Caribbean Business – April 7, 2016 by Latin Media House, LLC

I I I I I I I

I I

Debt Moratorium Faces Stiff Legal Challenges

Prepa Securitization Charge Goes Before PREC

Is the VAT Coming Down the Pike?

Life In Cuba After Obama Tour

Experts Weigh in page 7

Energy Commission Eyes Rate Case page 9

Zaragoza Makes his Case page 19

What Next? page 27

COVER STORY

TOP STORY

Puerto Rico Gov’t Plays its Card in Summer Debt Game Legislation Would Enable Unilateral Debt Moratorium, Overhaul of GDB

CEE Modernizes Election System

As this newspaper was going to press Tuesday, Puerto Rico lawmakers were still hammering out their differences regarding a bill presented by the Alejandro García Padilla administration that would allow the commonwealth government and its instrumentalities to unilaterally stop making debtservice payments—including a stay on lawsuits—as part of efforts to ensure essential services are not interrupted.

Government Development Bank (GDB), which only had roughly $560 million in liquidity as of April 1, according to the bill. The bank would also no longer act as the island’s fiscal agent and lead the commonwealth’s restructuring effort, and a new entity would be established to carry out these tasks. Caribbean Business first reported that the administration was on the verge of presenting the legislation seeking a moratorium

The measure is geared toward protecting the health, safety and welfare of the people of Puerto Rico, and represents “the least burdensome of alternatives to accomplish this purpose,” according to the bill. In addition to the so-called moratorium dispositions, the Puerto Rico Emergency Moratorium & Financial Rehabilitation Act would overhaul the receivership process of the financially battered

on Puerto Rico’s debt service, including the $422 million owed by the GDB on May 2, as well as the roughly $1.5 billion due across the board on July 1. Last week, La Fortaleza was moving forward on the measure as soon as Friday, but failed to deliver the bill to the Legislature at the time, government sources said.

$92 Million Shortfall Could Send Grid to Stone Age

Puerto Rico held its first general elections in 1809 to elect deputies to the Cádiz Courts and candidates represented two political positions: the so-called “unconditional,” who favored the Spanish regime prevailing at the time, and the liberals, who advocated for greater powers to the criollos living on the island. Since then, hundreds of elections have been held in Puerto Rico, featuring the most diverse problems and results, but always dependent on a metropolis: first

Madrid, until 1898, and later Washington, D.C., up to the present day. The elections cycle of 2016 begins on June 5 with the general primary in which candidates for governor will face off—Pedro Pierluisi and Ricardo Rosselló of the New Progressive Party—and candidates for municipal assemblies will be chosen. All this will take place amid the backdrop of a continuing decrease in the island’s voting population, as the massive

outmigration to the U.S. mainland continues. The most recent official election numbers indicate that in the 2008 general elections, the electoral register included 2,458,036 voters, of which 1,903,392 (79.05% participation rate) voted, versus an electoral register of 2,402,943 voters in 2012, of which 1,874,419 (78.22% participation rate) voted. BY ISMAEL TORRES pages 14-17

BY LUIS J. VALENTÍN continues on page 6

Thursday, april 7, 2016 |

THIS WEEK Editorial

By Philipe Schoene Roura EXECUTIVE EDITOR

Contents picture of the week page 9

An Investment in Democracy Worth Every Penny When Dominion Voting President Javier Jiménez, whose company is tasked with overhauling the State Elections Commission’s (CEE by its Spanish initials) electronic voting system, tells you that he has “very good employees” in response to the question, “Do you have the money to get the job done?”—it is time to start worrying. The response is a sign that the CEE does not have the money to fund Dominion Voting System’s upgrade of the elections scrutiny system, the money to get the job done right. In his months-long investigation, Politics Editor Ismael Torres discovered the CEE is facing severe challenges with the New Progressive Party (NPP) primary between Pedro Pierluisi and Ricardo Rosselló looming large on June 5, and general elections towering as a massive challenge in November. The CEE contracted Dominion—at a cost of some $38.8 million—to install a state-of-the-art computer system that will electronically scrutinize the votes directly at polling stations. The overhaul calls for the installation of some 6,075 machines, training personnel and implementing the needed software. To date, the CEE has already paid Dominion $8 million, but it has a payment of $7 million due in June and the remainder to be paid in installments across the next five years. With the commonwealth government facing a severe liquidity crisis, it seems unlikely that a June payment will be made, which means the more than 3,000 machines that have already arrived in Puerto Rico will not be installed to count votes, but rather will continue to collect dust in a warehouse. Puerto Rico’s electoral system has been observed by election contingents from across the world as a model of democracy. In tight contests such as the 2004 and 2012 elections—with less

than a 0.5% margin of difference—recounts were conducted in a reliable fashion that validated the electoral mandates of the people. The system that Dominion is implementing is not something that can be started at the last minute or be aborted in midstream. There are people to train and systems to test— which is not done overnight. All told, the CEE will require $18 million for the electronic scrutiny of votes, $30 million to hold the general elections and another $34 million for the overall operation of the commission. Then there is another $10 million for the June primaries. If nary a penny has been assigned to a process that is bound to cost at least $92 million and the date for a first electoral contest—the NPP primary—is drawing near, why is there no action being taken? It is an exercise in self-deception to believe that somehow the money to hold elections will magically appear when Puerto Rico’s government is on the verge of insolvency. During an interview with Caribbean Business, CEE President Liza García Vélez stressed the importance of the electronic vote count in providing greater opportunity for emerging parties and independent candidates—who perhaps lack the foot soldiers of democracy to oversee results at polling stations—to have the certainty that their votes will be adjudicated properly. The new system guarantees the transparency of results come election night. Puerto Rico’s electoral law establishes that the Governor and Legislature will assign sufficient funding to host primary contests and the general elections, in addition to funding that will cover the CEE budget during election years. It behooves the CEE to file legal action to demand funding at once. Democracy hangs in the balance.

It behooves the CEE to file legal action to demand funding at once. Democracy hangs in the balance.

this week

Editorial Reader’s Response/Retrovisor

2 4

puerto rico Top Story Lead Stories Banking/Finance Labor HR/Management Cover Story Retail/Commerce

6 6 7-9 10-11 12 13 14-17 18

economy Sin Comillas Taxes Poll

19 20-21 19, 22 23

politics

Puerto Rico Oye Como Vá

25-26 26

hemisphere

Latin American Affairs Federal Affairs

27 28

weekend

Guide Community Affairs Advertising

36 37 38

Special features

Industry Profile Taxes & IRAs, Part 2

24 29-35

caribbeanbusiness.pr Volume 2, No. 13 • Thursday, April 7, 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)2681626. 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

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THIS WEEK

Reader’s Response

Editor’s Note: The following Reader’s Opinion was written in response to the article, “Group of Puerto Rico-Chartered Credit Unions Presents Novel DebtRestructuring Idea,” published on March 24, 2016. To the Editors: I think the “entry point” proposal is a very important issue. However, people in the industry and lawyers I have spoken with tell me that it is a nonstarter to offer different prices to holders of the same bond simply because they purchased at different times. Industry players believe it is unlikely that a voluntary agreement will be reached on this basis and impossible in the context of a judicial process. Sadly, in the article, the reporter does not quote anyone who has a different opinion from that of attorney [José] Sosa Lloréns. The effect of the article is to give the impression to the cooperative movement that its proposal is likely [to be successful], when many people in the financial industry believe it is unlikely. Regards, Vicente Feliciano President, Advantage Business Consulting

Question of the Week Check out our “Question of the Week” at cb.pr

These are the results of last week’s question.

Thursday, APRIL 7, 2016

Retrovisor The Week in Hindsight By Rosario Fajardo r.fajardo@cb.pr

BUSINESS

Wal-Mart Transfer-Pricing Tax Ruled Unconstitutional

U.S. District Court Judge José A. Fusté ruled March 28 that a transfer-pricing tax the Puerto Rico government sought to impose on Wal-Mart stores in a bid to shore up its coffers is unconstitutional. Fusté’s ruling favored Wal-Mart Puerto Rico, which had filed a lawsuit against the commonwealth government after local officials implemented the transfer-pricing tax hike last year, effectively increasing the rate in which corporate property coming from outside Puerto Rico is taxed, specifically from 2% to 6.5% on entities that generate more than $2.75 billion in business annually on the island. In its lawsuit, Wal-Mart alleged government officials were singling out the retail giant for inequitable tax treatment.

Main Street Bondholders Applauds Support for ‘Protection of Constitutional Bondholders’

The Main Street Bondholders Coalition applauded last week the ongoing support from leading Puerto Rican elected officials for a consensual solution to the island’s debt crisis “despite actions by House Natural Resources Committee Chairman Rob Bishop (R-UT) to adopt a Super Chapter 9 approach to debt restructuring, and undermining the progress towards a consensual deal and the Puerto Rican Constitution.” According to the coalition, a “consensual solution would assure continued interest payments on Puerto Rico’s obligations consistent with the priority of bonds established by the Commonwealth’s Constitution, and would promote voluntary negotiations between the island and its bondholders.”

POLITICS

GDB States No Imminent Shutdown, Continues to Mull Options

The Government Development Bank (GDB) denied on April 1 reports of legislation to immediately shut down the bank’s operations and its engagement in privatization efforts. “This rumor is false, and it is also false the GDB will be privatized. Besides being incorrect, the information is also irresponsible with regard to employees because it creates much uncertainty for them and their families,” said GDB President Melba Acosta. “The bank’s management has met with employees and has shared with them that, given the fragility of [the GDB’s liquidity], all available options are being analyzed,” she said, adding that these measures do not entail dismissing public employees. “The GDB’s board of directors and its management continue evaluating all available options to urgently safeguard public finances. We continue advancing several initiatives…. No final decisions have been made,” Acosta stressed.

Thursday, april 7, 2016 |

PUERTO RICO Debt Moratorium /

Continued from cover

Senate President Eduardo Bhatia

The bombshell legislation was finally presented by La Fortaleza on Monday night, after days of uncertainty on when it would pull the trigger on the measure. Plans called for both chambers to approve the bill that night, and while the upper chamber passed the measure at 2 a.m. Tuesday, the House decided to debate the measure later during the day, amid concerns it still lacked enough support for passage. As of press time Tuesday, lawmakers in the lower chamber were still hammering out a consensus to approve the legislation. Legislative sources told Caribbean Business some majority lawmakers voiced deep concerns

over the bill’s broad scope over the island’s debt, while some legal experts believe the measure could be unconstitutional (see related story on debt moratorium, p. 7). In the halls of the Capitol Building, creditors’ lobbyists were fighting tooth and nail for their clients, seeking last-minute changes to the legislation or stopping it altogether. “What we are doing tonight has never been done in Puerto Rico. Obviously, there are concerns, but we have no doubt we are doing what we need to do,” Senate President Eduardo Bhatia said Monday. Four objectives Acting under the Puerto Rico

TOP STORY Constitution’s police powers, the legislation seeks to empower the governor to declare a moratorium, by executive order, on the commonwealth’s debt service—an authority that would last until January 2017. It also calls for a stay against litigation that may result from triggering the mechanism. That authority would be exercised on an entity-by-entity approach, covering all types of commonwealth debt, including those of the GDB and general obligations. Strong immunity protections would also be established for “persons acting in furtherance of this Act,” including “any person, director, officer, employee, contractor, agent or representatives,” the bill states. As for the bank, the measure would amend, or “modernize,” the receivership process not only of the GDB, but also that of the Economic Development Bank. The governor may allow the bank to continue performing its operations by triggering such actions as easing restrictions on deposit reserves, suspending payments on letters of credit and extending credit, prohibiting disbursements of loans and refusing to honor withdrawal requests unless the funds will be used for essential services. If the GDB is placed under the new receivership mechanism, a temporary “bridge” bank could be created to carry on some GDB

functions and honor deposits, the bill adds. The administration had been leaning toward splitting the bank into good/bad entities, “an FDIClike [Federal Deposit Insurance Corp.] approach,” with the government bank seeking “to protect depositors and access to its asset value, while figuring out some restructuring of the third-party creditor debt,” a government source with knowledge of the matter said. The “bridge bank” contemplated in the legislation would “preserve liquidity and valuable assets for the benefit of the commonwealth and ease the transition of the GDB into a more modern entity,” the bill reads. It could assume certain liabilities of the bank, including deposits, while creditor claims that are not assumed by the bridge bank would remain at the old GDB. Nevertheless, creditors would be entitled to receive a “net liquidation amount,” which is the money they would have received if the GDB were liquidated. Lastly, a new entity called the Puerto Rico Fiscal Agency & Financial Authority would be established to essentially take over the GDB’s roles as the island’s fiscal agent and financial adviser. The entity’s board would comprise only one member, and in addition to its fiscal agent duties, would “take charge of the commonwealth’s [debt-] restructuring efforts,” the bill further states.

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On the creditor front, the legislation has been “crafted with due regard to the rights of Puerto Rico’s creditors,” the bill reads, adding it would not seek to discharge any debt and “respects constitutional priorities by establishing minimum criteria for the payment of the commonwealth’s public debt that may come due during the temporary moratorium period,” among other related aspects. Advisers for the commonwealth and its debt holders continue to negotiate terms for a voluntary debtrestructuring plan that could secure enough support from all sides, which have entered into nondisclosure agreements, sources said. A group of GDB creditors that combined hold a substantial amount of the institution’s $4 billion debt sued the bank Monday, seeking to stop the bank from transferring assets out, except for those that cover essential services. While government officials downplayed its effect on the measures being discussed to deal with the GDB, two people with knowledge of the matter said it could affect the government’s action plan with respect to the bank. The commonwealth’s move to present debt-moratorium legislation before the summer debt cliff comes amid debate in Congress over draft legislation presented by Republicans in the House to tackle the island’s fiscal crisis.

PUERTO RICO

| Thursday, APRIL 7, 2016

LEAD

Legal experts’ views on P.R.’s debt moratorium

Debt Moratorium may be Defensible in Court, but Could be Unconstitutional BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

Legislation that would declare a debt moratorium on Puerto Rico’s debt service, which includes nearly $1.9 billion due in May and July, is slated to be presented by the government, but could violate the P.R. Constitution. However, this alternative would be defensible in court under current circumstances of the fiscal crisis, legal experts said. In just four weeks, the government will be confronted with the possible insolvency of the Government Development Bank (GDB)

and a major default. The GDB owes $422 million on May 2 while the government must pay $1.5 billion in general-obligation (GO) bond payments in July. While the government is in talks with creditors to discuss the possible restructuring of the debt, Gov. Alejandro García Padilla is slated to introduce a bill that would declare a debt moratorium. Last week, David Bernier, the Popular Democratic Party’s candidate for governor, as well as other PDP government officials, had objections to the moratorium and proposed a discussion with creditors to pay only the interest on the debts due

in May and July, and postpone debt payments on the principal for at least five years. “This is not a moratorium but a sensible and responsible way to meet payments,” Bernier said. The implementation of a debt moratorium could spur a slew of lawsuits against the government because it would constitute a violation of contractual obligations protected by the local and federal constitutions. The New Progressive Party opposes the alternative. The commonwealth Constitution establishes the priorities for budget items that must be paid when revenues are insufficient to

Carlos Ramos, constitutional law professor at Inter American University Law School

operate the government. GO payments are the first on that list that must be paid. “The moratorium is indeed a violation of the clause that protects contractual obligations…under the Puerto Rico and U.S. constitutions but none of those rights are

absolute nor operate in a vacuum,” said Carlos Ramos, a constitutional law professor from Inter American University Law School. The government, he said, could argue that while the Constitution Continues on page 8

PUERTO RICO

Thursday, APRIL 7, 2016 |

LEAD Debt

Continued from page 7

establishes a priority for debt payments and protects contractual obligations, the territory also has the obligation under the Constitution to ensure citizens’ welfare. “The clause that protects contractual obligations is not absolute because there are situations when an emergency calls for such contracts to be violated…. In the absence of an agreement with creditors, the government can say it had no other choice but to violate the contract because it also has the duty to protect the welfare of its citizens,” Ramos said. The constitutional lawyer argued that while the federal district court and the First Circuit Court of Appeals have not been sensitive to the actions taken by Puerto Rico’s government to deal with the fiscal crisis, such as when it declared the local bankruptcy law

unconstitutional, he believes the matter could change in the future. Ramos said the best way to deal with the situation in the coming weeks, will be to pay part of the debt or the interest on the debt when it becomes due, as some have suggested, and to continue to negotiate debt restructuring with creditors. “In the short term, there is no other choice but to take some emergency

measures to protect basic services such as education,” he said. Puerto Rico has some 18 different types of debt, each with their own characteristics. To make matters worse, the government has not been open about the nature of its obligations. Walter O. Alomar Jiménez, a constitutional law professor at the University of Puerto Rico Law

“The moratorium is indeed a violation of the clause that protects contractual obligations…under the Puerto Rico and U.S. constitutions but none of those rights are absolute nor operate in a vacuum.” —Carlos Ramos, constitutional law professor at Inter American University Law School

School, said public comments about defaulting or not paying, brings problems because it causes more downgrades and more distrust of the government. He said the commonwealth Constitution already states that all constitutionally guaranteed debt must be paid first, above other areas, so he rejected any calls for a moratorium on debt payments. “The best thing the government can do in the few weeks ahead is to establish dialogue Walter O. Alomar Jiménez, a constitutional law with financial markets professor at the University of Puerto Rico Law School and make payment plans. Creditors and banks do this. They reduce interest payments and eshe said. “There has to be transpartablish other payment plans. The ency. We have a serious, large debt government has to speak clearly,” that must be restructured.”

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LEAD

Energy regulations will report delinquent clients to credit bureaus

Energy Commission Slated to Analyze Prepa’s Securitization Analyzes Regulations to File Complaints About Utility Bills BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

The proposed regulations that would create an administrative process for Puerto Rico Electric Power Authority (Prepa) clients to file complaints about their utility bills and the suspension of services, would require customers to pay a portion of their bills before objecting to the amounts and would allow Prepa to report delinquent customers to credit-rating agencies. The regulations are currently being analyzed by the Energy Commission, which was slated to receive today the utility’s petition seeking approval of the securitization transition charge and adjustment mechanism for Prepa’s Revitalization Corporation. The Energy Commission also has a technical hearing scheduled April

11 to deal with the utility’s integrated resource plan. Following yearlong debtrestructuring negotiations, the utility was able to reach a deal several months ago with the Ad Hoc Group of Prepa bondholders, fuelline lenders, monoline insurers and the Government Development Bank—accounting for 70% of Prepa’s $9 billion debt load. Under the restructuring support agreement, bondholders would take a 15% haircut on the principal, after exchanging their bonds for new paper that would be backed by a special charge on clients’ bills. For its part, the utility would receive debt-service relief for five years, while freeing up cash to modernize its powerplants. As part of energy reform and the restructuring, the Energy Commission prepared regulations that would create a process for clients

to object to their Prepa utility bills, whose results can be appealed to the commission. A client who wishes to object to a utility bill will still have to pay an amount that is equal to the average he/she paid over the past six months. Using the complaints process will not exempt the Prepa customer from paying future utility bills. The regulations create a separate process for municipalities, which would be required to reduce their energy consumption. According to the regulations, customers who do not object to their utility bills and who do not pay, may get their electricity services cut off. Those who fail to pay two or more utility bills will be reported to credit bureaus. “This is not a final proposal…. I want to evaluate the regulations in light of [Puerto Rico’s] economic situation,” said Energy

Prepa Executive Director Javier Quintana

Commission Chairman Agustín Carbó, who said that in a recent hearing on the regulations, objections were raised against the reporting requirement. The regulations do not establish processes for suspending electricity services for public agencies, which owe millions of dollars to Prepa. Carbó says Prepa said in public hearings that it has reached payment agreements with these clients and it deemed them adequate. Carbó said the Legislature— through the general fund budget—approves the amounts earmarked to agencies to pay their utility bills. “As a former head of the Solid Waste Management Authority, which owes $6 million, the

amounts earmarked to pay utilities, didn’t even cover a month of utilities,” he said. He also noted that payments owed by agencies are being handled by a subsidy law recently approved by the Legislature. On the other hand, the regulations do not prevent Prepa from suspending services to certain entities that provide essential services such as hospitals, fire stations, police stations and schools. Carbó said the regulations do not want to give immunity to any organization providing essential services on the payment of utilities. “You have to save and be responsible for your consumption,” he said.

“This is not a final proposal…. I want to evaluate the regulations in light of [Puerto Rico’s] economic situation.” —Energy Commission Chairman Agustín Carbó Prepa board members

PUERTO RICO

Thursday, APRIL 7, 2016 |

BANKING/FINANCE

Reliable’s auto loans portfolio was $1.79 billion at the end of 2015, down 2.42%

Used Vehicles Helped Auto Finance Companies Stay Afloat in 2015

New Unit Sales Fell 7.8%, While Auto Loans Portfolio Dipped 2.4% BY JOSÉ L. CARMONA j.carmona@cb.pr

It’s no secret Puerto Rico’s lingering economic downturn has taken a toll on local consumers’ access to credit. As a result, many auto buyers with damaged credit scores have ended up driving off dealer lots in used vehicles instead of brand-new ones. The latest figures from the Puerto Rico Financial Institutions Commissioner’s Office attest to this growing trend. While new-auto sales fell 7.8% last year to 81,357 units, the island’s auto loans portfolio (excluding leases) dipped by a smaller 2.4% margin to $6.3 billion. “While there’s no reliable statistics on the sale of used vehicles in Puerto Rico, in the case of Reliable Auto we are practically 50/50 in terms of the number of new and used vehicles we finance on a monthly basis. However, in terms of dollars, new vehicles represent about 67%, as the average financing of a new vehicle is much higher than a used one,” Néstor Vale, senior vice president of

business development at Reliable Auto, explained to Caribbean Business. Although the loans portfolio of Reliable Auto—the undisputed leader in auto financing in Puerto Rico—fell slightly last year, it was able to retain its dominant market share intact, Vale noted. Reliable’s auto loans portfolio stood at $1.79 billion at the end of 2015, down 2.42%, but the company kept its 28.55% share of the market unchanged from 2014. Other industry players were also able to improve their respective auto loans portfolios and market shares last year, through increased promotional efforts and special financing offers to help dealers move their new- and used-vehicle inventories. Popular Auto’s loans portfolio grew 6.5% to $806 million, increasing its market share by 1.07% to 12.79% last year. Meanwhile, Puerto Rico-chartered credit unions, or co-ops, increased their auto loans portfolio 9.11% to $611.9 million, seeing their market share go up 1.03% to 9.71% in 2015. In the case of BMW

Néstor Vale, Reliable Auto senior vice president of business development

Finance, its auto loans portfolio jumped 18.51% to $252.47 million, and its market share rose 0.71% to 4.01% in 2015.

Vale said that in Reliable Auto’s case, the Wells Fargo subsidiary has seen an increase in the financing of used vehicles over the past year, but especially in the last six to seven months. “We have experienced an increase in loan originations, given the fact that we added three new floor-plan clients in 2014, which helped boost loan originations in the last quarter of 2015 and in the first quarter of this year,” he indicated. “February 2016 was a record month for us, with auto loan originations significantly higher than the same month the previous year.” Meanwhile, auto loan delinquencies and repossessions have remained low and controlled, staying in the single digits, Vale said, insisting this demonstrates Reliable’s strong focus on doing things right.

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| Thursday, APRIL 7, 2016

BANKING/FINANCE

PUERTO RICO

About 50% of local Scotiabank clients use alternate channels

Scotiabank Puerto Rico is Giving Away 42 Mortgage Payments in Latest Promotion

TE DAMOS MÁS ALTERNATIVAS PARA

CUIDAR LA SALUD DE

TU NEGOCIO

Part of Bank’s Efforts to Increase Use of Alternate Payment Methods

Scotiabank Puerto Rico’s latest promotional campaign, ‘Que prefieres ganar?’ (‘What do you prefer to win?’) BY JOSÉ L. CARMONA j.carmona@cb.pr

Continuing with the bank’s 105th anniversary in Puerto Rico and its efforts to promote the use of alternate channels among local clients to make their mortgage payments, Scotiabank Puerto Rico is rolling out a new promotional campaign by giving away free mortgage payments. In the bank’s new promotion titled, “Que prefieres ganar?” (“What do you prefer to win?”), if clients close a mortgage loan with Scotiabank between April 6 and July 31, they will compete to win either one or three months’ worth of free mortgage payments. To win three months of free

mortgage payments, clients must register for direct payments of their Scotiabank mortgages. To win a free month of mortgage, clients must make their mortgage payments through any of the bank’s alternate channels, such as Scotia en Línea (Scotia Online), Scotia Móvil (Scotia Mobile app) and Web Management, among others. “Part of our commitment is to offer consumers the tools they need to facilitate their banking transactions. The availability of our alternate channels provides consumers the opportunity to make their mortgage payments from wherever best suits their needs, saving them time,” said Hubert de la Feld, Scotiabank Puerto

Rico president & CEO. “At Scotiabank, we have transformed to offer clients all the alternatives to make their banking experience easier and more pleasant.” According to Michelle Pérez, Scotiabank Puerto Rico vice president of marketing, the financial institution wanted to continue rewarding its clients during its yearlong, 105th anniversary celebration. The awards in the bank’s latest promotion, she added, will allow clients to obtain financial relief that could help them achieve a short- or longterm goal. In all, some 42 monthly mortgage payments of up to $700 each will be awarded during the promotion, which Pérez pointed out aims to increase customer usage of the bank’s various alternate payment methods. About 50% of Scotiabank Puerto Rico’s mortgage clients utilize the alternate channels to make their monthly mortgage payments, she said. The average mortgage loan at the bank is $125,000, with an average monthly payment of $700 to $800, Pérez added. Scotiabank’s new promotional effort has a total media investment of $540,000, including traditional media (print, TV and radio), promotional print and display materials at bank branches, and nontraditional media (social media, web).

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Thursday, APRIL 7, 2016 |

Oversight Board would be empowered to approve tax incentives, ease labor laws and control P.R.’s three branches of government

LABOR

Oversight Board Empowered to Reform Labor Would be Able to Stop Strikes and Approve Tax Waivers

“The bottom line is that they say this is a conversation but it is not. It is an imposition.”

BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

Proposed congressional legislation that would impose a federal oversight board over Puerto Rico would be empowered to ease local labor regulations on commerce, if needed, including enforcing laws to prevent public workers from going on strike or lockout until certain terms are agreed to. The board would also have to approve all local tax waivers. The legislation, which members of Congress say is slated to be introduced April 11, amends the federal minimum wage law to allow employers to pay employees under age 25 a reduced federal wage of about $4.25 an hour for the first 90 days of their employment. “The regulations issued by the [U.S.] secretary of Labor relating to exemptions regarding the rates of pay for executive, administrative, professional, outside sales and computer employees, and published in the Federal Register 7 on July 6, 2015, shall have no force or effect in the Commonwealth of Puerto Rico,” the bill states. Another bill in Congress would allow Puerto Rico to opt out of the federal minimum wage, which was opposed locally. The legislation, submitted two weeks ago, has obtained two additional sponsors. The language of the bill to create a federal oversight board would allow the new entity to ease the regulatory web that may be preventing the economy from growing, including enforcing laws that could prevent public workers from going on strike, even though that is a right guaranteed in the commonwealth Constitution. The bill states, “The Oversight Board shall ensure the purposes of this Act are met, including by prompt enforcement of the laws of Puerto Rico prohibiting publicsector employees from participating in a strike or lockout.” The legislation, as introduced, proposes the creation of a five-

Carlos Ramos, a constitutional law professor at Inter American University Law School

in a historical context. This is a repetition of what we have been trying to fight for decades.” member board, whose members would be appointed by the president with the concurrence of the chairpersons of the U.S. House and Senate Natural Resources committees. This board will have ample powers over Puerto Rico’s three branches of government, which has prompted the commonwealth government to announce plans to challenge the board’s constitutionality. Some features of the bill include allowing the board to create a debtservice reserve fund under its authority to ensure debt payments and issuances or to create a superbond. The legislation poses restrictions on all borrowing, which would have to be approved by the board. The bill requires information on pensions and would allow for benefit reductions. The pension systems have more than $40 billion in liabilities. The Legislature, and as a consequence the board, will have to approve all contracts for more than $1 million. Veto power over government budgets The board is not empowered to create budgets but has veto power over them. If lawmakers cannot pass a balanced budget, the board will do it for them. In that regard, it will be able to lay off public workers or levy taxes.

The government will be required to issue reports on its finances. Government officers who decline to obey the board’s orders can be subject to criminal fines and penalties. The legislation provides for incentives for infrastructure development but does not grant earnedincome or child tax credits. It also does not address the healthcare fiscal cliff’s $2.5 billion funding gap expected to occur in 2017. The measures also provide for a debt-restructuring mechanism under the board’s control, which would require strict financial data and a budget plan, and for stays in creditor claims. The government has already said the bill strips the island of any sovereignty and has vowed to challenge the legislation in court, something that legal experts have said will be difficult. Constitutionality Walter O. Alomar Jiménez, a constitutional law professor at the University of Puerto Rico Law School, said it would be difficult to prove the law is unconstitutional because the U.S. Supreme Court says Puerto Rico is a territory and the U.S. Constitution grants Congress full powers over all U.S. territories. “There is already a faculty granted by the [U.S.] Constitution that allows Congress to modify and work on

its relationships with all territories. This board was born under the guise of the territorial clause. It would be a law authorized by Congress and the [U.S.] Constitution…. I cannot see what argument would be used to challenge this law because the [U.S.] Constitution gives Congress the faculty to regulate all territories, and the United States has already said we are a territory,” he said. There would also be some strategic problems in challenging the law because the Puerto Rico Oversight, Management & Economic Stability Act, or Promesa, states that action against the Oversight Board would have to be brought in the U.S. District Court for the District of Columbia and appealed to the U.S. Circuit Court of Appeals of Columbia, except for actions related to enforcing subpoenas or making adjustments to debts. Carlos Ramos, a constitutional law professor at Inter American University Law School, noted that the bottom-line problem with the proposed board is that just like the Military Law of 1900, the Foraker Act and the Jones Act, it is a unilateral imposition over Puerto Rico. “The bottom line is that they say this is a conversation but it is not. It is an imposition,” he said, noting the board’s broad powers over Puerto Rico’s three branches of government. “You have to put this

Territorial Fiscal-control boards While fiscal boards have been imposed on more than 100 jurisdictions, it would be the first time, with the exception of Washington, D.C., that Congress would impose such a board over a U.S. territory. “In other jurisdictions, we have seen states impose boards over their cities, as happened in New York and Detroit, and they accepted it. Congress has never imposed a board over a state…. The closest thing to that was Washington, D.C., but Congress is already there, so there is a difference with Puerto Rico,” he said. Daniel Hanson, an investment adviser, said he sees constitutional challenges involving the board’s authority to create a bankruptcy plan or to impair suppliers, pensioners or others. “…[T]he legislation probably muddles the debate over so-called Article III judges and the role of bankruptcy courts in the federal judiciary. Since district court judges and bankruptcy judges operate under separate authority, the authority of bankruptcy plans to be adjudicated in district court and the enforceability of bankruptcy plans from bankruptcy judges in district courts, has long been in dispute.” To read the rest of this story, go to cb.pr.

| Thursday, APRIL 7, 2016

HR/MANAGEMENT

PUERTO RICO

Talent developer creates guide for technical workers

Stryker P.R. Recognized: Pushes Job Creation

Kelly Conway, vice president of human resources operations for Stryker; Alexis Ponte, senior project manager; Vanessa Alvarado, senior talent manager; Erick Rodríguez, engineering associate director; and Lonny Carpenter, global operations president.

BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

In large companies and manufacturing plants, human resources officials often design professional development plans for managers and top executives but neglect to do so for employees in the lower echelons. Vanessa Alvarado, talent development manager at Stryker Puerto Rico, decided to change all of that in the medical-devices manufacturing company. She embarked on the difficult task of drafting a professional development plan for technicians and other employees at her company that specifies skills and areas of knowledge they need to grow in their jobs. Her plan, known as the Technical Development Guide, was so successful that Stryker awarded Alvarado a Platinum Award in the area of talent development. “Previously, we did not have such a tool designed in a structured way.… For each

position, you have a list of the skills and what you need to do to grow in that position or grow into another position. For instance, the guide tells you exactly what you need to do if you want to grow from a packaging engineer to a quality engineer,” she said. Alvarado noted that for each kind of technology, she identified the areas of knowledge and skills needed for all kinds of work, including tooling and molding, packaging, automation, operational engineering and quality. “This gives you a structure so you can get good results,” she said. “This is not only for chemists or biologists but for anyone in a technical position.” The plan allows the company to invest in its own people and brings in products that can open up opportunities for employees. Growing in a job not only entails moving up but also being able to work on special projects at other Stryker locations around the world, but also improving

employees’ performance or becoming more productive, she said. Along with Alvarado, Reginald Mingot, supplies chain director, was recognized for developing the first supplychain academy. Stryker’s annual Global Quality & Operations Awards also recognized the local company with golden awards in three other areas. Carlos Benítez, advanced manufacturing engineer, won an award in the area of innovation for a design that was used in manufacturing Iconix Tape, which resulted in significant market impact. The Arroyo plant also received an award in the area of collaboration for a production transition strategy from another plant in the area of inventory, product quality and financial projections. The quality team received a golden award for its achievement in the area of waste disposal that brought savings to the company.

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COVER STORY

TOP STORY

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

Puerto Rico’s Lost Decade A Series on Economic Decline

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

branches, each one controlled by a diļerent political party— was just the tip of the iceberg as

Ten years later, Puerto Rico once again faces the threat of another public sector shut-

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

PUERTO RICO

Thursday, april 7, 2016 |

Cloudy Skies Ahead for the CEE Bleak Electoral Landscape for 2016

BY ISMAEL TORRES i.torres@cb.pr

regime prevailing at the time, and the liberals, who advocated for greater powers to the criollos living on the island. Since then, hundreds of elections have been held in Puerto Rico, featuring the most diverse problems and results, but always dependent on a metropolis: first Madrid, until

1898, and later Washington, D.C., up to the present day. The elections cycle of 2016 begins on June 5 with the general primary in which candidates for governor will face off—Pedro Pierluisi and Ricardo Rosselló of the New Progressive Party—and candidates for municipal assemblies

will be chosen. All this will take place amid the backdrop of a continuing decrease in the island’s voting population, as the massive outmigration to the U.S. mainland continues. The most recent official election numbers indicate that in the 2008 general elections, the electoral

register included 2,458,036 voters, of which 1,903,392 (79.05% participation rate) voted, versus an electoral register of 2,402,943 voters in 2012, of which 1,874,419 (78.22% participation rate) voted, including about 35,000 votes cast Continues on next page

PUERTO RICO 15

| Thursday, april 7, 2016

The famed Valencia incident in which Puerto Rico’s gubernatorial election result was allegedly tampered with in 1980 will pale compared to the challenges that the system will face without the proper funding. All told, the State Elections Commission (CEE according to its Spanish acronym) faces a $92 million shortfall to hold a reliable democratic contest in November 2016.

Continues from previous page

through early voting allowed to prison inmates, police and electoral and judicial staff working on election day. As of February 2016, the electoral register in Puerto Rico had about 2,166,718 active voters, of

which 135,794 were new enrollees and 110,104 were reactivated voters. Voter registration for the 2016 elections officially closes on Sept. 19. Possible district consolidation after 2020 The significant decline in

population is reflected in the drop in the number of voters, so experts expect that if this trend were to continue, it is possible that after the 2020 Census, Puerto Rico may have to consolidate representative districts due to the number of voters lost. “With the reduction in population, it is possible that the Board of Electoral Review may need to consolidate districts,” said Mario Marazzi, executive director of the Puerto Rico Statistics Institute, adding that the institute is willing to work on the issue if asked to do so when the time comes. On July 1, 2015, Puerto Rico’s population showed a decrease of 9.2% when compared to 2004, according to data from the U.S. Census Bureau. As of July 1, 2015, the population was estimated at 3,474,182 people compared with the 3.8 million estimate on July 1, 2004. The Census Bureau also estimated that 10 municipalities have shown a significant population decrease when compared with April 1, 2010 Census results. Those municipalities include Lares (with a population decrease of 11%), Mayagüez (a loss of 10.7%), Fajardo (minus 10.5%), Guánica (minus 10.5%), Peñuelas (minus 10.5%), Ponce (minus 10.4%), Yauco (minus 10.4%), Ceiba (minus 10.4%), San Juan (minus 10.2%) and Las Marías (minus 10.1%). So far, the State Elections Commission (CEE by its Spanish initials) has not decided how many voting centers will be open for the general primary on June 5 because issues like the federal court order mandating the activation of 700 voters who did not vote in the 2008 and 2012 elections, still need to be addressed.

Fiscal uncertainty for the CEE In light of this situation, alleged mismanagement and an unwillingness to engage in a decisionmaking process are some of the problems CEE officials have to deal with, in addition to the fiscal uncertainty in meeting all the financial obligations of the electoral cycle, which includes the general primaries and the November 8 general elections. With the Puerto Rico government in an economic crisis, fiscal uncertainty affects other CEE processes such as: timely hiring the necessary services to design and print ballots, build booths and procure many additional materials required for the elections, including voting centers. The CEE had estimated that it would need about $15 million for the general primaries. However, the Office of Management & Budget has pledged $10 million for the general primaries, of which $7.2 million has been delivered so far. “One of my main concerns is the lack of strong voter education and guidance on the campaigns, which have not even been planned out,” said Roberto Iván Aponte Berríos, the electoral commissioner of the Puerto Rican Independence Party (PIP). The new electronic voting system modifies the environment for voters, so a massive education and guidance campaign is necessary, but there has been no movement in that direction, claimed the pro-independence official, expressing concerns about the lack of action to that effect. The shortage of funds aggravates the CEE’s performance, which by law is responsible for

planning, organizing, directing and supervising the electoral body and all electoral procedures applicable in all elections held in Puerto Rico. “The main problem is the current administrators’ unwillingness to go to court to force the Executive branch to comply with the electoral law regarding the agency’s budget,” said Jorge Dávila, electoral commissioner for the New Progressive Party (NPP). In recent years Dávila has insisted on the need to seek the court’s assistance so the electoral law’s provisions on the agency’s budget are met, but his claim has not obtained support from other commissioners. The Electoral Act states that the Legislature will provide the CEE with sufficient funds for its operation each year and that the Governor must submit a budget that will not be less than the one allocated for the previous fiscal year. The law specifically states that in general election years such as 2016, the Governor and the Legislature shall provide the CEE with additional resources to address the pre-election and electoral events included in that law, and these additional resources shall not be considered part of the CEE’s operating expenses budget. Today, the CEE must deal with the June 5 general primaries and the November general elections. Whether the necessary funds to cover the costs of the electoral cycle will be available, estimated by some to be $92 million (38 for the general elections), is still unknown. Preliminary estimates suggest the CEE requires $18 million for Continues on page 16

PUERTO RICO

Thursday, april 7, 2016 |

COVER STORY

Continues from page 15

the electronic vote count, $30 million for the general elections and another $34 million for its regular operations. The CEE’s operational status is complicated by having to comply with an order issued by federal judge Carmen Consuelo Vargas, ordering the agency to update its official lists by activating some 700 voters who were excluded in the 2008 and 2012 general elections because they did not vote. “Today, the CEE does not have the resources to verify the electoral status of those people. We do not know if they died or whether they are in Puerto Rico or what happened to them,” said Aponte Berríos. Dominion The Dominion Voting company is responsible for the vote

“Today, the CEE does not have the resources to verify the electoral status of those people. We do not know if they died or whether they are in Puerto Rico or what happened to them.” — Roberto Iván Aponte Berríos, the electoral commissioner of the Puerto Rican Independence Party (PIP). counting process, for which it has about 6,000 machines that will be installed at voting stations throughout the island and which should expedite the delivery of voting results, both in the general primaries and in November’s general elections. Last October, Dominion Voting signed a $38.8 million contract, of which the CEE paid $8 million in 2015. The agency’s next payment of $7 million is

due in June and the remaining balance will be paid in annual installments over the course of five years. Dominion Voting’s contract covers the 2016, 2020 and 2024 elections and includes 6,075 tabulating machines, personnel training, equipment storage and software maintenance. Javier Jiménez, Dominion’s Puerto Rico project manager, was confident about moving

forward with the electronic vote counting and expects to have all the machines available in time to train personnel who will be working on the elections. “We have been receiving machines and we are preparing them. It is detailed work since we have to receive them, get them ready to work, give them a firmware upgrade and then the CEE conducts a physical and functional inspection of the

machines according to processes created jointly,” Jiménez said. He also said that in addition to the machines, they are getting some 500 external batteries to be used in the case of a power failure. “Even though the machines have an internal battery that lasts for two hours, we have these external batteries that last eight hours in case they are needed,” he added. He highlighted that out of the many training sessions conducted throughout the island, there have been power failures in only four occasions, but he believes that based on experience, this should not be a recurring scenario. Regarding the CEE’s fiscal problems and Dominion’s payments, Jiménez replied: Continues on next page

PUERTO RICO 17

| Thursday, april 7, 2016

COVER STORY Continues from previous page

“Employees are working very well and we are confident that everything will go well.” With this system, the CEE seeks to ensure the accuracy and transparency of the results in electoral processes. The importance of transparency CEE President Liza García Vélez said the new system “will give emerging parties and independent candidates—which lack the resources of traditional parties with greater memberships— the opportunity to be certain that votes will be awarded. This ensures transparency during the evening’s results.” NPP commissioner Dávila understands that for voters, the

also supported the electronic vote counting and said integrating technology to the electoral process gives him more confidence. “The machines offer that transparency guarantee. I say this with full knowledge; in the last 2012 elections, our colleague María de Lourdes was able to rescue 11,000 votes—which were not counted at voting centers— thanks to the recount. Those votes do not belong to the PIP senator-at-large; they are votes cast by voters who exercised a right and therefore, I think we are taking an important step in recognizing the value in the fact that once voters leave a voting center, they know that their vote will be awarded as it was cast,” the PIP official said. However, almost two months

According to Dávila, using this technology eliminates subjectivity in interpreting the voter’s intention, which was formerly somewhat subjective “and possibly some officials in San Juan interpreted it one way, while in Mayagüez they interpreted it differently.”

Liza García, CEE president

Roberto Iván Aponte, PIP Electoral Commissioner

— Javier Jiménez, Dominion’s Puerto Rico project manager process would be transparent since they will continue to vote on ballots, noting that one of the great advantages of electronic vote counting is that “once a voting center closes, that machine will not accept any more ballots. After the voting center closes, the machine will handle the counting process and issue the results.” According to Dávila, using this technology eliminates subjectivity in interpreting the voter’s intention, which was formerly somewhat subjective “and possibly some officials in San Juan interpreted it one way, while in Mayagüez they interpreted it differently.” Meanwhile, Aponte Berríos

before holding the general primary, the number of voting centers to be open is still unknown. The NPP has suggested some 2,800 voting centers, while the Popular Democratic Party— which needs to hold fewer primaries—proposes 1,500 centers. This information is vital because it is used to determine the number of electors to be assigned to each voting center. During the last election in 2012, this number was 335 voters, but it will definitely increase, according to election officials consulted by Caribbean Business, as the lack of funds will not allow the CEE to rent many facilities such as private schools and universities, that were previously used as voting centers. n

Dominion Voting Pres & CEO John Poulos & Project Mgr Javier Jiménez

PUERTO RICO

Thursday, APRIL 7, 2016 |

RETAIL/COMMERCE

P.R. bookstore expands; industry fills niches left with Borders’ closure

The Bookmark: Impervious to Puerto Rico’s Shrinking Book Market

BY JUAN A. HERNÁNDEZ & MARISOL ROBLES VELÁZQUEZ j.hernandez@cb.pr

The Bookmark, located on the second level of San Patricio Plaza in Guaynabo, has expanded its operations by successfully diversifying its offerings, filling niche markets and providing top quality services, thereby bucking the general trend of struggling bookstores. Recently, the store acquired enough floor space to become one of only two tenants at the mall’s main entrance from the multistoried parking structure. Like La Tertulia in San Juan’s Río Piedras district, The Bookmark is also a book café, but favors publications in English, even though a significant portion of their selection is in Spanish. “We took the temperature of our customers, so we have literature to please different tastes. We emphasize literature for young adults such as ‘The Maze Runner’ and Divergent series and books

by John Green [‘The Fault In Our Stars,’ ‘Looking for Alaska,’ etc.],” said Bookmark manager Luis Ángel Oyola. But while Oyola admits literature for young adults in English is the store’s bestseller in terms of genre, literature in Spanish is not far behind, with contemporary authors such as Carlos Ruiz Zafón, Ildefonso Falcones and Milena Busquets leading the trends in the Spanish language. Open since May 2013, Bookmark is a retail operation of JR Blue Label Management, a book distributor servicing big retail chains such as Walgreens, Wal-Mart, Sam’s Club and Costco. Nevertheless, its inventory is rather different to what anyone might find in a big chain store. “We took control of the operation to diversify our offer…and our success is mainly due to our highquality service. Our personnel is very knowledgeable; they are young voracious readers,” said Oyola, who is convinced bookstores in Puerto

Rico should not compete against each other, but rather should be allies. “What we don’t have, another bookstore does,” the manager said. After the expansion, the next step for The Bookmark is opening a new location. “We are considering the possibility of opening a new store, but first we have to evaluate how it goes after the expansion,” Oyola said. How smaller bookstores stay afloat The key to staying afloat in the book industry is to specialize in the type of books to be sold, said Alfredo Torres Otero, owner of Librería La Tertulia and president of the Asociación Puertorriqueña de la Industria del Libro (April by its Spanish acronym), or the Puerto Rican Book Industry Association. “The only way you can achieve staying alive [in the book industry] is to start filling the holes bigger book companies aren’t reaching,” said Torres Otero, whose bookstore is strategically located on Juan Ponce de León Avenue (along with other bookstores) to target college textbook necessities from institutions the likes of University of Puerto Rico, Universidad del Sagrado Corazón and Universidad Politécnica de Puerto Rico. With the group of readers who stray from mainstream reads, La Tertulia limits the books in English, selling an abundance of Spanish literature, while Norberto González and Librería Mágica, also in Río Piedras, concentrate on selling textbooks with content such as politics, economy, mathematics and history. If a bookstand or kiosk were opened again in a shopping mall, he added, the business’ sustainability would depend on low operational costs and book sales of high circulation. In an attempt to preserve and prevent further impoverishment of Puerto Rican cultural life, April and other literary defenders previously had succeeded in establishing an exception in the commercial purchasing of books by making textbooks and literature tax free throughout the island, he said. “I don’t believe [the book industry] will go back to being the same

in Puerto Rico; however, I do believe there are spaces to be filled, more smaller bookstores to be built that can be manageable, limited and have less inventory,” Torres Otero said. Decline of bookstores in Puerto Rico Another factor thwarting the book industry in P.R. is the use of digital versions of the publications, accompanied by illegal printing of texts in schools and universities to economically ease the burden on students by not purchasing the printed version of textbooks. “The volume [of books] decreases because the primary source for book sales, where it actually counts, are schools and universities,” said Torres Otero, regarding the staggering decline in student population, the closing of public schools and less enrollment in universities every year. “There is no [official] statistic for the number of books sold in Puerto Rico,” stated Mario Marazzi Santiago, executive director of the Puerto Rico Statistics Institute. However, there are statistics on the general consumption of printedpaper reading material, grouping textbooks, magazines and newspapers together, he indicated. Torres Otero also confirmed he has heard of other people offering statistics on the number of books sold on the island, without having

Alfredo Torres Otero, owner of Librería La Tertulia and president of the Asociación Puertorriqueña de la Industria del Libro

actual evidence of a “reliable statistic,” he said. La Tertulia, along with other bookstores in Río Piedras, has suffered a substantial reduction in book sales throughout the years, a significant 50% loss in profit. “An estimation is made based on the experience distributors, editors and booksellers have when they sell books to the Education Department as well as [to specific] schools,” Torres Otero explained. The estimation for book sales (including textbooks) islandwide has been between $30 million and $35 million, substantially decreasing each year due to a number of reasons, he added. About 80% of the books in Puerto Rico are imported from Latin America and the U.S. Furthermore, since the huge void produced in the Puerto Rican book industry after the departure of Borders Book & Music Store about six years ago, the concept of bookselling mega-stores returning to the island has long vanished and created an uncertain future for local bookstores and bookstands. Borders on the island sold triple the amount of books and other merchandise than any other of the company’s stores in the U.S., marking 2005 as Borders’ most profitable year with about $17 million generated. The presence of this megabookselling chain, from 2000 until 2010—previously located in Plaza Las Américas shopping mall in San Juan and other stores in Mayagüez and Carolina—concentrated islandwide book sales by offering discounted prices on distinct content found in smaller local bookstores and providing a welcome hangout for teenage cliques and literary enthusiasts, while also causing the closing of about 30 smaller bookstores and bookstands within the past decade. To this day, the metropolitan area depends on nine main bookstores: Librería Mágica, Norberto González, Librería Isla, University Books, Librería Universitas, La Tertulia and K&L Books, on Américo Miranda Avenue, all in Río Piedras; Libros AC in San Juan’s Santurce district; and a much smaller La Tertulia bookstore in Old San Juan.

| Thursday, APRIL 7, 2016

ECONOMY

TAXES

P.R. Treasury Secretary Criticizes House Proposals, Defends Value-Added Tax Only New Legislation Could Stop VAT’s Full Implementation June 1

Rico’s distribution chain is small, since most retailers are importers, also facilitating the VAT’s credit oversight, he said. “Therefore, the implementation of a VAT in Puerto Rico is much easier compared with other jurisdictions,” the Treasury secretary indicated. VAT offers greater benefits to merchants The full implementation of a VAT on the island provides greater benefits for small merchants than

that Treasury is ready for the VAT’s full implementation. “We have issued several publications for the VAT’s implementation, including a regulations proposal. We have held several meetings with members of various industries to receive their comments and suggestions to the proposed regulations, as well as answer other inquiries related to the VAT. The educational campaign on the VAT is about to begin in the coming weeks,” Zaragoza commented. The Treasury chief pointed out

“It is imperative we maintain the transformation of our consumption tax system and achieve the transition from an IVU to a VAT as the latter is a more efficient consumption tax.” –Juan Zaragoza

Puerto Rico Treasury Secretary Juan Zaragoza

BY JOSÉ L. CARMONA j.carmona@cb.pr

The current 11.5% sales & use tax (IVU by its Spanish acronym) is 75% a value-added tax (VAT), and completing its transition June 1 is a must in order to achieve economic stabilization, Puerto Rico Treasury Secretary Juan Zaragoza commented last week. “It is imperative we maintain the transformation of our consumption tax system and achieve the transition from an IVU to a VAT as the latter is a more efficient consumption tax. Furthermore, the Treasury Department will oppose any bill that eliminates the transition to a VAT. Eliminating this

change, which is so important to our tax system two months before we initiate the transition, adds to the climate of fiscal uncertainty that Puerto Rico is experiencing,” the Treasury secretary said. Zaragoza testified during House Treasury & Budget Committee hearings analyzing three bill proposals from Committee Chairman Rafael “Tatito” Hernández to replace the IVU with either an excise or a general consumption tax and forgo the switch to a VAT. Currently, the IVU is considered almost a VAT as its main elements are already incorporated into the island’s hybrid consumption tax system, Zaragoza indicated. These include the imposition of

the tax at the beginning of the distribution chain (either at the arrival or sale of the goods by a manufacturer); a credit mechanism with respect to tangible non-real property acquired for resale; or the taxing of most professional services rendered at a reduced 4% rate. The 4% business-to-business (B2B) tax, which has been strongly opposed by the private sector, will increase to 10.5% on June 1 as part of the full transition to a VAT. In addition, the fact that a tight group of 300 importers introduce 80% of the goods consumed in Puerto Rico facilitates the handling of VAT credits, since few merchants will be claiming much of the credits generated. Puerto

under the existing IVU, Zaragoza pointed out. “Under the current IVU, only service providers with annual sales of less than $50,000 have the benefit of providing their services tax exempt, regardless of the type of services they provide. With the VAT’s implementation, all merchants generating annual sales of less than $125,000 from goods or services could be considered a small merchant, if they choose to do so,” Zaragoza explained. Small merchants have no obligation to collect the VAT from their sales, are not obligated to file monthly VAT returns, do not have to keep track of their VAT credits, and do not have to provide fiscal receipts to other merchants, the Treasury secretary said. Treasury is ready for VAT Although the full implementation of the VAT was pushed back for 60 days, from April 1 to June 1, to allow for alternative legislative tax proposals, Zaragoza assured

the agency is not against redistributing the tax load by reducing income taxes and taxing more on the consumption side, as part of efforts to foster savings and depenalize productivity. “We are also not against establishing mechanisms that alleviate the consumption tax’s regressive nature. These are elements we previously defended aggressively in our proposal to transform the commonwealth’s tax system,” Zaragoza said, in reference to the failed House Bill 2329. Kenneth Rivera, a former Society of CPAs president and partner at local accounting firm FPV & Galíndez PSC, said neither Treasury nor the Legislature supports any of the three proposals from Hernández, which paves the way for the VAT’s implementation on June 1. “The only way to stop the full implementation of the VAT on June 1 is through specific legislation that calls for its indefinite postponement, and that is unlikely to happen,” Rivera said.

ECONOMY

Thursday, APRIL 7, 2016 |

SIN COMILLAS

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

WINNERS FOR THE WEEK WINNERS WINNERS FOR THE WEEK 52-wk 52-wk

PRICE PRICE 52-wk 52-wk WEEKLY PERFORMANCE OF52-wk PUERTO RICO PRICE STOCKS 52-wk PRICE PRICE PRICE STOCK SYMBOL 52-wk 12/31 1/8 CHANGE STOCK SYMBOL LOW52-wk HIGH CHANGE STOCK SYMBOL LOW HIGH 12/31 1/8 CHANGE STOCK SYMBOL LOW HIGH 3/24 4/1 CHANGE --Triple-S Management Corp. GTS 17.34 27.23 24.70 25.44 0.74 -

WINNERS FOR THE WEEK Evertec Inc. 11.27 23.12 LOSERS FOR THEEVTC LOSERS FOR WEEK Popular Inc. BPOP52-wk22.4052-wk 35.81 LOSERS FOR THE WEEK 52-wk 52-wk STOCK SYMBOL LOW HIGH 52-wk 52-wk First BanCorp FBP 2.06 6.76 STOCK SYMBOL 52-wk LOW HIGH 52-wk STOCK SYMBOL LOW HIGH OFG 4.56- 17.25 - OFG Bancorp -

STOCK PopularInc. Inc. Popular

SYMBOL LOW BPOP 25,80 BPOP 25,80

LOSERS FOR THE Popular Inc.Management Triple-S Corp.BPOP GTS Triple-S Management Corp. GTS

WEEK 25,80 17,34 17,34

13.42 PRICE 27.94 PRICE 12/31 PRICE 2.69 12/31 PRICE 12/31 - 6.96

14.04 0.62 PRICE 28.39 0.45 PRICE 1/8 CHANGE PRICE 2.89 0.20 1/8 CHANGE PRICE 1/8 CHANGE - 6.97 - 0.01

HIGH 35,83 35,83

12/31 28,34 28,34

1/8 25,84 25,84

CHANGE -2,50 -2,50

35,83 27,07 27,07

28,34 23,91 23,91

25,84 22,07 22,07

-2,50 -1,84 -1,84

22,07 PRICE 15,47 15,47 PRICE 1/8 15,47 6,30 4/1 6,30 25,84 6,30 2,99 2,9922,07 2,99

-1,84 -1,27 -1,27 CHANGE -1,27 -1,02 CHANGE -1,02 -2,50 -1,02 -0,26 -0,26 -1,84 -0,26

Triple-S Management Corp. GTS 17,34 27,07 23,91 52-wk 52-wk PRICE Evertec Inc. EVTC 14,93 23,12 16,74 Evertec Inc. EVTC 14,93 23,12 52-wk 52-wk 16,74 PRICE STOCK SYMBOL LOW HIGH 12/31 Evertec Inc. EVTC 14,93 23,12 16,74 OFG Bancorp OFG 6,25 17,83 7,32 STOCK OFG Bancorp OFG SYMBOL 6,25 LOW17,83 HIGH 7,323/24 Popular Inc. BPOP 25,80 35,83 28,34-6,25 -17,83 OFG Bancorp OFG First BanCorp FBP 2,97 6,76 - 7,32 3,25 First BanCorp FBP 2,97 6,76 3,25 Triple-S Management Corp. GTS 17,34 27,07 23,91 First BanCorp FBP 2,97 6,76 3,25

Sin Sin Comillas Comillas isis aa Spanish-language Spanish-languagedigital digitalmedia mediawebsite websitethat that Sin Comillas is a Spanish-language digital media website banking, that specializes in business news in such areas as economics, specializes in business news in such areas as economics, banking, specializes in business news in such areas as economics, planning and tourism. Sin Comillas was founded in 2010 by planning and tourism. Sin Comillas was founded in 2010 bybanking, economist and journalist Luisa García Pelatti. planning Sin Comillas was founded in 2010 by economistand andtourism. journalist Luisa García Pelatti. economist and journalist Luisa García Pelatti.

Public-Debt to Hold First Meeting specializes in business Audit news in suchCommittee areas as economics, banking, Audit Committee to Hold First Meeting planning and tourism. Sin Comillas was founded in 2010 by to Hold First Meeting Public-Debt Audit Committee People With Ph.D.s Earn 10 Times More Than economist and journalist Luisa García Pelatti. Next Week Next Week Those With High-School Diplomas Public-Debt Audit Committee to Hold First Meeting Next Week Sin Comillas is a Spanish-language digital media website that

Evertec Inc.

EVTC 14,93 23,12 16,74 15,47 -1,27 Weekly Comment Comment on Puerto Puerto Rico Weekly on Rico Stocks Stocks OFG Bancorp OFG 6,25 17,83 7,32 6,30 -1,02 Weekly Comment on Puerto Rico Stocks

Despite stronger-than-expected U.S. jobs-growth jobs-growth report for December, First BanCorp FBP U.S.2,97 2,99 -0,26last Despite aa stronger-than-expected report forhigher December, Stronger-than-expected jobsU.S. data6,76 pushed 3,25 Wall Street the Standard & Poor’s (S&P) 500 Index and Dow Jones Industrial Average the Standard & Poor’s (S&P) 500 Index and Dow Jones Industrial Average Friday,awith stocks extending a rally tojobs-growth its seventh day. Thefor positive news Despite stronger-than-expected U.S. report December, posted their worst five-day start to a year on record last Friday, on continweighed favorably investors, at stronger corporate earnings posted their worst on five-day startastoitahinted year on record last Friday, on continthe Standard & Poor’s (S&P) 500 Index and Dow Jones Industrial Average ued concerns concerns slowdown in China China could damage damage the global At while downplaying concerns over potential future interest-rates hikes. ued aa slowdown in could the global economy. economy. At posted their worst five-day startthe to aDow yearfell on 1.02%, record the last S&P Friday, on continthe end of trading last Friday, 500 lost 1.08% The U.S.ofLabor Department’s Labor Statistics said1.08% last the end trading last Friday, Bureau the Dowoffell 1.02%, the S&P(BLS) 500 lost ued concerns a slowdown China could damage the global economy. At and the Nasdaq Composite dropped 0.98%. The weekly declines onand the S&P Friday U.S. nonfarminpayrolls rose by 215,000 month and thethat Nasdaq Composite dropped 0.98%. The weeklylast declines on the the S&P the end ofaDow trading last Friday, Dow fell 1.02%, the S&P lost 1.08% Despite stronger-than-expected U.S. jobs-growth report for December, unemployment rate edged upthe to 5% from an eight-year low of 4.9%. The and the were the largest since September 2011, and the500 largest on reand the Dow were the largest since September 2011, and the largest on reand the Nasdaq Composite dropped 0.98%. The weekly declines on the S&P the Standard & Poor’s (S&P) 500 Index and Dow Jones Industrial Average jobless continued or re-enter the cord to rate markincreased the start as of more a year.people Data released by to theenter U.S. Bureau of Labor cord to mark the start of a year. Data released by the U.S. Bureau of Labor and theforce, Dow were largest since 2011, the largest on the reposted their five-day start a year on record last Friday, on continlabor aworst signthe of confidence intoSeptember the jobincreased market, the BLS said. Statistics showed U.S. nonfarm payrolls byand 292,000 inWhile December Statistics showed U.S. nonfarm payrolls increased by 292,000 in December strong March jobs report underscored the stateside economy’s resilience, ued a slowdown in China could damage the global economy. At cord mark the start of asteady year. Data released by the U.S. Bureau of Labor andtoconcerns the jobless rate held at 5%. In addition, U.S. payrolls for October and the joblessat rate heldannualized steady at 5%. In in addition, U.S. payrolls for October after growing a 1% rate the first quarter, an influx of the end of trading last Friday, the Dow fell 1.02%, the S&P 500 lost 1.08% Statistics showed U.S. nonfarm payrolls increased by 292,000 in December and November were revised to show 50,000 more jobs created than previand November were revised to showcould 50,000 more jobs created than previworkers into the U.S. labor market temper wage growthfor and keep and the Nasdaq Composite dropped 0.98%. The Friday. weekly declines the S&P and the jobless rate held steady at a5%. Inday addition, U.S. payrolls October ously reported. Oil prices fell for fifth last Fears of aon slowdown ously reported. Oil prices fell for a fifth day last Friday. Fears of a slowdown the Federal Reserve cautious about further interest-rate increases. and the Dow the largest since September 2011, the on reand were revised to show 50,000 more jobsand created than previinNovember China and were the global economy kept spooking investors lastlargest week, creatin China and economy kept spooking investors week, creatAnalysts saidthe lastglobal month’s employment data suggests thelast U.S. economy cord mark the start a year. released by the Fears U.S. Bureau of Labor ously Oil prices fell for a Data fifth day last Friday. of afell slowdown ing reported. ato turbulent start toof the trading year. For the week, the Dow 6.2% to is growing fast to increase aboutthe inflation. the ingnot a turbulent startenough to the trading year.concerns For the week, Dow fellFor 6.2% to Statistics showed U.S. nonfarm payrolls increased by 292,000 in December inweek, Chinathe and the global economy spooking investors last at week, creat16,346.45. The S&P 500 lost 6%kept to 1,922.03, while Nasdaq Composite Dow Industrial added 1.6%the to close 17,792.75. 16,346.45. The Jones S&P 500 lost 6% Average to 1,922.03, while the Nasdaq Composite and thedropped jobless rateto held steady atyear. 5%. InFor U.S.the for 6.2% October ing a turbulent start trading the week, fell to Index 7.3% tothe 4,643.63. The Standard Poor’s (S&P) 500 Indexaddition, climbed 1.8%payrolls toDow 2,072.78, while Index dropped& 7.3% to 4,643.63. and November were revised to show 50,000 more jobs created than previ16,346.45. The S&P 500 lost 6% to 1,922.03, while the Nasdaq Composite the Nasdaq Composite Index jumped 3% to 4,914.54. ously reported. Oil to prices fell for a fifth daythe lastGovernment Friday. Fears of aRico slowdown On the local front, the Government Development Bank’s Puerto Stock After a moderate fall the previous week, Development Index dropped 7.3% 4,643.63. On the local front, the Government Development Bank’s Puerto Rico Stock in China and the global economy kept spooking investors last week, creatBank’s Puertoposted Rico Stock Index (PRSI)its closed on positive last Index (PRSI) a heavy loss during first week of the ground year, spearIndex (PRSI) posted a heavy loss during its first week of the year, spearpropelled by Wall Street’s strong rally. the week, the PRSI added ing a turbulent to the trading year. For For the week, the Dow fell 6.2% to headed byfront, last start week’s massive stock selloff. For the week, the PRSI lost Onweek, the local the Government Development Bank’s Puerto Rico Stock headed by last week’s massive stock selloff. For the week, the PRSI lost 46.56, or 2.86%, to close at 1,672.24, with all its components reporting 16,346.45. The S&P 500 lost 6% to 1,922.03, while the Nasdaq Composite 150.86, or 8.62%, to close at 1,598.79, with all components in the red for the Index (PRSI)8.62%, posted aclose heavy loss during its first week of the year, spear150.86, or to week’s attop 1,598.79, components inwhich the red for the weekly gains. Last gainerwith wasall First BanCorp, jumped Index dropped 7.3% tomassive 4,643.63. five-day period. Leading last week’s nongainers was OFG Bancorp, which headed by last week’s stock selloff. For the week, the PRSI lost five-day period. Leading last week’s nongainers was OFG Bancorp, which 20 cents, or 7.43%, to close at $2.89. It was followed by Evertec Inc., erased $1.02, orto13.93%, to1,598.79, close at with $6.30. Itcomponents was followedinby Popular Inc., 150.86, or 8.62%, close at all the red for the erased climbed $1.02, or62 13.93%, to at to $6.30. was followed by Popular Inc., which cents, orclose 4.62%, closeItat $14.04. Shares ofRico Triple-S On the local front, the Government Development Bank’s Puerto Stock which skidded $2.50, or 8.82%, to close at $25.84. Shares of First BanCorp five-day period.Corp. Leading week’s nongainers OFG Bancorp, which Management advanced 74tocents, or towas close at $25.44. which skidded $2.50, or last 8.82%, close at 3%, $25.84. Shares of First Popular BanCorp Index (PRSI) posted loss during its firstfollowed week of by thePopular year, fell 26 cents, or 8%,atoheavy close atat $2.99. Triple-S Management Corp. spearedged erased $1.02, or 13.93%, to close $6.30. It was Inc., Inc. added 45 or cents, to $2.99. close atTriple-S $28.39. Management OFG BancorpCorp. inched up fell 26 cents, 8%, or to1.61%, close at edged headed by last week’s massive stock selloff. Forofthe week,Inc. thelost PRSI lost down $1.84, or 7.70%, to close at $22.07. Shares Evertec $1.27, which skidded $2.50, or 8.82%, to close at $25.84. Shares of First BanCorp 1down cent,$1.84, or 0.14%, to close $6.97. or 7.70%, to at close at $22.07. Shares of Evertec Inc. lost $1.27, 150.86, or 8.62%, to at 1,598.79, with all components in the red for the or 7.59%, to or close atclose $15.47. fell cents, 8%, close at $2.99. Triple-S Management Corp. edged or 26 7.59%, to close atto $15.47. By José L. Carmona five-day period. Leading last week’s nongainers was OFG Bancorp, which down $1.84, or 7.70%,Banking/Finance to close at $22.07. Shares of Evertec Inc. lost $1.27, Senior Reporter, By José L. Carmona erased $1.02, or 13.93%, to close at $6.30. It was followed by Popular Inc., Business orCaribbean 7.59%, to close at $15.47. By José L. Carmona senior skidded reporter,$2.50, Banking/FinanCe which or 8.82%, to close at $25.84. Shares of First BanCorp senior reporter, Banking/FinanCe CariBBean BUsiness fell 26 cents, or 8%, to close at $2.99. Triple-S Management Corp. edged BUsiness ByCariBBean José L. Carmona

Weekly Comment on Puerto Rico Stocks

Puerto Puerto Rico Rico Senate Senate President PresidentEduardo EduardoBhatia Bhatiacalled calledfor forthe thefirst firstmeeting meetingnext nextTuesday, Tuesday,Jan. Jan.19, 19,ofofthe thePublic Public Debt Audit Committee. The committee will examine and evaluate the hiring, refinancing and/or renegotiatDebt Audit Committee. The committee will examine and evaluate the hiring, refinancing and/or renegotiatPuerto Rico Senate President Eduardo Bhatia called for the first meeting next Tuesday, Jan. 19, of the Public ing ing process processof ofPuerto PuertoRico’s Rico’spublic publicdebt, debt,the theorigin originand anddestination destinationof ofresources, resources,as aswell wellasasthe theperformance performanceofof Debt Auditfinanced Committee. The committee will debt. examine and evaluate the hiring, refinancing and/or renegotiatprograms with internal or external The first meeting was originally set for December programs financed with internal or external debt. The first meeting was originally set for Decemberbut butwas was ing processThe of Puerto Rico’sAudit publicCommittee debt, the origin and destination of resources, as well asand thehas performance of cancelled. Public-Debt was created through Act 97 of 2015 in July, to render cancelled. The Public-Debt Audit Committee was created through Act 97 of 2015 in July, and has to render programs financed with internal ormonths. external debt. The first meeting was originally set for December but was reports of its performance every six reports of its performance every six months. cancelled. Public-Debt Committee was created Act 97 of Tuesday, 2015 in July, has render Puerto RicoThe Senate PresidentAudit Eduardo Bhatia called for the through first meeting next Jan. and 19, of thetoPublic reports of its performance every six months. The commission has to define the methodology to conduct the audit of Puerto Rico’s $70 billion debt as orDebt Audit Committee. committee will examine and evaluate theof hiring, refinancing The commission has to The define the methodology to conduct the audit Puerto Rico’s $70and/or billion renegotiatdebt as ordered by law, create a database that allows for all manner of analysis regarding the indebtedness process and ing process ofcreate PuertoaRico’s public thefor origin and destination of regarding resources,the as well as the performance of dered by law, database thatdebt, allows all manner of analysis indebtedness process and set up an information transparency system fordebt. theto investigative, future indebtedness processes. The commission has to define the methodology conduct theauditing audit ofand Puerto Rico’s $70December billion debt as orprograms financed with internal or external The first meeting was originally set for but was set up an information transparency system for the investigative, auditing and future indebtedness processes. dered by law, a database that allows forwas all manner analysis theinindebtedness and cancelled. Thecreate Public-Debt Audit Committee created of through Actregarding 97 of 2015 July, and hasprocess to render Besides the committee’s are P.R. Speaker Jaime Perelló; Senateindebtedness majority spokesperset up anBhatia, information transparency system for theHouse investigative, and future processes. reports of its performance every members six months. Besides Bhatia, the committee’s members are P.R. House Speakerauditing Jaime Perelló; Senate majority spokesperBY GARCÍA PELATTI sonLUISA Aníbal José Torres; Senate Minority Leader Larry Seilhamer, Puerto Rican Independence Party Sen. María sonCOMILLAS Aníbal José Torres; Senate Minority Leader Larry Seilhamer, Puerto Independence Partythose Sen. who María her lifetime than a person with a Rican SIN to be unemployed than de Santiago; House Majority Leader Charlie Hernández; House Leader Jenniffer González; Besides Bhatia, the members are P.R. House Speaker Jaime Perelló; Senate majority spokesperTheLourdes commission hascommittee’s to define the methodology to conduct the audit ofMinority Puerto Rico’s $70 billion debt as orde Lourdes Santiago; House Majority Leader Charlie Hernández; House Minority Leader Jenniffer González; high-school diploma. did not finish college. Government Development Bank President & Chairwoman Melba Acosta; Statistics Institute Executive Mario son Aníbal José Torres; Senate Minority Leader Larry Seilhamer, Puerto Rican Independence Party Sen. María dered by law, create ashow database that allows all manner analysis regarding thedifferences indebtedness process and Government Development Bank President &going Chairwoman Melba Acosta; Statistics Institute Executive Mario Just&for fromLorenzo a of high-school Different studies that Wage by educational Marazzi; economist José Alameda; lawyer CPA Juan Martínez; Puerto Rico Syndicate of Workers de Lourdes Santiago; House Majority Leader Charlie Hernández; House Minority Leader Jenniffer González; set up an information transparency system thean investigative, auditing and future indebtedness processes. Marazzi; economist José Alameda; lawyer &for CPA Juan Lorenzodegree Martínez; Puerto Rico Syndicate of Workers diploma to associate people with higher levels of edulevels are even greater when comPresident Roberto Pagán; FirstBank President Alemán; IrmaAcosta; HilarioStatistics Arroyo, representing the Caguas Government Development Bank President & Aurelio Institute Executive Mario President Roberto Pagán; President Aurelio Alemán; Irma Hilario Arroyo, representing means anChairwoman increase of Melba $300,000 cation earn more and haveFirstBank lower paring Puerto Rico withthe theCaguas U.S. Savings & Loan Cooperative; and P.R. Chamber of Commerce President Frank Medina. Marazzi; economist José Alameda; lawyer & CPA Juan Lorenzo Martínez; Puerto Rico Syndicate of Workers Besides the committee’s P.R. House Speaker JaimeFrank Perelló; Senate majorityofspokesperSavings Bhatia, & Loan Cooperative; and members P.R.over Chamber of Commerce President aare person’s lifetime, which unemployment rates. Recently, TheMedina. wage differential a person President Roberto Pagán; FirstBank President Alemán; Irma Hilario Arroyo, representing the María Caguas son Aníbal José Torres; Senate Minority Leader Aurelio Larry Seilhamer, Puerto Rican Independence Party Sen. represents a 125% increase. Julio César Hernández, assiswith a high-school diploma is These appointments were made last November byofthe heads of both legislative bodies, in compliance with the Savings & Loan Cooperative; and P.R. Chamber Commerce President Frank Medina. de Lourdes Santiago; House Majority Leaderwith Charlie House Minority Leader Jenniffer González; These appointments were made last November byprofessional theHernández; heads of degrees both legislative bodies, in in compliance with in the tant professor at Universidad People 500% higher the U.S. than disposition of law that states that if the governor didn’t complete the appointments within 10 days after the Government Development Bank & Melba etc.) Acosta; Statistics Institute Executive Mario disposition ofSchool law that thatPresident if the governor didn’t lawyers, complete the appointments within 10 days after the (such asChairwoman doctors, del of states Business Puerto law Turabo’s went into effect, by mutual agreement the heads of the Legislature would carryRico, themwhile out. the pay gap is These appointments were made lastlawyer November byJuan the heads of both legislative bodies, in compliance with Marazzi; economist Alameda; & CPA Lorenzo Martínez; Puerto Rico Syndicate of Workers lawEntrepreneurship, went into effect, José by mutual agreement the heads of the Legislature would carry them out. or Ph.D.s are in the highest wage & analyzed 200% for those with associate de-the disposition of law that states that if President the governor didn’t complete appointments within 10 days after the President Roberto Pagán; FirstBank Aurelio Alemán; Irmathe Hilario Arroyo, representing the Caguas levels. “the of academic degrees grees and bachelor’s “Theeffect country and its fiscal situation are at a critical moment whereby determined action has to degrees. be takenThe relaw went into effect, by mutual agreement heads ofeducation the Legislature would carry them out. Savings &in Loan Cooperative; and P.R.are Chamber of Commerce President Frank Medina. “The country and its fiscal situation at athe critical moment whereby determined action has to be taken reon wages Puerto Rico,” for the Having higher not gap narrows as education levels garding the debt. In this process, transparency is indispensable for all parts, especially for the people of Puerto garding the debt. In this process, transparency is indispensable for all parts,increase. especially for the people of Puerto Department of Labor & Human only allows people to obtain For master’s and profesRico. That is the spirit of the creation of the Public-Debt Audit Committee through Act 97 of 2015, and it is my These appointments made last November by themoment heads ofCommittee both legislative bodies, in “The and its were fiscal situation are at a critical whereby determined action toand be with taken reRico. country That is the spirit of the creation of the Public-Debt Audit through Act 97compliance ofhas 2015, it is the my Resources’ Tendencias magazine, higher but also reduces sional degrees, commitment that action is taken to carry outincomes, the duties described in that law,” Bhatia said.the lifetime wage disposition ofthat lawIn that thattransparency if carry the governor didn’tdescribed complete the appointments within 10people days after the garding the debt. thisstates process, is indispensable all parts, especially for the of Puerto commitment action is taken to out the duties that law,” Bhatiais said. and he concluded that on avertheir unemployment rate.forin For difference 100% between the law into effect, byofmutual agreement heads ofwho the Legislature would carry them Rico. That isSTAFF the spirit the creation of thethe Public-Debt Audit Committee through Act 97out. of 2015, and it is my age, aCOMILLAS person with a Ph.D. earns example, people completed BY SINwent BY SIN COMILLAS STAFF commitment that action is taken out the duties in that law,” Bhatia said. 10 times more throughout his/ to carry a college degree aredescribed half as likely Continues on next page “The country and its fiscal situation are at a critical moment whereby determined action has to be taken reBY SIN COMILLAS STAFF In this process, transparency is indispensable for all parts, especially for the people of Puerto garding the debt.

ECONOMY

| Thursday, APRIL 7, 2016

SIN COMILLAS Continues from previous page

U.S. and Puerto Rico. “This may have implications for public policy seeking to reduce outmigration, since migration is expected to be less profitable to the extent that there are smaller salary differentials,” Hernández said. The analysis shows that it is more profitable for Puerto Ricans to improve their educational levels than those living in the U.S. The increase in wages received with each degree obtained is relatively larger in Puerto Rico than in the U.S. While in the U.S. a person who goes from a high-school diploma to an associate degree can increase his/her salary by 32% throughout their lifetime, in Puerto Rico, this increase is 125%. Another difference is that people with Ph.D.s are in the highest wage level in Puerto Rico, while in the U.S., those with professional degrees occupy higher salary scales. The increase in lifetime work wages is also studied by gender and race. Women obtained the highest increase in wages when they obtain a master’s or Ph.D. degree, but they earn less than men at all education levels, except when they only have a high-school diploma. In that case, women earn more. Men with associate degrees earn 73% more than women at the same educational level. The gender pay gap is 53% for bachelor’s degrees and 55% for master’s degrees. Women with professional degrees will obtain lifetime salaries that are 31% less than those of men with the same education level. Women with Ph.D.s will receive salaries that are 24% less than those of men. Hernández explained that these differences “do not necessarily respond to factors associated with employment discrimination” and could be associated with factors such as specialization by gender, time of entry and length of stay in the labor market associated with births and caring for relatives—although the fact that these tasks fall exclusively on women’s shoulders could be viewed as discriminatory. Race also affects wage levels. For example, black men receive salaries that are 31% lower than whites with the same level of education, associate degrees. n

BY LUISA GARCÍA PELATTI SIN COMILLAS

Commercial Bankruptcies up 26% Compared with February 2015

In February, 930 bankruptcies were filed in Puerto Rico, which was 109 more than for the same month last year, representing a 13.3% increase, according to final data from the Boletín de Puerto Rico. Bankruptcies have now been on the rise for four months. The year 2015 ended with 10,469 bankruptcies islandwide, which was 247 less than in 2014, or a 2.3% decrease. The number of bankruptcies has fallen in four of the past five years. For February 2016, 149 commercial bankruptcies were filed, 26% more than for the same month in 2015. Bankruptcies by business type consisted mainly of restaurants (22), grocery stores (10), beauty salons (6), cafeterias (5) and construction contractors (5). Meanwhile, in 2015, 52 more business bankruptcies were filed than in 2014. Total commercial bankruptcy debt for January and February 2016 was $355 million, which is 55% more than for the total debt for the same period in 2015. The largest commercial bankruptcies so far are S.M. Medical Services ($39.2 million), Norfe Group ($25.3 million) and A la Orden Discount ($23.3 million.) Bankruptcies reached their highest level in 2010 with 12,376, or 9.6% more than in 2009, the highest number since 2005, when then-President George W. Bush signed the new Bankruptcy Law. In March, 895 bankruptcies were filed—65 less than the same month last year—representing a decrease of 6.8%, according to preliminary data from Boletín de Puerto Rico. n

PuraCap Purchases Blu Caribe Pharmaceutical By SIN COMILLAS

PuraCap, a pharmaceutical company dedicated to

developing soft gelatin capsules, concluded the purchase transaction of the Blu Caribe pharmaceutical company, located in

the municipality of Dorado. The amount of the transaction was not revealed. Dahai Guo, CEO of PuraCap,

said “acquiring Blu Caribe in Puerto Rico is a major growth step for the manufacture of solid oral dosage forms in the United States, which also complements our plant in China.” Blu Caribe began its operations in 2010 after acquiring Biovial Laboratories, where 135 people worked at that time. In 2011, the company invested $4 million and committed to creating 120 additional jobs in exchange for $7.5 million in financing from the Economic Development Bank for Puerto Rico and a special electricity rate from the Puerto Rico Electric Power Authority, with an 11% discount. At that time, the company had sales averaging $3 million per month. n

ECONOMY

Thursday, APRIL 7, 2016 |

taxes

Treasury takes over the sale of regular, digital stamps used in business and civil transactions

Changes in Sales of Digital Stamps Increase Costs for the Public

Fewer Selling Points; New Service Charge Added BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

The possible loss of about $150 million in yearly revenues to Puerto Rico’s coffers, as well as delays and hikes in prices of legal transactions needed to conduct business, are just some of the immediate effects of the Treasury Department’s decision to shut down about 250 places that sell tax revenue stamps. After 15 years, Treasury opted to take over again the sale of regular and digital tax revenue stamps, effective April 1, shutting down the 250 places that currently also offer that service. Digital stamps are needed for all kinds of legal transactions such as obtaining a birth certificate, closing a mortgage and even filing court documents. The decision is accompanied by agency plans to consolidate its 89 colecturias, or tax collection centers, to 20 Integrated Service Centers. So far, the agency has closed 18 of the tax collection centers, which has affected a number of municipalities such as Arecibo, Bayamón, Caguas, Humacao, Mayagüez and Ponce. Treasury Secretary Juan Zaragoza rejected pleas from the Puerto Rico Bar Association, Notary Public Association, Mortgage Bankers Association, Cooperatives League and United Group of Automobile Importers to postpone launching the new system, arguing it would be costly for the public. P.R. Bar Association President Mark Anthony Bimbela said the 250 selling points, such as law firms and banks, which sell stamps, are once more required to go through a process to become certified as stamp sellers, which is more stringent than the previous one. For example, these establishments must now pay a bond and

other additional costs. “We are worried that this new system, which was imposed in such a trampled fashion, will affect the ability of lawyers to offer services, and rates will go up,” Bimbela said. Rodolfo Concepción Náter, president of the National Commission of Credit Unions of the Cooperatives League, said 80% of the sales in stamps are done outside Treasury’s colecturias, resulting in about seven million transactions a year. However, he noted that because

cooperatives and banks sell the stamps, the recent consolidation of 18 tax collection centers has not hurt residents that much. Silvio López, president of the Mortgage Bankers Association, said that when the new selling points start to operate under the new system, they will have to collect a new service charge for the stamps. “Nowadays, people can get the stamps from banks, municipalities or cooperatives without a service charge. This new charge will be

“We are worried that this new system, which was imposed in such a trampled fashion, will affect the ability of lawyers to offer services, and rates will go up.” — P.R. Bar Association President Mark Anthony Bimbela

”In many cases, the service

charge will be a 100% increase to buy the stamps.” —Silvio López, president of the Mortgage Bankers Association

$1 for each stamp valued at $40 or less and a 2.5% service charge for the value that is above $40. In many cases, the service charge will be a 100% increase to buy the stamps,” he said. This means the new system could increase the costs for closing mortgages or filing court documents. Thousands of administrative operations carried out by businesses that depend on the stamps, such as law firms that conduct mortgage closures, also will be limited because they will have to depend on the operating hours of the colecturías to be able to get the needed stamps for transactions. Ángel Ortiz Guzmán, a lawyer and San Juan municipal assembly member, said Treasury has failed to show under which authority it can confer permits to banks,

municipalities and cooperatives to increase the costs of the stamps with the service charge, adding that the new cost constitutes a tax hike that has not been approved by the Legislature. Treasury is currently amid litigation with the firm that was in charge of developing the digital stamps, OPG Technologies, after the agency asked a court to rule that its decision to take over the sale of stamps does not violate the firm’s intellectual property rights. Ortiz Guzmán said a ruling in favor of the firm could end up paralyzing the entire system to sell stamps. “What is the government and the agency’s plan if a court rules in favor of the firm and Treasury is forced to stop the only system that is selling the stamps?” he asked.

| Thursday, APRIL 7, 2016

POLL

ECONOMY

Puerto Rico’s fiscal crisis having an impact on health insurance

Government Health Insurance Subscribers Spike

Drop in Personal Health Insurance Coverage BY ROSARIO FAJARDO r.fajardo@cb.pr

During the first quarter of 2015, 54% of the population in Puerto Rico reported having government health insurance as their insurance provider. Since then, the number of people subscribed to a government health plan on the island has increased by 5%, according to this week’s Gaither International survey. This ties in accordingly with the decrease in personal health insurance subscriptions, which went from 32% during the first quarter of 2015 to 29% during the first quarter of 2016, Gaither reported. According to the rest of the people interviewed so far during the first quarter (from January through March) of 2016, when asked the type of health insurance plan they currently have, 8% said they currently do not have any kind of health insurance. The rest said they have their insurance with their employer (3%), spouse (2%) or a parent (1%). “When looking at the different age segments, it comes as no surprise that the age group with the largest amount of health insurance subscribers would be the segment of those ages 55 and older, seeing as healthcare needs usually increase along with age,” said Melanie Dederick, a client service associate at Gaither International. “That being said, the type of health insurance plan this age group most reported having was a personal insurance plan with a total of 50%.” However, among those ages 18 to 54, the most common type of health plan they have is a government health plan. Among those ages 18 through 34, 73% have government insurance and only 11% have personal insurance; within the 35 through 54 age segment, 64% have government health insurance and 18% have personal health insurance. Among the 59% who reported they currently have government health insurance, the providers they most mentioned having were Mi Salud (82%), the Puerto Rico government’s health plan for the medically indigent; Triple-S (6%); First Medical (5%); MMM (3%) and MCS (2%). And among those who reported they have personal health insurance, the providers

they mostly mentioned having were TripleS (23%), MMM (20%), MCS (18%), First Medical (14%) and Humana (5%). The results are from Gaither International’s Media Brand Profiles tracking survey, which interviews more than 80 people daily among a representative sample of Puerto Rico’s population 12 years and older. Consumers price sensitive When asked to explain the trends, Dederick indicated many residents may be price sensitive during these challenging economic times. “Personal health plans can be expensive, whereas government plans tend to have more affordable rates and usually cover more medical services than a personal health plan,” she said. “This could have been a large factor in having motivated people to move from a personal health plan to a government health plan. It could be the personal plan was no longer affordable for them since personal plans are paid right out of their pockets,” Dederick added. Meanwhile, Triple-S’ 2015 annual report for investors indicated there is a correlation with Puerto Rico’s economic and fiscal crisis. In discussing risk factors, Triple-S mentioned the government’s fiscal challenges, including its $70 billion public debt. This situation “has adversely impacted and may continue to adversely impact us… The government of Puerto Rico is experiencing a profound fiscal crisis.” Other challenges include a continuing contraction in the island’s gross national product and a decrease in employment levels from 1.2 million in 2007 to 990,113 in 2015, the company indicated. “Continued weakness in Puerto Rico’s economy or the failure of the Puerto Rican government to manage its fiscal problems in an orderly manner could have an adverse effect on our insured customers, which may require [many] to forego insurance coverage or scale back on the amount of insurance coverage purchased,” Triple-S said. —Polling is conducted by Gaither International and the results are reported exclusively by Caribbean Business.

Thursday, APRIL 7, 2016 |

SPECIAL FEATURE

COMPANY PROFILE

McConnell Valdés Commemorates 70th Anniversary

Evolving in Face of New Challenges BY JUAN A. HERNÁNDEZ j.hernandez@cb.pr

Before the commonwealth was presented as a form of self-government and political status to the people of Puerto Rico, the law firm McConnell Valdés LLC, currently the largest on the island, had already opened its offices in Old San Juan, and its first client was First National City Bank. So, contrary to widespread belief, McConnell and Valdés are the names of the original founding partners of the firm—Herbert S. McConnell and Adolfo “Wally” Valdés— and not a brand name. Closely linked to Puerto Rico’s economic and social development since its founding, the firm thrived thanks to the partners’ keen eye in

identifying areas that presented economic opportunities for both the island and their clients. “McConnell Valdés was founded to contribute to the changing needs of a developing Puerto Rico during the 1940s and 1950s. Following that tradition, for 70 years we have continued to adapt our way of doing business and our vision in line with the evolution and new challenges of our Puerto Rico,” said attorney Arturo García, managing director of McConnell Valdés. Throughout its 70 years of actively and successfully contributing to Puerto Rico’s economic and social development, McConnell Valdés has also been committed to improving communities throughout Puerto

Rico. To that effect, and in the context of the firm’s 60th anniversary 10 years ago, McConnell Valdés institutionalized the Pro Bono program for nonprofit organizations. The program offers free transactional and legal advisory services to not-for-profit organizations assisting people of limited means. Under this program, the firm’s attorneys offer volunteer work in their different areas of expertise and interests to benefit the organizations and communities requiring such help. The firm’s attorneys invested 1,030 hours of volunteer work last year. For its 70th anniversary, McConnell Valdés is instituting the Antonio Escudero-Viera Scholarship Program to provide

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McConnell Valdés legal team

economic assistance to college students pursuing law degrees. The scholarship will provide up to $5,000 a year to qualifying students to cover the cost of tuition, fees and expenses related to obtaining a Juris Doctor degree from the University of Puerto Rico Law School. Aspiring students must be in their second or third year of graduate studies. “Supporting the education of professionals in the field of law in Puerto Rico is an important component of our commitment to Puerto Rico,” García said.

“McConnell Valdés was founded to contribute to the changing needs of a developing Puerto Rico during the 1940s and 1950s.” —Arturo García, managing director of McConnell Valdés

| Thursday, APRIL 7, 2016

POLITICS

PUERTO RICO

NPP Gubernatorial Candidates Weigh-in on Puerto Rico Debt Crisis BY ISMAEL TORRES i.torres@cb.pr

The current crisis of the Puerto Rico government is getting worse due to the lack of credibility in government processes and the clumsy handling of the delicate situation without a satisfactory exit in the short and long run, aggravating Puerto Rico’s economic scenario, according to Ricardo Rosselló, an aspiring gubernatorial candidate for the pro-statehood New Progressive Party (NPP). Rosselló also said he is against any bankruptcy petition for Puerto Rico or of non-compliance with its credit obligations because this

would hurt the island’s access to the markets. “No one will lend to someone who is only actively looking for how not to comply and not to pay,” said Rosselló during a recent press conference in his campaign headquarters in San Juan. Rosselló said the actual crisis is the result of a government that spends more than its income and now finds itself without credit and without access to markets because of its own actions. Adding to that scenario, he said, is that the current administration hides its financial reality, insults those who are lending money to the government and actively searches for tools at the local and federal

levels for non-compliance with payments and then is offended because financing is not provided. In tune with his political ideology, Rosselló said that if efforts at the federal level had been invested in a transition towards statehood, Puerto Rico would have had greater economic support, credibility and short-term financial opportunities. Proposes Debt Management Authority Given the fiscal crisis, Rosselló proposed the creation, by the U.S. Congress, of an organism that could take charge of the management of Puerto Rico’s debt. He explained that with the new proposed structure, to be known as

the Puerto Rico Debt Management Authority (PRDMA), which would have the collaboration of the federal government and dedicated income sources, creditors would know that they can count on an entity with the credibility and the will to search for agreements to pay the debt and guarantee government operations and economic development. He said that although the Government Development Bank (GDB) is no longer a solid public corporation, it has useful human resources to develop the PRDMA. He also referred to the need for government reform, given the cost and bureaucracy of government, where “much of what is budgeted is obsolete, redundant or inefficient. “The governmental apparatus needs to be reorganized, transforming it into a more agile and cost-effective one,” said Rosselló, explaining that the government reform he proposes would create a new agency structure, focused on direct services to people, without laying off public employees and resulting in savings in “billions of dollars” in the budget. After pointing out that the main problem of the Puerto Rico government is the lack of credibility, he said the situation is aggravated because the current administration has not published its financial statements for the past three fiscal years, with the resulting negative implications of this action. Regarding debt negotiations with leading creditors, Rosselló said that it must be given on the basis of good faith and denied that creditors do not have the good faith to negotiate. He said that due to the weak value of Puerto Rico bonds in the market, the difficulty of collecting and the legal battles that would take years to be resolved, a majority of creditors are in a position to negotiate with the government to achieve an improvement in the value of their investments, while making financing possible in a transition to a more efficient government.

Rosselló explained that this negotiation would prevent the government from non-payment and would serve as a mechanism to finance government operations, while implementing needed reforms. “Through this strategy, the direct payment to the debt could decrease enough so as not to affect essential services provided by the government,” he said, reiterating his belief that any solution from Congress has to be “tied to the decolonization and equality that is only guaranteed by statehood.” In this context, he justified his decision not to attend the meeting called for by Gov. Alejandro García Padilla to discuss the fiscal crisis and search for possible solutions. Rosselló said he did not attend because days before, he had heard the governor say that those who associated a solution to the fiscal crisis with the political status issue were crazy. He said that he did not go to the meeting because he believes the political status issue and the solution to Puerto Rico’s fiscal crisis are intimately related and that while there was talk about a meeting to address the crisis, García Padilla limited himself to meeting separately with aspiring candidates who arrived at La Fortaleza and afterwards, without having met with all those invited, he announced they had reached some consensus, which Rosselló said did not exist. Pierluisi also blames current administration Resident Commissioner Pedro Pierluisi, blamed the García Padilla administration for the GDB fiscal woes and its possible liquidation. Pierluisi said the lawsuit against the GDB, filed by a group of creditors earlier this week, poses the threat of a possible trusteeship and eventual liquidation of the bank, adding that the GDB’s liquidation would have nefarious consequences for Puerto Rico. Continues on next page

POLITICS

Thursday, APRIL 7, 2016 |

PUERTO RICO

Firm in his belief that economic crisis tied to status issue

The current administration hides its financial reality, insults those who are lending money to the government and actively searches for tools at the local and federal levels for non-compliance with payments and then is offended because financing is not provided. —Ricardo Rosselló

Oye Como Vá There’s nothing like an election year to spice up pop culture with quotable quotes. This weekly section—Oye Como Va, roughly translated as “this is how it goes”—features the most entertaining statements from the campaign trail in Puerto Rico and the United States. The picks range from the sublime to the ridiculous. —Executive Editor P.S.R.

Money, What Money?

“We have some excellent employees ready to fulfill their electoral duty.”—Dominion Voting President Javier Jiménez in response to the question: Do you have the money to implement the electronic vote system?

Baile, Botella y Baraja

“Let’s promote Puerto Rico as the best destination for weddings, a destination with the best beaches in the world; the best forests, bioluminescent bays and caves; the best music on the planet; the most chévere people; a bilingual community; and [a place] where you can drink the best beer, the best rum and smoke the best pot, while enjoying the most beautiful sunsets in the world. And if you want, you can record that and I assure you that tomorrow, planes will be packed with tourists who will want to come to this paradise where we were so fortunate to have been born.”—Independent candidate for governor, Alexandra Lugaro

“The policy of lack of transparency and the refusal to sit down and negotiate with the GDB’s creditors has provoked a group of them to sue the bank in federal court.” —Pedro Pierluisi Continues from page 25

The also aspiring NPP gubernatorial candidate reiterated his call for García Padilla to “correct” the course his administration has followed regarding the management of the island’s fiscal and economic crisis. “Sadly, [on Monday, April 4], what I have been warning about for months has become

concrete,” Pierluisi said. “The policy of lack of transparency and the refusal to sit down and negotiate with the GDB’s creditors has provoked a group of them to sue the bank in federal court.” He pointed out that the allegations in the lawsuit are very serious and they have to be addressed immediately. “From the beginning, I have

said that the only way to responsibly address the issue of the public debt and the fiscal and economic crisis, is through consensual, transparent and good faith negotiations with our creditors, including the thousands of Puerto Ricans who deposited the fruit of their work in government investments and now find themselves in danger of losing a large part of their savings,” Pierluisi said.

How Macho

“I bullied him like a little girl.”—Former Popular Democratic Part (PDP) House Minority Leader Héctor Ferrer in assessing his performance during the debate with PDP Sen. Ángel Rosa. The two are vying to become the PDP candidate for the resident commissioner’s

post in the November general elections.

Sick and Fed Up

Actually sick and fed up would best describe the diatribe, “You know, I am sick of people in Bernie Sanders campaign with their lies about my donors being large oil corporations. Just sick of it.”— Hillary Clinton in response to a Greenpeace supporter’s question on the former Secretary of state’s alleged petroldriven Super PAC, or Political Action Committee.

Stopping the North Korean Menace

“Good luck. Enjoy yourself, folks.”—Republican Party presidential candidate Donald Trump on the possibility of nuclear-armed North Korea going to war again Japan.

| Thursday, APRIL 7, 2016

HEMISPHERE

LATIN AMERICAN AFFAIRS

Now What?: Cuba After the American President’s Visit BY JUAN A. HERNÁNDEZ j.hernandez@cb.pr

With images still fresh in their memories of an affable Barack Obama having dinner with his family at a “paladar,” watching a baseball game with fellow President Raúl Castro and laughing it up in a comedy skit on Cuban national television, people on both sides of the Florida Straits are left to wonder “now what?” President Obama’s visit to Cuba, the first by a U.S. president since 1928, and the first since the two countries severed diplomatic relations in 1961, has created high expectations about whether the recent distention could promote the political changes the U.S. seeks in one of its closest neighbors. “I’ve come to Havana to extend the hand of friendship to the Cuban people. I’m here to bury the last vestige of the Cold War in the Americas and to forge a new era of understanding to help improve the daily lives of the Cuban people,” said Obama after meeting with Castro at the Palacio de la Revolución in Havana, while also acknowledging “there continue to be real and profound differences on the way to promote safety, security, opportunity and human rights.” Obama came to Havana knowing that retaking political and economic relations with the Caribbean island would be a tough sell, even for Cubans eager to have a taste of what the U.S. market has to offer. So, despite the upbeat tone of his message, not many Cubans seemed eager to jump on the Obama bandwagon, including Cuba’s former president and historic revolutionary leader, Fidel Castro. Still an influential voice in government and among the people, the senior Castro warned the U.S.

president and those promoting that Cuba change from its socialist economic model that Cubans do not need “any presents” from the “americanos.” “I also warn that we are capable of producing the food and material riches we need by our own effort and the intelligence of our people. We don’t need the empire to give us anything. Our efforts will be legal and peaceful because that is our commitment to peace and fraternity with all human beings living on this planet,” said Castro in a written statement after Obama’s visit. With political and economic change being considered more of a long-range goal, what can be expected of this new phase in U.S.Cuba relations, which is still under the shadow of an economic embargo? The Obama administration’s goal is to make this rapprochement irreversible by promoting whatever economic relations are allowed under the embargo and strengthening them so U.S. businessmen and entrepreneurs can become the first line of defense. So far, there seems to be enough evidence to anticipate a success in that area. In the next few months, more than 100 commercial flights between the U.S. and Cuba will be moving U.S. tourists daily between the two countries. In addition, Marriott International and Starwood Hotels & Resorts Worldwide, the former in the process of acquiring the latter, have secured deals with the Cuban government—with Washington’s blessing—to manage several hotels in Cuba. The U.S. Treasury Department authorized Starwood to operate existing hotels in Cuba. Hotel Inglaterra in Havana will be part of Starwood’s Luxury Collection brand, while Hotel Quinta Avenida, also in

Cuban President Raúl Castro and U.S. President Barack Obama greet the public at a baseball game in Havana.

Havana, will become a Four Points by Sheraton. Both hotels will undergo renovations before becoming Starwood properties later this year. There will be up to 12 different “licenses” available for individuals to travel to Cuba, ranging from diplomatic missions to trips on behalf of charities, to education and artistic groups. In terms of Cuban goods, U.S. citizens traveling back to the States from Cuba will be able to take with them up to $400 in Cuban goods. Nevertheless, no more than 25% of their souvenirs’ cost, or $100, can be spent on alcohol and/or tobacco products, or a combination of both. This means U.S. connoisseurs will have to continue waiting for the moment when they can enjoy a Cohiba or Montecristo while sipping Havana Club Añejo. The Obama administration expects these “small steps” not only will improve economic conditions for Cubans, but also provide them with greater exposure to “the outside world.” Meanwhile in Argentina Obama’s second stop in his brief Latin American farewell tour was to address another historical political issue: The extent of U.S. involvement in one of Argentina’s darkest periods, “La Guerra Sucia” (“The Dirty War”). U.S. deputy national security adviser Ben Rhoades said Obama’s goal is to demonstrate the U.S. is putting an end to its old ways and

is now ushering in a new era of “engagement and respectful partnership” with Latin America. That is why Obama’s visit to Buenos Aires, precisely on the 40th anniversary of the 1976 military coup, is no coincidence; the date is considered to be the beginning of The Dirty War. To many Argentines, the U.S. government actively supported the military junta presided by the in-

However, the president’s intentions were not met as he had expected. When President Obama stood beside Argentine President Mauricio Macri on the platform at the Parque de la Memoria to pay homage to the disappeared, the Madres y Abuelas de la Plaza de Mayo (Mothers & Grandmothers of the Plaza de Mayo), probably the most recognizable human rights group in

Obama came to Havana knowing that retaking political and economic relations with the Caribbean island would be a tough sell, even for Cubans eager to have a taste of what the U.S. market has to offer. famous Gen. Jorge Rafael Videla, who is considered the main person responsible for the murder and disappearance of 30,000 citizens who were suspected to be members of the political opposition. Obama has agreed to declassify secret diplomatic documents from that period that could shed some light on what role the U.S. government played during the military junta’s rule. The release, combined with the president’s participation in offering flowers in memory of the victims of the junta, should demonstrate Obama’s “clear-eyed recognition of the past,” Rhodes said.

Latin America, had been invited to stand alongside the two presidents. They flat-out refused. Nora Cortinas, co-founder of the Madres y Abuelas de la Plaza de Mayo, characterized Obama as “a representative of death” and accused the U.S. of supporting the junta that killed thousands of people. “What would victims say if they saw us hugging and paying homage to a president from a country responsible for state terrorism?” Cortinas questioned.

Continues on page 28

HEMISPHERE

Thursday, APRIL 7, 2016 |

LEAD STORY

U.S. Justice Department announces packages to help overhaul high fines and fees charged to the poor

Federal Officials Begin Initiatives to Reform Harmful Legal Fines and Fees

Loretta Lynch said these practices can be found throughout the nation, “and their effects are particularly severe for the most vulnerable members of our communities, often with a disproportionate impact on racial minorities.” The Justice Department, she said, is committed to reforming justice-system practices that perpetuate poverty and result in unnecessary deprivations of liberty. “The consequences of the criminalization of poverty are not only harmful—they are far-reaching,” Lynch said. “They not only affect an individual’s ability to support

their family, but also contribute to an erosion of our faith in government. One of my top priorities as attorney general is to help repair community trust where it has frayed, and a key part of that effort includes ensuring our legal system serves every American faithfully and fairly, regardless of their economic status.” In Puerto Rico, the U.S. District Court, which is one of the most productive in the nation, is known for denying bail or imposing millions of dollars in fines on criminal defendants, especially those committing drug crimes, many of which come from public housing projects or poor communities. Anaudi Hernández, who was arrested on corruption charges, was given a $200,000 bail in December. The resources are meant to support the ongoing work of state judges, court administrators, policymakers and advocates in ensuring equal justice for all people, regardless of financial circumstances, Lynch said. The package, which was sent to state chief justices and state court administrators throughout the country, includes: a “Dear Colleague Letter” from the Civil Rights Division and the Office for Access to Justice to provide greater clarity to state and local courts regarding their legal obligations with respect to the enforcement of court fines and fees.

courage to acknowledge when we don’t live up to the ideals that we stand for. We’ve been slow to speak out for human rights, and that was the case here,” said Obama, thus seeming to ignore the constant indictments about U.S. support of the atrocities committed by the military junta in Argentina. In 2000, former U.S. President Bill Clinton ordered the declassification of some 4,000 government documents—some of which have been used in ongoing trials against former military officers. Argentina was also chosen as a destination for Obama because it is the latest nation to vote out the socialist leaders that used to preside over most of Latin America for the past decade. For Macri, who was elected on

the promises of revitalizing Argentina’s ailing economy, Obama’s visit represents the opportunity to lure back foreign investors. Macri recently announced he intended to negotiate a deal to pay U.S. bondholders and investors still owed money from his country’s 2002 bond default. Paying off that debt would allow Argentina to access international markets and borrow money by issuing new debt at reduced interest rates. Obama’s entourage included U.S. Commerce Secretary Penny Pritzker and more than 400 U.S. business executives, who Argentine officials were eager to meet. Specific bilateral agreements and trade deals covering renewable energy, agriculture and technology are yet to be made.

U.S. Attorney General Lynch: Justice Department Committed to Reforming Practices That Perpetuate Poverty BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

The U.S. Department of Justice announced packages to assist state and local efforts to reform harmful and unlawful practices in certain jurisdictions related to the imposition of fines and fees. The department made the move following an investigation in Ferguson, Mo., where the courts routinely imposed high fines and fees on poor and homeless people in what appeared to be a practice to increase revenues. However, U.S. Attorney General

Cuba

Continues from page 27

While Obama openly admitted the U.S. has been “slow to speak out for human rights,” he stopped short of apologizing for Washington’s early support of the military junta. At the memorial, where he dropped white roses into the water in an act of commemoration, Obama said the U.S. was too slow to condemn human-rights violations during Argentina’s dictatorship. “There has been controversy about the policies of the United States early in those dark days…. Democracies have to have the

“The consequences of the criminalization of poverty are not only harmful— they are farreaching. They not only affect an individual’s ability to support their family, but also contribute to an erosion of our faith in government. ” — U.S. Attorney General Loretta Lynch

The letter listed several practices that may violate a person’s due process, such as jailing people because they can’t pay fines; making fines a prerequisite for a judicial hearing; and using bail or bond practices that leave poor people in jail only because they can’t afford to pay for their release. The letter noted that these policies can force people into debt, land them in jail despite posing no risk to the community, and trap them “in cycles of poverty that can be nearly impossible to escape.” The communication also discusses the importance of dueprocess protections such as notice and, in appropriate cases, the right to counsel; the need to avoid unconstitutional bail practices; and due process concerns raisedby certain private probation arrangements. The department also announced $2.5 million in competitive grants through the Bureau of Justice Assistance (BJA) to state, local or tribal jurisdictions that, together with community partners, want to test strategies to restructure the assessment and enforcement of

fines and fees. The grant program will provide four grants of $500,000 to agencies and their collaborative partners to develop strategies that promote appropriate justice system responses, including reducing unnecessary confinement of individuals who are unable to pay fines and fees. The BJA will award an additional grant of $500,000 to a technical assistance provider. Lynch also announced support for the National Task Force on Fines, Fees & Bail Practices, which is led by the Conference of Chief Justices and the Conference of State Court Administrators. The task force is being funded by the BJA and is also supported by the State Justice Institute. It comprises leaders from the judiciary, state and local governments, the advocacy community and academia. The task force will draft model statutes, court rules and procedures, and will develop an online clearinghouse of best practices. Department officials will also serve as ex-officio members of the task force.

Part 2

SPECIAL FEATURE

April 7, 2016 Pages 29-35

YO NO ME QUITO. YO VOY PA’ LANTE. YO VOY A MÍ. POR LA FAMILIA, POR MI PAÍS.

Thursday, april 7, 2016

IRAs: More Than Just a Tax-Season Resource BY MARIO BELAVAL DÍAZ

Individual Retirement Accounts (IRAs) may appear to be a simple financial product, but the benefits are manifold. For starters, it is a mechanism that promotes savings while also providing a source of income for retirement. As a way to promote savings, IRAs allow people to claim a deduction on their income-tax form for contributions made to such accounts. “This allows a person to set aside some savings, so at the time of their retirement, they have a resource that can help them enjoy or maintain their quality of life,” said José Ignacio Posada, business development officer in Popular Fiduciary Services at Banco Popular. “It may serve as another source of income during that stage in life, complementing Social Security and other savings options.”

Posada said IRAs provide an option for people who do not have access to plans such as 401k’s, which are offered by employers, or Keogh plans, which are pension plans for self-employed people. Even if a person has access to these types of plans, IRAs would be an additional and beneficial resource for retirement. “Of course, there is the added benefit that since an IRA promotes savings, it also allows deductions that help reduce people’s tax burdens,” Posada said. “For this and other IRA-related matters, a person should consult his or her financial adviser to determine the best course of action to receive the most benefits from their IRA.” Posada said one edge Banco Popular has with its IRAs is the wide range of options they can offer people, adjusting to their needs and preferences. For example, while there are people

who tend to be more conservative with the money they put into their IRAs, others are willing to take on more risk and long-term growth, and their money in an IRA can be invested in the stock market. Another aspect to consider is related to IRA rollovers, or switching the investment to another IRA account, for example, or retiring the money from an account such as a 401k to avoid a 20% tax on that money, or because they were laid off or changed jobs. The IRA allows rollovers of funds from a qualified retirement plan without a tax impact, thus consolidating the available assets for retirement. Prepaid contribution balances should be transferred to a Roth IRA so any growth can be tax-exempt. “Whatever the case may be, at Banco Popular, we have expert professionals who will guide

S P E C I A L

clients to identify just the right IRA that best fits their needs,” Posada said. Taxpayers are allowed to take advantage of the tax benefits available from IRA accounts and retirement plans as defined by the Puerto Rico Internal Revenue Code under section 1081. A taxpayer can contribute up to $15,000 to a retirement plan and up to $5,000 to an IRA account. There are two basic types of IRAs. The first, which may be called a traditional IRA, allows each taxpayer to deduct up to $5,000 per year on their tax return. While early withdrawal of funds from an IRA will be treated as ordinary income and will be subject to taxation, the nonexempt interest generated will pay taxes at a special 17% rate, if the person chooses a withholding that applies. Then, there is a Roth IRA, in which contributions are also limited to $5,000 per taxpayer per year, but are not deductible on tax returns. However, when withdrawn, these funds are tax-exempt. Since the purpose of an IRA is to save money for retirement, if funds are withdrawn before age 60, a penalty will apply. There

F E A T U R E

José Ignacio Posada, business development officer in Popular Fiduciary Services at Banco Popular.

are several reasons under which early withdrawals are penaltyfree, such as chronic, degenerative or terminal illness, disability, unemployment and the purchase of one’s first principal residence in Puerto Rico. n

A NEW ROUTE IN IRA ACCOUNTS Structured with Popular’s mutual funds Open your new IRA or do a rollover today. Call 787.758.7400 | popular.com/ira

The Mutual Funds IRA are not bank deposits, not guaranteed by Banco Popular de Puerto Rico, not insured by the FDIC. There is a possible risk of loss of principal. Certain fees and restrictions apply. Banco Popular offers various investment alternatives. Obtain more information to determine which one is best for you.

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F E A T U R E

Thursday, aprpil 7, 2016

MassMutual’s Ample Product Portfolio: Something for Every Financial Need BY B.G. DOYLE

Given Puerto Rico’s volatile economic environment, it is more important than ever to choose financial investment products that offer a respectable return and growth potential for the future. With more than 160 years of excellence providing a wide variety of financial alternatives to satisfy client needs, MassMutual has been benefiting local customers in a number of ways. “We have the options to help clients in all their financial needs,” said Osvaldo Cruz-Cintrón, sales manager for MassMutual Financial Group Puerto Rico. “Not only has our fixed-products portfolio helped reduce the impact of the local

crisis, but our options protect our clients against the regressive effect of local tax codes.” This includes life and disability insurance products, long-term care insurance, 401(k)s, IRAs and investment products—all backed by companies with the highest-possible ratings. One example is MassMutual’s whole life policy, which Cruz-Cintrón noted has been a lifesaver for those in Puerto Rico looking for guarantees with a respectable return. “In the case of IRAs, we offer Universal Life Insurance IRA products and others with a very competitive fixed interest,” he said. With MassMutual having also recently acquired the John Hancock Financial

Network operation in Puerto Rico, as well as adding MetLife operations, the company is not only the largest life insurance operation on the island, but one of the largest career operations in the U.S., with new technological tools consistently being developed to enhance adviser knowledge and customer service. “When clients have all the alternatives at one stop, it makes all the difference,” he added. While MassMutual offers a broad range of quality financial products, CruzCintrón pointed out that sound knowledge is essential when determining the right product fit. “Quality service starts with ethics and knowledge, and a well-informed adviser will deliver a much better service when recommending those products that fit client objectives and needs,” he said. “Given that our industry is a very dynamic one, and changes in the various economic frontiers require us to reinvent and build products that meet expectations, our sales force is continually trained to ensure we are up-to-date with the various regulations, codes and legal changes as they occur.” For example, he noted that the U.S. Department of Labor’s new fiduciary rule, which may be imposed next year, will require additional preparation. “That is why we are requiring our sales force to become Series 66 licensed, so our clients will be much better served in line with the rule,” he said. As a result of the company’s product quality and training efforts, MassMutual’s local operation has recently won various awards. This includes the Net Field Force Award for agencies with 100 or more agents, as well as the Burvin Pugh Award for the agency with the highest recruitment growth for the year. “As you can see, our agency in Puerto Rico is an outstanding operation, and the main reason this is happening is because of our commitment to excellence and our ethically driven sales force,” Cruz-Cintrón said. “Every day, we hear

“Not only has our fixed-products portfolio helped reduce the impact of the local crisis, but our options protect our clients against the regressive effect of local tax codes.” —Osvaldo Cruz-Cintrón, sales manager for MassMutual Financial Group Puerto Rico

about people living in extreme poverty because they did not plan for the future or have an adviser help in the process. Having a strategy is a must, but having no strategy is also one that drives you to fail. The best bet is to contact us so you have an adviser who can help you with a successful strategy.” n

Thursday, april 7, 2016

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Leading your financial future in the right direction products and services we have to offer. While no one knows certainly what their future holds, with the right guidance and assistance, your financial future doesn’t have to be left to chance. (1)Diversified Growth IRA (“DGI”) is only for individuals that are residents of Puerto Rico. Diversified Growth IRA or DGI is not insured by the FDIC, is not an Oriental Bank deposit or obligation, is not guaranteed by the Bank and is subject to investment risk, including the possible loss of the principal invested. It also carries greater risks because it uses borrowed money to leverage the asset base of the Diversified Growth IRA trust. Please ask for the DGI Prospectus at any of our branches or at Oriental Financial Services Corp. (authorized dealer), Member FINRA/ SIPC, and read it carefully before investing. Minimum opening balance: $250. The fees for investment withdrawals (for reasons other than the participant attaining age 60, death, disability or unemployment) are: 5% of the investment balance if withdrawn during the first year, 4% of the investment balance if withdrawn during the second year, 3% of the investment balance if withdrawn during the third year, 2% of the investment balance if withdrawn during the fourth year, and 1% of the investment balance if withdrawn during the fifth year. A $54.99 rollover fee will be assessed for each rollover to an IRA in another institution. Subject to a 10% (15% in some cases) early withdrawal tax penalty if the withdrawal does not comply with any of the conditions permitted by the Puerto Rico Treasury Department. The annual fee for administrative and other services is 1.80%. Such annual fee is calculated based on the DGI trust’s average total assets. You should consult with your tax advisor. (2) Maximum refund, per customer, for any penalty incurred by the customer due to a transfer (rollover) of an IRA from another institution to Oriental. We also offer other types of IRA’s. Ask for detailed information about each IRA to decide which is the best for you. For more information, visit any of our branches or access www.orientalbank. com. Products offered by Oriental Bank. n Oriental Bank is a subsidiary of OFG Bancorp. © 2016 All rights reserved.

When it comes to your financial future, the name of the game is savings, but when it comes to helping you save and invest, you have to be confident that your partner won’t play any games with your money. Retirement may seem like a far off prospect for you today, but the earlier you start laying the groundwork for that moment, the better off you and your family will be tomorrow. At Oriental, we help our clients analyze their current financial situation, project the income they will need as they work towards retirement, and which financial instruments can best help them achieve all the goals they have along the way. We realize that our clients have different needs, which is why we offer every possible solution and product available for retirement planning on an individual or corporate level. For example, if you are looking for tools to save for the education of your children, grandchildren, nephews or nieces you should consider our Educational IRA. This IRA allows you choose among 1, 2, 3 or 5 year terms, with an interest rate which is computed daily and credited monthly, and it has the benefit of a tax deferment of up to $500.00. We also recommend our clients to consider our diverse IRA accounts as an additional financial tool. These accounts allow individuals to direct pretax income towards investments that can grow tax-deferred. The Diversified Growth IRA, or DGI, is the first and largest IRA investment fund in Puerto Rico, and invests in a combination of stocks, bonds, and general assets in the United States and Puerto Rico designed to maximize long term investment. This fund is not assured by the FDIC. If you are looking to invest for a short or medium fixed term between 1 to 5 years, with a conservative strategy, the CD IRA may be for you. You can open it with a minimum balance of $250, interests are accumulated every quarter, and it can be used to purchase your first home. These are just some of the retirement

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F E A T U R E

Thursday, aprpil 7, 2016

As Ranked by

PUERTO RICO’S LARGEST ACCOUNTING FIRMS

(Listed According to Total Number of Full-Time Professional Staff as of February 2016) Current/ Previous Ranking

Company Name Telephone/Fax Internet/Email Address

Physical Address

No. of Full-Time Professional Staff

No. of CPAs

No. of Partners

Three Main Industries Served

Year Established in P.R.

Top Executive(s) Title

1/1

PricewaterhouseCoopers LLP (787) 754-9090 / (787) 766-1094 www.pwc.com

Oriental Center 254 Muñoz Rivera Ave., Suite 900 Hato Rey 00918

216

131

Banking Finance Insurance

1925

Benito Morales Managing Partner

2/2

BDO Puerto Rico PSC (787) 754-3999 / (787) 754-3105 www.bdopr.com

1302 Ponce de León Ave. Suite 101 Santurce 00907

123

Banking Real Estate Services

2000

Fernando Scherrer Managing Shareholder

3/3

Kevane Grant Thornton LLP (787) 754-1915 / (787) 758-6610 www.kevane.com

33 Bolivia St. Suite 400 Hato Rey 00917

112

Hospitality Retail/Wholesale Services

1975

Luis Carlos Marcano Managing Partner

4/5

RSM Puerto Rico 1 (787) 751-6164 / (787) 759-7479 www.rsm.pr

Reparto Loyola 1000 San Roberto St. Río Piedras 00926

100

Insurance Government Retail/Wholesale

1977

Doris Barroso Vicens Managing Partner

5/4

Deloitte (787) 282-5300 / (866) 560-0754 www.deloitte.com

Chardón Tower 350 Chardón Ave., Suite 700 Hato Rey 00918

Insurance Banking Consumer Business

1947

Carlos D’Almeida Marketing Director

5/6

KPMG LLP (787) 756-6020 / (787) 754-6175 www.kpmg.com

AIG Plaza, Suite 1100 250 Muñoz Rivera Ave. Hato Rey 00918

Banking Insurance Government

1958

Miguel R. Venta Managing Partner

7/8

Ernst & Young Puerto Rico LLC (787) 759-8212 / (787) 753-0808 www.ey.com

Plaza 273, Suite 1000 273 Ponce de León Ave. Hato Rey 00917

Government Finance Manufacturing

1952

Arturo I. Ondina Managing Partner

8/7

HLB Parissi PSC (787) 641-9801 / (787) 641-9809 www.hlbparissi.com

650 Muñoz Rivera Ave. Suite 502 Hato Rey 00918

Government Education Retail/Wholesale

2002

Wallace Rodríguez Parissi Managing Partner

9/11

FPV & Galíndez CPAs PSC (787) 764-5049 / (787) 764-0528 www.fpvgalindez.com

Pérez Morris Urb. 19 Ponce St. Hato Rey 00917

Healthcare Construction Retail

2008

Julio A. Galíndez Managing Partner

10/12

Baker Tilly Puerto Rico CPAs PSC (787) 622-8855 / (787) 622-8850 www.bakertillypr.com

Metro Office Park Lot 3, Suite 505 Guaynabo 00968

Education Government Banking

1982

José A. Rodríguez Managing Partner

11/10

Rodríguez, Rivera & Toro PSC (787) 834-3100 / (787) 831-2909 www.cparrt.com

Las Nereidas Bldg., 2nd Floor 95 Méndez Vigo St. Mayagüez 00682

Healthcare Hospitality Construction

1967

José A. Toro Mercado President

12/14

Crowe Horwath Vélez 2 (787) 625-1800 / (787) 625-1812 www.crowehorwath.net/pr/

Centro Intl. de Mercadeo 100 Rd. 165, Suite 410 Guaynabo 00968

Construction Education Insurance

1990

Héctor J. Vélez President

13/9

Aquino, De Córdova, Alfaro & Co. LLP (787) 253-9595 / (787) 253-9511 www.adacpa.com

Cecilia’s Place Cond. 7 Rosa St., Suite C-1 Isla Verde 00979

Retail Auto

1997

Jorge Aquino Partner

13/13

Falcón Sánchez & Associates PSC (787) 273-7979 / (787) 273-9797 www.falcon-sanchez.com

Triple-S Plaza, Suite 6A-1 1510 F.D. Roosevelt Ave. Guaynabo 00968

Non-profit Government Retail

1981

Ismael Falcón Ortega President

13/14

LLM&D PSC (787) 777-0660 / (787) 765-8033 www.llmdcpa.com

165 Ponce de León Ave. Suites 201 & 301 Hato Rey 00917

Banking Insurance Government

2001

Carlos Dolagaray Managing Director

16/16

Valdés, García, Marín & Martínez LLP (787) 725-1600 / (787) 721-2795 www.vgmmcpa.com

San José Bldg., Suite 702 1250 Ponce de León Ave. San Juan 00907

Wholesale Services Manufacturing

1975

Luz N. Martínez Managing Partner

17/17

UHY Del Valle & Nieves PSC (787) 793-4650 / (787) 749-8722 www.uhy-pr.com

Bo. Quebrada Arenas Hwy. 1, Km. 25.0 Río Piedras 00926

Construction Manufacturing Development

1988

Rafael Del Valle Carlos F. Nieves Partners

18/18

Carbonell & Co. LLP (787) 300-3777 / (787) 300-3771 www.carbonellcpa.com

San Francisco Urb. 1654 Tulipán St. Río Piedras 00926

Banking Retail Pension Plans

1985

Fernando Carbonell Torres Partner

19/20

Torres CPA Group (787) 752-4545 / (787) 752-4644 www.torrescpa.com

La Cerámica Ind. Park Rd. 190, Km. 0.7 Carolina 00983

Retail Real Estate Construction

1981

Luis Hernández Santana Managing Partner

20/19

Landa Umpierre PSC (787) 765-4644 / (787) 763-5504 www.landaumpierre.com

Rd. 176, Km. 1.1 Río Piedras 00926

Banking Retail Auto

1988

Xavier A. Curet Managing Shareholder

21/-

González Torres CPA Group PSC (787) 993-4360 / (787) 995-4365 www.gtcpapr.com

33 Bolivia St. Suite 301 Hato Rey 00917

Insurance Banking Government

1996

José A. González Torres President

Thursday, april 7, 2016

S P E C I A L

F E A T U R E

As Ranked by

PUERTO RICO’S LARGEST ACCOUNTING FIRMS

(Listed According to Total Number of Full-Time Professional Staff as of February 2016) Current/ Previous Ranking

Company Name Telephone/Fax Internet/Email Address

Physical Address

22/22

PSV & Co. PSC (787) 793-4400 / (787) 793-6056 www.psvpr.com

Santa María Urb. 87 Romerillo St. Río Piedras 00926

Manufacturing Wholesale Construction

1968

Francisco J. Perdomo Managing Director

23/21

Díaz Bergnes & Cid (787) 722-1938 / (787) 724-4820 cpadbc@gmail.com

1351 Ashford Ave. Suite 2-F San Juan 00907

Construction Services Retail/Wholesale

1981

Andrés Díaz Bergnes Luis Cid Partners

24/29

De Ángel & Compañía CPA CSP (787) 758-4428 / (787) 763-9386 carlos@deangel.com

College Park Urb. 1890 Glasgow Ave. San Juan 00921

Retail/Wholesale Healthcare Government

1975

Carlos De Ángel President

25/23

JLM & Co. LLP (787) 764-6365 / (787) 766-1275 msantiago@jlmco.com

304 Domenech Ave. Hato Rey 00918

Services Retail Manufacturing

1973

José L. Mendoza Managing Partner

26/26

Zayas Morazzani & Co. (787) 753-7025 / (787) 759-7122 www.zmcompany.com

Belisa Urb. 1538 Bori St. Río Piedras 00926

Non-profit Government Services

1978

Pedro Morazzani Luis A. Martínez Partners

27/27

D’Leading Business Solutions LLC 3 (787) 726-3300 / (787) 726-3400 www.dlbspr.com

The Hato Rey Center, Suite 1404 268 Ponce de León Ave. Hato Rey 00918

Gaming Finance Food

2013

Pablo Morales Padillo President

1. Formerly known as RSM ROC & Company 2. Formerly known as Horwath Vélez & Co. PSC 3. Formerly known as HLBS Associates LLC

No. of Full-Time Professional Staff

No. of CPAs

No. of Partners

Three Main Industries Served

Year Established in P.R.

Top Executive(s) Title

Thursday, april 7, 2016 |

WEEKEND

GUIDE

European Films Take Over Fine Arts Miramar

BY ANDREA MOYA MUÑOZ a.moya@cb.pr

The seventh edition of the European Film Festival “Hecho en Europa,” organized by L’Alliance Française of Puerto Rico, features an exciting collection of films from across the European continent,

with a strong showing by French language countries as well as Nordic and German films. This year, from Thursday, April 7 to Wednesday, April 13, moviegoers will have the opportunity to view 24 feature films at the Fine Arts Cinema in Miramar, including several that have won such prestigious film

Still from “A Bigger Splash ”

Weekend Guide Bacchanalia Wine and spirits festival featuring five wine stations and one spirits station, accompanied by food pairings. Live music by Almas Band. Friday, April 8, from 7 pm to 12 am Venue: Mona Lisa: pizza. arte. cerveza, Río Piedras Tickets are $40 or $75 for two Information: 787-754-7272 Barbacoa Chefs Xavier Pacheco (La Jaquita Baya), José Mendín (Pubbelly, Miami) and Jeremy Ford (Winner, Top Chef Miami), along with other local chefs present a unique barbecue event. Saturday, April 9, 6 pm to 12 am Venue: La JaquitaBaya, Miramar

Entrance fee is $5, plates cost around $12 each Information: 787-993-5359 European Film Festival ‘Hecho en Europa’ Fans of foreign cinema will have the opportunity to watch some outstanding films from Europe including the winners of such prestigious festivals as Cannes and Tribeca Film Festival. Thursday, April 7 to Wednesday, April 13, screenings at different hours Venue: Fine Arts Cinema in Miramar Information: www.festivaldecineeuropeo.com Festival del Tinglar A family festival dedicated to the leatherback turtle, which uses the

festivals as Cannes, Tribeca, Venice and Berlin. “Most of the time, these films aren’t shown in the commercial theaters of Puerto Rico because the space for exhibiting independent foreign films is very limited. Since there’s a huge number of productions, there are many that never make it here, which is why the European Film Festival is the only opportunity for these films to be shown in the island’s movie screens,” said festival organizer Camille Vandenbunder. On Thursday, the festival will host director Alix Delaporte. After the screening of her film “La Dernier Coup de Marteau,” (The Last Hammer Blow) she will talk about the production and take questions from the audience. Delaporte and several other directors, producers and members of the European film industry will also be part of round-table discussions and conferences at different local universities. coast of Luquillo as nesting grounds. There will be live music, arts and crafts tables for kids, food and artisans kiosks, and a parade. Saturday, April 9, from 10 am to 10 pm Venue: Luquillo town plaza Information: http://www.corredorecologicodelnoreste.org/ Le Petit Prince Ballet Brío and the Modern Dance program of the School of Fine Arts of Bayamón present the Antoine de Saint-Exupéry classic. Saturday, April 9, at 8 pm, and Sunday, April 10, at 4 pm Venue: Teatro Braulio Castillo, Bayamón Information: http://www.municipiodebayamon.com/serviciosmunicipales/educacion/escuelade-bellas-artes/

Still from “Highrise”

Puerto Rico films For the fourth year in a row, the festival will also have two shortfilm competitions. “We have a Puerto Rican shortfilm competition; the films are created each year by professional filmmakers for the festival and they are screened together,” explained Anne Chays, the director of L’Alliance Française, during an interview with Caribbean Business. The winning film will then compete in a European film festival. The Phantom of the Opera Ballet Concierto of Puerto Rico presents the ballet version of The Phantom of the Opera. Friday and Saturday, April 8-9, at 8pm, and Sunday, April 10, at 4 pm Venue: Centro de Bellas Artes Luis A. Ferré, Santurce Information: http://www.cba. gobierno.pr/eventos-detalles/elfantasma-de-la-opera-ballet/ Rincon Beach Boy StandUp Paddleboard Race The world’s largest Stand-Up Paddleboard Race featuring an elite race, an open race and a race for kids, followed by a big beach party. Saturday April 9, 7 am. Races begin at 9 am

The other competition is for university students. Participants had 48 hours to write, shoot and edit a short film, and this year, the festival received 31 entries. The 15 finalists will be screened the last day of the festival and the winner will receive a scholarship for a summer course at the International Film & Television School of Paris. For more information about the festival, the featured films and the educational programs, visit http:// festivaldecineeuropeo.com/ or call 787-722-3174. Venue: Hotel Villa Cofresí & Parador Villa Antonio’s beach, Rincón Information: www.rinconbeachboy.com Saborea Puerto Rico A flavorful weekend with tastings from 30 restaurants per day of the island’s finest restaurants, plus rums, wine, beer, distilled spirits and 50 international and local culinary personalities. Saturday and Sunday, April 9-10 (11 am to 7:30 pm on Saturday, 11 am to 6 pm on Sunday) Venue: Escambrón Beach, San Juan Tickets are $85 per adult for a one-day pass, but discounts available for using Mastercard Information: www.saboreapuertorico.com

WEEKEND

| Thursday, APRIL 7, 2016

COMMUNITY AFFAIRS

Boy Scouts P.R. Council Presents 2016 Distinguished Citizen

Miguel A. Ferrer, Caribbean Business publisher; José ‘Pepe’ Izquierdo, Gala chairman; José Domingo Pérez Muñiz, Boy Scouts Puerto Rico Council’s 2016 Distinguished Citizen

Waleska Rivera, Boy Scouts P.R. Council’s 2015 Distinguished Citizen; and José Domingo Pérez Muñiz, Boy Scouts P.R. Council’s 2016 Distinguished Citizen

BY ÁNGEL RODRÍGUEZ ar.rodriguez@cb.pr

Camaraderie, celebration and great pride for the movement they represent reigned at the presentation before local press of the Boy Scouts Puerto Rico Council’s 2016 Distinguished Citizen. This

year, the honor was bestowed upon engineer José Domingo Pérez Muñiz, who was accompanied at the activity by his wife, son and friends. Waleska Rivera, the 2015 Distinguished Citizen, talked about the importance of this recognition and had high praise for this year’s selection.

Rivera congratulated Pérez Muñiz, along with Distinguished Citizens from previous years such as attorney Héctor Mayol and Marcos Vidal. The proud recipient of this recognition spoke to Caribbean Business and expressed the pride he felt, more so because he was

once a Boy Scout and even reached the highest level in the organization, Eagle Scout. “It is a special feeling, a recognition that touches the core of any citizen in any country,” Pérez Muñiz said. “But for one who participated in the Scout movement when [he was] barely beginning his adolescence, it has a double meaning because one sees that the things upon which one has based his principles, values and life since he was young have borne fruit, and not only are they adequate for one’s self, but

Aviso de cambio de Nombre Por el presente se notifica que en el 1 de enero de 2016, HDI-Gerling America Insurance Company (la “Corporación”), una compañía de seguros de Contra Accidentes con domicilio en Illinois, cambió su nombre a HDI Global InsuranceCompany. Este cambio de nombre de la Corporación fue aprobado por la División de Seguros de Illinois e implementado por la presentación de los artículos revisados de Incorporación con el Registro de Contratos del Condado de Cook, Illinois. La oficina legal de la Corporación y la principal dirección de la oficina administrativa sigue siendo 161 North Clark Street, piso 48, Chicago, Illinois 60601. Si tienen preguntas sobre este aviso, por favor de comunicarse con David Neumeister a (312) 456-6796.

also adequate or valued by the rest of the community and citizens.” Pérez Muñiz, who presides over the Caribe Tecno company, was also part of the staff of Camp Guajataka for some decades, and does not tire in promoting the Scout movement. “Scouting is an organization for forming citizens, where from the earliest stages, the importance of being a good citizen at home is taught, of taking part in the day-to-day chores, and from there it evolves into being a good citizen in the community,

adding to the neighborhood, the municipality and eventually being a good citizen in the complete sense of the word, a good citizen in the nation,” Pérez Muñiz said. Engineer José “Pepe” Izquierdo, the Gala chairman, invited all present to commit themselves to the council’s fundraising campaign. The activity was held at the Bodega de Méndez, and the Distinguished Citizen Gala Dinner will take place May 21 at the Condado Plaza Hilton Hotel. For more information, call 787-790-0323.

SE VENDE Bayamón, Carretera #2 ¡Haga su oferta!

Se vende Edificio Comercial de 35,000 p/c dentro de una cuerda de terreno. Propio para Colegio, Dealer de Auto, Almacenes, Iglesia y otros.

¡Se vende por debajo de tasacion! Financiamiento disponible si cualifica.

Tel: 787-501-7727/ 787-717-1462

WEEKEND

Thursday, april 7, 2016 |

Millennial generation’s influence continues to rise

ADVERTISING

Ad Calendar Millennials Able to Live in Now online!

Need more frequency for your B2B campaign? Your directory listing and display ad on the new CARIBBEANBUSINESS.PR website allows you to keep your product or service in front of potential users

24 / 7 / 365.

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

april 14

Harmony With Contradictions

In Puerto Rico, This Group Represents 22% of the Population BY MARIO BELAVAL DÍAZ m.belaval@cb.pr

This year marks the 25th anniversary since Canadian author Douglas Coupland wrote and published his first novel, “Generation X: Tales for an Accelerated Culture,” which portrayed the travails of a group twentysomethings in the late 1980s and early 1990s. The book struck a chord with people who identified with the characters, naming, or branding, a new generation that was

Y, or the Millennials, are the ones most talked about, especially when it comes to marketers and advertisers, because they are establishing themselves as consumers with characteristics all their own, which are different from previous generations. “This generation cannot be bombarded with information about a brand or a product,” said Liza Umpierre, planning director at local advertising agency de la Cruz & Associates, an affiliate of Ogilvy & Mather.

largest generation like the Baby Boomers, they still are a significant number,” said Umpierre, adding that Millennials may be from age 18 to 34. “So you’re talking about key ages in many of our customers’ target, and understanding their attitudes and preferences helps us understand this segment for developing communication strategies that allow us to effectively connect with them.” The study, which was conducted by market research firm Latino FootPrint, con-

“The Millennials generation is extremely important because you’re talking about key ages in many of our customers’ target.”

GREEN ISSUES Caribbean Business provides in-depth information on “green” business practices, corporate conservation initiatives, the many measures local businesses are implementing to become more energy efficient, and much more. If your product or service can help our 100,000 readers become more environmentally friendly, make sure you advertise it here. CLOSING DATE: APRIL 8

april 14 PRMA Excellence Awards 2016 – Industrial Gala Caribbean Business presents the award winners who will be honored at this year’s event, to be held at the Condado Plaza Hilton on April 16. Find out who will be the recipients of the awards handed out this year in our island’s seven industrial regions. An ad in this supplement is a salute to excellence. CLOSING DATE: APRIL 8 SPECIALIZED HEALTHCARE Only Caribbean Business has the latest industry news on healthcare technology, state-of-the-art equipment and advanced products and treatments. We also offer details on modern healthcare facilities available in Puerto Rico, innovative drug therapies and companies that provide a wide range of health-related services. An ad in this supplement is perfect to promote your product or service! CLOSING DATE: APRIL 8

Call 787-728-8415 today!

with 64% expressing they always feel like they make their own decisions, while 75% stated they never feel like they prefer to work alone, instead of being part of a team, according to the study. Findings also suggest that Millennials, while able to be in constant contact with family and friends through digital resources, are usually private individuals who choose what they desire to share with the rest of the world, primarily because they do not want

generally considered as being born between the early 1960s and early 1980s. Gen X is the offspring of the previous Baby Boom generation, who were born between 1945 and the late 1950s. The branding of the X generation also set the trend in naming the generations that followed. Generation Y are those born somewhere between early 1980s and the early or mid-1990s; Generation Z was born roughly between the mid-1990s and the first decade of the 2000s. Of these age groups, Generation

“You don’t aim to tell them, you aim to engage them.” Umpierre made these comments during a presentation of “Millennials: A Generation of Togetherness Full of Contradictions,” which is billed as the first quantitative study of Millennials in Puerto Rico. While in the U.S., Millennials comprise some 80 million people, in Puerto Rico, they number more than 830,000, which represents 22% of the local population. “The Millennials generation is extremely important because, although it isn’t the

sisted of 1,000 people between 18 and 34. Of this sample, 49% were female and 51% male. In tune with Millennials’ lifestyles, the research was conducted digitally through online panels, where respondents could answer through their mobile device or computer. The results of the study suggest Millennials in Puerto Rico are a generation of togetherness in relation to the family and friends, collaborating with teams to study and work. However, it is a generation full of contradictions,

— Liza Umpierre, planning director at local advertising agency de la Cruz & Associates

others judging them and telling them what is right or wrong, or what to do. In fact, despite being constantly connected with friends and family through social media, for example, 48% feel they do not like to share personal life with so many people. As consumers, the study reports that Millennials are attracted to a good deal, but will always look for unique and engaging experiences.

Heiko Faass, CEO Ferrer Faass & Co

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