Caribbean Business - February 4, 2016 by Latin Media House, LLC

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Evertec Hearings Delve Into ATM Outage

Wal-Mart Takes on Puerto Rico Government in Court

Treasury to Audit Big Taxpayers

Iowa Caucuses Set the Tone for New Hampshire

Businesses Seek Greater Transparency PAGE 6

Lawsuit Challenging Transfer Pricing Underway PAGE 7

Selects 25 Companies From List PAGE 8

Cruz Upsets Trump PAGE 27

COVER STORY

TOP STORY

Puerto Rico Government Puts Forth Debt Restructuring Plan Creditors Call Effort Into Question

CRIM Stuck in a Twilight Zone

With the Puerto Rico debt crisis saga in crescendo, several developments on diﬀerent fronts took place this week, as the commonwealth continues to grapple with a fiscal crunch that slowly but surely keeps taking a toll on the island’s economy and 3.5 million residents. As anticipated by Caribbean Business Online (Jan. 29), the Puerto Rico government made public on Monday its revised debt-restructuring plan—a voluntary exchange oﬀer to creditors that would reduce the commonwealth’s debt by roughly

Chairwoman Melba Acosta told Caribbean Business on Monday. She added that meetings were mainly focused on addressing concerns and questions from creditors about the government’s plans to restructure its debt and achieve economic growth. While Gov. Alejandro García Padilla’s fiscal team views the debt-exchange plan as “fair, balanced and reflective of the commonwealth’s actual capacity to pay our creditors over the long term,” it did not take long for some creditors to deem

Property Tax System Dates Back to 1957

A change in how the Municipal Revenue Collections Center (CRIM by its Spanish acronym), the entity in charge of municipal finances, calculates real property taxes in Puerto Rico to bring the system to the 21st century and obtain muchneeded additional revenues may be on the horizon, but not any time soon. The debate is continuing on whether to update the methodology used to calculate real property taxes, which

currently uses property values from nearly 60 years ago, and how property taxes are distributed to the island’s 78 municipalities. What is certain is that CRIM is becoming more aggressive in how it is capturing taxes owed by residents and businesses, surpassing tax collections of more than $1 billion in fiscal 2014-2015. For example, CRIM is adding new properties to its rosters and going after delinquent property-tax owners.

For the first time in its history since its creation in 1991, the entity is also slated to put 10 commercial properties up for a public bid in March, whose owners have not paid property taxes despite CRIM’s eﬀorts to collect. Because it is an election year, however, oﬃcials do not want to touch anything remotely having to do with increasing real property taxes. BY EVA LLORÉNS PAGES 14-18

La Fortaleza $22 billion while providing debt-service relief during the next few years, according to a government statement. After presenting creditors’ representatives on Friday with their latest proposal, advisers for all sides were expected to continue talks through this week, Government Development Bank (GDB) President &

the oﬀer as less than hopeful. For instance, Nader Tavakoli — president & CEO of Ambac, a municipal bond insurer with exposure to $9.8 billion in Puerto Rico debt’s net principal and interest— said, “We do not view this proposal as a serious eﬀort.” BY LUIS VALENTÍN CONTINUES ON PAGE 4

THURSDAY, FEBRUARY 4, 2016

Editorial

Contents PICTURE OF THE WEEK PAGE 27

Cruz Upsets Trump

By Philipe Schoene Roura EXECUTIVE EDITOR

Puerto Rico in the Spotlight Again

Advertising ...........................................................................................................42 Advertising Calendar............................................................................................42 Autos ....................................................................................................................28 Banking.......................................................................................................... 10-11 Cars 101 ..............................................................................................................29 Column.................................................................................................................21 Community Affairs ...............................................................................................41 Economy ......................................................................................................... 12-13 Editorial .................................................................................................................2 Front Page ...................................................................................................... 14-18 Hispanic Affairs ...................................................................................................19 Lead Stories ....................................................................................................... 6-8 Politics ........................................................................................................... 26-27 Poll .......................................................................................................................20 Technology............................................................................................................21 Top Story............................................................................................................ 1, 4 Trade ....................................................................................................................30

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

SPECIAL FEATURES: Mano a Mano.................................................................................................. 24-25 Medical Tourism ............................................................................................. 31-34 Meetings and Events Planning ....................................................................... 35-40 North America International Auto Show ................................................................28 caribbeanbusiness.pr Volume 2, No. 4 • Thursday, February 4, 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

“Just when I thought I was out, they pull me back in,” the famous line by Al Pacino in the role of Michael Corleone of the Godfather trilogy would have been a fitting statement for U.S. Rep. Don Young (R-Alaska), as he kicked off a hearing by the House Subcommittee on Indian, Insular & Alaska Native Affairs on Tuesday about establishing a federal fiscal control board for Puerto Rico. Young was at the center of Puerto Rico’s status debate in 1998 when thenGov. Pedro Rosselló was determined to hold a federally mandated status plebiscite, which passed by one vote in the U.S. House of Representatives, but fell short in the U.S. Senate. The Rosselló administration aggressively lobbied Congress, but managed only to obtain a perfunctory resolution supporting Puerto Rico’s right to host nonbinding advisory referendums. It was a Steve Harvey moment—“I’m sorry, but the winner really is….” Now Young is back in the Puerto Rico maelstrom, attempting to ascertain whether the island deserves to handle its own affairs or needs oversight imposed from afar. At this writing, Caribbean Business learned that the hearings’ witnesses included Anthony Williams, the former mayor of Washington, D.C., who was the city’s CFO when Congress established a fiscal control board for D.C. in the late 1990s; Carlos García, former Government Development Bank president during the Luis Fortuño administration; Simon Johnson, an economics professor at the Massachusetts Institute of Technology; and attorney Thomas Moers, partner at New Yorkbased Kramer Levin, which represents two bondholder groups challenging the Debt Compliance & Recovery Act. Puerto Rico’s locally enacted bankruptcy law is before the U.S. Supreme Court, which will hold a hearing this spring on the enforceability of the law.

If the Supremes decide on Puerto Rico’s behalf that the law is enforceable, it would provide the island with access to orderly debt restructuring for much of its $70 billion debt. In truth, a decision favoring the so-called criollo bankruptcy code would prompt a huge sigh of relief in the Republican House majority because there is an immovable fundamentalist faction in the lower chamber that would rather have us shouldering the burden than grant Puerto Rico relief. Just ask their constituents in Arkansas, Mississippi and Alabama. The latest congressional hearing on the need to establish “a Puerto Rico Financial Stability and Economic Growth Authority,” marks the seventh time since 2015 that a congressional committee has publicly discussed issues related to the island’s fiscal and economic crisis. This is epic foot dragging in a body prone to moving at a glacial pace. Resident Commissioner Pedro Pierluisi is hopeful that Congress will file a measure to address Puerto Rico’s fiscal and economic woes following the Feb. 2 hearing. The island’s nonvoting member of Congress is adamant that federal oversight must be paired with access to a debt restructuring regime. And Santa Claus lives in Plaza Las Américas. I am willing to bet that Puerto Rico will not receive a path to orderly relief in Congress—not during an election year and not in the House. By the time this newspaper prints, Young will have chaired the hearings and members of Congress will be back on the campaign trail. With the exception of those who represent constituents in Hispanic American electoral bastions, few seeking re-election will focus on Puerto Rico’s woes. In the face of that reality, what is the likelihood that House Speaker Paul Ryan (R-Wis.) will find a “responsible solution” to Puerto Rico’s crisis by the end of March? 䡲

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THURSDAY, FEBRUARY 4, 2016

Top Story Debt restructuring

Continued from cover

The government’s plan represents a huge haircut for creditors—averaging about 50%—according to several media outlets. While La Fortaleza is aware of some of the negative feedback by creditors that has been highlighted in several press reports, the administration would rather wait for a counterproposal, Public Affairs Secretary Jesús Manuel Ortiz told the press earlier this week. What’s more, Tavakoli added, “It is difficult to engage in discussions since Puerto Rico refuses to share basic information.” For its part, La Fortaleza says its intent has always been to have the most financial information publicly available. Yet, it could take Puerto Rico at least until the end of March to release its audited financial statements for fiscal year 2014, Treasury Secretary Juan Zaragoza told Caribbean Business. TWO NEW BONDS ON THE TABLE In November, officials

unveiled the “superbond” plan, whereby bondholders would exchange their existing commonwealth paper for a new, more solid security that would take into consideration the legal priority of each type of Puerto Rico debt. However, a recent update to the administration’s long-term Fiscal & Economic Growth Plan (FEGP)—portraying a gloomier fiscal and economic future for the island—prompted a revision to the commonwealth’s first proposal. Based on the previous superbond oﬀer, the administration is now asking creditors to exchange their existing bonds for two new types of security: a “base bond,” with a 5% interest rate and a 35-year maturity, and a “growth bond,” payable only if government revenues exceed expectations as a result of economic growth. In all, the administration seeks to exchange $49.2 billion worth of debt for $26.5 billion of commonwealth-guaranteed base bonds and $22.7 billion in growth bonds. “By sharing in the

La Fortaleza waiting for counterproposal

It will be “extremely challenging to reach a resolution with multiple issuers without access to a legal [debt-restructuring] framework.” —Gov. Alejandro García Padilla island’s economic recovery, creditors would have the opportunity to recover the principal amount of their investments,” stated the administration’s fiscal team.

Still, timing “is of the essence,” according to the government. To the extent that if a deal cannot be reached by May 1, when $422.8 million in GDB debt is due, “and creditors do not consensually agree to a means of resolving the May 1 GDB payment, the commonwealth may be forced to declare a moratorium,” the proposal reads. The plan also calls for local legislative action and high participation levels from creditors in the exchange. In addition, it assumes the federal government maintains current levels of support to the island. Failure to achieve these benchmarks would prompt a revision in the

terms of the oﬀer, including creditor recoveries. Meanwhile, the mechanism would “reflect, and seek to respect, the constitutional priorities” of each type of credit. For instance, general-obligation (GOs) bondholders would receive payments on their base bonds before exchanging with Sales Tax Financing Corp. (Cofina by its Spanish acronym) bondholders, who then would be followed by the remaining exchanging creditors. Targeted issuers include GOs, Cofina and the GDB, as well as the Highways & Transportation; Infrastructure Financing; Public Buildings; and Convention Center District authorities. Excluded issuers include the Electric Power; Aqueduct & Sewer; and Housing Finance authorities; and Municipal Financing Corp., as well as the Children’s Trust. Statutory liens and pledges on certain revenue streams would back the base bonds, including the 4.5% share of the sales & use tax that currently goes to pay Cofina debt, and roughly $325 million annually in petroleumproducts tax revenues, also known as la crudita. With debt-service relief during the next few years, Puerto Rico would be able to fully implement the FEGP and ensure “essential services to its citizens, repay stretched suppliers and taxpayers, rebuild depleted cash resources and properly fund the retirement system,” the proposal states. Interest payments on base bonds would begin in January 2018, scaling up to the fixed 5% rate by fiscal

2021, when principal payments kick in. Meanwhile, payments, if any, on the so-called growth bonds would begin in the 10th year after the exchange oﬀer materializes. CALLS FOR FEDERAL ACTION On Capitol Hill, the administration continues to urge for congressional action, particularly related to access to a debtrestructuring regime such as Chapter 9 of the U.S. Bankruptcy Code. Commonwealth oﬃcials strongly believe federal legislation is needed to avoid additional defaults and achieve access to a restructuring mechanism that could facilitate talks with its creditors. A day before presenting creditors with the latest exchange proposal, the governor stated it will be “extremely challenging to reach a resolution with multiple issuers without access to a legal [debt-restructuring] framework.” House Speaker Paul Ryan (R-Wis.) has pledged to come up with a solution to the Puerto Rico issue before the end of March, a deadline that could be met, according to Rep. Rob Bishop (R-Utah), chair of the House Natural Resources Committee. One of the latter’s subcommittees discussed earlier this week the potential establishment of a federal fiscal-control board for the commonwealth. (See Editorial on page 2.) Allowing Puerto Rico to access any type of debtrestructuring mechanism would most likely come at the cost of enhanced federal oversight from Congress. 䡲

THURSDAY, FEBRUARY 4, 2016

Lead

Evertec says it does not overcharge for ATH network use; businessowners say otherwise

Evertec Hearings Place Focus on Electronic Processing Fees Business Groups Call for More Oversight BY DENNIS COSTA d.costa@cb.pr

A Puerto Rico legislative probe into Evertec, an electronic transactionprocessing firm, has centered around allegations that the San Juan-based company represents a monopoly in the island’s transactions, and aﬀects local small and midsize businesses (pymes by the Spanish acronym). During a legislative hearing Jan. 19, privateand public-sector representatives discussed House Resolution 1108, which calls for an investigation into Evertec. A similar Senate resolution was also filed and recently approved, after a Jan. 9 outage of the company’s debit network, dubbed ATH (A Toda Hora, or At All Hours in English), paralyzed commercial activity on the island for two hours. Most of the discussion focused on the processing fees that Evertec charges for electronic transactions. According to retail and wholesale industry groups, such fees are higher than on the U.S. mainland, constitute a burden for pymes, and result in more expensive items and services for local consumers. Participants at the hearing—led by Popular Democratic Party Rep. Javier Aponte Dalmau, who submitted HR 1108 and chairs the House’s Small Business, Commerce, Industry

& Telecommunications Committee—also talked about the degree of federal regulatory oversight to which companies such as Evertec are subjected. The Chamber of Food Marketing, Industry &

transactions and over 80% of all debit transactions in Puerto Rico are processed through the ATH network.” According to a testimony by Rubén Piñero, president of the United Re-

The company has a presence in 19 countries including the Dominican Republic, Mexico, Guatemala, Costa Rica, Panama and Colombia. In Puerto Rico, there are about 3,000 ATM terminals, half of which are from independent suppliers and half are owned by commercial banks. When it comes to the heavy presence of the ATH network among the

“The economy stopped for two hours, and there are few companies with such power. Apart from being an issue of competitiveness and markets, it is about a systemic risk and security issue for [Puerto Rico’s] entire financial structure.” —MIDA testimony

Distribution (MIDA by its Spanish acronym) stressed the large presence that Evertec and its ATH network have in local commerce, citing the company’s own 2014 annual report: “Management believes that over 70% of all ATM

tailers Association (CUD by its Spanish acronym), Evertec processes more than two billion transactions annually through a network that consists of more than 4,100 automated-teller machines (ATMs) and 104,000 points-of-sale (POS).

island’s ATMs, Evertec execs have stressed that many ATMs are independent and are not operated by Evertec. However, the MIDA testimony countered such an assessment, stating that such terminals “end up having to access the Evertec

network when it comes to local accounts.” Regarding the Jan. 9 incident, a CUD survey revealed store owners lost between $200 and $7,000 each as a result of the outage, which lasted from about 5 p.m. to 7 p.m. Carlos Ramírez, Evertec’s executive vice president of business solutions, said about 200,000 transactions were affected. An unofficial estimate by economist José Alameda placed the total economic impact of the outage at $126.4 million. “[Many people] realized that [debit networks] have become an essential service,” read the MIDA testimony. MIDA also partly blamed the government for the alleged monopoly. “In past years, various legislative measures have been presented, forcing businessowners to accept electronic payments and not differentiate between payment methods,” said Ricky Castro, MIDA president. “However, such measures ignore the most important fact affecting businesses and consumers: the enormous cost of [electronic] transactions.” Regarding the cost of such transactions, Evertec execs said the ATH network offers lower rates than other PIN-based debit networks in Puerto Rico, among them Interlink and NYCE (New York Currency Exchange) (PIN is the acronym for personal identification number). Specifically, such costs are associated with interchange fees, with the bank issuing the debit card charging the business establishment for each processed transaction.

According to a 2014 graph from the U.S. Federal Reserve, the ATH network charges an average of about 0.49% on each commercial transaction. By comparison, the average charge for Visa and MasterCard, two companies Evertec considers as competitors, were of 0.84% and 1.04%, respectively. Despite this diﬀerence, HR 1108 says that cardprocessing transaction costs in Puerto Rico have increased of late, at times going over the 25-centper-transaction limit imposed by federal regulation. Meanwhile, the CUD testimony said issuing banks can charge as much as 1.15% per transaction. Evertec representatives took issue with the House resolution, saying that federal laws pertaining to the processing of electronic transactions—including the Dodd-Frank Act and the subsequent Durbin Amendment with its 25-cent cap—have been successfully implemented in Puerto Rico. They also said the Federal Reserve requires the validation of interchange fees by issuing banks as part of the auditing process. Gas stations were singled out as being among the most aﬀected by the current model. “Profit margins for gas stations barely total 8 cents to 10 cents a gallon, while banking charges per transaction average 23 cents,” said the CUD testimony. “Below a certain point, profits do not surpass the cost of electronic transactions; that is why gasoline retailers require a minimum payment for debit and credit cards.” 䡲

THURSDAY, FEBRUARY 4, 2016

Lead

Wal-Mart and Puerto Rico square off over transfer pricing tax

Wal-Mart Civil Trial Challenging Transfer Pricing Tax Gets Underway BY EVA LLORÉNS VÉLEZ

The civil trial in the lawsuit that Wal-Mart Puerto Rico filed against the commonwealth government over the hike in the transfer pricing tax got under way this week at the federal court in San Juan amid concerns over the divulging of confidential government documents. “You have to understand that this case cannot be treated in secrecy,” said Judge of the U.S. District Court for the District of Puerto Rico José A. Fusté, during a pre-trial conference on Monday, contending that his obligation is to maintain a balance. “The press will be here.” The trial has 11 witnesses including Government Development Bank (GDB) President Melba Acosta and Treasury Secretary Juan Zaragoza, who will be called upon by Wal-Mart.

Fusté said he was going to try to protect the confidentiality of certain documents that the GDB did not want to be made public. The bank is currently in negotiations with creditors in an eﬀort to restructure the island’s $70 billion public debt. Despite limits on the ability of federal courts to interfere with tax collections, Wal-Mart sued the P.R. Treasury Department, contending that Act 72 of 2015, “unconstitutionally” singles out Wal-Mart for inequitable tax treatment. Act 72 increases the rate at which tangible corporate property that comes from outside Puerto Rico is taxed, from 2% to 6.5% on entities doing more than $2.75 billion of business on the island. The retail giant says the tax violates the Commerce Clause of the U.S. Constitution and equal protection laws. The

Commerce Clause gives Congress the power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.”

contends that the Butler Act prevents lawsuits that seek to restrain the collection of any tax imposed by the laws of Puerto Rico. In other words, the commonwealth’s position is the way to challenge a tax is to pay it first and then sue to get the money back. The Butler Act, a close relative of the Tax Injunction Act, provides that “[n]o suit for the pur-

“You have to understand that this case cannot be treated in secrecy. The press will be here.” —Judge of the U.S. District Court for the District of Puerto Rico José A. Fusté

Wal-Mart also alleges that the new tax rate will amount to more than 91% of its net income in Puerto Rico. Should the company’s net income fall, says Wal-Mart, the tax may actually exceed this figure. For its part, the commonwealth government

pose of restraining the assessment or collection of any tax imposed by the laws of Puerto Rico shall be maintained in the United States District Court for the District of Puerto Rico,” according to an Aug. 2013 decision regarding a case on Colorado’s eﬀorts to collect

sales tax by the U.S. Court of Appeals, 10th Circuit. While legal experts contend that Wal-Mart faces jurisprudence that places limits on the ability of federal courts to interfere with state taxes, this case is different because the multinational chain claims that the new law violates the Commerce Clause, as it is being taxed at 6.5% when it buys tangible property outside the commonwealth, but not if Wal-Mart buys the same property in Puerto Rico. The lawsuit comes as Puerto Rico is in the midst of a crippling debt crisis. The island’s efforts to address the situation have already resulted in a local bankruptcy law that would allow the territory’s utilities to restructure $20 billion in debt being thrown out in court. The U.S. Supreme Court is slated to hear an appeal on the case in March. Puerto Rican and Obama administration officials have said the territory’s crisis is so severe it could turn into a humanitarian crisis if Puerto Rico can’t restructure its debt. Meanwhile, Fusté dismissed earlier this month

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claims by the commonwealth government that Wal-Mart Puerto Rico had used transfer pricing to evade its proper tax burden as utterly irrelevant to whether those laws themselves are justified. Revenue projections for Puerto Rico could be significantly aﬀected by the transfer-pricing tax legal challenge filed by WalMart. Puerto Rico oﬃcials warned about the negative impact of the litigation as it updated projections for fiscal years 2016 to 2020 to account for year-todate actual results. In response to creditor requests for additional information, projections were further extended until fiscal 2025. “General Fund inflow assumptions do not account for the potential risk of a material negative impact [$115 million in fiscal 2016] from the ongoing Wal-Mart litigation,” according to a footnote in an update issued Jan. 18 to the Puerto Rico Fiscal and Economic Growth Plan. 䡲

—Editor Rosario Fajardo contributed to this story.

Thursday, february 4, 2016

Lead

Treasury selects sample of 25

Treasury Begins Audits of ‘Big Taxpayers’ in Puerto Rico By EVA LLORÉNS VÉLEZ

The Puerto Rico Treasury Department has identified 126 “big taxpayers” on the island and has already selected a sample list of 25 to be audited. According to documents obtained by Caribbean Business, Treasury’s Economic Affairs Unit produced a list of 126 big taxpayers shortly after the so-called Big Taxpayers Unit was created in September, following the enactment of Act 72 of 2015. The new law will implement a new valueadded tax (VAT, or IVA by its Spanish acronym) in Puerto Rico on April 1, for both goods and services. Act 72 created a new definition of big taxpayers in the Internal Revenue Code to include: commercial banks or trust companies; private banks; brokerage houses; insurance companies; telecommunication entities; and entities with a

volume of business of at least $50 million. Big taxpayers are required to file their income tax returns at the Big Taxpayers office established by the Treasury or electronically. The office will be in charge of monitoring this specific group of taxpayers, using a team of 10 tax analysts and 10 tax technicians. The office is part of the new Internal Revenue Secretary’s Office. “The Economic Affairs Office has produced a list of 126 big taxpayers, of which 25 were selected to start the round of audits with the help of the Special Tax Investigations Unit,” states the document signed by Treasury Secretary Juan Zaragoza. The commonwealth government enacted last year the Tax Reform Process Act, which will phase out the 10.5% sales & use tax (IVU by its Spanish acronym) and change the tax system to a VAT, with the rate unchanged. The

tax reform will be implemented in a three-phase process. On July 1, 2015, the total IVU rate was increased from 7% to 10.5%. On Oct. 1, 2015, the IVU base was expanded to include a new 4% businessto-business (B2B) tax. Finally, on April 1, the new VAT will be implemented at 10.5%. These major changes have been enacted in an effort to raise muchneeded revenue and address Puerto Rico’s severe budget crunch. Certain products will be exempt from the VAT, including the sales of prescription medicine; unprepared food and food ingredients; real property; commercial realproperty leases; nonprofit sales of items acquired by way of donations; printed books; certain hotelroom charges; petroleum derivatives; and health services that qualify for Medicare, Medicaid or the Puerto Rico government’s

Health Insurance Plan. To the extent a transaction is subject to the VAT, the person who introduces the article or service to Puerto Rico is responsible for the tax. According to the annual sales-tax rate study issued recently by Vertex Inc., a provider of corporate tax solutions, 2015 saw two significant increases: Effective July 1, 2015, Kansas’ sales tax rate went from 6.15% to 6.5%, and Puerto Rico’s rate increased from 7% to 10.5%. “It is significant that both Kansas and Puerto Rico raised sales-tax rates in 2015,” said John Minassian, vice president of tax content development at Vertex. “Both jurisdictions have considerable budget shortfalls; salestax increases and incometax schedule adjustments are attempts to generate additional revenue in 2016.” “Puerto Rico is suffering from a debt crisis due to exceeding budgets over a period of years, while its economy contracted— increased tax revenues will be a step in the right direction to help service

“The Economic Affairs Office has produced a list of 126 big taxpayers, of which 25 were selected to start the round of audits with the help of the Special Tax Investigations Unit.” —According to a document signed by Treasury Secretary Juan Zaragoza the debt incurred, which is now in default,” Vertex said in a statement. In addition to the salestax increase, Puerto Rico instituted a 4% B2B tax on professional services, the company said. “But the biggest news is that

on April 1, Puerto Rico will implement a 10.5% VAT, which applies to both taxable goods and services. This is momentous since it represents the first VAT to date in any U.S. territory or possession,” Minassian said. n

THURSDAY, FEBRUARY 4, 2016

Banking/Finance

Both corporations focused on executing their business plans

First BanCorp Shines, OFG Bancorp Fizzles in Fourth Quarter Executives comment on impact of island’s ﬁscal and debt woes BY JOSÉ L. CARMONA j.carmona@cb.pr

As the island’s No. 2 and No.3 financial institutions by assets reported on their fourth quarter (4Q) and full-year 2015 results, First BanCorp and OFG Bancorp, respectively, remained focused on successfully carrying out their business plans as Puerto Rico is still grappling with its fiscal and debt challenges. On Jan. 29, First BanCorp, the bank holding company of FirstBank Puerto Rico, reported a net income of $15 million in 4Q and a net income of $21.3 million for 2015. Due to macro events that dominated the second half of 2015, First BanCorp’s financial results were affected through otherthan-temporary-impairment (OTTI) adjustments and increased provisioning for government-related exposure. “Uncertainty is dominating the macros, and there’s not a definitive timeline for resolution of fiscal matters. Everyone is clear on that,” said Aurelio Alemán, president & CEO of First BanCorp, during the earnings call webcast following the release of financial results last Friday. In First BanCorp’s case, its government-debt exposure remained at similar levels in 4Q, Alemán

said. The bank took an additional OTTI charge in its Puerto Rico securities and increased its reserves based on qualitative adjustments by some $19 million. “We continue to stay comfortable with our exposure to municipalities. These municipalities are very well-managed entities that have a strong source of repayment assigned to credit facilities. With 80% of our municipal exposure from four of the largest municipalities in Puerto Rico with the best tax base, we feel comfortable with this exposure,” Alemán commented. The First BanCorp executive noted the bank needs to focus on carrying out its business plan and taking advantage of market opportunities, while also continuing its eﬀorts to grow its business in Florida and the U.S. Virgin Islands. OFG BANCORP On Feb. 1, OFG Bancorp, the bank holding company of Oriental Bank, reported a net loss of $4.4 million for 4Q and a net loss of $16.4 million for 2015. Despite the challenging economy and Puerto Rico’s diﬃcult fiscal situation, José Rafael Fernández, OFG president, CEO & vice chairman, noted the bank’s core business performed well in 4Q and

throughout 2015. For Fernández, it is clear that market valuations and sentiment regarding OFG outside of Puerto Rico appears to be incongruent with the bank’s core performance and asset quality trends and positions. Shares of OFG have dropped 23% since the beginning of the year, while the stock has dropped 65% in the past 12 months. “We are cognizant of

the high level of uncertainty regarding Puerto Rico’s future. While lower fuel prices have significantly enhanced personal disposable income and reduced operating costs for businesses, the [local] government lost an opportunity to take a major step in solving the fiscal situation when the Legislature, for a second time, delayed voting on the [Puerto Rico Electric Power Authority’s] Revitalization Act,” Fernández said. Despite the diﬃcult environment in which the bank operates, he reaffirmed Oriental remains steadfast in its longstanding management strategies—maintaining discipline in underwriting, pricing, operations and expenses. 䡲

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caribbeanbusiness.pr Volume 2, No. 4 Thursday, February 4, 2016 Publisher Miguel A. Ferrer

Editor in Chief Heiko Faass

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THURSDAY, FEBRUARY 4, 2016

Banking/Finance

Puerto Rico’s negative spiral will continue if no action is taken to resolve its ﬁscal & liquidity woes

Carrión: Uncertainty Behind Volatility in Puerto Rico Bank Stocks B2B Tax to Cost Popular $20M to $25M in 2016 BY JOSÉ L. CARMONA j.carmona@cb.pr

After reporting last week an adjusted net income of $98 million for the fourth quarter (4Q) and a net income of $895 million for full-year 2015, Richard Carrión, chairman & CEO of Popular Inc.—the bank holding company of Banco Popular—said the deep slide that Puerto Rico stocks have experienced since the beginning of this year is all related to Puerto Rico’s fiscal and liquidity crisis. “The selloﬀ of Puerto Rico stocks, banks’ especially, is totally related to the island’s situation— people’s perception of Puerto Rico and the

prevailing uncertainty. Uncertainty is the biggest factor and the basis for this situation,” Carrión told Caribbean Business during a phone interview following the earnings call with investors. “I believe there will still be volatility in the price of Puerto Rico stocks until there’s more clarity on what the outcome will be.” Regarding the recent 0.25% increase in interest rates by the Federal Reserve and future subsequent rate hikes expected for the remainder of this year, the top Popular executive said that given all the recent turbulence in the stock markets, he believes the Fed will be in no rush for other rate increases.

“Besides, we’re talking about one or two more 0.25% increases, which I believe won’t have a meaningful impact,” Carrión noted. THE COST OF B2B TAX During the earnings call, it was revealed that Popular’s expenses during the year had increased as a result of the implementation of the new 4% business-to-business (B2B) tax. Carrión said Popular estimated the B2B tax will cost the bank between $20 million and $25 million in 2016. When asked about the bank’s position on postponing the transition of the 11.5% sales & use tax into a value-added tax

(VAT, or IVA by its Spanish acronym), slated for April 1, which includes increasing the B2B tax to 10.5%, the Popular Inc. chairman & CEO said there are already too many taxes in Puerto Rico. In recent days, there have been calls from local politicians, namely the minority New Progressive Party, and trade organizations urging the VAT’s postponement, fearing it will further hurt the island’s already battered economy. “The truth is, we don’t have an oﬃcial stance, but we wouldn’t oppose the postponement of the VAT. Now, there are more pressing issues on the table the government needs to resolve,” Carrión pointed out. Last week, La Fortaleza Public Aﬀairs Secretary Jesús Manuel Ortiz reiterated that the VAT is the public policy of the administration. “Here, in the executive [branch], there is no intention of

Richard Carrión, chairman & CEO of Popular Inc.

considering a measure to remove the IVA. It is necessary,” he said. EFFORTS BY POLITICAL GROUPS TO SOLVE FISCAL WOES PROMISING The fact that Puerto Rico’s multiple fiscal and liquidity challenges in the coming months are on the agendas of political groups in both the U.S. Congress and Puerto Rico is promising, Carrión said, but warned political

processes are inherently unpredictable. “It’s very hard to predict what could happen in Congress. I do believe there’s now more awareness due to the fact that, just a few days ago, 42 Democrat senators signed a letter and that [U.S. House] Speaker Paul Ryan stated he wanted to have something done in the first quarter of this year,” Carrión commented. “Now, if that translates into effective action, it is difficult to say.” In his Dec. 1 testimony before the U.S. Senate Judiciary Committee, Carrión said he tried to convey the message that any successful solution would require three things: One, a legal framework for a debt restructuring; two, an effective fiscal control board; and three, a meaningful economic-stimulus plan. “We still believe that. Otherwise, we will continue in a negative spiral,” the top Popular official warned. 䡲

Thursday, february 4, 2016

WINNERS & LOSERS WINNERS WINNERS&&LOSERS LOSERS WINNERS & LOSERS WEEKLY PERFORMANCE OF PUERTO RICO STOCKS WEEKLY WEEKLY PERFORMANCE PERFORMANCE OF OF PUERTO PUERTO RICO RICO STOCKS STOCKS

WINNERS FOR THE WEEK WEEKLY PERFORMANCE OF PUERTO RICO STOCKS 52-wk 52-wk PRICE PRICE WINNERS WINNERS FOR FOR THE THE WEEK WEEK STOCK

SYMBOL LOW HIGH 12/31 1/8 CHANGE 52-wk 52-wk 52-wk 52-wk PRICE PRICEPRICE PRICE

52-wk 52-wk STOCK SYMBOL LOW HIGH -Popular - Inc. -52-wk -52-wk BPOP- 22.40 35.83 STOCK SYMBOL LOW HIGH LOSERS FOR THE WEEK First BanCorp FBP 2.06 6.76 LOSERS LOSERS FOR FOR THE THE WEEK WEEK 52-wk 52-wk -OFG Bancorp OFG -4.78 17.83 STOCK STOCK - WINNERS

STOCK

LOSERS STOCK STOCK Popular Inc.

SYMBOL SYMBOL LOW FOR WEEK - THE - LOW HIGH - HIGH

PRICE PRICE 12/31 - 12/31 1/8 - 1/8 1/22 1/29 -PRICE -PRICE 23.41 25.14 12/31 1/8 2.30 2.60 PRICE -5.62 -5.50 PRICE

CHANGE - CHANGE

CHANGE - 1.73 CHANGE 0.30 0.12

SYMBOL LOW HIGH 12/31 1/8 CHANGE 52-wk 52-wk 52-wk 52-wk PRICE PRICEPRICE PRICE

FOR SYMBOL THE WEEK SYMBOL LOWLOW BPOP 25,80

Popular Popular Inc. Inc. Triple-S Management Corp. BPOP GTS BPOP STOCK SYMBOL Triple-S Triple-S Management Corp.Corp. GTS GTS Evertec Inc. Management EVTC STOCK SYMBOL Popular Inc. BPOP Evertec Inc. Inc. Evertec Evertec Inc. EVTC EVTC OFG Bancorp OFGEVTC Triple-S Management Corp. GTS Triple-S Management Corp.OFG OFG OFG Bancorp Bancorp OFG First BanCorp FBPGTS Evertec Inc. EVTC First First BanCorp BanCorp FBP FBP OFG Bancorp OFG

52-wk 25,8025,80 17,34 52-wk LOW 17,34 17,34 14,93 LOW 25,80 13.80 14,93 14,93 6,25 17,34 17.34 6,25 6,25 2,97 14,93 2,97 2,97 6,25

HIGHHIGH 12/3112/31 1/8 1/8 CHANGE CHANGE 35,83 28,34 25,84 -2,50 52-wk 35,8335,83 27,07 52-wk HIGH 27,07 23,12 HIGH27,07 35,83 23.12 23,12 23,12 17,83 27,07 27.07 17,83 17,83 6,76 23,12 6,76 6,76 17,83

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

Public-Debt Audit Committee to Hold First Meeting Job Losses Increase tointoHold Puerto Rico Public-Debt Public-Debt Audit AuditCommittee Committee HoldFirst First Meeting Meeting Next Week Next NextWeek Week Public-Debt Audit Committee to Hold First Meeting During 2nd Quarter of 2015 Next Week

PRICE PRICE 28,3428,34 25,84 23,91 22,0725,84 -2,50 -1,84-2,50

PRICE 12/31 PRICE 1/8 CHANGE 23,91 22,07 -1,84 16,7423,911/29 15,4722,07CHANGE -1,27-1,84 1/22 28,34 25,84 -2,50 14.65 16,74 15,47 -1,27 7,32 16,7413.74 6,30 15,47-0.91 -1,02-1,27 23,91 22,07 -1,84 22.36 7,32 6,30 -1,02 3,25 7,32 22.29 2,99 6,30 -0.07 -0,26-1,02 16,74 15,47 -1,27 3,25 3,25 2,99 2,99 -0,26-0,26 7,32 6,30 -1,02

Weekly Comment on Puerto Rico Stocks FBP 2,97 6,76 3,25 2,99 -0,26 Weekly Weekly Comment Comment onon Puerto Puerto Rico Rico Stocks Stocks

First BanCorp

Despite a stronger-than-expected U.S. jobs-growth report for December, the Standard & Poor’s (S&P) and Dow Jones Industrial Average After aatough start for the 500 NewIndex Year, Wall Street closed January with Despite Despite stronger-than-expected a stronger-than-expected U.S.U.S. jobs-growth jobs-growth report report for for December, December, Puerto Rico Senate President Eduardo Bhatia called for the first meeting next Tuesday, Jan. 19, of the Public posted their worst five-day start to a year on record last Friday, on continan upswing last Friday. An unexpected move by Japan’s central bank the the Standard Standard & Poor’s & Poor’s (S&P) (S&P) 500500 Index Index andand DowDow Jones Jones Industrial Industrial Average Average Debt Audit Committee. The committee will examine and evaluate the hiring, refinancing and/or renegotiatued concerns a slowdown in China could damage the global economy. At also helped lift worst stocks. Asstart a result, last Friday’s market gain Puerto RicoRico Senate Senate President President Eduardo Eduardo Bhatia Bhatia called called for for thethe firstfirst meeting meeting next next Tuesday, Tuesday, Jan.Jan. 19, 19, of the of the Public Public posted posted their their worst five-day five-day start to ato year a year on record on record last last Friday, Friday, on helped continon contin-Puerto ing process of Puerto Rico’s public debt, the origin and destination of resources, as well as the performance of Despite aofstronger-than-expected U.S. jobs-growth report for December, the end trading last Friday, the&Dow fell (S&P) 1.02%,500 the S&P 500 lost 1.08% offset the 8% Standard Poor’s Index had reportDebt Audit Audit Committee. Committee. TheThe committee committee willwill examine examine andand evaluate evaluate thethe hiring, hiring, refinancing refinancing and/or and/or renegotiatrenegotiatuedued concerns concerns aloss slowdown a the slowdown in China in China could could damage damage the the global global economy. economy. At AtDebt programs financed with internal or external debt. The first meeting was originally set for December but was the Standard & Composite Poor’s (S&P) 500 Index and Dow Jones Industrial Average andsince the Nasdaq dropped 0.98%. The weekly declines on the S&P ed ofFriday, this Pummeled bythe falling oil ing process process of Puerto of Puerto Rico’s Rico’s public public debt, debt, thethe origin origin andand destination destination of resources, of resources, as well as well as the as the performance performance of of the the endend ofthe trading ofbeginning trading lastlast Friday, theyear. the DowDow fell fell 1.02%, 1.02%, the S&P S&P 500500 lostprices lost 1.08% 1.08%ing cancelled. The Public-Debt Audit Committee was created through Act 97next of 2015 in July, and has to render Puerto Rico Senate President Eduardo Bhatia called for thefirst firstmeeting meeting Tuesday, Jan. 19, of the Public posted their worst five-day start to September a year onthe record last Friday, on continand the Dow wereon the largest since 2011, and the largest on rethat cast doubts the global economy, stock market had a very programs programs financed financed with with internal internal or external or external debt. debt. The The first meeting was was originally originally set set for for December December but but was was andand the the Nasdaq Nasdaq Composite Composite dropped dropped 0.98%. 0.98%. TheThe weekly weekly declines declines on the on the S&PS&Preports of its performance every six months. Debt AuditThe Committee. The Audit committee will examine and evaluate the refinancing and/or renegotiatued atoslowdown China could damage the global economy. At cordconcerns to mark start a in year. Data released by the U.S. Bureau of Labor cancelled. cancelled. The Public-Debt Public-Debt Audit Committee Committee waswas created created through through Acthiring, Act 97 of 972015 of 2015 in July, in July, andand has has to render to render volatile startthe 2016.ofGlobal equities received a surprise boost last andand the the DowDow were were the the largest largest since since September September 2011, 2011, andand the the largest largest on reon re-ing process of Puerto Rico’s public debt, the origin and destination of resources, as well as the performance of the endafter ofshowed trading last Friday,bank the Dow 1.02%,by the S&Pbelow 500 1.08% reports reports of its of performance its performance every every six months. six months. Statistics U.S. nonfarm payrolls increased 292,000 in lost December Friday Japan’s central cut afell benchmark rate zero, to commission has to define theormethodology toThe conduct the auditwas of Puerto Rico’s billion debt as was orcordcord to mark to mark the the start start of aof year. a year. Data Data released released by the by the U.S.U.S. Bureau Bureau of Labor of LaborThe programs financed with internal external debt. first meeting originally set$70 for December but and the Nasdaqrate Composite dropped 0.98%. The weekly declines onby the S&P jobless held steady at 5%. In addition, U.S. payrolls for October help stimulate its ailing economy. Stocks were also buoyed weak by law, create a database that allows for all manner of analysis regarding the indebtedness process and Statistics Statistics showed showed U.S.U.S. nonfarm nonfarm payrolls payrolls increased increased by 292,000 by 292,000 in December in Decemberdered cancelled. The Public-Debt Audit was through Act 97 2015 in July, andbillion hasdebt todebt render TheThe commission commission hashas to define toPELATTI define theCommittee the methodology methodology tocreated conduct to conduct audit audit of ofof Puerto Rico’s Rico’s $70$70 billion as oras and the Dow were the largest September 2011, and the growth largest refourth-quarter (4Q) U.S. gross domestic (GDP) data. November were revised tosince show 50,000 product more jobs created than on previLUISA GARCÍA Infor the half the of the 2015, anPuerto The 38,676 jobs created in orupBY an information transparency system thefirst investigative, auditing and future indebtedness processes. andand the the jobless jobless raterate heldheld steady steady at 5%. at 5%. In addition, In addition, U.S.U.S. payrolls payrolls for October for Octoberset reports of its performance every six months. dered dered by law, by law, create create a database a database that that allows allows for for all manner all manner of analysis of analysis regarding regarding the the indebtedness indebtedness process process and The bolstered arguments the Federal Reserve may fucord to mark the of fell a year. the U.S. Bureau ofits Labor ouslynews reported. Oilstart prices for aData fifthreleased day last by Friday. Fears ofslow a slowdown SIN COMILLAS estimated 74,469 jobs were the second quarter of 2015and andand November November were were revised revised to show to show 50,000 50,000 more more jobsjobs created created than than previprevi-set set up an up information an information transparency transparency system system for for the the investigative, investigative, auditing auditing and and future future indebtedness indebtedness processes. processes. ture rate-hike plans. Microsoft shares jumped $3.04, or 5.83%, to Statistics showed U.S. nonfarm increased by 292,000 December in China and the global economypayrolls kept spooking investors last in week, creatcreated inHouse the private represent 2,883 more jobs Besides Bhatia, the committee’s members are P.R. Speakersector, Jaime Perelló; Senate majority spokesperously ously reported. reported. Oil prices Oil prices fell fell for afor fifth a fifth dayday lastlast Friday. Friday. Fears Fears of aof slowdown a slowdownThe commission has to define the methodology to conduct the audit of Puerto Rico’s $70 billion debt as orclose at jobless $55.09start on better-than-expected 4Q week, financial results, lifting and rate held steady at 5%. In For addition, U.S. the payrolls for son Aníbal José Torres; Senate Minority Leader Larry Seilhamer, Puerto Rican Independence Party Sen. María ing athe turbulent to the trading year. the Dow fell October 6.2% to In the second quarter of but 89,393 were lost, which than in the previous quarter. byBhatia, law, create a database that allows for all manner of analysis regarding the indebtedness process and in China in China andand the the global global economy economy keptkept spooking spooking investors investors lastlast week, week, creatcreat-dered Besides Besides Bhatia, thethe committee’s committee’s members members are are P.R. P.R. House House Speaker Speaker Jaime Jaime Perelló; Perelló; Senate Senate majority majority spokesperspokespertechnology stocks. Forlost theto week, the Dow Jones Average de Lourdes Santiago; House Majority Leader Charlie Hernández; House Minority Leader Jenniffer González; and November were500 revised show 50,000 more jobs created previ2015, the number of jobs lostsystem leaves a investigative, balance of auditing 14,924 On the other hand, processes. the gross 16,346.45. The S&P 6% to 1,922.03, while theIndustrial Nasdaqthan Composite set up an information transparency for the and future indebtedness Aníbal Aníbal JoséJosé Torres; Torres; Senate Senate Minority Minority Leader Leader Larry Larry Seilhamer, Seilhamer, Puerto Puerto Rican Rican Independence Independence Party Party Sen.Sen. María María ing ing a turbulent a2.3% turbulent start start to the to the trading trading year. year. For For the the week, week, the the DowDow fell fell 6.2% 6.2% to tosonson gained to7.3% 16,466.30. 500 1.7% to 1,940.24, while Government Bank President & Chairwoman Melba Acosta; Statistics Institute Mario in PuertoDevelopment Rico due to the closfewer jobs. loss of 46,166Executive jobs means ously reported. Oil prices fellThe for S&P a fifth dayadded last Friday. Fears of a slowdown Index dropped to 4,643.63. de Lourdes de Lourdes Santiago; Santiago; House House Majority Majority Leader Leader Charlie Charlie Hernández; Hernández; House House Minority Minority Leader Leader Jenniffer Jenniffer González; González; 16,346.45. 16,346.45. The The S&P S&P 500 500 lost lost 6% 6% to 1,922.03, to 1,922.03, while while the the Nasdaq Nasdaq Composite Composite the Nasdaq Index jumped 0.5% toinvestors 4,613.24.last week, creatMarazzi; economist José Alameda; lawyerIn & all CPA Lorenzo Puerto Rico Syndicate oflost Workers ing Bhatia, or contraction of comofJuan 2014, some Martínez; 155,817 2,939 more jobs were than in China andComposite the global economy kept spooking Besides the committee’s members are P.R. House Speaker Jaime Perelló; Senate majority spokesperGovernment Government Development Development Bank Bank President President & Chairwoman & Chairwoman Melba Melba Acosta; Acosta; Statistics Statistics Institute Institute Executive Executive Mario Mario Index Index dropped dropped 7.3% 7.3% to 4,643.63. to 4,643.63. President Roberto Pagán; FirstBank President Aurelio Alemán; Irma Hilario Arroyo, representing the Caguas After falling for three-consecutive weeks, the Government DevelpaniesJosé wasTorres; aboutSenate 46,166, the jobs were created, which isRicanthe previous quarter. son Aníbal Minority Leader Seilhamer, Puerto Independence Partyof Sen. ing a turbulent start toGovernment the trading year. For the week, thePuerto Dow fell 6.2% to On the local front, the Development Bank’s Rico Stock Marazzi; Marazzi; economist economist JoséJosé Alameda; Alameda; lawyer lawyer & CPA &Larry CPA Juan Juan Lorenzo Lorenzo Martínez; Martínez; Puerto Puerto RicoRico Syndicate Syndicate Workers of María Workers Savings & Loan Cooperative; and P.R. Chamber of Commerce President Frank Medina. opment Bank’s Puerto Rico6% Stock1,922.03, Index (PRSI) managed to Composite close last highest in at Pagán; least four years, the lowest number in the past InArroyo, 2013 and 2014,the net emde Lourdes Santiago; House Majority Leader Charlie Hernández; House Minority Leader Jenniffer González; 16,346.45. The S&P 500 lost while the of Nasdaq Index (PRSI) posted a heavy losstoduring its first week the year, spearPresident Roberto Roberto Pagán; FirstBank FirstBank President President Aurelio Aurelio Alemán; Alemán; Irma Irma Hilario Hilario Arroyo, representing representing the Caguas Caguas On the Oninthe local local front, front, the the Government Government Development Development Bank’s Bank’s Puerto Puerto RicoRico Stock StockPresident week the black, buoyed by last Friday’s market rally. For the week, according to the report rethree years. Some 167,548 ployment was only created in Government Development Bank President & Chairwoman Melba Acosta; Statistics Institute Executive Mario Index dropped to 4,643.63. headed by last7.3% week’s massive stock selloff. For the week, the PRSI lost Savings Savings & Loan & Loan Cooperative; Cooperative; andand P.R.P.R. Chamber Chamber of Commerce of Commerce President President Frank Frank Medina. Medina. Index Index (PRSI) (PRSI) posted posted a heavy a heavy lossloss during during its its first week week of the of the year, year, spearThese appointments were made lastlawyer November by the heads of both legislative bodies, inSyndicate compliance with the the PRSI gained 51.92, or 3.57%, to close atfirst 1,504.81. Topping the listspearof Marazzi; economist José Alameda; & CPA Juan Lorenzo Martínez; Puerto Rico of Workers cently published by the Busijobs were created in 2013 and the last quarter of those years, 150.86, or 8.62%, to close at 1,598.79, with all components in the red for the of law that states that if President the 176,621 governor didn’t complete theHilario appointments within 10 days the headed headed by last byFirst last week’s week’s massive massive stock stock selloff. selloff. For the the week, week, the the PRSI PRSI lostlostdisposition gainers was BanCorp, which added 30For cents, or 13.04%, to close President Roberto Pagán; FirstBank Aurelio Alemán; Irma Arroyo, representing theafter Caguas ness Employment Dynamics in 2012. probably by higher These These appointments appointments were were made made lastlast November November by the by the heads heads of However, both of both legislative legislative bodies, bodies, infueled compliance in compliance with with thethe On the local front, the Government Bank’s Ricowhich Stock five-day period. Leading last week’sDevelopment nongainers was OFGPuerto Bancorp, law went into effect, by mutual agreement the heads of the Legislature would carry them out. 150.86, 150.86, or 8.62%, or 8.62%, to close to close at 1,598.79, at 1,598.79, with with all components all components in the in the red red for the for the at $2.60 after reporting net income of $15 million in 4Q and $21.3 Savings & Loan Cooperative; P.R. Chamber ofjobs Commerce President Frank Medina.within of the U.S. Bureau ofand Labor 161,379 were lost in Puercommercial activity to the disposition disposition of law of law thatthat states states that that if the if the governor governor didn’t didn’t complete complete thethe appointments appointments within 10 days 10 related days after after the Index a heavy lossat during week of the year, spearerased(PRSI) $1.02,posted or 13.93%, to close $6.30.its It first was followed by Popular Inc., five-day five-day period. period. Leading Leading lastlast week’s week’s nongainers waswhich was OFGOFG Bancorp, Bancorp, which whichlawlaw million for 2015. It was followed bynongainers Popular Inc., surged $1.73, Statistics (BLS). to Rico, which suggests a net holiday sales. went went intointo effect, effect, by mutual by mutual agreement agreement thethe heads heads of the of the Legislature Legislature would would carry carry them them out.out. headed by last $2.50, week’sormassive stock selloff. For the week, the PRSI lost which skidded 8.82%, to close at $25.84. Shares of First BanCorp and its were fiscal situation are at a critical moment determined action has to be taken the reThesecountry appointments last November the heads ofwhereby both 2014 legislative bodies, in compliance or 7.39%, to close $25.14 reporting income milerased erased $1.02, $1.02, or 13.93%, or at 13.93%, to close to after close at $6.30. at $6.30. It was It net was followed followed by of Popular by$98 Popular Inc.,Inc.,“The Meanwhile, somemade 38,676 loss ofby 5,562 jobs during The data provide a with differ150.86, or 8.62%, to close at 1,598.79, with all components in the red for the fell 26 cents, or 8%, to close at $2.99. Triple-S Management Corp. edged garding the debt. In this process, transparency is indispensable for all parts, especially for the people of Puerto disposition of and lawand that states that if the governor didn’t complete the appointments within after the lion in skidded 4Qskidded and $2.50, $895 million into 2015. Shares of OFG Bancorp edged up which which $2.50, or 8.82%, or 8.82%, close to close at $25.84. at $25.84. Shares Shares of First of First BanCorp BanCorp jobs were created in the private in sector. ent perspective to analyze “The “The country country its fiscal its fiscal situation situation are are at the aat critical aprivate critical moment moment whereby whereby determined determined action action has10 has todays be to taken be taken re- refive-day period. Leading last week’s nongainers was OFG Bancorp, Rico.went Thatinto is the spiritbyofmutual the creation of thethe Public-Debt Audit Committee through Act 97 out. of 2015, and it is my down $1.84, or 7.70%, to close at $22.07. Shares of Evertec Inc. lost which $1.27, effect, agreement heads of the Legislature would carry them 12 2.18%, to at $2.99. $5.62. Last week’s top nongainer was fellcents, fell 26 cents, 26or cents, or 8%, or 8%, to close close to close at at $2.99. Triple-S Triple-S Management Management Corp. Corp. edged edgedlaw sector Puerto Rico asprocess, a result The is change in employment employment its of dynamgarding garding thein the debt. debt. In this In this process, transparency transparency indispensable is indispensable for all forparts, all parts, especially especially for the forand the people people Puerto of Puerto commitment that action is taken to carry out the duties described in that law,” Bhatia said. erased $1.02, or 13.93%, to close at $6.30. It was followed by Popular Inc., or 7.59%, to close at $15.47. Evertec Inc., which erased cents, or 6.21%, to at $13.74. It$1.27, was Rico. That is the is the spirit spirit the of the creation creation of the Public-Debt Audit Committee Committee through Act 97many of 972015, of 2015, andcreated and it isitmy is my down down $1.84, $1.84, or 7.70%, or 7.70%, to close to91 close at $22.07. at $22.07. Shares Shares ofclose Evertec of Evertec Inc.Inc. lostlost $1.27,Rico. ofThat the opening orof expansion of of the is aPublic-Debt result of Audit the increases icthrough on Act how are which skidded $2.50, or 8.82%, to close at $25.84. Shares of First BanCorp “The country that andthat its fiscal are atout a critical moment whereby action has On to be refollowed by Triple-S Management Corp., which lost 7 cents, or 0.31%, commitment commitment action action is situation taken is taken to carry to carry out the the duties duties described described in that indetermined that law,” law,” Bhatia Bhatia said. said. businesses. This represents and decreases in employor eliminated. a taken positive or 7.59%, or 7.59%, to close to close at $15.47. at $15.47. BY SIN COMILLAS STAFF fell 26 L.cents, or 8%, to close at $2.99. Triple-S Management Corp. edged By close José Carmona garding the debt. In this process, transparency is indispensable for all parts, especially for the people of Puerto to at $22.29. a net drop in employment of ment at companies, which is note, employment in the priRico. That isSTAFF theSTAFF spirit of the creation of the Public-Debt Audit Committee through Act 97 of 2015, and it is my down or 7.70%, to close at $22.07. Shares of Evertec Inc. lost $1.27, BY SIN BYCOMILLAS SIN COMILLAS senior $1.84, reporter, Banking/FinanCe 7,490 jobs in the private secwhat the BLS Business Emvate sector, which had been By José By José L. Carmona L. Carmona CariBBean commitment that action is taken to carry out the duties described in that law,” Bhatia said. By José L.BUsiness Carmona or 7.59%, to close at $15.47. tor, the most significant drop ployment Dynamics report falling since 2006, grew in the senior senior reporter, reporter, Banking/FinanCe Banking/FinanCe Senior Reporter, Banking/Finance CARIBBEAN BUSINESS since the start of 2014. measures. past five months of 2015.n CariBBean CariBBean BUsiness BUsiness BY SIN COMILLAS STAFF By José L. Carmona

Weekly Comment on Puerto Rico Stocks

senior reporter, Banking/FinanCe

THURSDAY, FEBRUARY 4, 2016

Electric Power Consumption Falls by 0.6% in 2015 BY LUISA GARCÍA PELATTI SIN COMILLAS Electric-power consumption in Puerto Rico fell 0.6% in 2015, the third-consecutive drop since 2012. Decreases in demand for electric power were registered in the commercial and industry segments, while the industrial sector’s consumption of electric power increased. The demand or consumption of electric power is a representative indicator of the behavior of the economy, and a variable that is measured with great precision, according to experts. Demand in the residential segment, which represents 36% of the total consumption of electric power in Puerto Rico, increased 1.6%, while commercial demand, which represents 48% of the total demand, increased 1.6%. The industrial

Commission Launches Hearings on Prepa’s Oil Purchases

segment registered a 0.9% increase. The year 2014 had ended with a decrease of 2.5% in electric-power demand and 2013 ended with a 2.9% decrease. Meanwhile, the production of electric power decreased 0.7% in 2015. In 2014, production had decreased 2.0% after a 3.6% drop in 2013. 䡲

BY SIN COMILLAS STAFF The Special Commission for the Study of Norms & Procedures Regarding the Purchase & Use of Petroleum by the Puerto Rico Electric Power Authority (Prepa) was scheduled to launch public hearings Feb. 2, at 10 a.m., in the Capitol’s Leopoldo Figueroa Room, which are expected to extend throughout the month. Among those summoned to testify are former Prepa executive directors under various past administrations, former presidents and members of the Government Board, past and present functionaries, fuel suppliers, and top management from labs

and other experts. They are expected to testify regarding the purchase, management and use of petroleum. “[Puerto Rico] should be very aware of the development of these public hearings,” said Aníbal José Torres, chairman of the commission. “We want people to know about Prepa’s operations regarding the purchase of fuel and the results that our investigation will reveal.” Torres said the commission is ready to present Puerto Rico “the truth that we have discovered about Prepa’s fuel-purchase processes, the lack of formalities, the manipulation of processes and noncompliance that have had an impact on the cost of energy. 䡲

Para la Naturaleza and Roosevelt Roads Enter Alliance BY SIN COMILLAS STAFF Malu Blázquez Arsuaga, executive director for the Redevelopment of Roosevelt Roads, and Fernando Lloveras San Miguel, president of the nonprofit Para la Naturaleza (For Nature), recently announced that both organizations signed a lease contract for 20 years to establish a Visitors Center at the former Roosevelt Roads Naval Station in Ceiba. The center would be located in front of the ports area, in a facility that used to house the print shop of the base when it was under the U.S. Navy, and encompasses 3.43 acres of land with a 6,240-squarefoot structure. The center will serve as the administrative oﬃce for the estimated 3,408 acres of conservation land in the area. The center’s staﬀ will

organize and give tours of the land, as well as forge alliances and volunteer eﬀorts with the Ceiba community and other surrounding municipalities. Para la Naturaleza currently oﬀers tours on the grounds of the old base, in the areas known as Medio Mundo and Daguao, where 40% of the land has been given over to conservation. This protected natural area features ecosystems such as wetlands, estuaries, mangrove forests, coral systems, marine habitats and dry forests, as well as species in danger of extinction such as the Puerto Rican yellowshouldered blackbird (known in Spanish as mariquita) and manatees. Tours groups also visit Los Machos wetland, which represents 10% of the mangroves that are left in Puerto Rico.

These lands under conservation were transferred to the P.R. Natural & Environmental Resources Department (DNER) from the Department of the U.S. Navy as part of the Public Benefit Transfer that took place in 2008, when 3,340 acres were transferred, and then in 2014, when another 68 acres were transferred. As part of the agreement between the Navy and the DNER, the land is to be administered by Para la Naturaleza, which is expected to invest some $300,000 for remodeling the building that will house the Visitors Center. The work is expected to begin sometime this year and should be in operation by the end of 2016. Besides the employment generated during the remodeling phase, the land management and administration

Medio Mundo & Daguao in Ceiba-Naguabo

efforts and the organization’s other offerings, the project represents new recreational and educational opportunities for residents and tourists, especially for the estimated 10,000 young people who live in the Ceiba and Naguabo municipalities. Para la Naturaleza is a nonprofit organization of the Puerto Rico Conservation Trust. Its goal is to integrate society with the conservation efforts of natural ecosystems on the island and increase the percentage of protected lands

from the current 8% to 33% by 2033. The organization aims to provide people and communities with transforming experiences that inspire and motivate concrete action in favor of nature, such as volunteer work, donation of funds and lands, and/or the establishment of conserved lands. Para la Naturaleza also manages the Visitors Centers and natural areas at Hacienda Buena Vista in Ponce, Hacienda La Esperanza in Manatí and Cabezas de San Juan in Fajardo. 䡲

THURSDAY, FEBRUARY 4, 2016 FRONT PAGE

CRIM Still Using Property Values Dating Back to 1957

CRIM More Aggressive in Tax Collections as Mayors Call for Changes to Property Tax Formula BY EVA LLORÉNS VÉLEZ

change in how the Municipal Revenue Collections Center (CRIM by its Spanish acronym), the entity in charge of municipal finances, cal-

culates real property taxes in Puerto Rico to bring the system to the 21st century and obtain much-needed additional revenues may be on the horizon, but not any time soon. The debate is continuing

on whether to update the methodology used to calculate real property taxes, which currently uses property values from nearly 60 years ago, and how property taxes are distributed to the island’s 78 municipalities.

What is certain is that CRIM is becoming more aggressive in how it is capturing taxes owed by residents and businesses, surpassing tax collections of more than $1 billion in fiscal 2014-2015. For

example, CRIM is adding new properties to its rosters and going after delinquent property-tax owners. For the first time in its history since its creation in 1991, the entity is also

slated to put 10 commercial properties up for a public bid in March, whose owners have not paid property taxes despite CRIM’s efforts to collect. Continues on next page

FRONT PAGE THURSDAY, FEBRUARY 4, 2016

Continues from previous page

“The distribution favors big cities over small ones,” according to Mayors Association President Rolando Ortiz, mayor of Cayey, who denied his organization is promoting changes in the formula to calculate property taxes.” —Mayors’ Association President Rolando Ortiz

Continues from previous page

Because it is an election year, however, oﬃcials do not want to touch anything remotely having to do with increasing real property taxes, but sources told

Caribbean Business some mayors are privately trying to come up with a new way to update the current formula, which uses property values from 1957, to calculate the tax. Oﬃcially, the Mayors

Federation, which groups New Progressive Party (NPP) mayors, and the Mayors Association, which groups Popular Democratic Party (PDP) mayors, are seeking to change the way money from property taxes and other sources of income are being distributed. “The distribution favors big cities over small ones,” according to Mayors Association President Rolando Ortiz, who is the mayor of Cayey, denying his organization is promoting changes in the formula to calculate property taxes. The Mayors Federation, however, admitted it is promoting a new formula to calculate property taxes paid by homeowners and businesses to allow municipalities to increase their borrowing margin without aﬀecting the local economy. Some PDP mayors reportedly support the idea, but believe the matter should not be discussed at the present time. In 1991, the Puerto Rico government created the Municipal Autonomy Law and with it the Municipal Revenue Collections Center, or CRIM, which delegated to the municipalities the task of collecting taxes that, until recently were

deposited in the Government Development Bank (GDB). Because residents today have more access to municipal services, the government has been delegating more responsibilities to municipalities, but often without providing the necessary financial resources. The central government has also taken resources away from municipalities, as it did in 2014, when it took 0.5% of the 1.5% share of the sales & use tax, which was 7% at the time. Money from the sales tax is used by municipalities to borrow funds. Due to the aforementioned reasons, municipalities need to increase the amount of money they have to operate with by reducing costs and increasing the “capture” level of property and business taxes.

OUTDATED FORMULA

FOR PROPERTY TAXES One of the factors hindering the ability of municipalities to yield enough resources to operate is that the formula to calculate property taxes is outdated. Contrary to popular belief, the formula used to calculate the property taxes does not come from what is

commonly known as realestate appraisals based on current market values, but rather on property values dating back to 1957. The 1991 Municipal Autonomy Law states cities shall impose a basic tax, which “shall not exceed 6% of the appraised worth of real property, and of 4% on the appraised worth of chattels that are not exempted or relieved from the payment of taxes, located within its territorial limits…. The municipality may impose [a] special tax, ad valorem 1957, on all real property that is not tax-exempt, including machinery, that is located within its territorial limits, and which does not aﬀect the $15,000 tax exemption in the case of properties dedicated to a principal residence, in order to accrue funds to meet any obligation incurred for solidwaste management services, or the acquisition, construction, reconstruction, renewal, expansion or improvements of any solid-waste management facility.” Luis Vázquez, a CPA who advises the Mayors Federation, said the methodology used by CRIM is one based on “unitary costs,” or a cost approach that takes

into account all elements in a property and then calculates the value by taking into account how much it would have cost to build the same property in 1957. “If a property gets new equipment, they calculate it using as a base how much it would have cost to make that improvement in 1957,” he said. When CRIM uses the term “reappraisal” of a property, it is not that it is establishing a new market-value price on the entire property, he said. “If a property was built in 1970 and new things were added or improvements were made, then they calculate the value of the new additions and take it back to 1957 values,” he said. CRIM Board Vice President Carlos López, who is the mayor of Dorado, confirmed this information. “There is truly no reappraisal as such. If there are improvements, then you add those up,” he said. Despite the outdated methodology being used, municipalities have been able to collect millions in taxes, with a capture rate in recent years of 76% to 78%. In fiscal year 2011-2012, Continues on page 16

THURSDAY, FEBRUARY 4, 2016 FRONT PAGE

of new properties and 16,958 were revisions. There are an estimated 1.26 million properties in Puerto Rico and around 50,000 are exempt from paying property taxes for diverse reasons established in the law. For example, many properties are exempt in Old San Juan because it is a historic district. It is common knowledge that many properties in Puerto Rico do not appear in CRIM’s database and this problem is not new. In 2010, the government enacted a law to create a registry of properties that have not been appraised by CRIM and authorized a $20 million credit line for the entity to appraise all the residential, commercial and industrial properties that need to be appraised. At the time, officials expected the new legislation to yield some $200 million in additional

revenues for municipalities. The roster of properties to be appraised was supervised by an interagency committee. From February to June 2011, homeowners and businessowners were supposed to register their properties that had not been appraised by the CRIM. The law offered some incentives to register, including a three-year property-tax exemption. According to information provided by the GDB, some 31,004 new properties were eventually registered, of which 27,817 were residential properties, 2,846 were industrial and 341 were commercial. But as of December 2012, only 89 properties had been “appraised” by CRIM and no additional information is available about how many more appraisals

CRIM Executive Director Víctor Falcón Continues from page 15

municipalities collected $392 million in business taxes and $552 million in real property taxes. The amount in real property taxes was 76% of the total $721 million that should have been collected for that tax, according to CRIM figures. The following fiscal year, 2012-2013, cities collected $403 million in business taxes and $574 million in property taxes. The amount in real property tax collected was 78.3% of the $733 million that should have been collected for that tax. For the year 2013-2014, cities collected $405 million in business taxes and $595 million in real property taxes. The amount in real property taxes was 78% of the total

“If a property gets new equipment, they calculate it using as a base how much it would have cost to make that improvement in 1957.” —Luis Vázquez, a CPA who advises the Mayors Federation $762 million CRIM should have collected for that tax. In 2014-2015, municipalities collected $406 million in business taxes and $604.9 million in property taxes. The amount in real property taxes was 78% of the $800 million that should have been collected for that tax. In 2013, the Legislature passed a law that established a tax amnesty for those owing property

taxes, which allowed CRIM to collect $97.3 million in additional taxes. At the same time, 15,567 payment plans were established that will allow the entity to collect an estimated $91.1 million in additional taxes over the next four years.

EFFORTS TO APPRAISE NEW AND/ OR UNREGISTERED PROPERTIES CRIM has also been

making eﬀorts to increase the number of new properties that have been “appraised” for property-tax purposes. For instance, in fiscal 2013-2014, CRIM appraised 21,274 properties, of which 13,952 were new and 7,322 were revisions of appraisals because of improvements to those properties. In fiscal 20142015, CRIM oﬃcials appraised 32,752 properties, of which 15,974 consisted

Dorado Mayor Carlos López

Continues on next page

FRONT PAGE THURSDAY, FEBRUARY 4, 2016

Continues from previous page

have been conducted, if any. The law also called for a fund to be created, in which the amount collected in property taxes would be deposited, but it was never created. Regarding the $20 million credit line, it is being paid with money from the government’s general fund.

STILLBORN

LEGISLATION In 2013 and with Puerto Rico mired in a fiscal crisis, House Treasury Committee Chairman Rafael “Tatito” Hernández, House Municipal Committee Chairman José Rodríguez Quiles and House Speaker Jaime Perelló submitted legislation that sought to bring up-to-date the system of appraisals used by CRIM to calculate real property taxes. Starting in 2014-2015, the legislation called for all

property taxes to be based on a property’s true market value or its sales value, whichever was higher. This value was then slated to be used by each municipality to determine the amount of property taxes owed. The measure also would have required notary publics to register homes with CRIM. Residential property owners, according to the bill, were going to be exempted from paying property taxes for the first $200,000 of the value of their properties, subject to certain conditions. The legislation would have forced CRIM to conduct new appraisals on all properties in Puerto Rico, which critics said would have been too costly. As a result, the legislation largely failed largely because it was opposed by many sectors, including banks, because of the negative impact on the local economy, especially businesses. López, the mayor of Dorado, criticized Hernández during his interview with Caribbean Business and called him “Tatito Tax” for pushing new taxes on the people during the past three years, said the legislation was stillborn because if property taxes depended on market values, it would create a lot of uncertainty for municipalities because questions would surround how much money they would have in their budgets every year. “Not to mention the damage it would have caused to the economy,” he said.

Mayors’ Federation Executive Director Reinaldo Paniagua

CRIM: CURRENT SYSTEM FAIR, NO NEED TO CHANGE CRIM Executive Director Victor Falcón said the entity is becoming more

“If you place a beachfront property that is in Condado, in the middle of Puerto Rico, it will have the same value because we put value in the construction, not in the location.” — CRIM Executive Director Víctor Falcón aggressive not only in capturing property taxes but also conducting appraisals. He said the formula used to calculate property taxes contains elements that take into account the passage of time since 1957 by imposing a tax that goes up from 8% to 11%. For

example, the basic business tax is around 4% and the basic property tax is around 6%, but CRIM also imposed a 1.03% tax on property owners for paying central government debt and another 3% tax for paying municipal debt. Falcón said CRIM cannot

assess property taxes using as the base marketvalue prices or the sales value because it would need to hire licensed appraisers. “We are ready to handle the methodology of a cost approach (which estimates the value of a property by adding the land value and the depreciation of any new additions or improvements), but not to use other methodologies,” he said. He did acknowledge that for CRIM to stop using 1957 values to calculate property taxes, it would have to do more economic studies, adding that information would also “need to be updated every couple of years, but we have not done so.” Falcón said the current approach is fair for

Continues on page 18

THURSDAY, FEBRUARY 4, 2016 FRONT PAGE

Continues from page 17

everyone because for CRIM’s purposes, a home in Condado has the same value as a home in Utuado. “If you place a beachfront property that is in Condado, in the middle of Puerto Rico, it will have the same value because we put value in the construction, not in the location,” he said. The CRIM executive director also believes municipalities collect enough money to be able to operate, and at the present time, there is no need to change the formula, as municipalities should just reduce costs.

MUNICIPALITIES COMPLAINING,

ESPECIALLY SMALL TOWNS Ortiz, of the Mayors Association, said that during a meeting that mayors from the NPP and PDP had with Gov. Alejandro García Padilla, mayors spoke of the need for CRIM to distribute funds from property taxes in a way that is fair to small towns. Right now, most business and property taxes that are collected come from about 17 of the biggest cities in Puerto Rico. Through a formula based on the population of each municipality and other factors, the money is then distributed to all 78 municipalities. Ortiz said small towns are suﬀering financially because they are receiving less money through the formula and are unable to borrow. “There are towns that will not be able to get out of their fiscal crisis, such as Santa Isabel, Maunabo and Yabucoa,” he said. Currently, more than 40 of Puerto Rico’s 78 municipalities are in the red, according to recent government figures.

In response, Falcón noted that in addition to the money municipalities receive in property taxes, they also get 2.5% of the central government’s income taxes, 35% of the net income of the electronic lottery and additional amounts from the state, which in 2014-2015 was about $120 million, to compensate for certain exemptions given to homeowners when they pay property taxes. For instance, homeowners do not pay taxes on the first $15,000 of their property’s value. Municipalities also receive money from construction taxes, but this figure has gone down in recent years. “That money is used to help small towns that have little economic activity,” Falcón said. According to Mayors Federation Executive Director Reinaldo Paniagua, the government has said it will conduct a study to determine what methodology should be used to distribute property taxes and other funds from other sources to the 78 municipalities. Paniagua, however, said the Federation believes the appraisal methodology used to calculate property values and taxes must be updated to 2016 numbers. The goal would be to allow municipalities to increase their borrowing margins, he added. CPA Vázquez said he is proposing taking the value of a property and multiplying it by 10 to bring property values to 2015 levels. Then, he said, basic taxes should be divided by 10 and from there, property taxes could be calculated. He said the new calculations would not cost CRIM additional resources because it would not entail conducting new appraisals.

SOURCES OF INCOME (IN MILLIONS) Government Contributions

2011

2012

2013

2014

2015

20 hundredths

$29.68

$32.19

$36.70

$16.72

Basic Exempted

86.00

Exempted Special Surtax

30.00

30.19

Electronic Lottery

42.60

42.98

51.87

43.40

50.00

Central Government Subsidy

183.17

204.82

210.14

227.58

Subtotal

371.45

395.99

414.71

403.88

410.49

938.6

966.19

979.39

1,000.40

1,011.60

1,310.05

1,362.18

1,394.10

1,404.28

1,422.09

Revenues Business & Property Taxes Total Income

Source: CRIM

DISTRIBUTION OF DEBT (IN MILLIONS) 2011

2012

2013

2014

2015

317.70

324.39

341.66

361.11

367.72

2.15

3.56

0.36

0.16

0.08

Subtotal

431.45

442.61

56.72

475.72

482.83

Municipalities Liquidation

878.60

919.57

937.58

928.66

939.26

1,310.05

1,362.18

1,394.10

1,404.28

1,422.09

Municipal Surtax General Fund

Total Distribution

Source: CRIM According to Vázquez, the government could maintain the current exemptions enjoyed by many homeowners, as he insisted the proposal will have little economic impact on taxes paid by home and business owners. However, Falcón and Ortiz disagreed, saying that bringing property values from 1957 levels to 2016 would have an impact on the local economy. “We do not support raising property taxes,” Ortiz said. Falcón said in recent meetings, CRIM’s board

has not discussed the idea of raising property taxes or updating the formula. He did note that one way the central government could help municipalities is by giving mayors a say in how incentives are granted to commercial and tourism projects approved within their jurisdictions. “The government often grants incentives for a hotel to operate in a specific municipality, but does not consult the mayor about those specific incentives. As a result, the mayor

has a business operating in his town, but the municipality is not getting taxes,” Falcón said. He also said that a study done by CRIM showed that in 2013-2014, municipalities lost around $527 million in real property taxes and $366 million in business taxes because of tax incentives granted by the central government. “We, ultimately, do not know if the incentives are working,” Falcón said. The government recently enacted a law to create an interagency

website that would monitor incentives to promote a better use of public resources. Ortiz, Falcón and Paniagua believe that if the government wants to regionalize services or grant more responsibilities to municipalities, it must give them the resources to do so. Paniagua, however, noted that decentralizing services will not happen any time soon because central government agencies do not want to give up their power or money.䡲

Thursday, february 4, 2016

Hispanic Affairs

More than 1 million Puerto Ricans now living in Florida

Puerto Ricans in Florida Untapped Business Opportunity for Local Entrepreneurs BY JUAN A. HERNÁNDEZ j.hernandez@cb.pr

The influx of Puerto Rican migrants to Florida could have a silver lining for businessowners and entrepreneurs on the island, according to Frank Nieves, president of the Puerto Rico Hispanic Chamber of Commerce (PRHCC) in Broward County, Fla. “This is a matter of numbers. If you have [more than] one million Puerto Ricans in Florida, including many entrepreneurs among them, there is a demand for Puerto Rican goods. What happens? There is not one place in Southern Florida where non-Puerto Rican businesses can offer Puerto Ricans the goods they are looking for,” said Nieves, who considers it obvious to establish a venue where those goods can be imported to supply the demand in Florida. As an example of the

demand for Puerto Rican products, Nieves mentioned the local pan de agua (the local version of French bread), which is readily available in Florida, but is labeled pan cubano (Cuban bread). As of late, a new bag was designed for the bread with a new name: Puerto Rico. Now it is selling like pan caliente, or hotcakes. “This tells you there’s a demand for Puerto Rican goods. So, why don’t we reach back to our culture, our food, the flavors we crave for…. Let’s go and get our sofrito (a mixture of herbs and spice), the crackers we like…. All those things we like, we are going to look for,” Nieves said, emphasizing the business opportunities that Puerto Rican entrepreneurs have with their fellow countrymen & women now living in Florida. In a clear shift, more Puerto Ricans are moving to Florida than New York, according to an October 2015 report by the

Pew Research Center. There are now more than one million Puerto Ricans living in Florida. “[T]he number of Puerto Ricans in Florida has increased 110% since 2000, when their population was 479,000,” Pew reported, noting that the trend is the result of local residents fleeing the island’s fiscal and economic woes. With Florida’s economy growing, more Puerto Ricans—and other Latinos—are also moving to the Sunshine State from other states. For the aforementioned reasons, the PRHCC is planning to have a Hispanic Business Convention & Expo in September, to give members the opportunity to network statewide and get in contact with businesspeople and entrepreneurs from various Florida counties and Puerto Rico. The initiative is part of the PRH USA Round Table, which comprises businesspeople from Florida’s Polk, Palm Beach, Broward, Duval, Clay and Lucie counties, as well as Puerto Rico, all creating events to help the business and local communities at large. While the chamber of commerce concept has focus traditionally on developing business-tobusiness networks, Nieves said there were limits to what they could do by following that model. So, he expanded their approach

“If you have [more than] one million Puerto Ricans in Florida, including many entrepreneurs among them, there is a demand for Puerto Rican goods.” —Frank Nieves, president of the Puerto Rico Hispanic Chamber of Commerce in Broward County, Fla. to reach out beyond the organization’s associates and the local business community. “The difference between this chamber and the other chambers is the way we fulfill our mission. We integrate business, the community and our culture. The community element is evident because businesses need customers, while culture is what binds us together,” Nieves explained. Following this approach, the PRHCC also has organized and/or sponsored fiestas patronales (patron saint festivals), the Festival del Pilón and Festival del Plátano, among other cultural activities. According to Nieves,

with the increasing number of Puerto Ricans who are now moving to Florida, the demand for these kinds of activities is also increasing. However, Puerto Rican migration to Florida is not something new. Historically, Puerto Ricans have been migrating since pre-Columbian times, but in modern days since the 1930s to different parts of the U.S., with many hopeful they would return to the island. “For whatever reasons, what is happening now is that [Puerto Ricans] are opting to stay in Florida, probably because it is similar to Puerto Rico, it is close to Puerto Rico…even the weather is

similar,” said Nieves, who is also convinced that the first migrants “are now pulling their friends and families, and this will continue to grow.” Research by the PRHCC and the Sun-Sentinel newspaper estimates that more than 200,000 Puerto Ricans have moved to Florida in the past 10 years. “This is an estimate because there is no way we can determine an exact number…. We are American citizens, we don’t go through immigration [at the airport]…,” Nieves said. n

—Editor Rosario Fajardo contributed to this story.

THURSDAY, FEBRUARY 4, 2016

Poll

No beneﬁts increase in 2016

increase in numbers.” The results are from Gaither International’s Media Brand Profiles tracking survey, which interviews more than 80 people daily from among a representative sample

billion in Social Security benefits, according to the Social Security Administration website. As of June 2015, about 39.5 million retired workers and their dependents received $53 billion in Social Security benefits a year, with $1,335 as the average monthly benefit. However, with consumer prices down in the mainland U.S. over the past year, monthly Social Security and Supple-

provides for an automatic increase in Social Security and SSI benefits if there is an increase in inflation as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPIW),” according to the Social Security Administration website. “As determined by the Bureau of Labor Statistics, there was no increase in the CPI-W from the third quarter of 2014 to the third quarter

would normally take effect based on changes in the national average wage index also will not take eﬀect in January 2016, the website adds. “Since there is no COLA, the statute also prohibits a change in the maximum amount of earnings subject to the Social Security tax, as well as the retirement earnings test exempt amounts. These amounts will remain unchanged in 2016.”

of Puerto Rico’s population ages 12 and older. In 2015, more than 59 million people in the U.S. received almost $870

mental Security Income (SSI) benefits will not automatically increase in 2016, the website states. “The Social Security Act

of 2015. Therefore, under existing law, there can be no COLA [cost-of-living adjustment] in 2016.” Other adjustments that

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

More P.R. Residents Receiving Social Security Benefits Four-Percentage Point Increase Since 2012 BY ROSARIO FAJARDO r.fajardo@cb.pr

The percentage of people in Puerto Rico receiving Social Security benefits has increased by four percentage points since 2012, according to this week’s Gaither International survey. Currently, almost two out of every five (39%) homes have a member who benefits from Social Security. By comparison, during 2012 that percentage stood at 35%. “This trend correlates with the accelerated aging of the island’s population,” explained Armando Sánchez, vice president of syndicated studies at Gaither International. “During the past five years, the only group that has increased in size in Puerto Rico is adults 65 years old and older. They have gone from 546,000 in 2010 to 617,000 in 2014.” About 32% of households with Social Security beneficiaries count that as their main or only source of income, Gaither reported. Meanwhile, 43%

of households with Social Security beneficiaries also count “government aid” as one of their income sources. However, only 14% mention salaries as another source of income. While the average Social Security beneficiary in Puerto Rico receives $796 a month (as of 2012), their lifestyle level is lower than that of the average adult, Gaither noted. Almost one-third (31%) of the average adults classified themselves as in the “High” or “Middle” Lifestyle Tiers, which correlates to socioeconomic indicators. Meanwhile, among those adults who receive Social Security, this percentage only reached 22%. “This would mean that most beneficiaries [in Puerto Rico] are living in poverty, but it’s not a situation exclusive to them since virtually half of the local population lives below the U.S. poverty line,” Sánchez said. “And yes, the current trend in population seems to indicate that Social Security beneficiaries will continue to

THURSDAY, FEBRUARY 4, 2016

21 Puerto Rico residents, expect to wave their smartphones at the cashier very soon

Column

Technology

#OscarsSoWhite...and old and Male

Mobile Payment About to Enter Prime Time in Puerto Rico

BY CLARENCE PAGE

The hashtag movement #OscarsSoWhite popped up for the second year on Twitter. Jada Pinkett Smith, apparently miﬀed that her husband Will Smith’s widely praised performance in “Concussion” was passed over, said on Martin Luther King Jr. Day that she would not attend the Oscars and encouraged others to join her. Spike Lee, whose movie “Chi-Raq” also was passed over, joined in. So did Will Smith, who told ABC News he was out of the country when his wife posted her decision online and that he wished she had given him a “heads-up,” nevertheless said he supported her decision. I understand their frustration, but bestactress nominee Charlotte Rampling was not entirely wrong when she complained that the #OscarsSoWhite protest sounded “racist to whites.” She later apologized for her inflammatory wording, but let’s face it: She said what a lot of other people are still thinking. Bold discrimination against whites would further damage the Oscars’ already embattled brand and prestige as much as allegations of discrimination against nonwhites have done. Yet, as often happens with these clashes between cultures, this Oscar controversy presents both problems and an opportunity to expand diversity beyond race in their judging process. It is shocking, for example, to see the demographic statistics of the about 6,000 Academy of Motion Picture Arts & Sciences members who vote for the Oscars. In 2012, a Los Angeles Times study found 94% of the voting members were white, 77% were male and 64% were found to be over age 60. Nothing against seniors, especially since I’m one of them, but the academy’s voting members appear to be about two generations older than the most frequent group of moviegoers. That could help explain why watching the Oscar ceremonies has become less enjoyable for many viewers than complaining about who did not win. Seizing this opportunity, the academy’s

president, Cheryl Boone Isaacs, herself an African-American, announced changes approved by the academy’s board of governors with the aim of doubling the numbers of women and racial-ethnic minorities in the academy’s membership by 2020. The current Oscar “whiteout,” as some are calling it, is particularly disappointing because it follows more than a decade of encouraging racial breakthroughs at the annual ceremonies. In 2005, for example, black actors including Morgan Freeman (“Million Dollar Baby”), Don Cheadle (“Hotel Rwanda”) and Sophie Okonedo (also “Hotel Rwanda”) earned a record five of the 20 nominations. In that year, Jamie Foxx also became the first black performer to receive two nominations in the same year—for “Ray” and “Collateral.” Three years before that, Halle Berry became the first black woman to win the best-actress award—for “Monster’s Ball”—and Denzel Washington for “Training Day” became the first black winner of the best-actor honor since Sidney Poitier in 1963 for “Lilies of the Field.” But just as electing an African-American president did not by any means end racial divisions in the U.S., Hollywood cannot rest on its past Oscar breakthrough laurels either. Surveys have found, for example, that black and female actors on average receive fewer job oﬀers after winning an Oscar than white males do. And a recent analysis by the Economist points out that as much as blacks may be underrepresented in Oscar nominations, Hispanic, Asian and other nonwhites fare even worse, even though Hispanics are the most frequent moviegoers. “We aren’t lowering any standards,” states the academy in the frequentlyasked questions page on its website. “We’re widening our net.” That’s the spirit. It is not only the right thing to do in our rapidly diversifying society. It is also a smart business move.

Banco Popular Mention on Android Pay Website Signals Wider Adoption of New Technology BY DENNIS COSTA d.costa@cb.pr

been made yet. Samsung Pay is yet another platform making the rounds, and even retail giants such as Wal-Mart have gotten on the bandwagon in developing their own proprietary mobile wallets. This doesn’t mean that making purchases in Puerto Rico with your smartphone is impossible, though. National chains such as Walgreens, for instance,

The concept of waving around a smartphone to pay for goods and services may seem like science fiction conceit, yet such a technology, commonly known as mobile payment or mobile wallet, is already a reality in many jurisdictions. In Puerto Rico, however, this new chapter in ecommerce has failed to take center stage due to various factors, but that should soon change. In late January, it was reported that Banco Popular Puerto Rico was mentioned among the participating banks working toward the implementation of Android Pay, which can be used on Android-based phones Mobile wallets carry out electronic transactions at a point of sale using a technology called near-field communication, or NFC. and is one of several competing mobile payment platforms in the market. The bank can accept mobile payments; the only is listed among 33 other financial insticatch is that the account linked to the tutions mentioned on Android’s oﬃcial smartphone must be located in a certisupport website, which includes banks fied bank on the U.S. mainland. and credit unions based in the mainland Such a dynamic dovetails with the fact U.S. as well as credit card companies that none of the banks based in Puerto such as American Express. Rico are currently certified to use a moWhen it comes to Apple Pay, a combile payment platform, although Popular peting mobile payment platform geared is reportedly close to doing so. Carlos for the iPhone lineup of smartphones, Ramírez, executive vice president of the prognosis is much less certain. Back business solutions at Evertec, an elecin September, an executive for Visa tronic transaction processing firm, told told Tecnetico.com, a technology blog, Caribbean Business that banks need to that the decision to have Apple Pay first adopt a technology called tokenizaavailable in Puerto Rico was entirely up tion in their systems. In simple terms, to Apple itself. tokenization involves replacing a sensiMeanwhile, Microsoft, which has a tive piece of information, such as a bank strong presence in Puerto Rico, is reaccount number, with a “token,” or a portedly working toward establishing placeholder that doesn’t contain dangerits own mobile payment platform, alous data but nevertheless links to the real though no definite announcements have data through an untraceable route.

Thursday, february 4, 2016

Mano a Mano Antonio Faz Alzamora

José Nadal Power

Senator

PDP Sen. Antonio Faz Alzamora, 67 years old, is from Cabo Rojo. An attorney by profession, he has 40 years of experience as a legislator, four of these at the House of Representatives (1977-1980) and 36 years at the Senate (1981-2016). He obtained his Bachelor’s degree in biology from the University of Puerto Rico, Mayagüez Campus and his law degree from the Pontificia Universidad Católica de Puerto Rico in Ponce.

PDP Sen. José Nadal Power, 42 years old, is from San Juan. He has a B.A. in political science from the University of Puerto Rico (UPR) in Río Piedras, a juris doctor from the UPR’s School of Law, and a Master’s degree in applied political studies from the International and Ibero-American Foundation for Administration & Public Policies in Madrid. He is a “freshman” senator, serving his first term in office, after being elected in 2012.

What motivated you to run for office as a lawmaker in Puerto Rico’s Legislature?

I was sworn in as a legislator for the first time when I was 28 years old. I came to the Legislature to address the problems of the poor, seek the approval of legislation to improve the infrastructure in my district of Cabo Rojo, Lajas and San Germán and in my country, and achieve changes to the commonwealth [status] geared to obtaining more sovereignty. I came to the Legislature due to my performance as a civic and sports leader in the western region.

Are you satisfied with your performance? I don’t feel satisfied with what I have achieved in legislative terms because there are still a lot of poor people with needs and infrastructure to be developed. Regarding the development of the commonwealth, I believe that while I have managed to elaborate a piece of writing which reflects my vision of the autonomous development of the commonwealth through a pact of association with the U.S., there’s still a lot of work to be done. I think the recent position of the U.S. regarding the colonial condition of Puerto Rico validates the need to achieve the association pact that I am proposing.

Would you recommend people run for a legislative seat? Why? To people who are thinking of running for the Legislature, I recommend they have as parameters the same objectives that motivated me, particularly to directly help residents, and also to fight for an ideal.

Is there corruption in the Legislature?

Before arriving at the Legislature, I had worked as an adviser for Gov. Aníbal Acevedo Vilá, and then in Washington, D.C., in the Resident Commissioner’s office. I also worked for a while at San Juan City Hall, with [then-Mayor] Sila María Calderón. As an attorney, I worked for four years at the law firm of McConnell Valdés. I have always been interested in the issues of economic development and maximizing the tools that Puerto Rico already has to achieve that development. As a lawmaker, I have distinguished myself by searching for new ways to support and strengthen Puerto Rico’s economic development. In particular, I look to promote bills that set mechanisms to address situations that weren’t there when Section 936 of the U.S. Internal Revenue Code was in place.

Are you satisfied with your performance? I feel very satisfied with my performance in the Legislature. I have initiatives to keep working on and I want to make sure these bills are approved and implemented as they should be implemented. For example, there’s a bill that was approved regarding coffee, to protect that product. We have to expand this [initiative] to other products with the aim of creating homegrown brands.

Would you recommend people run for a legislative seat? Why? At this moment, the most important thing someone who wants to get into politics must have is knowledge about the economy, which is what will truly help solve the immediate challenges that Puerto Rico is facing.

I think it has been proven there has been [corruption] in the past, but I don’t think that there is now because in my particular case, I don’t tolerate it and I fight it. In my 40 years in the Legislature, I personally have not detected corruption.

Is there corruption in the Legislature?

Do you favor a unicameral system? Do you think the Legislature’s problems stem from the number of lawmakers?

Even though during my Senate presidency I promoted legislation to consult the people about a unicameral system, I do not support unicameralism because, independent of the number of legislators that comprise those bodies, the bicameral system allows one body to evaluate legislation approved by the other body. This may prevent bigger acts of corruption at the legislative level because what one body does not see, the other can detect.

What are your recommendations, if any, to improve the Legislature’s work? I recommend there be truly a calling for this vocation in people who arrive at the Continues on next page

Not in my experience because I haven’t seen inappropriate actions that could qualify as corruption.

I prefer a bicameral system because it helps perfect the division of powers. What should be explored is the kind of representation to have, in which at-large lawmakers comprise one body and there is another body with legislators who are elected by districts.

What are your recommendations, if any, to improve the Legislature’s work? I think that legislative committees could be consolidated in a way so that work may be done more harmoniously, from the point of view of the issues addressed by those committees. Those that deal with environmental issues could be consolidated with Continues on next page

THURSDAY, FEBRUARY 4, 2016

INTERVIEWS CONDUCTED BY ISMAEL TORRES

“The recent position of the U.S. regarding the colonial condition of Puerto Rico validates the need to achieve the association pact that I am proposing.”

“I have always been interested in the issues of economic development and maximizing the tools that Puerto Rico already has to achieve that development.”

Antonio Faz Alzamora

José Nadal Power

Continues from previous page

Legislature because I have noticed that many come here only to show oﬀ, without any project in which to work. Many arrive to have certain power and influence in society, rather than have true interests and a call to service that they must have. Many of these people who arrive without a clear program or legislative objectives are those who usually fall into acts of corruption later on. 䡲

the committee that handles planning; the Transportation & Public Works Committee could also deal with some planning issues; the Treasury [Committee] with Retirement Systems; Education with Cultural Aﬀairs and Sports & Recreation; and the committee that deals with Social Well-Being could be consolidated with issues of the Third Sector, meaning nonprofits. 䡲

THURSDAY, FEBRUARY 4, 2016

Politics

Deadline to ﬁle necessary endorsements is Feb. 15

Endorsement Filings Moving Forward at the CEE BY ISMAEL TORRES

Two of the three independent candidates aspiring to be elected governor of Puerto Rico, in the November 2016 elections have reached the minimum 50% of endorsements required by Feb. 1, submitting some 16,000 endorsements each. As of Monday, La Fortaleza hopefuls Alexandra Lúgaro, who is an

Stadium. Meanwhile, Lúgaro and her team have been seen at local beaches and malls also seeking endorsements. Meanwhile, as of Jan. 28, Ramón López Vergué, a doctor from Aguadilla, has yet to submit any endorsements, which places him in a tough spot in meeting the first requirement of filing 50% of the 26,882 endorsements required from independent

certified as candidates by the State Elections Commission (CEE). As the only candidate for governor from the pro-commonwealth Popular Democratic Party, former Secretary of State David Bernier was already certified, as were the candidates from the Puerto Rican Independence Party (PIP), Sen. Maria de Lourdes Santiago, and from the Working

“This issue of providing the residential address was one of the factors why many of the endorsement documents were returned. By eliminating this requirement, the process of validating endorsements should show significant progress.” —CEE Secretary Walter Vélez

attorney, and businessman Manuel Cidre, who is the founder of the local bakery-goods chain Los Cidrines, still had some 10,000 endorsements to submit—or some 700 endorsements needed per day until the Feb. 15 deadline—to be oﬃcially certified as candidates. Last week, Cidre and his team were seen seeking endorsements at a baseball game in the finals series between the Santurce Cangrejeros and the Mayagüez Indios at San Juan’s Hiram Bithorn

candidates before their candidacies can be made oﬃcial. The primaries laws in Puerto Rico require that by Feb. 15, aspiring candidates file 100% of all their endorsements to be certified as candidates. Ricardo “Ricky” Rosselló and Resident Commissioner Pedro Pierluisi, both aspiring gubernatorial candidates from the pro-statehood New Progressive Party, have already completed the oﬃcial quota of 8,000 endorsements and were

People’s Party, university professor Rafael Bernabe. CEE Secretary Walter Vélez said to accelerate the process of validating endorsements, the CEE has eliminated the requirement of including the residential address of the person who signs the document. “This issue of providing the residential address was one of the factors why many of the endorsement documents were returned. By eliminating this requirement, the process of validating endorsements

should show significant progress,” Vélez told Caribbean Business. A few weeks ago, the electoral commissioners of the four registered parties in Puerto Rico agreed to increase the number of voters per voting college from 325 to at least 425. As a result, there could be a decrease of available colleges on the day of the general elections on Nov. 8. The PIP’s electoral commissioner, Roberto Iván Aponte, said the Executive branch had promised to remit by mid-February some $6 million for the primaries, which would be

added to the $1.2 million that it had already given to the CEE in December. The amount is part of the total $10 million approved to finance the local primaries on June 5. With Puerto Rico mired in a fiscal and economic crisis and given the evident lack of money in the government’s coﬀers, the CEE’s second vice president, Milagros “Lolín” Santiago urged Gov. Alejandro García Padilla to identify as soon as possible the funds to finance the electoral cycle this year, which includes the primaries and the general elections, as

well as the CEE’s administration expenses. The CEE has requested a total $90.6 million for this electoral year, of which $29.7 million are for the general elections; $10 million for primaries; $18 million for the general elections (including special ballots and other materials), and $33 million for the CEE’s administration. “I urge the governor to identify as soon as possible this money and assign the funds,” Santiago said. 䡲

—Editor Rosario Fajardo, CB editor contributed to this story.

THURSDAY, FEBRUARY 4, 2016

Politics

Clinton breathes sigh of relief

Cruz and Clinton Win Iowa, Next up is New Hampshire Republicans in Three-way Contest BY THE ASSOCIATED PRESS & CB STAFF

A victorious Ted Cruz and buoyant Marco Rubio emerged from Iowa with compelling claims to the outsider and mainstream mantles in the fractured Republican primary, as the presidential race shifted overnight to New Hampshire. Democrats were girding for a protracted slugfest between Bernie Sanders and Hillary Clinton, locked in a virtual tie. Donald Trump, uncharacteristically humble after a second-place Iowa finish, was headed for far friendlier territory in New Hampshire, where the billionaire firebrand had a commanding lead. Amid historically large turnout in Iowa, the unexpected benefactor was Rubio, who came within striking distance of Trump. Republicans had already been looking to New Hampshire to winnow their congested field, and the Florida senator’s strong showing bolsters his case that Republicans should coalesce behind him as the mainstream alternative to the rowdier Trump or Texas senator Cruz. “We have taken the first step, but an important step, to winning the nomination,” Rubio told supporters in Des Moines. Monday’s Democratic contest was a cliﬀhanger. “The results tonight are the closest in Iowa Democratic

caucus history,” said state party chairman Andy McGuire—a far cry from the coronation for Clinton, former U.S. secretary of State, that most Democrats once expected. Even with an elaborate campaign operation and backing from most Democratic Party leaders, Clinton

Hillary Clinton

a general election is still deeply questioned. Although Clinton said she was “breathing a big sigh of relief,” and her campaign said it had won an outright victory, the neckand-neck contest was a blow, evoking the setback she faced in 2008 after her upset loss to then-Sen.

Bernie Sanders

Iowa, Cruz collected at least eight of the state’s 30 Republican delegates, with Trump winning seven and Rubio six. Democrats apportion their delegates diﬀerently, and even with no declared winner, the AP awarded Clinton 22 delegates and Sanders 21. The statewide winner will collect the final delegate. MCCLINTOCK: CLINTON NEEDS TO MAKE ADJUSTMENTS “I think Hillary Clinton has begun with her left foot and has to do signifi-

Ted Cruz

“The result of the Republican caucuses in Iowa put an end to what I have termed “the dictatorship of the analysts and the polls” because now we have the start of the best poll possible: the votes of Republican voters.” —Rep. Jenniﬀer González

was unable to stem a flood of enthusiasm from young and liberal voters for Sanders, the eccentric Vermont senator whose viability in

Barack Obama. Given the closeness of the Democratic caucuses, the AP did not declare a winner. As the GOP winner in

cant adjustments to her campaign in order to prevail,” said Kenneth McClintock, committeeman of the Democratic Party

in Puerto Rico and former president of the Puerto Rico Senate. The chairwoman of the Republican Party in Puerto Rico, Rep. Jenniﬀer González said, “the result of the Republican caucuses in Iowa put an end to what I have termed “the dictatorship of the analysts and the polls” because now we have the start of the best poll possible: the votes of Republican voters.” Monday’s results, besides starting to set possible trends in the presi-

Donald Trump

dential primaries in Iowa, can also help boost a candidate’s momentum as other states start holding their own primaries in the run up to the November elections, with everyone’s eyes on the grand prize: the White House. Next up will be the New Hampshire primaries on Feb. 9, followed by Nevada on Feb. 20. PREVIOUS POLLS SHOWED A TIGHT DEMOCRATIC RACE According to the last Iowa polls conducted before the caucus, Clinton was in a tight race with

Sanders in the Democratic primaries, which has three candidates. Clinton was ahead 45% compared with 42% for Sanders, as reported by Bloomberg Politics/Des Moines Register Iowa Poll. Meanwhile, among the far bigger field of 11 Republican presidential contenders, Trump was leading the pack with 28%, followed by 23% for Cruz and 15% for Rubio, according to the same Bloomberg Politics/Des Moines Register Iowa Poll. With the support that has been generated throughout the process, candidates Jeb Bush, the former governor of Florida, and former First Lady Clinton—members of two famous families comprising the country’s political elite—and others with deep ties to the Democratic and Republican parties have found themselves unexpectedly challenged by a billionaire businessman-turnedTV star (Trump), a young senator with the support of many Republican leaders (Cruz), and an outspoken social democrat along European lines (Sanders). Among the biggest issues in the presidential race include immigration, gun control, climate change, the Syrian refugee crisis, healthcare, taxes and of course, the economy. At stake in the New Hampshire primaries were 23 delegates for the Republican Party and 32 delegates for the Democratic Party. The Republican National Convention will be held July 18-21 in Cleveland, while the Democratic National Convention will take place July 25-28 in Philadelphia. 䡲

THURSDAY, FEBRUARY 4, 2016

Dave Zuchowski, president & CEO of Hyundai Motor America, introduces the South Korean automaker’s Genesis luxury brand and its new flagship model, the G90, at the North American International Auto Show in Detroit.

2016 NAIAS

2017 Genesis G90: Hyundai Steps up to the Luxury Plate BY JOSÉ L. CARMONA j.carmona@cb.pr

Jan. 11 marked a pivotal moment for Hyundai Motor Co., when the South Korean automaker oﬃcially unveiled Genesis as a standalone luxury-brand division, along with its first flagship vehicle, the G90, during the North American International Auto Show (NAIAS) in Detroit. In recent years, Hyundai—one of the world’s top-10 automakers by volume— has been making some serious inroads in the luxury vehicle segment with its Genesis sedan, now relabeled as the G80, and its Equus flagship sedan—being replaced by the all-new G90. The popular Genesis Coupe will be replaced by the production version of the Vision G Concept, a more premium coupe revealed late last year in Los Angeles. By the end of the decade, the Genesis brand plans to have a total of six distinct models in its lineup, to compete against premium segment stalwarts Lexus, Infiniti and Acura. THE GENESIS G90 The Genesis G90’s distinctive appearance exudes both confidence and originality, benefitting from an intensive four-year development focus by the 800-strong team of Hyundai Motor’s new Prestige Design Group (PDG), according to Dave Zuchowski, president & CEO of Hyundai Motor America. “Under the oversight of Hyundai Chief Design Oﬃcer Peter Schreyer, the G90 expresses the first interpretation of the

Genesis design identity called Athletic Elegance,” he said. In crafting the G90, the Hyundai executive said the PDG aimed to capture the vehicle’s strength and originality, while presenting a fresh appeal. The G90’s identity is conveyed through a Genesis-family design feature—the brand’s crest grille—crowned with the updated winged Genesis emblem. PREMIUM INTERIOR Extensive consideration was given to the selection of the materials used in the G90’s interior to create what Hyundai calls eﬀortless ergonomics, interior design harmony, convenience and luxurious comfort. Throughout the cabin, the controls for the latest in technology are wrapped in genuine Nappa leather and wood inserts, to heighten the senses and surround occupants with a first-class ambience, the South Korean automaker said. Passenger space was another key component of interior comfort and design in the G90. According to Hyundai, the new G90 has significantly improved spaciousness, thanks to a generous 4.5-inch increase in wheelbase from the Equus, for greater passenger comfort. TWO ENGINE CHOICES The G90 will be fitted with a choice of two gasoline engines: A 3.3-liter, direct injected, twin-turbocharged V6 engine delivering an estimated 365 horsepower, or the top-trim 5.0-liter, direct injected, V8 engine producing an estimated 420 horsepower. Both engines benefit from an advanced second-generation, eight-speed automatic transmission that is lighter than the one used in the Equus. Through rigorous testing in Germany, South Korea and California, the PDG engineering team was able to refine the G90’s ride, handling, steering feel and suspension damping (i.e. the process of absorbing the energy of impacts) to deliver what Hyundai describes as an exhilarating driving experience. The G90 will feature an intelligent Drive Mode with four distinctive driving settings: Eco, Smart, Sport and Individual (driverspecific parameters). 䡲

THURSDAY, FEBRUARY 4, 2016

Cars 101 Where the Rubber Meets the Road BY JUAN A. HERNÁNDEZ j.hernandez@cb.pr

WELCOME TO CLASS! Tires, you probably remember them only when one goes flat or blows out. I know I do. Most of us mere mortals do not think of tires as the most important safety device in our cars. However, tires are even more important than seat belts, which in fact are designed to come into play when other safety features (such as tires and/or brakes) fail.

There are two main elements to take into consideration when talking about tires: inflation pressure and wear. Let’s take this alphabetically: 1) INFLATION PRESSURE How do you know what is the right pressure for your tires? Your car will tell you… Seriously. Newer car models (let’s say from the 1990s on) have a sticker inside the driver’s door that states what is the recommended tire pressure for the car’s

specific year and model. For instance, I sometimes drive a 2001 Americanmade SUV and the sticker on the driver’s door specifies that tire pressure for the front tires should be 35 PSI (pounds per square inch), while the rear-end tires should be at 41 PSI. If you think the number on your tires indicates the recommended pressure, you’re wrong! Don’t trust the tire! The PSI number on the tire’s wall indicates the maximum pressure it will hold, not the right pressure for your vehicle.

If you think the number on your tires indicates the recommended pressure, you’re wrong! Don’t trust the tire! Properly inflated tires will have a better grip on the road and perform better in extreme weather conditions (you will be less likely to skid during a local aguacero, or downpour) and when braking. With properly inflated tires, you will also get the best gas mileage possible and extend the tires’ life. But the nifty driver’s door sticker also oﬀers additional information, such as the size of the rims and the tires themselves. This information is very valuable when it’s time to change your tires.

2) WEAR When do you need to change your tires? In this case, Honest Abe will tell you. If you think your tires are looking a little too worn out, but you aren’t sure, just dig into your pocket and pull out one of the several pennies you must be carrying around since the sales tax was imposed. Now put Abe Lincoln upside down into the tire’s treads. Place the penny into several tread grooves across the tire. If part of Lincoln’s head is always covered

by the tread, this means there’s more than 2/32 of an inch of tread depth remaining and you are still good to go. Nevertheless, always use common sense. If Abe’s toupee is still covered but there’s a little of it sticking out, you should consider replacing your tires because their performance may be compromised. Of course, tires are costly, but cheer up…as long as gas prices are low, the money you save in gas could go to a nest egg for your tires. 䡲

THURSDAY, FEBRUARY 4, 2016

Trade

International imports and exports must be reported electronically

Starting Feb. 28, One-Step Filing for International Imports and Exports Required BY JUAN A. HERNÁNDEZ j.hernandez@cb.pr

By the end of February, all goods entering and/or leaving Puerto Rico from or to any international port will have to be reported electronically using the Automated Commercial Environment (ACE) system, which is set to become the primary system (“Single Window”) through which businesses will declare imports and exports before they can be deemed admissible by the government. “We have a number of drivers for the need to make this change, one of which has to do with our current technology just becoming outdated. Technology, as we all know, has a lifespan. Our current ACS [automated commercial system] has been in place for 20 years now…so from a technological perspective, it is

time for an update,” said Steve Henson, director of the Oﬃce of International Trade, which operates under the U.S. Customs & Border Protection. But aside from the technological update, Henson emphasized the eﬃciencies and improvements that both the government and the business community will soon see, particularly in terms of the limitations associated with “moving data on paper” vis-à-vis moving data electronically. “Our process today is not completely on paper, but there is a significant component that requires paper. The technology we are putting into place for ACE is to move to electronic processing,” said Henson, who highlighted the plus of reducing costs associated with the paper process. The change in electronically reporting imported

and exported goods from and to a foreign port supports the agency’s “critical security mission” by allowing it greater and improved “visibility and information of shipments that are coming in or going out.” According to Henson, the ability to obtain that information earlier in the supply chain will enable the agency to strengthen its security mission by identifying legitimate trade and shipments that are potentially risky or are not complying with trade laws. While ACE has been in use since November 2015, transition period under eﬀect to allow the business community to get used to the new electronic-filing method. Starting Feb. 28, ACE must be used as the Single Window system and the ACS will no longer be available for electronically filing the shipment of goods.

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The change in electronically reporting imported and exported goods from and to a foreign port supports the agency’s “critical security mission” by allowing it greater and improved “visibility and information of shipments that are coming in or going out.” Nevertheless, Henson admitted that submitting documentation on shipments could always be done by hand, but was quick to point out that this would limit the ability of businesses to access the goods they may be importing or exporting in an expedited manner. “The ability to submit to the U.S. government all the information it needs in one time, in one place, to get one answer back, one determination, is going to save them significant resources, time and energy. In today’s environment, they may have to send something to the

CPSC [Consumer Products Safety Commission], the Food & Drug Administration, or any other government agency,” he explained. According to Henson, an importer may potentially have to file more than 200 forms for just one shipment. With ACE, all these requirements can be done electronically in just once action, and information regarding a shipment can be shared quicker so decisions can be made earlier. In terms of meeting the February deadline, Henson said the two key functionalities in the system

are progressing, even though not necessarily at the same pace. Determining duties, taxes and fees has already been in place for the past three or four year, with 70% of the transactions being made through ACE. The other functionality, the cargo release, which provides information to the business about discharging cargo from ports, registered a 15% to 17% rate of all transactions through ACE, as of December. Henson said in the past couple of weeks, this number has increased to more than 20% of transactions made through ACE. 䡲

CB GUIDE AND BIG BUSINESS PROFILE:

MEDICAL TOURISM

SPECIAL FEATURE February 4, 2016 PAGES 31-34

S P E C I A L

F E A T U R E

THURSDAY, FEBRUARY 4, 2016

Ashford Dental Playing Important Role in P.R.’s Medical-Tourism Sector BY B.G. DOYLE

Offering a wide array of oral rehabilitation procedures, Ashford Dental began providing these and other services to the medical-tourism sector in 2013. “I had been practicing in the U.S. for 10 years, but moved my practice and family here in 2012 after recognizing the island’s potential in terms of medical tourism,” said Dr. Omar Cruz, Ashford Dental’s owner & prosthodontist. “After a decade of working in Boston and Chicago, I saw an opportunity to provide cutting-edge services in Puerto Rico by combining the latest techniques and best technology resources for excellent results for both tourists and the local community.” Services provided at the high-tech location in San Juan’s Condado community include dental implants, oral rehabilitation, esthetic/cosmetic rehabilitation, crowns, porcelain veneers, root canals (performed by endodontist Dr. Amarilys Rodríguez), smile makeovers and whitening treatments, oral sports protectors, dry mouth (Xerstomy) treatments, and other related procedures. In addition to reasonable rates, his office also accepts most medical plans, and offers payment plans as well, Dr. Cruz added.

With a Doctor of Medicine in Dentistry (D.M.D.) from the University of Puerto Rico’s School of Dentistry, and both a Master’s in Oral Biology and Prosthodontics Certificate from Harvard School of Dental Medicine, Dr. Cruz is also a Certified Provider and board member of Puerto Rico’s Medical Tourism Corp., as well as the director of www.dentaltourismpr. com. Staying abreast of the latest developments in this medical niche, he has participated in various seminars and continuing education courses over the past two years, and has received a number of awards, including the 2015 Dentist Choice Award in Puerto Rico for prosthodontics and dental implants. Dr. Cruz also pointed out that because Puerto Rico is a U.S. territory and easy to travel to from the States, the island offers a number of advantages over other medical-tourism destinations. Ashford Dental’s patient-oriented staﬀ also facilitates the process by scheduling patients at specific times for their convenience, providing taxi services to and from their accommodations and the dental facility, as well as putting travelers in touch with area hotels that are Medical Tourism-Certified. “Our commitment to our patients is not

“After a decade of working in Boston and Chicago, I saw an opportunity to provide cutting-edge services in Puerto Rico by combining the latest techniques and best technology resources for excellent results for both tourists and the local community.” —Dr. Omar Cruz, D.M.D., M.M.Sc., owner & prosthodontist at Ashford Dental

just limited to oral health, but to each person’s overall wellness,” he said. “By paying attention to every detail, we create an environment where patients are relaxed and confident they are in good hands— even those who experience anxiety when visiting dentists.” To enhance the medical-tourism experience, Ashford Dental will be unveiling its new medical-tourism section Feb. 19. “This new spa-like area will have two dental stations, a 3D digital scanner,

digital X-rays with an intraoral microscope and a comfortable waiting area,” the doctor said. “Given the significant increase we’ve seen in our medical-tourism sector over the past year, these enhancements are worth the investment.” While he noted medical tourism represents about 10% of Ashford Dental’s total business at this time, he is very optimistic about the growing popularity of medical-tourism services, especially for the island. 䡲

THURSDAY, FEBRUARY 4, 2016

As Ranked by

PUERTO RICO’S TOP PRIVATE HOSPITALS Primary Medical Specialties

Top Executive Title

General

Specialized

(Listed According to 2014 Net Patient Revenue) Current/ Previous Ranking

Hospital Name Telephone/Fax Internet Address

Physical Address

2014 Net Patient Revenue $

No. of Beds in Use

No. of Licensed Beds

No. of Full-Time Employees

1/1

Hospital Español Auxilio Mutuo de P.R. (787) 758-2000 / (787) 771-7952 www.auxiliomutuo.com

715 Ponce de León Ave. Stop 37 1/2 Hato Rey 00918

239,742,523

503

611

2,216

2/2

Manatí Medical Center (787) 774-6558 / (787) 774-5626 www.manatimedical.com

Atenas Urb. 68 Hernández Carrión St. Manatí 00674

200,000,000

235

1,235

3/3

Hospital HIMA - San Pablo Caguas (787) 653-1796 / (787) 653-1290 www.himapr.com

100 Luis Muñoz Marín Ave. Caguas 00725

196,714,218

414

440

4/6

Mayagüez Medical Center (787) 774-6558 / (787) 774-5626 www.mayaguezmedical.com

40 Hostos Ave. Mayagüez 00680

162,000,000

190

5/4

Hospital HIMA - San Pablo Bayamón (787) 620-4747 / (787) 620-9273 www.himapr.com

Santa Cruz Urb. 70 Santa Cruz St. Bayamón 00959

147,657,017

6/5

Doctors’ Center Hospital (787) 621-3322 / (787) 884-3307 www.tuhospitalfamiliar.com

Hwy. 2, Km. 47.7 Manatí 00674

7/7

Saint Luke’s Memorial Hospital (787) 844-2080 / (787) 844-7253 www.ssepr.com

8/8

Type of Hospital

Pediatrics, oncology, open- heart surgery, liver, kidney & pancreas transplant, obstetrics & gynecology

Jorge L. Matta Executive Director

Neurosurgery, orthopedics, general surgery, obstetrics & gynecology, family medicine

José L. Quirós CEO/President

1,963

Surgery, oncology, nuclear medicine, radiology, obstetrics & gynecology, neuro sciences

Joaquín Rodríguez Sr. Chairman/CEO

399

935

Cardiology, cardiovascular surgery, internal & family medicine, orthopedics

Jaime Maestre Executive Director

421

436

1,623

Surgery, cardiology, pediatrics, radiology, obstetrics & gynecology

Joaquín Rodríguez Sr. Chairman/CEO

144,000,000*

250

1,722

Oncology, obstetrics & gynecology, cardiology, nuclear medicine

Carlos Blanco CEO/President

916 Tito Castro Ave. Ponce 00733

114,000,000*

N/P

Hospital Pavía Santurce (787) 641-1616 / (787) 727-7500 www.metropavia.com

1462 Augusto Rodríguez St. Santurce 00910

108,000,000

193

247

722

9/11

Hospital Damas Inc. (787) 840-8686 / (787) 259-0680 www.hospitaldamas.com

2213 Ponce Bypass Ponce 00717

91,623,786

232

331

833

10/9

Hospital Menonita de Cayey (787) 535-1001 / (787) 535-1021 www.sistemamenonita.com

Bo. Rincón Las Lomas Sector, 14th St. Cayey 00737

85,713,624

262

1,039

11/13

Hospital Menonita de Aibonito (787) 954-8001 / (787) 535-1021 www.sistemamenonita.com

José C. Vázquez St. Aibonito 00705

78,238,748

150

841

12/12

Ashford Presbyterian Community Hospital (787) 721-2160 / (787) 723-3797 www.presbypr.org

1451 Ashford Ave. San Juan 00907

77,804,623

180

207

13/14

Hospital de la Concepción (787) 264-7905 / (787) 264-7908 www.hospitalconcepcion.net

Bo. Caín Alto Hwy. 2, Km. 173.4 San Germán 00683

76,575,580

167

14/10

Hospital Hermanos Meléndez Inc. (787) 620-8181 / (787) 622-8430 www.hospitalhermanosmelendez.net

Hwy. 2, Km. 11.7 Bayamón 00960

73,380,728

15/19

Hospital Perea (787) 834-0101 / (787) 265-2455 www.metropavia.com/perea

15 Dr. Basora St. Mayagüez 00681

16/15

Ryder Memorial Hospital (787) 852-0768 / (787) 852-0157 www.hryder.org

17/17

N/P

Pedro Barez Operations Executive Director

Internal medicine, general surgery, obstetrics & gynecology, neurosurgery, cardiovascular surgery

Karen Artau President

Internal medicine, cardiology, surgery, orthopedics, neurology, obstetrics & gynecology

Mariano McConnie Chairman

Bariatric & orthopedic surgery, cardiology, pediatrics & neonatal intensive-care unit

Pedro L. Meléndez CEO

General & orthopedic surgery, obstetrics & gynecology, pediatrics, cardiology

Pedro L. Meléndez CEO

778

Obstetrics & gynecology, orthopedics, internal medicine, emergency, pediatrics

Pedro J. González CEO

167

665

Internal medicine, nephrology, obstetrics & gynecology, neurosurgery, pediatrics, urology, neonatology

Álvaro Corrada del Río President

229

274

815*

Obstetrics & gynecology, surgery, orthopedics, nuclear medicine, pediatrics, radiology

Richard Machado Chairman

59,100,000

148

153

500

Internal medicine, obstetrics & gynecology, surgery, pediatrics, hematology, oncology

Jorge Martínez Rivera Executive Director

355 Font Martello Ave. Humacao 00791

57,699,760

171

173

888

Pediatrics, surgery, internal medicine, obstetrics & gynecology, orthopedics

José Feliciano Executive Director

Hospital Pavía de Arecibo ** (787) 650-7272 / (787) 650-7310

Rd. 129, Km. 0.1 San Luis Ave. Arecibo 00612

57,416,632

175

230

572

Gastroenterology, pneumology, internal medicine, neonatology, obstetrics

Homar Pérez CEO

18/18

Bella Vista Hospital Inc. (787) 834-6000 / (787) 831-6315 www.bvhpr.org

Rd. 349, Km. 3.2 Mayagüez 00680

53,000,000

158

199

720

Gastroenterology, cardiology, nuclear medicine, orthopedics, roboticurology & gynecology, radio oncology

Rafael García Álvarez CEO

19/16

San Jorge Children’s Hospital (787) 727-1000 / (787) 268-3610 www.sanjorgechildrenshospital.com

258 San Jorge St. Santurce 00912

51,784,000

167

171

Pediatric oncology, pediatric surgery, plastic surgery, pediatric emergency, neumology

Domingo Cruz Vivaldi Vice President

* CARIBBEAN BUSINESS estimate ** Formerly known as Hospital Cayetano Coll y Toste. N/P - Not Provided 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 hospitals. Research by Marilda A. Quiñones del Castillo Copyright © 2016 CARIBBEAN BUSINESS

575

S P E C I A L

F E A T U R E

THURSDAY, FEBRUARY 4, 2016

Cenegenics Helps You Work Out Smarter to Achieve Optimum Results BY CB STAFF

It is not unusual to want to counteract the health eﬀects of the holidays by starting or intensifying an exercise program around this time of year. However, enthusiasm quickly wanes when we do not see the desired results as soon as we expected. “Frustration is often the result of misguided intentions,” said exercise physiologist Luis R. López. “When exercise is undertaken solely as a means of losing weight instead of a means of achieving optimum health, people tend to make themselves follow a rigorous routine or take up the latest exercise fad.” When people find it too diﬃcult to keep up an exercise plan or get hurt in the process, they may get frustrated, he indicated.

with almost two decades of experience, Cenegenics Puerto Rico oﬀers Concierge Elite Health Programs, which emphasizes that achieving and maintaining optimum health must be an ongoing process that takes into consideration the changes in our bodies and personal habits. The foundation of the Cenegenics approach to Elite Health is a comprehensive evaluation to establish the patient’s metabolic, physiologic, neurocognitive and fitness baseline. “As part of this initial assessment, we will conduct exercises to determine your level of functionality, flexibility, strength and endurance, and compare them with standards for your age and gender,” López explained. “We will also analyze your personal objectives and the time at your disposal.” The results of this assessment

“Patients with greater aptitude will receive recommendations to strengthen their deficiencies in specific areas, under the supervision of an exercise physiologist or a trainer.” —Luis R. López Exercise physiologist

Exercise physiologists are trained healthcare professionals who assess, plan and implement fitness programs or physical activities from a clinical perspective with the goal of improving body composition and muscular strength, as well as endurance, flexibility and cardiorespiratory function. López is one of two certified exercise physiologists who are part of the Cenegenics Puerto Rico team of age management professionals. A leading authority in healthy aging

will guide the Cenegenics staﬀ to design a customized exercise routine to meet your healthcare needs and performance goals, which will be integrated into your individualized Elite Health Program, he added. Exercise may be prescribed to improve metabolic variables such as high-density lipoprotein (HDL), lowdensity lipoprotein (LDL) cholesterol, triglycerides and blood glucose; help with weight control; restore functionality or cardiorespiratory

function and rehabilitation after an operation; and improve general physical fitness. The individualized pro gram will establish attainable short- and long-term goals, as well as the appropriate intensity and supervision protocol to allow for progressive adjustments so that each physical function is optimized and maximum benefit is obtained from a medical, individual and scientifically proven aspect. “In some cases, this means a progressive increase in light physical activity, such as counting the steps taken each day, as a way to introduce exercise,” López noted. “Patients with greater aptitude will receive recommendations to strengthen their deficiencies in specific areas, under the supervision of an exercise physiologist or a trainer.” The advantage of working with an exercise physiologist lies in this professional’s expertise in monitoring how the body adapts to exercise in the short and long term, to ensure that your physical condition improves without injury. A personalized exercise program, combined with a nutrition program centered on natural, whole foods with low glycemic index and hormonal optimization (when clinically indicated), comprise the trifecta for Elite Health with significant improvements that go far beyond the increased energy levels, decreased body fat and muscular tone associated with exercise. They also contribute to increased sexual vitality, mental acuity, restful sleep and a younger appearance, while helping prevent the degenerative conditions associated with aging. “Exercising like crazy for the sake of losing weight is really selling yourself short,” López said. “Why work harder, when you can work smarter and reap the benefits of physical fitness to reach and maintain optimum health?”

SPECIAL FEATURE February 4, 2016 PAGES 35-40

S P E C I A L

F E A T U R E

Thursday, february 4, 2016

Classic and Modern Converge at CAAPPR’s Headquarters BY LAURA RENTAS-GIUSTI

Recently, a Puerto Rico food & beverage distributor was looking for a venue to relaunch a brand of beer that had been quite popular on the island in the 1960s, 1970s and 1980s. The ideal location would harmoniously bring together the past and present and offer the amenities to entertain a sizable crowd. The company found a sweet spot at the headquarters of the Society of Architects & Landscape Architects of Puerto Rico (CAAPPR by its Spanish initials), a versatile property that

offers a variety of configurations to suit different needs. The San Juan-area property consists of a former family residence in Casa Cuyar, an architectural gem built in the early 1900s and restored to its original state by the CAAPPR. Casa Cuyar is a small venue, fit for events of up to 60 people, with a beautiful indoor patio, wrap-around balcony and front terrace for outdoor activities, designed by renowned architect Rafael del Valle Zeno, who also designed Auxilio Mutuo Hospital and the Antiguo Casino de Puerto Rico. At

the back of the home is a modern multipurpose hall consisting of 1,930 square feet of new construction with capacity for up to 120 guests. “The venue is suitable for a variety of events such as corporate functions, weddings, seminars and meetings,” said Olga Angueira, executive director of the CAAPPR. “I believe we have even hosted baby showers here.” One of the many advantages of the CAAPPR’s headquarters, located on Del Parque Street in Santurce, is the flexibility of configurations available

for different types of events. Angueira explained that event planners have numerous alternatives when renting out the facilities, including the use of the multipurpose hall by itself or in conjunction with the outdoor terrace that connects both buildings; the historical building by itself or along with the front-yard terrace, as well as any combination of those configurations. The historical building can be closed up for indoor, air-conditioned events or have all of its doors and windows opened to allow the entire space—interior

rooms, indoor patio and balcony—to be occupied by attendees. Meanwhile, the multipurpose hall is equipped with numerous electrical outlets, a built-in sound system and dividers to break up the space into two or four separate areas, according to the needs of event planners. Additionally, the facility has pedestrian access to the adjacent San Jorge Children’s Hospital parking lot, which provides easy access and security to event attendees, she said. “We are very proud of what we have

accomplished with these facilities,” Angueira noted. “When the CAAPPR acquired this property in the 1990s, it was in very bad shape and, true to our mission to promote architectural preservation, it was completely restored to its original beauty.” The restoration kept intact a 100-year-old tree that grows in the indoor patio, “giving life to the entire property,” she added. Other architectural details preserved during the renovation include hardwood floors and arched gateways (medio punto), typical of the period’s construction. n

S P E C I A L

THURSDAY, FEBRUARY 4, 2016

F E A T U R E

AVCO Takes Events’ Sights and Sounds to new Levels

BY MARIO BELAVAL DÍAZ

In just five years, AVCO, the all-in-one audiovisual company, has grown into one of the most sought after companies in the industry, not only because of its top-notch resources and talent, but also due to its philosophy based on total commitment to clients.

that because more than a provider of services, we become the audiovisual operational arm of our clients during their events.” Román said despite the company’s growth, AVCO has maintained its essence of being a company focused on making a client’s event or activity a success based on a series of core principles.

not brand new, we keep our equipment in excellent working condition because that equipment is part of the image of an event and can add to the quality of what is being communicated or presented,” Román said. “Let’s just say that if we invest, for example, $300 in a microphone, we will also invest $150 in a case

“We look out for every detail to ensure both the quality and safety of our services.” —Rolando Román, principal & founder of AVCO “We make our clients’ events and activities our own,” said Rolando Román, principal & founder of AVCO. “In fact, after an event I usually ask the team to tell me three things about what took place at the event, what was presented or talked about, and they come out knowing more than

“The first is proficiency,” he explained. “While every client and every event is unique, we have the talent and know-how to fulfill and surpass their expectations.” AVCO also aims to maintain the latest equipment and makes sure everything is in tip-top shape. ”You could say that if

for that microphone.” Safety is another of the core pillars of AVCO’s commitment to clients, ensuring that the setup of the equipment and the equipment itself, far from being a hazard or an obstacle, adds to the flow of an event. “It could be as simple as the configuration and

position of cables, covering them with insulating tape, for example, or our secure towers for the sound systems,” Román added. “We look out for every detail to ensure both the quality and safety of our services.” Before leaving the AVCO facilities for an event, every piece of equipment is

tested and on the day of the event, the team always has spare and backup equipment for any eventuality, Román said. Finally, there is the hands-on service that characterizes AVCO’s relationship with its clients. “From that first step of consultancy, where we find out what the client

wants, to developing a working plan, through the activity itself and a post-event assessment of our performance, we always work handin-hand with our clients,” Román said. “There is no space for the word ‘no’ when it comes to clients; for example, if the client originally required two microphones for an event and on the day of the event it turns out he needs a third, we are there to provide it and any decision that is taken has to be taken with the benefit of the client’s event in mind.” As part of the company’s plans to provide services that answer to the market’s needs, AVCO recently launched its Music in Motion division, which will provide services such as disk jockeys, illumination and atmospheric decoration, and related audiovisual structure for clients’ events. 䡲

S P E C I A L

F E A T U R E

THURSDAY, FEBRUARY 4, 2016

San Juan Water Beach Club Hotel Adds Special Touch of Atmosphere to Events, Meetings BY MARIO BELAVAL DÍAZ

Just as the San Juan Water Beach Club Hotel (WBC) in Carolina’s Isla Verde community redefined the boutique-hotel experience, as a space and ambiance facilitator it offers clients the opportunity to transform events and meetings into a unique experience. The hotel, located at an exclusive spot in front of Isla Verde Beach, features a series of venues that range from

boardrooms and activities to event rooms and terraces, all with spectacular oceanviews and capacity for 10 to more than 90 people, depending on the space configuration. “We add the exceptional style and impeccable service of a boutique-hotel experience to events and meetings,” said Betsy Mujica, director of sales & marketing for the WBC. “From a boardroom meeting to a banquet or conference,

a client has to do little to achieve that unique, special atmosphere because we already provide it.” Among the venues at the WBC is the Arena Boardroom, which seats 10 people around a solidonyx conference table and features audiovisual resources such as projector and flatscreen TV. Across from the Arenas Boardroom is Olas Room, which is used for corporate and social events. Its capacity depends on the type of activity or event. For example, in a conferenceroom configuration where people are seated at a long table, the Olas Room has capacity for 30 people. For a banquet with tables, it seats 50 and for a reception-style activity, it has a capacity for 60 people. The WBC also has Horizonte and Bambú terraces. The Horizonte Terrace, which is covered, is used for activities such as breakfasts and snacks to cocktails, and has a capacity for 20 to 30 people depending on the configuration. Bambú Terrace, which is popular for wedding ceremonies and cocktails, allows for 30 to 50 people. Nailín Delgado, catering sales manager at the WBC, added that other oﬀerings at the hotel help complement meetings and activities, such as the hotel’s dining options. “For example, we provide the option of having lunch at our Zest restaurant,” Delgado said. Since the restaurant is not open

Arenas boardroom

to the public for lunch, it can be oﬀered to activities and event clients for that purpose. “Some clients may be more laid-back and prefer to end their meetings at Mist, our rooftop lounge.” Asked what makes the

WBC an excellent venue for people looking to make their events, meetings or activity a special experience, Delgado said it is because the WBC can be considered a true outof-the box concept. “You don’t feel you are

in a cold, boxlike room like you traditionally find in other hotels,” Delgado said. “At the WBC, our atmosphere becomes an essential element that allows our clients to experience their meetings and events in a truly new manner.” 䡲

S P E C I A L

THURSDAY, FEBRUARY 4, 2016

F E A T U R E

Caparra Country Club Brings out the Best in Meetings, Events BY MARIO BELAVAL DÍAZ

The Caparra Country Club (CCC) adds that elegant, distinguished touch that helps bring out the best in any meeting or event. CCC has four rooms that provide the perfect setting for corporate and social activities, from small business meetings to grand celebrations. Take, for instance, the Salón de Juntas (the Board Room), which has a capacity for 18 people and provides the perfect private

atmosphere for small meetings, while Salón Las Reinas, with capacity for some 75 people, is ideal for activities such as conferences and seminars, as well as social activities. The Salón Terrazas, with capacity for 100 people, also lends itself as a perfect venue for social and corporate events, with the added feature of having an open-air terrace. Then there is the majestic Salón Ponce de León, a grand room with the capacity for 500 people, which

Salón de juntas

has been the site of many events that have distinguished CCC as a venue

where activities become aﬀairs to remember. All the rooms have a

sophisticated, elegant flair achieved by the contrast and harmony of details and finishes in wood, metal and glass, which may include views of the club’s lush exterior. The rooms also have internet access and audiovisual capabilities. In addition to the venues, CCC features the service of an attentive professional staﬀ who are totally committed to helping clients achieve their goals during their event or meeting. Add to that CCC’s culinary

Think out of The District...

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GRAND OPENING APRIL 2016... 66 stylish rooms designed by the well-known Interior Designer Pilar Moreno A new meeting space at the top of the tower with a gorgeous view to the Mayagüez Bay. It will take your breath away!

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oﬀerings by Executive Chef José A. Meléndez and his team, who are ready to develop a menu in tune with the event. “Our goal is to help a client’s activity be a success,” said Coral Marrero, head of event sales & coordination at CCC. “There have been times when a client comes without any clear idea about what they want, so we work hand in hand with them every step of the way, making that event happen within their budget.”

THURSDAY, FEBRUARY 4, 2016

As Ranked by

PUERTO RICO’S TOP CONVENTION & MEETING FACILITIES (Listed According to Total Square Feet Area of all Meeting Rooms as of July 2015) Exhibit Area (Sq. Ft.)

No. of Guest Rooms

Parking Capacity

Services & Equipment Offered

Top Executive Title Telephone/Fax

Catering

Maximum Banquet Seating Capacity

Computers

No. of Meeting Rooms

Fax Machines

Smallest/ Largest Meeting Room Area (Sq. Ft.)

Executive Center

Total Area of all Meeting Rooms (Sq. Ft.)

Secretarial Services

Facility Name Location Internet Address

Audiovisual Equipment

Current/ Previous Ranking

3,665

Blarys Segarra General Manager (787) 641-7722 / (787) 300-6736

984

555

Dermot Connolly Managing Director (787) 863-1000 / (787) 863-6550

15,700

917

416

Pablo Torres General Manager (787) 721-0303 / (787) 724-1436

15,000

598

2,000

Danny Williams General Manager (787) 888-6000 /

700

N/P

552

540

Carlos De Freitas Managing Director (787) 657-1040 / (787) 809-1785

700

4,439

572

527

Raúl Bustamante Managing Director (787) 721-1000 / (787) 722-2955

264 12,000

740

6,000

416

590

Jacqueline Volkart General Manager (787) 253-1700 / (787) 253-1777

35,000

352 11,040

900

N/P

386

950

Jeff Lesker General Manager (787) 791-1000 / (787) 791-6985

Sheraton Puerto Rico Hotel & Casino San Juan www.sheraton.com/puertoricoconventioncenter

35,000

688 15,000

1,400

23,726

503

410

Sam Basu General Manager (787) 993-3500 / (787) 993-3525

10/9

Costa Bahía Hotel & Convention Center ** Guayanilla

33,000

N/P 27,000

950

18,000

136

800

Eduardo Artau President (787) 835-3335 / (787) 927-0011

11/-

Condado Vanderbilt Hotel San Juan www.condadovanderbilt.com

26,000

171 8,100

560

10,340

316

300

Nicholas Gold General Manager (787) 721-5500 / (787) 751-1919

12/11

La Concha Renaissance Resort San Juan www.laconcharesort.com

25,000

440 5,576

550

2,660

483

450

José Suárez President (787) 721-7500 / (787) 977-4053

13/16

Embassy Suites Dorado del Mar Beach Resort Dorado www.doradodelmar.embassysuites.com

24,500

1,120 10,000

700

5,600

174

590

Marisol Colón General Manager (787) 796-6125 / (787) 796-6145

14/12

Hilton Ponce Golf & Casino Resort Ponce www.ponce.hilton.com

24,294

138 11,963

1,140

6,240

255

600

Gunther Mainka General Manager (787) 259-7676 / (787) 259-7699

15/13

InterContinental San Juan Carolina www.icsanjuanresort.com

18,828

339 5,145

400

4,100

397

400

Michael Herrmann General Manager (787) 791-6100 / (787) 253-2510

16/-

Mayagüez Resort & Casino Mayagüez www.mayaguezresort.com

17,404

650 12,604

560

12,904

140

650

Santos Alonso Maldonado CEO (787) 832-3030 / (787) 834-3475

17/14

Coco Río Luquillo www.cocoriopr.com

17,000

8,000 9,600

1,000

17,000

200

Yolanda Carlo Owner (787) 889-7430 / (787) 889-7471

18/15

Verdanza Hotel Carolina www.verdanzahotel.com

16,000

88 3,922

300

222

225

Ricky Newman General Manager (787) 253-9000 / (787) 625-9007

1/1

Puerto Rico Convention Center * San Juan www.prconvention.com

285,000

400 153,000

7,560

153,000

2/2

El Conquistador Resort & Las Casitas Village, A Waldorf Astoria Resort Fajardo www.elconresort.com

100,000

439 21,000

1,400

33,718

3/3

Caribe Hilton San Juan www.caribehilton.com

65,000

165 12,624

3,000

4/4

Wyndham Grand Río Mar Beach Resort & Spa Río Grande www.wyndhamriomar.com

48,000

300 20,900

1,100

5/10

Gran Meliá Golf Resort Puerto Rico Río Grande www.granmeliapr.com

41,208

560 11,946

6/5

The Condado Plaza Hilton San Juan www.condadoplaza.com

41,000

N/P

7/6

The Ritz-Carlton, San Juan Carolina www.ritzcarlton.com/sanjuan

40,000

8/7

El San Juan Resort & Casino Carolina www.elsanjuanhotel.com

8/7

* Total area of all meeting rooms plus all common areas is 580,000 sq. ft. ** Formerly known as Pichi’s Hotel & Convention Center. N/P - Not Provided Unless otherwise noted, all information was provided by the companies. Research by Ayleen Anqueira Copyright © 2016 CARIBBEAN BUSINESS

THURSDAY, FEBRUARY 4, 2016

Community Affairs

Enticing Act 22ers to invest in community-based initiatives

Fundación Comunitaria Bets on Nonprofit Sector to Help Boost Economy San Juan-Based Philanthropic Firm Uses Various Instruments to Leverage Funds for Community Work BY DENNIS COSTA d.costa@cb.pr

For most of the past three decades, Fundación Comunitaria de Puerto Rico (Puerto Rico Community Foundation) has kept a low profile among the island’s communitybased organizations, with campaigns that have been frequently carried out in collaboration with other entities and seldom occupying center stage. Nevertheless, what the organization has lacked in exposure has been compensated for in the scope of the initiatives it has stewarded. In light of Puerto Rico’s precarious economic environment and growing public discussion about the role that foundations and nonprofit organizations can play in the island’s recovery, Fundación Comunitaria seems ready for its close-up. Recently, the organization celebrated its 30th anniversary by inviting Ronald “Ronn” Richard, president of the Cleveland Foundation, which 101 years ago was the first community foundation to be established. Founded in Cleveland in 1914, it currently boasts more than $2.2 billion in total assets and has granted around $1.8 billion throughout the years to myriads of

nonprofit organizations. In 2015 alone, the foundation granted around $105 million in communitybased donations. Perhaps most importantly, it is the precursor to more than 1,800 community foundations now operating worldwide, as well as the mentor institution for Fundación Comunitaria since the latter was founded. During his visit, Richard and Nelson I. Colón Tarrats, chief executive of Fundación Comunitaria, held various meetings. In one such talk, various foundations discussed collaborations to achieve a bigger role in spurring economic development; at another meeting, they met with potential donors and pitched the potential of community foundations to enact social and economic change, taking the Cleveland Foundation’s story as a prime example. Of note is that many of the potential donors who attended the meeting are wealthy Act

22 beneficiaries who have established residence in Puerto Rico due to attractive tax incentives. One of the most successful initiatives the Cleveland Foundation recently carried out involved ex-convicts who had been found guilty of minor crimes and had served their sentences, but were unable to find work. “We saw that many Cleveland institutions were paying a lot in electricity, something I understand Puerto Rico is also going through,” Richard told Caribbean Business. “We created a micro-business in which these individuals could work on a task as simple as replacing traditional light bulbs with energy-eﬃcient bulbs in places like the Cleveland Hospital. The energy savings the hospital achieved were passed in part to the company so it could grow further,” he explained. “This is an example of what Puerto Rico could work toward,” Colón

“This is an example of what Puerto Rico could work toward.” —Nelson I. Colón Tarrats, chief executive of Fundación Comunitaria

Ronald “Ronn” Richard, president of the Cleveland Foundation

Tarrats said. “Community foundations act as social investors, facilitators of resources and catalysts for various groups to sit down and hash out transformational projects in our society and economy.” VARIOUS PATHS TO COMMUNITY INVESTMENT Fundación Comunitaria is one of the few, if not the only, foundations based in Puerto Rico that leverage money from the community to give out in return, Colón Tarrats explained. By contrast, other foundations such as Fundación Fonalledas or Fundación Ángel Ramos do not usually leverage funds, mainly because they come from the foundation’s own assets or from related businesses. There are three ways in which Fundación Comunitaria leverages funds, the first being an endowment. This consists of a certain amount of money, such as $1 million, which is invested in the stock

market. For purposes of donations, the money remains frozen, except for a certain amount that is given out to the community annually, mostly 5% of the total money, plus whatever has been earned as a result of investment throughout the year. This is to ensure there is always “money in the pot” from which to disburse donations on a long-term basis; otherwise, the fund would rapidly deplete itself. Endowments are usually used by wealthy families, partly because they do not require setting up a foundation and because they practically guarantee that the funds will continue producing donations in perpetuity. The second vehicle consists of temporary funds, which are mainly used by corporations for social responsibility purposes and overall public projection. It is money that is assigned and then used for community-based work fairly quickly. The third instrument is

a Community Investment Fund (CIF), a comparatively new mechanism that Fundación Comunitaria recently debuted on the island for nonprofit purposes. It is touted mainly as an investment fund for investors who not only seek a financial return, but also a social one, Colón Tarrats said. Through a CIF, the foundation in charge of managing the fund pays investors with interest, while the funds also generate donations and scholarships, as well as financing for nonprofit organizations. However, in the latter case, the financing acts as a loan. “This is a new model for community-based investment and changes the paradigm toward nonprofit organizations,” Colón Tarrats added. “We are not a bank, although we have a dispensation from the Commissioner of Financial Institutions to do this because this is a model for communitybased foundations in the mainland U.S.” 䡲

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Pablo Picasso once said, “Every act of creation is first of all an act of destruction.” It is time to create a new version of the advertising industry by destroying the concept of what advertising is, never was and what it will never be again. First, advertising needs to stop being an ostrich-minded industry, with its head buried in the...sand. We need to embrace the steady strength that has defined us from the very beginning, be consistent with that oﬀering, perpetuate and regain the value of that strength. Consumer interests and behaviors change every day, but from day one, good advertising has been about intelligent presence in points of contact with memorable messages that generate a reaction from consumers. With media planning and placing becoming more and more commoditized, it is the human side of the industry that will keep advertising alive. A refreshing approach is proposed by Droga5. In its agency description, Droga5 defines itself as “humanity obsessed.” If we look beyond all the fads, this is essentially what a brand and its communication partner must be. We wake up and tell our clients that today is the beginning of the print era, radio era, TV era, guerrilla advertising era, email marketing era and social/mobile/digital era... We need to stop selling trends and stick to what we are at the core. The advertising industry was never the shaman of brand managers. Just as consumers have taken over brand messaging, the new breed of clients has defined what agencies are. Chris Johns defines these new clients as professionals

Advertising needs to stop being an ostrich-minded industry.

With media planning and placing becoming more and more commoditized, it is the human side of the industry that will keep advertising alive. who “grew up hacking the system...collaborating with people around the world who will face challenges around speed and agility...and will demand an agency to be custom-built for today’s world—a leaner more agile strategic and creative consultancy...” Creativity, together with measurable results, has survived the test of time and the ever passing

fads that constantly attempt to redefine our landscape. With a constant battle for a market’s share of mind, share of stomach and share of heart, every brand manager must take a look at their agencies and see if they are the right partners for making their brands have cultural leadership. Advertising agencies will never again be media agents, surviving on commissions. The industry needs to evaluate its compensation structure and retake the value of its expertise. The damage of giving away free creative work is done, but through great work, advertising can and is regaining importance within this new breed of brand managers and specialized agencies. They are willing to work with best-in-class talent if the idea generates results. Michael Farmer invites the industry to stop having the mentality of “being a client’s Agency of Record and think more of becoming Agencies of Results.” Advertising must always be the industry with a soul. Great concepts have redefined cultures, people and countries. This relevance must always exist and in hard times, such as the one Puerto Rico is going through, we must always be the industry with innovative solutions to improve humanity. 䡲

Jorge Bauzá is partner and cofounder of La Ferretería, which bills itself as “a collaborative platform where agencies, brands and startups will find talented creatives from all disciplines, working on discovering eﬀective ways to connect with consumers and creating new communication solutions.”