was a big focus of the automaker and the local oﬃce last year. “In fact, Puerto Rico is the only jurisdiction where Ram surpasses Ford as the

market’s truck leader, and that’s very exciting. In our brand meetings, I make sure they know Puerto Rico has done that,” Stark said. “And we continue to be No. 1 in the sportutility vehicle [SUV] segment with the Jeep brand, which as a company has really helped because Jeep achieved 1.2 million unit sales last year. Jeep is truly a global brand for us.” January was a record month for FCA’s international group, the best in its history, and in the U.S. it was the best month since 2007, Stark noted, adding that the Jeep brand will be celebrating its 75th anniversary this year with special commemorativeedition models. “As a company, our total sales went from 2.8 million units to 4.4 million units last year. That’s a 57% increase, so it’s pretty exciting to be part of this growing company,” said Stark, who in May will celebrate 30 years with the automaker.

Special Feature March 3, 2016 Pages 37-43

Voices in the Telecommunications & Technology Industry

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Telecom Players Look to Puerto Rico and Caribbean for Consolidation Liberty’s Acquisition of CWC Signals Important Changes in Regional Telecom Landscape BY DENNIS COSTA

The eyes of the global telecommunications sector are firmly placed on Puerto Rico and the Caribbean. This was the idea behind several statements put forth by telecommunications industry executives during the recent Capacity Caribbean 2016 conference, which was held in Puerto Rico for the first time in the event’s decade-long history. Chief among the topics discussed during the event’s many panels was the wave of consolidations currently taking place industry-wide, led by international cable company Liberty Global’s acquisition of London-based telecom provider Cable & Wireless (C&W) Communications in a cash and stock transaction valued at $5.3 billion. The deal, announced last November, is still waiting for regulatory approval, with Naji Khoury, president & CEO of local Liberty Global subsidiary Liberty Puerto Rico, telling Caribbean Business that regulators should reach a decision by the summer. Liberty has also carried out a slew of acquisitions in the Puerto Rico market, most recently by buying Choice Cable TV last June for $272.5 million and slowly merging its network into the Liberty Puerto Rico umbrella. “A lot is happening,” Khoury said. “We’re focused right now into finishing the Choice consolidation first, which should be completed sometime in the second quarter. Then there’s the matter of the CWC transaction, and once that is completed, it will change the landscape

dramatically in the Caribbean and Puerto Rico too. How is it going to look like in the end? I have no idea.” The Liberty/C&W acquisition took place months after Cable & Wireless made a similar move in March of last year when it completed a merger with Columbus International, a Barbados-based telecom company, in a deal worth $3.025 billion. Columbus provides digital cable TV, broadband internet and digital landline telephony in Trinidad, Jamaica, Barbados, Grenada, St. Vincent & the Grenadines, St. Lucia and Curacao under the brand name Flow and in Antigua under the brand name Karib Cable. “For both companies, the acquisition also enables greater focus on the Caribbean, Andean and Latin American markets as a region that oﬀers attractive growth,” according to a press release at the time. “The acquisition will provide new opportunities and focus on Colombia, Guatemala, Costa Rica, Honduras, El Salvador, Dominican Republic, Puerto Rico and Peru.” Following the Columbus acquisition, C&W Communications nowadays consists of three business units in the region: C&W Networks; C&W Business and various subsidiary retail companies including Flow, Lime, Bahamas Telecommunications Co. and Cable & Wireless-Panama. Paul Scott, president of C&W, told Caribbean Business that the company is, for the moment, concentrating on its robust subsea cable system in the region. “Puerto Rico is a real hub for the region,” he said. “Just recently, we introduced a new subsea

fiber-optic cable, dubbed Pacific Caribbean Cable System (PCCS). It’s a state-of-the-art system connecting Puerto Rico onward with the U.S. mainland, as well as an example of additional investment.” C&W deployed the PCCS as part of an industry consortium that includes major companies such as Setar, Telconet, Telefónica Global Solutions and United Telecommunication Services. Total investment in the 6,000-kilometer subsea cable, which boasts transmission speeds of 100 gigabits per second, was about $165 million, out of which $40 million came out of C&W’s pockets. The cable came into service last August and since then has serviced many of the island’s main telecom players on a wholesale basis. “As folks like Claro, Liberty, AT&T and others grow their wireless LTE networks and fixed-line broadband networks, they need more upstream connectivity because the internet doesn’t originate here; the onramp for this regions’ internet is in Miami, so everything has to connect with that global internet gateway,” Scott noted, adding that the pending approval of the Liberty/C&W acquisition should not aﬀect the company’s wholesale business model, at least when it comes to access to its subsea network. Industry analysts have said the move by the likes of Liberty and others are partly a reaction to ever-tightening regulatory restrictions in the European market, which has prompted telecom giants to look toward the Caribbean and Latin America regions as markets that are ripe for growth.

In yet another sign of its increasing focus on the Caribbean, Liberty Global created a separate tracking stock called LiLAC Group in July 2015. Short for Liberty Latin America & Caribbean Group, LiLAC refers to a group of assets and liabilities owned by Liberty Global in the region, and which include its operations in Puerto Rico and Chile. LiLAC’s latest quarterly report shows that the company’s everincreasing focus on the region is paying oﬀ. When it comes to RGUs, (revenue generating units, a key industry metric), Liberty added 30,000 RGUs in Puerto Rico during 2015, including 8,000 in the fourth quarter. “Our RGU growth was driven in part by our strategy to drive bundled services to our customer base, including our newly acquired Choice customers, which have been historically more focused on single-play broadband services,” the report stated. By the same token, the telecom provider ended the year in Puerto Rico with a revenue growth of 6% for the year, including 5% growth

in the fourth quarter. “During 2016, we plan to significantly increase

customer

broadband

speeds, with a new top speed of 200 Mbps [megabits per second], as well as expand the HD lineup and implement harmonized product portfolios across our entire footprint,” the report added. Liberty Puerto Rico’s Khoury added that increasing upload speeds—which historically have always lagged behind compared with download speeds—has also been a priority for the company. “Weeks ago we completed an overhaul of the network to reach a 10-to-one ratio in upload speeds,” the Liberty exec revealed. (The ratio essentially means that for every 10 Mbps of download, there is one Mbp of upload.) Khoury also believes such a ratio is enough to satisfy the demands of the local market “It is the most complicated and timeconsuming part of a network overhaul,” he said. “It takes a lot of money.” 䡲

THURSDAY, MARCH 3, 2016

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Samsung Unveils S7, Puts VR Front and Center with Gear 360 Camera Tech Giant Puts Back Extended Storage, Water-Proofing into Galaxy Phones; Camera Allows Easy Recording of 360-Degree Video

BY DENNIS COSTA

Korean electronics giant Samsung announced various upcoming devices during the Mobile World Congress held late February in Barcelona, Spain. Foremost among the announcements was the unveiling of the Galaxy S7 and S7 Edge smartphones and the Gear 360 camera, which as the name suggests, records video in 360 degrees. The S7 phones, despite not deviating wildly from their predecessor the S6, nevertheless contain some improvements. Oddly enough, the most noteworthy features in the S7 and S7 Edge are not really new, but are instead features that had

been controversially left out in the S6. Foremost among these features is the capacity to add more storage through a MicroSD card. While in-phone storage will top at 32 gigabytes (GB) in most cases, the expandable storage can add up to 200 GB. Samsung also reincorporated water-proof resistance into the new smartphones. The battery on the S7 is still non-removable, yet has more capacity than the S6, with 3,000 mAh (milliampere-hours) versus 2,550 on the S6. Design-wise, the S7 has not changed significantly from the S6. When it comes to both versions of the S7, the Edge has a slightly larger screen that

Samsung Gear 360

basically curves around the sides of the device. As to the base unit, the screen retains the S6’s specs: a 5.1-inch AMOLED with 2,560 x 1,440-pixel resolution. It has a Qualcomm Snapdragon 820 processor under the hood, running Android 6.0 Marshmallow as its operating system. The S6’s superb camera underwent a bit of a makeover in the S7, but the jury is still out on

whether this is for the better. For instance, the resolution has been reduced to 12 megapixels (MP) from the S6’s 16 MP. On the other hand, the company says that although there are fewer pixels, the pixels are bigger, which lets in more light and allows better low-light photos. Speaking of cameras, Samsung’s Gear 360 represents uncharted territory for the company, with several other firms quickly hopping on the 360 camera bandwagon. The spherical device features two 15MP cameras looking in opposite directions, sitting behind extreme wide-angle lenses (also known as “fisheye”), with each camera able to capture a 195-degree field

of view. In-built software takes both video feeds and “stitches” them together to create the 360-degree experience; it also features a microSD card slot and swappable battery. Of note is that only the S7 lineup can stitch together this kind of footage using a built-in app, although compatibility with other Galaxy models will soon be announced. Finished videos can then be seen on the company’s Gear VR headset, which uses compatible Galaxy phones as the main display. The Galaxy S7 and S7 Edge are slated for availability at most major carriers in mid-March, while the Gear 360 is scheduled for release during the summer. 䡲

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THURSDAY, MARCH 3, 2016

Infomedika’s Solutions Help Clients Maintain Healthy Operations BY MARIO BELAVAL DÍAZ

For more than 35 years, Infomedika has maintained its place as a pioneer and leader in Puerto Rico by developing advanced health information solutions and services that have made a diﬀerence in their clients’ operations. Essential to the company’s success has been a commitment to identify the specific needs of the local healthcare industry and create products that fit those needs and thus help strengthen the sector, which after all is one of the most significant in the island’s economy. The company is renowned for its own Evolution solutions suite, which include electronic health records (EHRs) and hospital information systems (HIS’). “One of the tasks we have set for ourselves this year is to help the local industry with tools and resources that give them a competitive edge,” said Félix Medina, sales & marketing manager at Infomedika. “In developing those solutions, we always ask ourselves how can we, through our services, help local businesses and by doing so, do our part for Puerto Rico’s economy.” Among these solutions is Infomedika’s Evolution Rx, geared toward what are known as farmacias de la comunidad (neighborhood pharmacies) that provides all the elements for the eﬃcient handling of electronic information. “We want to provide these pharmacies with the same resources that multinational pharmacy chains have in terms of infrastructure and applications that perhaps set neighborhood pharmacies at a disadvantage,” Medina said. “That way, local pharmacies can process more

information eﬀectively and provide quality services to their customers.” Infomedika also carries this commitment to other segments of the local industry such as the cooperative sector with products that include Sage 100, a finance and accounting application that helps in day-to-day back-end operations. In fact, the company is certified by the Cooperatives Supervision & Insurance Corp.

to fine tune it to clients’ needs. Other partners include 3M, Ebsco Host, Win-Pharm and Dr. First. Infomedika’s belief in making a diﬀerence in the local industry has led it to partnerships with local enterprises, as it has with Assertus, a young local company dedicated to processing claims to medical plans from any provider, and whose application is integrated into Infomedika’s Evolution HIS (Hospital Information

“We are also looking into going into the academic sector by oﬀering our systems for educational institutions that have degrees involving nursing, laboratories or pharmacy studies, for example.” —Félix Medina, sales & marketing manager at Infomedika.

(Cossec by its Spanish acronym) to supply cooperatives with the technological information tools that they use to file or submit important reports required by Cossec. Besides developing homegrown solutions, Infomedika is able to adapt its business partners’ solutions so that they can best fit the needs of local companies. For example, Infomedika is classified as a Sage Master Developer, which allows Infomedika to carry out adjustments to Sage software

Systems) solutions for hospitals. “We are also looking into going into the academic sector by oﬀering our systems for educational institutions that have degrees involving nursing, laboratories or pharmacy studies, for example,” Medina said. “This would add value to the professionals who graduate because they would already be knowledgeable in a platform that is used by 85% of hospitals in Puerto Rico.” Furthermore, not only would this mean that graduates such

as nurses will have a higher probability of getting a job in Puerto Rico, and thus help retain that much-needed talent on the island, but also help hospitals save time and money from having to train personnel in the technology. “This year, it is very important for us that our plans not only take into consideration the continued success of the company, but also on how, through our operations, we can be part of the process of getting the economy of Puerto Rico back on track,” Medina noted. Infomedika, is a local Puerto Rican-owned company founded

by Luis M. Ramírez-Ronda, Kenneth Torres Alcalá and Héctor Santini in 1981. Since that time, the company has provided mainly the healthcare industry with information management solutions that not only help them run more eﬃcient operations and provide the best quality service and care possible, but also help them satisfy and comply with the required local demands and federal mandates. Infomedika operates a 20,000-square-foot facility in San Juan that includes work centers, a call center and software design and production areas. 䡲

THURSDAY, MARCH 3, 2016

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Take Your Child to the Lab Week It is estimated that there are some 600,000 technology jobs in the United States, which pay significantly higher than the average salary, and are currently unfilled. The federal government has taken notice and is taking big steps in an eﬀort to encourage young people to pursue careers in the fields of science, technology, engineering and math (STEM), President Obama has launched a version of “take your child to work day” but focused on taking your child to a science laboratory. During the last week of February, over 50 national labs in 20 states opened their doors to approximately 5,000 elementary, middle and high school students to expose them to the scientists, engineers and lab employees who carry out

important work and research. Students participate in mentoring sessions, hands-on experiments and other activities as part of the event. Thought before as the nerdy subjects at school, science, technology, engineering and math will shape the future. More and more kids are participating in all sorts of STEM-related programs. There is a real void and there is interest by young minds to fill that void. Projects like the White House Science Fair, the “Educate to Innovate” campaign and the “Grand Challenge” Scholars Program inspire students to structure their undergraduate experience around topics like making solar energy economical, and providing access to clean water for nearly a billion people who lack it. These programs give

students the opportunity to engage in research or design projects, develop entrepreneurship skills, and gain valuable field experience through service. In Puerto Rico, schools are integrating into their curriculum courses and projects around STEM subjects. Robotics competitions, science bowls, science fairs and many other similar activities are designed to encourage local students to participate and gain interest in these areas. Technology and science will not wait and students should not be left behind. STEM programs are and must continue to be a part of the education programs of every school in the nation. Raising interest in children is a first step which may be taken by simply taking a child into a lab one day. 䡲

STEM programs are and must continue to be a part of the education programs of every school in the nation.

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As Ranked by

PUERTO RICO’S LARGEST TELECOMMUNICATIONS COMPANIES (Listed According to Number of Employees as of February 2016) Current/ Previous Ranking

Company Name Telephone/Fax Internet Address

Physical Address

No. of Full-Time Employees

1/1

Claro (Puerto Rico Telephone Co.) (787) 782-8282 / (787) 749-3933 www.claropr.com

1513-1515 F.D. Roosevelt Ave. Guaynabo 00968

3,410

Wireline & wireless communications, high-speed internet, intra & offisland long distance, IPTV

1914

Enrique Ortiz de Montellano CEO/President

2/2

AT&T Mobility Puerto Rico Inc. (787) 397-1000 / (787) 397-5107 www.att.com

103 Ortegón Ave. Guaynabo 00966

1,675

Wireless communications

1990

José J. Dávila VP/General Manager Puerto Rico & USVI

3/3

Liberty Cablevision of P.R. LLC (787) 657-3050 / www.libertypr.com

279 Ponce de León Ave. Hato Rey 00918

938

Cable TV, internet, long distance, commercial & residential telephone provider

1997

Naji Khoury CEO/President

4/5

T-Mobile Puerto Rico LLC (787) 754-1010 / (787) 773-3999 www.t-mobilepr.com

654 Muñoz Rivera Ave. Suite 2000 Hato Rey 00918

651

Wireless communications

2000

Jorge Martel Vice President/General Manager

5/4

DirecTV Puerto Rico Ltd. (787) 776-5200 / www.directvpr.com

CTP Scotiabank Plaza 273 Ponce de León Ave. 12th Floor Hato Rey 00917

440

Satellite TV & internet

1999

Thelma López General Manager

6/6

Open Mobile (P.R. Wireless Inc.) (787) 554-6736 / (787) 295-0101 www.openmobilepr.com

Metro Office Park Chrysler Bldg., Suite 300 Guaynabo 00968

320

Wireless communications

2007

Juan Saca President

7/7

AT&T Corporate Business Solutions (787) 717-9600 / (787) 620-9899 www.attbusinesspr.com

Bo. Monacillos 996 San Roberto St. Río Piedras 00926

300

Private data, internet, mobility, cloud, security, hosting, VoIP

1996

Ana Michelle Concepción General Manager

7/7

Sprint (787) 775-6700 / (787) 775-5850 www.sprint.com

304 Ponce de León Ave. Suite 801 Hato Rey 00918

300

Mobile communications, high-speed internet

1990

Patricia M. Eaves General Manager

9/9

WorldNet Telecommunications Inc. (787) 706-2600 / (787) 749-8887 www.worldnetpr.com

Centro Intl. de Mercadeo 90 165 Rd., Suite 201 Guaynabo 00968

146

Voice, data, internet, cloud & IT consulting

1996

María Virella President

10/10

Ericsson Caribbean Inc. (787) 771-1700 / (787) 771-1747 www.ericsson.com/pr

City View Plaza 48 165 Rd., Suite 6010 Guaynabo 00968

Telecommunications

1999

Lin Amundarain General Manager

11/-

Telefónica Larga Distancia (787) 749-5800 / (787) 749-5804 www.us.telefonica.com

1502 F.D. Roosevelt Ave. Guaynabo 00968

Internet & long distance

1989

Carolina Valeriano Country Manager

12/-

Skytec Inc. (787) 275-5454 / (787) 275-5437 www.skytecpr.com

Royal Ind. Park 500 Rd. 869, Suite 501 Cataño 00962

GPS automatic vehicle location, computer-aided dispatch, radio communication, wireless high-tech communications solutions

1999

Henry Barreda III President

13/-

Verizon (787) 289-5747 / (787) 289-5777 www.verizon.com

665 Ponce de León Ave. Santurce 00907

Internet, ethernet, international & U.S. private lines, MPLS, security, cloud

1982

Aitor González Senior Account Manager

14/-

Dish Network Puerto Rico LLC (787) 705-2347 / www.dishpuertorico.com

B7 Tabonuco St., Suite 804 Guaynabo 00968

Satellite TV

2012

Reynaldo Pagani General Manager

Main Services Offered

Telecommunication refers to the electronic transmission of impulses by cable, telephone, radio or television. This chart includes telephone, cellphone, cable- and satellite-TV companies. Radio and television companies are included in separate charts. 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 Ana D. Ortiz Copyright © 2016 CARIBBEAN BUSINESS

Year Established in P.R.

Top Executive Title

THURSDAY, MARCH 3, 2016

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LONG-DISTANCE TELEPHONE COMPANIES IN PUERTO RICO (Listed in Alphabetical Order) AT&T Corporate Business Solutions

Claro (Puerto Rico Telephone Co.)

Ana Michelle Concepciรณn, General Manager Bo. Monacillos 996 San Roberto St., Rรญo Piedras 00926 Tel. (787) 717-9600 / Fax (787) 620-9899 www.attbusinesspr.com Other Services: Private data, internet, mobility, cloud, security, hosting, VoIP Established: 1996

Telefรณnica Larga Distancia

Carolina Valeriano, Country Manager 1502 F.D. Roosevelt Ave., Guaynabo 00968 Tel. (787) 749-5800 / Fax (787) 749-5804 www.us.telefonica.com Other Services: internet Established: 1989

Verizon

Aitor Gonzรกlez, Senior Account Manager 665 Ponce de Leรณn Ave., Santurce 00907 Tel. (787) 289-5747 / Fax (787) 289-5777 www.verizon.com Other Services: internet, ethernet, international & U.S. private lines, MPLS, security, cloud Established: 1982

WorldNet Telecommunications Inc.

Marรญa Virella, President Centro Intl. de Mercadeo, 90 Rd. 165, Suite 201, Guaynabo 00968 Tel. (787) 706-2600 / Fax (787) 749-8887 www.worldnetpr.com Other Services: Voice, data, internet, cloud & IT consulting Established: 1996

Enrique Ortiz de Montellano, CEO/President 1513-1515 F.D. Roosevelt Ave., Guaynabo 00968 Tel. (787) 782-8282 / Fax (787) 749-3933 www.claropr.com Other Services: Wireline & wireless communications, high-speed internet, IPTV Established: 1914

Liberty Cablevision of P.R. LLC

Naji Khoury, CEO/President 279 Ponce de Leรณn Ave., Hato Rey 00918 Tel. (787) 657-3050 www.libertypr.com Other Services: Cable TV, internet, commercial & residential telephone provider Established: 1997

Sprint

Patricia M. Eaves, General Manager 304 Ponce de Leรณn Ave., Suite 801, Hato Rey 00918 Tel. (787) 775-6700 / Fax (787) 775-5850 www.sprint.com Other Services: Mobile communications, voice, messaging, high-speed internet Established: 1990

Unless otherwise noted, all information was supplied by the companies or taken from their websites. Research by Ana D. Ortiz Copyright ยฉ 2016 CARIBBEAN BUSINESS

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THURSDAY, MARCH 3, 2016

WEEKEND Weekend Events

Caribbean Business presents its new weekend guide for events across the island. PUERTO RICO CASALS FESTIVAL From Feb. 20 to March 12, the Puerto Rico Casals Festival celebrates its 60th Anniversary with performances by some of the world’s top classical musicians at the University of Puerto Rico Theater and the Centro de Bellas Artes in San Juan’s Santurce district.

will host the first edition of Puerto Rico Fashion In March 5-7, an international fashion event showcasing the work of some of Latin America’s most influential designers.

HUEY LEWIS & THE NEWS The famous 80s band Huey Lewis & the News will take the stage this Friday, March 4, 8:30pm at the Puerto Rico Coliseum José Miguel Agrelot with guest band Loverboy.

GUEST CHEF EVENT AT 1919 This Friday and Saturday, March 4-5, visit 1919 restaurant at Condado Vanderbilt Hotel where executive chef Juan José Cuevas has teamed with guest chefs Walker Stern and Joseph Ogrodnek as well as master sommelier Ronn Wiegand to oﬀer a six-course tasting menu with wine pairings as part of the Guest Chef Series.

PUERTO RICO FASHION IN The Hotel Sheraton at the Convention Center

SANGRÍA FEST This Saturday, March 5, is the ninth edition of the Sangría Fest, the largest

Francisco Oller’s El Velorio to climb, crawl and run through a muddy obstacle course in Orocovis this Saturday March 5. CIRCO FEST International clowns, trapeze artists and more will take over Old San Juan this Saturday and Sunday, March 5-6 during nternational Festival the International rcus Arts, with “mini of Circus s” oﬀered in Vieques, tours” mo and Cayey. Coamo

tasting event in the world according to the Guinness Book of World Records. The entrance fee includes

unlimited tastings of the best sangrias, wines and culinary creations from 6 p.m. to midnight at the Convention Center. PR MS 5K WALK This Saturday, March 5, at 7:30 a.m. run or walk the P.R. MS 5K and 3K starting at Luis Muñoz Rivera Park in support of the Multiple Sclerosis Foundation of Puerto Rico.

Huey Lewis & the News

TITAN’S ULTIMATE OUTDOOR CHALLENGE This year’s Titan’s Ultimate Outdoor Challenge is actually three races, a 5K, 10K and the Kronos Challenge (both races). Participants will have

L MORRO PET EL FEST On Sunday, March om 10 a.m. to 6, from m. bring your 4 p.m. nd the fampet and o El Morro ily to Pet Fest re where e there

Check out full schedule of events on cb.pr starting Friday, March 4.

will be an adoption station, yoga classes, dog massages and activities for kids on the green space in front of El Morro in Old San Juan. EL IMPRESIONISMO Y EL CARIBE: FRANCISCO OLLER Y SU MUNDO TRANSATLÁNTICO The Museum of Art of Puerto Rico (MAPR) presents the historic exhibit “El impresionismo y el Caribe: Francisco Oller y su mundo transatlántico,” on display from Jan. 30 to April 24 in Miguel Antonio Ferrer Gallery. 䡲

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MARCH 10 BIG BUSINESS PROFILE: AUTO INDUSTRY Caribbean Business is your best source for the latest information from the automotive front! This special report will focus on 2016 models—including compacts, sedans, SUVs, crossover SUVs, luxury vehicles, sports vehicles, work vehicles and much more—and their unique attributes and advantages. The latest information on car insurance options and financing offers will also be highlighted. Advertise your product here! PHARMACEUTICAL & CONTRACT MANUFACTURING Big pharma is seeing active collaborations between expert chemists and leading bio-tech engineers who are breaking new ground in 2016. If your company offers essential services—including research, validation or marketing, among many others—that are specially targeted to pharmaceutical companies in Puerto Rico, don’t miss the chance to advertise in this special report. CLOSING DATE: MARCH 4

MARCH 17 COMPANIES IN MOTION Caribbean Business showcases Puerto Rico companies that have increased the value of their businesses by discovering tools to further their objectives, grow their market share and soar above the competition. What are their winning strategies and fresh approaches to continue moving forward? Read all about it in this supplement. CLOSING DATE: MARCH 11 TAXES & IRAS Caribbean Business provides its readers with everything that is needed to know about financial planning, with special emphasis on the latest changes on this year’s tax form. In addition, we will include news on IRA products available in 2015 and other ways to financially prepare for your retirement. Advertise your financial-oriented product or service here! CLOSING DATE: MARCH 11

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THURSDAY, MARCH 3, 2016

Advertising

Ad aims straight at the heart

UM, Media Affiliate of McCann Worldgroup, Sports new Director in Puerto Rico BY MARIO BELAVAL DÍAZ m.belaval@cb.pr

Gisella Rivera was ready for that feeling of once again “rolling up my sleeves and taking on a new challenge.” Thus, when UM, the media agency affiliated with advertising company McCann Worldgroup, came knocking with an offer to become UM’s media director in Puerto Rico, she accepted and joined UM earlier this year. “This is one of those cases where an opportunity presents itself, a good challenge at a moment when I was ready for it,” said Rivera, a 14-year veteran of the industry. “The work [UM and McCann] did last year had already caught my attention, how they were working toward a greater integration of resources to develop solutions for clients.” Prior to joining UM, Rivera headed OMD, the media agency affiliated with BBDO advertising network in Puerto Rico, also as media director. She explained that in the ad world there is much discussion about how agencies should develop and provide solutions for clients but most of this remains on the level of discussions, short of action, “but here we are putting words into action with a very robust team, who are very knowledgeable in such areas as digital, and integrating this knowledge into the work we do for our clients.” “At the end of the day, we have a competitive advantage, and we have expertise in the area of media services but also the expertise of the rest of the team at McCann Puerto Rico,” Rivera said. “We will work toward integrating our strategic media to develop effective solutions for our clients that

Gisella Rivera, media director of UM in Puerto Rico

go beyond just finding a coveted advertising spot in a medium but will help that client’s business grow: help them sell more vehicles, for example, or in the case of an academic institution, help them increase enrollment.” Rivera will be overseeing the Johnson & Johnson account, which UM landed last year, as well as clients such as a MillerCoors, Mitsubishi and Caribbean University. Rivera arrives at a time when UM is celebrating 2015 as one of the most successful years in its recent history. UM was recently selected Global Media Agency of the Year by Adweek, and shortly before that it was selected Media Agency of the Year by Advertising Age, both leading trade publications. “I could not be more proud,” said Daryl Lee, Global CEO of UM. “We live in the golden age of media, with a desire for strategic innovation in media

everywhere—evident by the number of media reviews last year. At UM, we saw the opportunity to be a true challenger brand in the media industry, and we moved quickly to capitalize on every opportunity the year presented. I celebrate this incredible honor with UMers around the world.” In 2015, UM saw its business grow with more than 130 commercial accounts, which not only included Johnson & Johnson at a regional level, but also Coca-Cola in Central America and the Caribbean. UM also came away with more than 175 awards in the industry’s leading competitions. Among the awards are the “Chic Chat with L’Oréal Paris” campaign, which nabbed top awards last September at the Festival of Media LatAm Awards 2015 in Miami. The campaign, which won a gold in the “best engagement with consumer” and a bronze in the “best use of mobile” categories, created a free beauty-advice service through the popular WhatsApp social platform, where consumers could seek information on a product that best fit their needs, right at the point of purchase. The campaign also took awards and recognitions from the Sales & Marketing Executives Association of Puerto Rico, the Digital Forum and Cúspide, the local advertising competition. According to McCann Puerto Rico, “Chic Chat” helped increase L’Oréal Paris’ sales by 16% across all brand categories, compared to the previous year, and was 90% more affordable and costeffective than previous efforts the brand had done at the point of sale, when the brand took its beauty and personal healthcare experts to stores. 䡲

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