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A faster network. n Find out m more inside. w e e k o f M A R C H 1 7 - 2 3 , 2 0 1 6 | V o l . 2 E d i t i o n 1 0 | WEEKL Y $ 2 . 0 0 | © 2 0 1 6 La t i n M e d i a H o u s e , LL C | car i b b e a n b u s i n e s s . p r
Debt Enforcement & Recovery Act Goes Before The Supremes
Sen. Menéndez Files Measure To Tackle PR Debt
Is Local Labor Participation Under 40 percent?
Business Sector Up in Arms Over Onerous Labor Bills
Scalia Death Looms Large Page 6
Broad Restructuring Included Page 7
Economist Weighs In Page 8
On Alert Over 18 Measures Page 20
COVER STORY
TOP STORY
Debt-Moratorium Clouds Brewing
Concerns Remain About GDB Amid Steep Debt Service As time runs out to achieve federal legislation that could spark debt-restructuring talks with creditors, the Government Development Bank for Puerto Rico (GDB) will be the first walking the plank as more than $2.5 billion in debt payments owed by the cash-strapped commonwealth begin hitting over the next few months.
pressed to enact legislation declaring a moratorium on payment of public debt to ensure the government’s essential operations, two sources told this newspaper. Creditors, in turn, would most likely sue for relief. Yet, as the administration holds back on pulling the trigger on such a measure, the GDB could find itself up the creek,
The island’s fiscal agent faces about $10 million in interest payments due April 1, followed by $422 million on May 2—mostly corresponding to debt issued in 2011, during the administration of former Gov. Luis Fortuño. In fact, most of the GDB’s roughly $4.2 billion in outstanding notes date back to the previous administration. Given the current state of affairs and absent timely federal action, the Alejandro García Padilla administration could be
particularly in the run-up to the May debt payment.
Pending VAT Looms Large
Business Sector Resisting Additional Taxes At the behest of several business organizations and some politicians and political candidates, Juan Zaragoza, secretary of the Puerto Rico Treasury Department (Hacienda) postponed last week the implementation of the first phase of the 11.5% value-added tax (VAT or IVA by its Spanish acronym), including raising the 4% business-tobusiness (B2B) tax to 10.5%, to June 1.
The controversial VAT and its 10.5% B2B tax were originally slated to begin April 1, replacing the 11.5% sales & use tax, or SUT (IVA by its Spanish acronym). The second phase of the VAT, originally set for June 1, has been pushed back to Aug. 1. During his State of the Commonwealth speech earlier this month, Gov. Alejandro García Padilla requested that the Legislature revisit his original
proposal for a VAT and the elimination of income taxes for those individuals earning $40,000 a year or less, places the government against a financial wall. For one, politicians don’t usually touch taxes during an election year, in addition to the fact the Legislature’s current session, this year’s last, ends BY JOSÉ L. CARMONA pages 14-18
Holding pattern at La Fortaleza
The administration has said it would stand ready to declare a moratorium on its debt service—if necessary. The governor has repeatedly stated he would choose essential services over debt obligations if the government has no cash to pay for both. BY LUIS J. VALENTÍN continues on page 4
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Thursday, march 17, 2016
Contents
Editorial
picture of the week page 20
Labor Bills
By Philipe Schoene Roura EXECUTIVE EDITOR
Hurtling Toward the Debt Cliff Advertising............................................................................................................46 Advertising Calendar............................................................................................46 Autos.....................................................................................................................44 Banking/Finance............................................................................................. 10-11 Column.................................................................................................................19 Cover Story...................................................................................................... 14-18 Economy.......................................................................................................... 12-13 Editorial..................................................................................................................2 Labor............................................................................................................... 20-21 Lead Stories........................................................................................................ 6-8 Politics............................................................................................................ 26-28 Poll........................................................................................................................22 Retail/Commerce..................................................................................................23 Sin Comillas.................................................................................................... 12-13 Top Story............................................................................................................ 1, 4
Financial Data: Stock Comment.....................................................................................................12 Winners & Losers..................................................................................................12
special features: Companies in Motion...................................................................................... 37-43 North American International Auto Show...............................................................45 Taxes & Iras................................................................................................... 29-35
caribbeanbusiness.pr
Volume 2, No. 10 • Thursday, March 17, 2016 PO Box 12130, San Juan PR 00914-0130
CARIBBEAN BUSINESS ® (USPS 313150) is published weekly, except the first two weeks of January, by Latin Media House, LLC, 1700 Ave. Fernández Juncos, San Juan, P.R. 00909-2938. Subscription rates: $45 a year + $4.73 state tax +.45 municipality tax = $50.18; $58 for two years + $6.09 state tax +.87 municipality tax = $64.96; $108 a year for foreign + applicable tax and shipping & handling. Customer Service/Subscription telephone: (787)728-8280, toll free 1-844-723-2351. Fax: (787)728-0195. Circulation Department telephone: (787)728-7670. General telephone: (787)728-3000. Fax: (787)268-1626. Periodicals postage paid at San Juan PR 00936-9998. Postmaster: Send address changes to CARIBBEAN BUSINESS, PO Box 12130, San Juan PR 00914-0130, (ISSN 0194-8326). Entire contents: Copyright ©2016 by Latin Media House, LLC
On Sunday, March 13, clocks in the U.S. sprung forward by one hour, as part of Daylight Savings Time, bringing Puerto Rico’s time back in line with Wall Street and Washington, D.C. Sadly, that is the extent of the alignment in the Alejandro García Padilla administration’s timing with the financial markets and hallowed halls Congress, where the commonwealth government’s advisers continue to hope that the Republican leadership on Capitol Hill will deliver a bill to address Puerto Rico’s debt crisis. The confluence of events last week are dark omens for the prospects of a comprehensive measure to be filed in time to help Puerto Rico handle big debtservice payments it is facing in May and July. The lightning visit by House Speaker Paul Ryan’s emissaries, Republican congressmen Rob Bishop of Utah, and James Sensenbrenner of Wisconsin, was not an encouraging sign for Congress filing a debt-relief measure. In no uncertain terms, Sensenbrenner stated that it will be tough sledding for a relief bill in the U.S. Senate. Lobbyists hired by the Puerto Rico government to help obtain a bipartisan debt-restructuring measure all point to Ryan’s commitment to help draft legislation that will enable a federal financial-control board to oversee the island’s financial affairs. So, too, are they encouraged by the reported support of House Minority Leader Nancy Pelosi, who allegedly believes she can rally the support of Democrats in the House. Passing such a bill would take a simple majority vote—218 votes out of the total 435 members in the House—but there is an immovable block of representatives who continue to resist Ryan in his quest to file a measure for a federal control board for Puerto Rico, as well as
legislation that would include a broad restructuring mechanism to help the island restructure a portion of its $70 billion debt load. Sources on Capitol Hill have told Caribbean Business that Ryan continues to work on a draft of the Puerto Rico relief bill, but it would not come down for a floor vote in time to meet payments due on May 1. With the passing of every minute, hope on Capitol Hill is diminishing. This race against time is taking place against the backdrop of a debt-exchange plan that is reportedly being retooled to make it more palatable for competing creditor groups that are fighting tooth and nail to have the hierarchy of the various obligations respected. Closing a deal that would bring 18 creditor groups into the fold will take more time than the seven days it took to create the universe—or is it millennia (that’s another debate). Without congressional action or a debt-exchange deal ironed out by May, the commonwealth must start to contemplate enabling a debt moratorium for the Government Development Bank (GDB) that would buy time to enter negotiations with creditors. Unlike the Puerto Rico Electric Power Authority, which survived from extension to extension until it achieved a restructuring-support agreement, the GDB does not yet have a legal path to a forbearance agreement (see Top Story, p.1). That route to consensual restructuring will be a nasty legislative gauntlet, but it must be set in motion now. It is of utmost importance to commence serious dialogue with creditors. It benefits no one to hope that Congress will act as we hurtle toward this horrendous debt cliff at breakneck speed. n
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Thursday, march 17, 2016
Top Story Moratorium
Continued from cover
“As of today, there isn’t a date for it to happen,” Public Affairs Secretary Jesús Manuel Ortiz told Caribbean Business on Monday. When asked whether La Fortaleza is waiting for Capitol Hill before moving forward on this front, Ortiz said, “It is a possibility. Obviously, all our focus is on achieving legislation in Congress.” The administration would announce additional emergency measures to the extent it is ready to do so, he added. For his part, Height Securities analyst Daniel Hanson stated earlier this week that “as liquidity strains and political factors put at least a portion of the May 1 GDB payment at risk, the timeline may prove complicated for Congress, which is likely to be in the throes of debate about Puerto Rico when the GDB payment comes due.” The government bank is already making its moves to try to tackle its woes. In fact, it has been doing so for more than a year, by implementing a series of measures aimed at
improving its dwindling liquidity position. Most recently, on March 10, the bank posted a notice for institutions interested in acquiring roughly $32 million in loans made by the GDB to various hotel projects. The entity in charge of receiving future debt payments from the GDB is no longer Banco Popular, after the local bank decided last month to step aside from being the trustee for more than $4.2 billion in outstanding GDB notes. Wilmington Trust succeeded Popular as new trustee of this debt, effective March 7. The writing has been on the wall for quite some time over the bank’s deteriorating fiscal health, with officials already foretelling it may not have enough money to meet in full its upcoming payments. One would ask if the bank could get some type of forbearance from its creditors. After all, the Puerto Rico Electric Power Authority (Prepa) did so a year ago, when it entered into forbearance agreements with a majority of its creditors. With consent of at least 60% of its bondholders, bond documents could be
La Fortaleza waits for Congress while the option of enacting a debt moratorium looms large amended to enable the forbearance while restructuring talks were held until a deal was reached. But the GDB is a different story. Its trust indenture doesn’t provide the opportunity to promptly achieve such relief actions as forbearance. It also lacks a mechanism to bind holdout creditors and, as happens with the rest of the commonwealth, there is very little leverage to have creditors voluntarily sitting down at the negotiation table. This was evidenced last year, when the GDB engaged in discussions with a group of its creditors, seeking an exchange of existing notes for new paper and more favorable payment terms for the bank. But talks were suddenly ended in October, after failing to reach a “mutually acceptable arrangement,” the bank stated at the time. It further said it would focus on achieving a broader, voluntary exchange offer for most Puerto Rico creditors—a process that has yet to gain traction, with advisers for all sides going back and forth over several proposals that have been brought to the table. These include two from the
government, with a third offer soon to be released, as previously reported by Caribbean Business. A familiar idea Far from being an ace in the hole, two Puerto Rico lawmakers have already introduced legislation to declare a debt moratorium, and a former chief of staff under García Padilla, Ingrid Vila Biaggi, has supported it as well. For Popular Democratic Party Rep. Manuel Natal, a moratorium could avoid a government shutdown in the summer, without further increasing taxes. In 2014, he introduced House Bill 2003, which would authorize the governor to use his fiscal emergency
powers to declare a moratorium on debt not secured by the commonwealth’s full faith and credit. Puerto Rican Independence Party Sen. María de Lourdes Santiago also introduced early this year a similar bill in the upper chamber, although tying it up to solving the island’s political status quo. Both measures are still pending in their respective legislative committees. “None of the GDB bonds have [the commonwealth’s guarantee] for their repayment, so the bank’s debt service would be automatically suspended [with HB 2003], including the $420 million due in May,” Natal told Caribbean Business, although acknowl-
edging litigation could still follow any moratorium legislation. Proponents argue that the commonwealth may constitutionally enact legislation for a moratorium to protect public welfare and essential services to residents, while naysayers question the validity of any such local law, along with the consequences it may have on the commonwealth’s reputation in the capital market. Despite the concerns that have been brought up, the ever-worsening cash crunch and the possibility of no timely congressional action would surely test the García Padilla administration on pulling the trigger on this maneuver. n
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Thursday, MARCH 17, 2016
Lead
Lawyers will make their case before the U.S. top court
U.S. Supreme Court Will Hear Oral Arguments on Debt Recovery Act BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr
On March 22, the U.S. Supreme Court will hear oral arguments on whether the Puerto Rico government has the authority to restructure its own public debt through its own bankruptcy law. This will be the second time this year that the top court of the land hears a case involving Puerto Rico’s powers to handle its local affairs. The appeal by the Government Development Bank involves the Debt Enforcement & Recovery Act, which Puerto Rico passed in 2014 to restructure the debt of some of its public corporations. The federal appeals court struck the law down after ruling it was pre-empted by the federal bankruptcy law, even though Puerto Rico does not have access to bankruptcy the way other U.S. jurisdictions do.
When Congress revised the Bankruptcy Code in 1984, it included a provision that said Puerto Rico and the District of Columbia could not be classified as debtors under Chapter 9 of the U.S. Bankruptcy Code. The case on the Recovery Act consists of two cases that were consolidated: the Puerto Rico v. Franklin California TaxFree Trust and AcostaFebo v. Franklin California Tax-Free Trust. In defending the constitutionality of the Recovery Act, the P.R. Justice Department argues that the commonwealth government is on the brink of insolvency. Besides $70 billion in public debt, Puerto Rico owes $40 billion in pension benefits to retired public employees. Puerto Rico has no recourse under federal law to deal with its fiscal crisis and, unlike other U.S. jurisdictions, cannot benefit from Chapter 9
bankruptcy protection. “A proper reading of the text, structure and history of the Bankruptcy Code demonstrates that Congress in no way precluded the commonwealth from exercising its police powers to legislate its own solution to its debt emergency,” local officials have argued. But Franklin California Tax Free Trust, in its brief to the court, contends that there is no legislative history in the 1984 amendments indicating that, by barring Puerto Rico and Washington, D.C., from invoking Chapter 9, Congress intended to exempt those jurisdictions from pre-emption and allow them to enact an identical statute as their own law. One of the judges on the Circuit Court, Judge Juan Torruella, argued that Chapter 9’s treatment of Puerto Rico is not only an unconstitutional form of discrimination, but also
violates the basic principle that the bankruptcy law should be uniform for all jurisdictions. Former New Progressive Party Sen. Oreste Ramos, who is now a lawyer in private practice, said he believes the top court will uphold the lower court rulings because U.S. Bankruptcy Law specifically bans states from approving their own bankruptcy laws. “A decision to the contrary will be going against the territorial clause and what Congress decided,” he said. Ramos, as well as another lawyer, Gonzalo González, said there are
precedents in the U.S. Supreme Court stating that Congress can discriminate against Puerto Rico because of its territorial status. In the case of Harris vs. Rosario, for instance, the justices said the lower level of reimbursement provided to Puerto Rico under the Aid to Families with Dependent Children program did not violate the Fifth Amendment’s equal protection guarantee. Another lawyer, Robert Gómez, said that given the commonwealth government’s precarious fiscal situation and Congress’ unwillingness to
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help Puerto Rico deal with its problems, the top court may side with the island. Because two of the conservative justices on the top bench will not be ruling in the case, he said the probability that Puerto Rico may get a favorable ruling is higher. Justice Samuel A. Alito Jr. recused himself from the case because of his financial investments and Justice Antonin Scalia, one of the most conservative voices in the Supreme Court, died recently at the age of 79, the victim of a heart attack. “We have to see how the arguments go,” Gómez said. n
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Thursday, MARCH 17, 2016
Lead
Congress proposes debt restructuring but no economic-growth incentives
U.S. Senate Democrats Would Allow P.R. to Restructure its Debt Legislation Would Require Governor to Pass 5-Year Fiscal Plan Overseen by CFO, Board BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr
The fiscal package for Puerto Rico introduced by U.S. Senate Democrats would allow the island to restructure all of its $70 billion debt but will require the governor to pass a five-year fiscal plan that will be overseen by a chief financial officer and a nine-member board, both of which would be in charge of fiscal matters. The legislation, however, does not contain incentives or alternatives that can spur economic growth. Gov. Alejandro García Padilla, nonetheless, said the legislation filed by a group of senators, headed by Sen. Robert “Bob” Menéndez (D-N.J.), shows that they understand the island’s crisis. “[House] Speaker
Paul Ryan promised to push congressional action before April 1 for the 3.5 million U.S. citizens living in Puerto Rico. A demonstration of that commitment will be to draft similar legislation in the House,” he said. The bill, supported by local legislative leaders, faces an uphill battle in the Republican-dominated Congress, which has already said it will approve a fiscal-control board for Puerto Rico with sweeping powers that would virtually strip the island of the fiscal sovereignty it currently enjoys. Menéndez was joined by Sens. Sherrod Brown (D-Ohio), Maria Cantwell (D-Wash.) and Richard Blumenthal (D-Conn.) to announce the combination of a Puerto Rico Stability Act (Menéndez,
Brown, Cantwell, Blumenthal) and the Puerto Rico Recovery Act (Menéndez, Brown, Blumenthal). “When combined, the legislative package would help the island avert a complete financial collapse, stabilize its financial standing in an orderly and legal fashion, and provide for equitable tax-credit treatment and healthcare equity for the 3.5 million U.S. citizens residing in Puerto Rico,” the senators said in a statement. Unlike Chapter 9 of the U.S. Bankruptcy Code, which would only cover about one-third of Puerto Rico’s $70 billion debt, the senators’ proposal gives the island the ability to restructure all of its debt. The proposal would also establish a “chief financial officer” (CFO) and “Fiscal Stability & Reform
Board” (Board), both of which would provide much-needed transparency, oversight and technical assistance. Additionally, under this plan, the governor will have to develop a five-year fiscal plan, which will be subject to the Board’s approval, and will serve as the guiding financial benchmark for the island’s debt-restructuring and budgeting processes. To trigger the restructuring mechanism, the Puerto Rico Legislature would need to pass a resolution to opt in to the process and request the establishment of the Fiscal Stability & Reform Board. Once the Board is established, the governor would then appoint a CFO. The Board will consist of nine members chosen as follows: six members must be full-time residents of Puerto Rico; six members must have knowledge of Puerto Rico’s history, culture and socioeconomics; and all members must have financial and management expertise with staggered terms to ensure
Sen. Robert ‘Bob’ Menéndez
continuity. Four members will be chosen by the Puerto Rico Legislature; two by the governor of Puerto Rico; two by the U.S. president; and one by the Puerto Rico Supreme Court. Once the Board is established, the governor will submit a five-year Fiscal Plan to the Board, which proposes levels of debt, spending and tax policy necessary to restore solvency and fully fund pensions. The Board will either approve or disapprove the Fiscal Plan. Once the Fiscal Plan is approved, the governor will
submit an annual budget to the Board, which can either certify or deny that the proposed budget complies with the Fiscal Plan. If the Board certifies that the budget complies with the Fiscal Plan, the budget is sent to the Legislature for approval. If the Board denies the initial budget proposal, the governor would submit a new budget, and the Board would either certify or deny the new budget as compliant. If after all these processes, the budget fails to comply with the Fiscal Plan, this vote of “no confidence” from the Board will send a strong and unequivocal message to the Legislature, capital markets and Puerto Ricans that the proposed budget is unsustainable. As soon as Puerto Rico passes a resolution to opt in to the restructuring mechanism, the proposal institutes an automatic 12-month stay. Because of a disparity in current law, the measure also provides for economic and healthcare equity in federal funding. n
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Thursday, MARCH 17, 2016
Lead
Labor-participation rate stuck at 40.5%
Puerto Rican Migration Decreases Pressure on Labor Market BY JUAN A. HERNÁNDEZ j.hernandez@cb.pr
The number of people working and/or actively seeking employment in Puerto Rico, as of January 2016, was 1.138 million, for a labor-force participation rate of 40.5%, according to the Puerto Rico Labor Department’s newly released Working Group Survey. The last time Puerto Rico’s labor force had such numbers was in the summer of 1990.
For the same survey, the Labor Department reported the island’s unemployment rate for January was 11.9%, a slight decrease from the 12.2% registered in December 2015. “We have been experiencing a recession for the past 10 years, and now the labor market seems to be adjusting. Nevertheless, the fact that the unemployment rate is going down doesn’t mean labor participation is increasing,” explained Mario
Marazzi, director of the Puerto Rico Statistics Institute. For Marazzi, it is high time to start using the term “escape valve” to describe the effect of outmigration on the island’s economy and define the “adjustment of the labor market.” “People are leaving the island in sufficient numbers to reduce the pressure on the labor market…. Migration lowers that pressure,” Marazzi argued.
The Working Group Survey defines the term “working group” (i.e. labor force) as people 16 years of age and older who are employed and/or are actively seeking to be employed. This figure—1.138 million for January—is seasonally adjusted. When compared to the Total Employment table in the survey, which refers to the total number of people employed—1.003 million for January— there is a difference of 135,000 fewer people employed. This is exactly the number of unemployed people included in the corresponding table. The last time Puerto Rico had one million or fewer people employed, was in February 1993. If one were to use the Total Employment numbers to determine the labor-force participation rate in Puerto Rico, following the same calculations as those used by the Labor Department, the
real labor-force participation rate would be significantly lower than the 40.5% announced by the Labor Department earlier this week. In its summary, the Labor Department highlights the fact that there are 5,000 fewer people unemployed than in the month before, but the agency fails to mention that a similar decline is experienced every year due to the Christmas season, when there is a surge of temporary jobs, particularly in retail. It also seems that while the government has reduced its payroll
significantly through attrition, the fact is that for the second year in a row, the number of people employed by the government significantly increased between July and December of both 2014 and 2015. For example, in 2015, the number of government employees increased from 173,000 in July to 189,000 in December. The Labor Department’s figures also coincide with those reported by the U.S. Census Bureau regarding the number of people who have moved from Puerto Rico to the U.S. mainland since 2010, roughly 300,000. n
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Banking/Finance
As of September 2015, Scotia Auto had a $462.2 million auto loan & lease portfolio, 6.45% market share
Scotia Auto Intends to Remain Competitive in Puerto Rico Market Launches Special 3.99% APR Offer, Promotional Campaign BY JOSÉ L. CARMONA
“Fully aware of the current economic reality, we are inviting consumers As the Puerto Rico auto to tie the knot with the industry continues to face best financing deal. We a prolonged sales slump want to offer the best amid a 10-year economic auto financing products recession, auto finance while supporting dealcompanies are intensifyers in moving their newing their financing offers vehicle inventory,” Bidot to help local dealers boost said. “This is a joint effort by the entire auto industry, and this is our commitment to support their effort.” As of Sept. 30, 2015, Scotia Auto had $404.8 million in auto loans and $57.5 million in auto leases, for a Willie Bidot, vice president of combined portScotiabank’s auto unit folio of $462.2 million and a their new-auto sales. 6.45% share of the local Such is the case with market, according to the Scotia Auto, which late Puerto Rico Financial Inlast month launched a stitutions Commissionspecial, lower annual er’s Office. percentage rate (APR) ofBy offering a very comfer starting at 3.99% for petitive interest rate, Binew vehicles, along with dot expects to increase a promotional campaign the Canadian bank’s portto support the effort. folio of auto clients while Under the slogan, helping them acquire new “Cásate con la mejor ofervehicles. ta” (“Tie the knot with the A $270,000 promotionbest offer”), Scotia Auto’s al campaign was launched promotional financing in print, radio, digital and rate is available at all auto social media, along with dealers throughout the issupport material at the land, explained Willie Bidealers, to promote the dot, vice president of Scospecial financing offer. tiabank’s auto unit. The effort is aimed at j.carmona@cb.pr
boosting new-auto sales at local dealers, which have been experiencing a sales slump for three years in a row, with no signs of improving anytime soon, he said. New-auto sales finished 2015 down 7.8%, while the start of 2016 has so far been disappointing for the local auto industry, which supports 32,000 direct and indirect jobs islandwide.
January sales were off by 12.1%—the worst January ever for the local auto industry—followed by a 4.3% drop in sales in February. The United Automobile Importers Group is forecasting the sale of 77,000 new-auto units for 2016, a number similar to the industry’s worst year on record set in 2009, when 76,477 new units were sold. Increased sales of preowned and repossessed vehicles, as well as the outmigration of residents to the States and consumer uncertainty over the government’s fiscal woes have been affecting new-auto sales on the island for the past few years, Bidot noted. n
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Thursday, march 17, 2016
Banking/Finance
Federal Reserve Board of Governors’ Lael Brainard highlights resiliency of U.S. consumers, progress on employment
Stateside Economists: Next Fed Hike Most Likely in June Another Rate Increase Slated Before Year’s End BY JOSÉ L. CARMONA j.carmona@cb.pr
Statements by Lael Brainard, member of the Federal Reserve’s Board of Governors, one week before the March 14-15 meeting of the Federal Open Market Committee hinted at the Fed’s decision to leave benchmark interest rates unchanged, at least until the summer. Coincidentally, a survey of the 53 top U.S. economists conducted last week by the Financial Times
showed that nearly 75% of them believed the U.S. central bank would keep interest rates unchanged until their June 14-15 meeting. In addition, those surveyed said another interest rate hike was most likely in September. Speaking March 7 at the Institute of International Bankers’ annual conference in Washington, D.C., Brainard said that after a volatile start to the year, it was a fitting moment to take stock of economic and financial developments.
In her speech, Brainard said she was pleased with the “continued strong progress� on stateside employment and the “resilience� of U.S. consumers that stand out against a considerably more challenging global backdrop. “In February, the [U.S.] unemployment rate was 4.9%—a level that is onehalf its peak during the depths of the recession in 2009. On March 4, we learned that unemployment growth has averaged 223,000 per month over
Lael Brainard, member of the Federal Reserve’s Board of Governors
the past 12 months,� Brainard said. “And there likely is some room to go.� The prime-age employment-to-population ratio remains one and threequarters percentage points below levels prevailing prior to the financial crisis, Brainard said, adding that a relatively large share of employees who are working part time would prefer to work full time. “Domestic spending continues to grow at a moderate pace. The pace of consumer spending, after slowing some at the end of last year, looks to have picked up in January, and auto sales remained strong in February,� Brainard indicated. Over the past two years,
she said consumption has increased at about a 3% pace on average, and she expected to see growth to continue at near this pace, based on solid jobs and income growth—together with elevated readings on consumer confidence and the boost to household power from persistent declines in energy prices. “The housing sector has also contributed steadily to growth over the past year. With housing activity well below pre-recession norms, it appears there is still scope for continued growth in construction activity.� Continued reductions in the number of drilling rigs this year suggest that further declines are likely, she said. n
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12
Thursday, MARCH 17, 2016
WINNERS&& LOSERS WINNERS WINNERS & LOSERS WEEKLY PERFORMANCE PERFORMANCE OF OF PUERTO PUERTO RICO STOCKS WEEKLY RICO STOCKS STOCKS WEEKLY PERFORMANCE OF PUERTO RICO
WINNERS FOR FOR THE THE WEEK WEEK WINNERS WINNERS FOR THE WEEK STOCKWEEKLY STOCK STOCK -STOCK - Popular Inc.
52-wk
52-wk
PRICE
PRICE
52-wk 52-wk PRICE PRICE 52-wk PERFORMANCE PUERTO RICO PRICE STOCKS SYMBOL 52-wk LOW OF HIGH 12/31 1/8 52-wk 52-wk PRICE PRICE PRICE CHANGE SYMBOL LOW HIGH 12/31 SYMBOL LOW HIGH 12/31 SYMBOL LOW HIGH - 3/4 BPOP 22.40 35.83 - 27.64
WINNERS FOR THEEVTC WEEK Evertec Inc. 11.27 23.12 13.48 LOSERS FOR THE WEEK LOSERS FOR THE WEEK OFG Bancorp FOR THE WEEK OFG52-wk 4.5652-wk 17.52 PRICE 6.84 LOSERS 52-wk 52-wk PRICE STOCK SYMBOL LOW HIGH 12/31 52-wk 17.34 52-wk PRICE Triple-S Management Corp.SYMBOL GTS 27.23 PRICE 25.81 52-wk 52-wk STOCK LOW HIGH 12/31 STOCK SYMBOL LOW HIGH 12/31 FBP 2.06 - First BanCorp - 6.76 12/31 - 2.88 STOCK SYMBOL LOW HIGH
Popular Inc. BPOP 25,80 35,83 28,34 Popular Inc. BPOP 25,80 35,83 28,34 Popular Inc.Management Corp.BPOP 25,80 35,83 28,34 Triple-S GTS 17,34 27,07 23,91 LOSERS FOR THE WEEK Triple-S Management Corp. GTS 17,34 27,07 23,91 Triple-S Management Corp. GTS 17,34 27,07 23,91 Evertec Inc. EVTC 14,93 23,12 16,74 52-wk 52-wk PRICE Evertec Inc. EVTC 14,93 52-wk 23,1252-wk 16,74 PRICE Evertec Inc. EVTC 14,93 23,12 16,74 STOCK SYMBOL LOW HIGH 12/31 OFG Bancorp OFG 6,25 17,83 7,32 STOCK OFG Bancorp OFG SYMBOL 6,25 LOW17,83HIGH 7,323/4 OFG Bancorp OFG 6,25 First BanCorp FBP 2,97 6,76 - 7,32 3,25 Popular Inc. BPOP 35,83 28,34-25,80 -17,83 First BanCorp FBP 2,97 6,76 3,25 First BanCorp FBP 2,97 6,76 3,25 Triple-S Management Corp. GTS 17,34 27,07 23,91
1/8 CHANGE 1/8 CHANGE 3/11 CHANGE - 28.35 - 0.71
13.96 0.48 PRICE 7.18 0.34 PRICE 1/8 CHANGE PRICE 25.98 CHANGE 0.17 PRICE 1/8 1/8 CHANGE - 3.01 CHANGE - 0.13 1/8 25,84 25,84 25,84 22,07 22,07 22,07 15,47 PRICE 15,47 PRICE 15,47 1/8 6,30 3/11 6,30 6,30 2,99 25,84 2,99 2,99 22,07
-2,50 -2,50 -2,50 -1,84 -1,84 -1,84 -1,27 -1,27 -1,27 CHANGE -1,02 CHANGE -1,02 -1,02 -0,26 -2,50-0,26 -0,26 -1,84
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 Stocks 6,30 -1,02 Weekly Comment on Puerto Rico Evertec Inc.
Despite a stronger-than-expected U.S. jobs-growth report for December,
First BanCorp FBP (S&P) 2,97500 6,76 and3,25 2,99 -0,26 The Standard & Poor’s U.S. crude prices Despite a stronger-than-expected U.S.Index jobs-growth report for oil December, the Standard & Poor’s (S&P) 500 Index and Dow Jones Industrial Average closed last Friday at their highest levels so far this year, as invesDespite a stronger-than-expected U.S. jobs-growth report for December, the Standard & Poor’s (S&P) 500 Index and Dow Jones Industrial Average posted their worst five-day start to a year on record last Friday, on contintors reassess thefive-day latest measures by theIndustrial European Centhe Standard Poor’s (S&P)stimulus 500 Index andon Dow Jones posted their& worst start to a year record last Friday, onAverage continued concerns a slowdown in China could damage the global economy. At tral Bank (ECB). Oil gains followed a report from the International posted their worst five-day start to a year record the lastglobal Friday,economy. on continued concerns a slowdown in China couldon damage At the end Agency of trading lastsuggesting Friday, the Dow fellmarket 1.02%, the S&P 500bottomed lost 1.08% Energy (IEA) the oil may have ued concerns a slowdown in China could damage the global economy. At the end of trading last Friday, the Dow fell 1.02%, the S&P 500 lost 1.08% and the Composite droppedout 0.98%. The weekly declines on the S&P out. TheNasdaq IEA report pointed production declines were pickthe end trading last also Friday, the Dow fell 1.02%, the S&P 500 lost 1.08% and theofNasdaq Composite dropped 0.98%. The weekly declines on the S&P and the Dow were the largest since September 2011, and the largest on reDespite a stronger-than-expected U.S. jobs-growth report for December, ing up in the U.S. and other non-member producers of the Orgaand the Nasdaq Composite dropped The weekly declines on the and the Dow were the largest since0.98%. September 2011, and the largest onS&P record to mark the start of a year. Data released by the U.S. Bureau of Labor the Standard & Poor’s (S&P) 500 Index and DowBrent Jones crude Industrial Average nization of Petroleum Exporting Countries. oil rose 34 and thetoDow were largest since September and theBureau largestofon record mark the the start of a year. Data released2011, by the U.S. Labor Statistics U.S. nonfarm payrolls bylast 292,000 in December posted their worstto five-day start to a year on record Friday, on contincents, or showed 0.9%, settle at $40.39 a increased barrel. Meanwhile, U.S. crude cord to mark the start of a year. Data released by the U.S. Bureau of Labor Statistics showed U.S. nonfarm payrolls increased by 292,000 in December andgained the jobless at 5%. In addition, U.S. payrolls for ued concerns a rate slowdown in China could damage thehigh global economy. At oil 1.7% to held closesteady at $38.50, setting a new for theOctober year. and the jobless rate steady at 5%.50,000 In addition, U.S. payrolls October Statistics showed U.S.held nonfarm increased by 292,000 infor December andend November revised topayrolls show more jobs created Both Brent andwere U.S. crude oil prices more than from this the of trading last Friday, the Doware fellup 1.02%, the S&P40% 500than lostprevi1.08% and November were revised to show 50,000 moreU.S. jobspayrolls created previand the jobless rate held steady at Inday addition, October ously reported. Oil prices fell for a5%. fifth last Fears of for athan slowdown year’s lows. Last Thursday, the ECB announced a bold new stimulus and the Nasdaq Composite dropped 0.98%. The Friday. weekly declines on the S&P ously reported. Oil prices fell for a fifth day last Friday. Fears of a slowdown and were revised to show 50,000 jobs created than previinNovember China and the global economy kept spooking investors last week, creatplan, but signaled itlargest was unlikely to cutmore its2011, negative interest rates and the Dow were the since September and the largest on rein China and the global economy kept spooking investors last week, creatously reported. Oil prices fell for a fifth day last Friday. Fears of a slowdown any For the week, the Dow Jones Industrial Average rose ing afurther. turbulent start toof the trading year. For theby week, the Dow fellof 6.2% to cord to mark the start a year. Data released the U.S. Bureau Labor ing a turbulent start to the trading year. For the week, the Dow fell 6.2% to in206.54, China and the global economy kept spooking investors last week, creator 1.21%, to close The S&P 500 gained 22.2, or 16,346.45. The S&P 500 lost at 6%17,213.31. to 1,922.03, while the Nasdaq Statistics showed U.S. nonfarm payrolls increased by 292,000 inComposite December 16,346.45. The S&P 500 lost 6% to 1,922.03, while the Nasdaq Composite ing a turbulent start trading the week, Dow fell to 1.11%, to close at to 2,022.19, while Nasdaq Composite Index adIndex 7.3% tothe 4,643.63. and thedropped jobless rate held steady atyear. 5%.the InFor addition, U.S.the payrolls for 6.2% October Index dropped 7.3% to 4,643.63. vanced 31.45, or 0.66%, to close at 4,748.47. 16,346.45. The S&P 500 lost 6% to 1,922.03, while the Nasdaq Composite and November were revised to show 50,000 more jobs created than previIndex dropped 7.3% 4,643.63. On the local front, the Government Development Bank’s Puerto Stock ously reported. Oil to prices fell for a fifth day last Friday. Fears of aRico slowdown On the local front, the Government Development Bank’s Puerto RicospearStock Propelled by Wall Street’s rally and afirst weekly gain inyear, financial Index (PRSI) posted a heavy loss during its week of the in China and the global economy kept spooking investors last week, creatstocks, the Government Development Bank’s Puerto Rico Stock InIndex (PRSI) posted a heavy loss during its first week of the year, spearOning the local theto Government Development Bank’s Puerto Rico Stock headed byfront, last start week’s massive stock selloff. For the the week, the PRSI lost a turbulent the trading year. For the week, Dow fell 6.2% to dex (PRSI) managed to close in the black last Friday for the fourth headed by8.62%, last week’s massive stock selloff. For the week, the PRSI lost Index (PRSI) posted a heavy loss during its first week of the year, spear150.86, or to close at 1,598.79, with all components in the red for the 16,346.45. The S&P 500 lost 6% to 1,922.03, while the Nasdaq Composite week in a8.62%, row, Leading with allat components reporting aOFG weekly gain. For 150.86, orlast to close 1,598.79, all components in the for the five-day period. last week’s nongainers Bancorp, which headed by week’s stock with selloff. For was the week, the red PRSI lost Index dropped 7.3% tomassive 4,643.63. the week, the PRSI added 47.17, ornongainers 2.88%, to close at 1,683.44. Topfive-day period. Leading last week’s was OFG Bancorp, which erased close at with $6.30. was followedinby Popular 150.86, or$1.02, 8.62%,orto13.93%, close atto1,598.79, allItcomponents the red forInc., the ping last week’s list of to gainers was OFGItBancorp, which edged upInc., 34 erased $1.02, orLeading 13.93%, close at $6.30. waswas followed byFirst Popular which skidded $2.50, or 8.82%, to close at $25.84. Shares of BanCorp five-day period. last week’s nongainers OFG Bancorp, which On the local front,to theclose Government Development Bank’s Puerto Rico Stock cents, or 4.97%, at $7.18. It was followed by First BanCorp, which skidded $2.50, orto 8.82%, to close atIt$25.84. Shares by of First BanCorp fell 26 cents, or 8%,ato close atat $2.99. Triple-S Management Corp. edged erased $1.02, or 13.93%, close $6.30. followed Inc., Index (PRSI) posted heavy loss during itswas first weekShares of thePopular year, spearwhich rose 13 cents, or 4.51%, to close at $3.01. of Evertec fell 26 cents, or 8%, to close at $2.99. Triple-S Management Corp. edged down $1.84, or 7.70%, to close at $22.07. Shares of Evertec Inc. lost $1.27, which skidded $2.50, or 8.82%, to close at $25.84. Shares of First BanCorp headed by last week’sormassive stock selloff. For the week, Inc. the jumped PRSI lost Inc. added 48 cents, 3.46%, to close at $13.96. Popular down $1.84, or 8%, 7.70%, to close at $22.07. Shares of Evertec Inc. lostedged $1.27, or26 7.59%, to or close atto $15.47. fell cents, close at at $2.99. Triple-S Management Corp. 150.86, or 8.62%, to close at 1,598.79, with all components in the red Corp. for the 71 cents, or 2.57%, to close $28.35. Triple-S Management or 7.59%, to close at $15.47. down $1.84, or to $22.07. Shares ofwas Evertec Inc. lost $1.27, five-day period. Leading last at week’s nongainers OFG Bancorp, which moved up 17 7.70%, cents, or close 0.66%, to close at $25.98. By José L. orerased 7.59%, toCarmona close $15.47. $1.02, or at 13.93%, to close at $6.30. It was followed by Popular Inc., By José L. L. Carmona senior reporter, Banking/FinanCe By José Carmona which skidded $2.50, or 8.82%, to close at $25.84. Shares of First BanCorp Senior Reporter, Banking & Finance CariBBean BUsiness senior reporter, Banking/FinanCe ByCaribbean José26 L. Carmona fell cents,Business or 8%, to close at $2.99. Triple-S Management Corp. edged CariBBean BUsiness senior downreporter, $1.84, orBanking/FinanCe 7.70%, to close at $22.07. Shares of Evertec Inc. lost $1.27, CariBBean BUsiness or 7.59%, to close at $15.47.
Weekly Comment on Puerto Rico Stocks
Sin digital media website that Sin Comillas Comillas isis is aaa Spanish-language Spanish-language digital media website Sin Comillas Spanish-language digital media websitethat that specializes in business news in such areas as economics, specializes in business news in such areas as economics,banking, banking, specializes in business news in such areas as economics, banking, planning planning and and tourism. tourism. Sin Sin Comillas Comillaswas wasfounded foundedinin2010 2010by by planning and tourism. Sin Comillas was founded in 2010 by economist economist and and journalist journalist Luisa Luisa García GarcíaPelatti. Pelatti. economist and journalist Luisa García Pelatti.
Sin Comillas is a Spanish-language digital media website that Public-Debt to Hold First Meeting specializes in business Audit news in suchCommittee areas as economics, banking, Public-Debt Audit Committee to Hold First Meeting A Tough Federal Board, Without Economic Public-Debt Audit Committee to Hold First Meeting planning and tourism. Sin Comillas was founded in 2010 by Next Week economist and journalist Luisa García Pelatti. Next Week Next Week
Incentives or Bankruptcy
Public-Debt Audit Committee to Hold First Meeting Next Week
BY LUISA GARCÍA PELATTI SIN COMILLAS
Last week’s visit to Puerto Rico by U.S. Congressman James Sensenbrenner has made it clear that Congress is currently working on a bill to create a federal fiscal-control board, but the extent of its scope remains uncertain. What duties will the board have? Who will its members be and how will they be selected? It is not known whether legisPuerto Rico Senate President Eduardo Bhatia called for the first meeting next Tuesday, Jan. 19, of the Public lation enabling the board will Puerto RicoCommittee. Senate President Eduardo Bhatia called for first meeting next Tuesday, Jan. 19, renegotiatof the Public Debt Audit The committee will examine andthe evaluate the hiring, refinancing and/or Puerto Rico Senate President Eduardo Bhatia called for the first meeting next Tuesday, Jan. 19, of the Public Debt Audit Committee. The committee will examine and evaluate the hiring, refinancing and/or renegotiatbe approved before April 1, in ing process of Puerto Rico’s public debt, the origin and destination of resources, as well as the performance of Debt Audit Committee. The committee will examine and evaluate the hiring, refinancing and/or ing process of Puerto Rico’s public debt, the origin and destination of resources, as well as the performance time for Puerto Rico to avoid a programs financed with internal or external debt. The first meeting was originally set for Decemberrenegotiatbut wasof programs with internal external debt. The meeting for December but wasof ing process of Puerto Rico’s publicor debt, the origin and first destination ofwas resources, well asand thehas performance default in financed May. cancelled. The Public-Debt Audit Committee was created through Act 97originally of 2015as inset 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 or external debt. The first meeting was originally set for December but was What is clear—as Sensenreports of its performance every six months. reports ofhimself its performance months. was created through Act 97 of 2015 in July, and has to render cancelled. The Public-Debt Audit brenner said—isevery thatsixCommittee Puerto Rico President Eduardo Bhatia called for the first meeting next Tuesday, Jan. 19, of the Public reports ofnot itsSenate performance every months. we likehas it. board The will commission toThe define thesix methodology to conduct the audit of Puerto Rico’s $70 billion debt as orDebt Audit Committee. The committee will examine and evaluate theof hiring, refinancing renegotiatThe commission has to define the methodology to conduct the audit Puerto Rico’s $70and/or billion debt as ormay lay off emdereddecide by law,tocreate a public database that allows for all manner of analysis regarding the indebtedness process and ing process of Puerto Rico’s public debt, the origin and destination of resources, as well as the performance dered by law, create a database that allows for all manner of analysis regarding the indebtedness process and The commission has to define the methodology to conduct the audit of Puerto Rico’s $70 billion debt as orployees cancel transparency contracts, system for the investigative, auditing and future indebtedness processes.of set up an and information programs financed with internal or external debt. The first meeting was originally set for December but was set up an information transparency system the investigative, auditing and future processes. dered by law, create a database that allows for all manner of analysis regarding the indebtedness process and and it appears that it would not cancelled. The Public-Debt Audit Committee was created through Act 97 of 2015 in July, and has to render set up anBhatia, information transparency system for theHouse investigative, auditing and future indebtedness processes. Besides the committee’s are P.R. Speaker Jaime Perelló; Senate majority spokesperinclude any economic stimu-members reports of its performance every six months. Besides Bhatia, the committee’s members are P.R. House Speaker Jaime Perelló; Senate majority spokesperson Aníbal José Torres; Senatethat Minority Leader Larry Seilhamer, Puerto Rican Independence Party Sen. María lus measures. But still, sonLourdes Aníbal José Torres; Senate Minority Leader Larry Seilhamer, Puerto Rican Independence Party González; Sen. María Besides Bhatia, the committee’s members are P.R. House Speaker Jaime Perelló; SenateJenniffer majority spokesperde Santiago; House Majority Leader Charlie Hernández; House Minority Leader would not be the worst scenarThe commission has to define the methodology to conduct the audit of Puerto Rico’s $70 billion debt as orde Lourdes Santiago; House Majority Leader Charlie Hernández; House Minority Leader Jenniffer González; —Sergio Marxuach, son Aníbal José Torres;with Senate Minority Leader Larry Seilhamer, Puerto Statistics Rican Independence Party Sen. María Government Development Bank President & Chairwoman Melba Acosta; Institute Executive Mario io—noncompliance debt dered by law, create a database that allows for all manner of analysis regarding the indebtedness process and Government Development Bank President & Chairwoman Melba Acosta; Statistics Institute Executive Mario CNE’s director of public policy Marazzi; economist Alameda; & CPA Juan Hernández; Lorenzo Martínez; Rico Syndicate of Workers de Lourdes Santiago; House Leader Charlie House Puerto Minority Leader Jenniffer González; obligations in MayJosé or JulyMajority is. lawyer set up an economist information transparency system&for theJuan investigative, auditing and future indebtedness processes. Marazzi; José Alameda; lawyer CPA Lorenzo Martínez; Puerto Rico Syndicate of Workers President Roberto Pagán; FirstBank President Aurelio Alemán; Irma Hilario Arroyo, representing the Caguas Government Development Bank President & Chairwoman Melba Acosta; Statistics Institute Executive Mario This would be the island’s first President Roberto Pagán; FirstBank President Aurelio Alemán; Irma Hilario Arroyo, representing the Caguas 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 using the U.S. Constitution’s major default and it would be paralyze possible lawsuits. Besides the committee’s are P.R. House Speaker JaimeFrank Perelló; Senate majority spokesperSavings Bhatia, & Roberto Loan Cooperative; and members P.R.President Chamber of Commerce President Medina. President Pagán; FirstBank Aurelio Alemán; Irma Arroyo, representing Caguas territorial clause, whichthe grants catastrophic. It is crucial to know what du-Hilario son Aníbal José Torres; Senate Minority Leader Larry Seilhamer, Puerto Rican Independence Party Sen. These appointments were made last November byofthe heads of both legislative bodies, in compliance withMaría the Savings & Loan Cooperative; and P.R. Chamber Commerce President Frank Medina. it extensive powers González; beyond After meeting with Sensenties the created board will have. de Lourdes Santiago; House Majority Leader Charlie House Minority Leader Jenniffer These appointments were made November bydidn’t theHernández; heads of both legislative bodies, in compliance withthe the disposition of law that states thatlast if the governor complete the appointments within 10 days after Puerto Rico’s ownExecutive constitution. brenner last Development week, MiguelBank Soto President If Puerto Rico loses its self-inGovernment & Chairwoman Melba Acosta; Statistics Institute Mario disposition of law that states that if the governor didn’t complete the appointments within 10 days after the law went into effect, by mutual agreement the heads of heads the Legislature would carry themin out. These appointments were made last November by the of both legislative bodies, compliance with “This has collateral effects be-the Class, president of José the Alameda; Center volvement inJuan fiscal policy, the Marazzi; economist lawyer & CPA Lorenzo Martínez; Puerto Rico Syndicate of Workers law went into effect, by mutual agreement the heads of the Legislature would carry them out. disposition of law that statesand that if government the governor that didn’t complete the appointments within 10 days after the cause it opens the Pandora’s for a New Roberto Economy (CNE), emerges from President Pagán; FirstBank President Aurelio Alemán; Irma Hilario Arroyo, representing the Caguas “The country and its fiscal situation are at a critical moment whereby determined action has to be taken relaw went into effect, by mutual agreement the headselections of the Legislature would carryisthem out. boxMedina. that thehas status Sergio Marxuach, CNE’s direcupcoming will be determined Savings & Loan Cooperative; andtransparency P.R.the Chamber Commerce Frank “The country and fiscal situation are at a critical moment President whereby action to be[issue],” taken regarding the debt. Inits this process, isof indispensable for all parts, especially for the people of Puerto he noted. for the people of Puerto tor of public policy, said thetransparency an administrator government garding the debt. In this process, is indispensable for all parts, especially Rico. That is the spirit of thesituation creation of the Audit Committee through Actaction 97 of 2015, and is myre“The country and its fiscal are atPublic-Debt a critical moment whereby determined has to beittaken A federal board will only U.S. of Representatives with limited Puerto These appointments were made last November by thepowers. heads ofCommittee both legislative bodies, in with Rico. House That is the spirit of is the creation of the Public-Debt Audit through Actsaid. 97compliance of 2015, and ittake is the my commitment that action taken to carry out the duties described in that law,” Bhatia garding theon debt. In this process, is indispensable forthe all parts, for the people of Puerto itsespecially own interests is working a bill, but there is transparency Ricogovernor would no longer have disposition ofthat law that states that if carry the didn’t complete the appointments within daysconsidafter the commitment action is taken to out the duties described in that law,” Bhatia said. 10into Rico. That isSTAFF the spirit of the of the Public-Debt Audit through Actnot 97 of 2015,ofand it is my eration those Puerto no guarantee that it by will be creation apability to heads makeoffiscal orCommittee mon- would BY SIN COMILLAS law went into effect, mutual agreement the the Legislature carryand them out. commitment that action is taken to carry out the duties described in that law,” Bhatia said. BY SIN COMILLAS Rico, warned Soto Class. And proved. TheSTAFF bill to restructure etary policy. the island’s include Soto Class moment explained that determined action has to be taken re“The countrydebt and would its fiscal situation are at a critical whereby BY SIN COMILLAS STAFF the debt. In this process, indispensable for all parts, especially for the people of Puerto agarding probation period and wouldtransparency Congress’isbill will be legislated Continues on next page Rico. That is the spirit of the creation of the Public-Debt Audit Committee through Act 97 of 2015, and it is my commitment that action is taken to carry out the duties described in that law,” Bhatia said.
It is not known whether legislation enabling the board will be approved before April 1, in time for Puerto Rico to avoid a default in May.
13
Thursday, MARCH 17, 2016 Continues from previous page
although there are Puerto Ricans who support the board, they do so not knowing what they support and “may live to regret it because they don’t know what’s in store,” Marxuach said. “If they come out with a rough draft before March 31, that would be a sign that something is being done,” said the president of the CNE, a San Juan-based independent think-tank that conducts public policy research and analysis on matters related to economic development. The CNE fears that a congressional bill will be approved that does not include measures to stimulate economic growth in Puerto Rico or at least allow the island to soften austerity measures. Or worse, that May 1 rolls around and nothing has been done. Sensenbrenner was inclined to introduce a bill that would allow the island to restructure its debt and do everything possible to avoid a default, but any stimulus for economic growth and fiscal stabilization would have to wait. n
‘Puerto Rico Calls You’ a New Public Administration Model By SIN COMILLAS
Ismael Falcón Ortega, president of the Association of ExAlumni of Business Administration of the University of Puerto Rico, recently presented a proposal to implement a new model of government administration that would serve to make all the necessary reforms to restore the island’s economic growth. The proposal, which is called Puerto Rico te llama, or “Puerto Rico Calls You,” would consist of four principals: • Create a Board of Fiscal and Monitoring Supervision, instead of a fiscal control board, with defined powers and with ample participation of the Puerto Rican government.
This board should be accompanied by incentives and financial support that will help reactivate the local economy. •P resent local legislation, with the proposed board’s endorsement, to carry out a comprehensive restructuring of the basic framework and governance of the central government and public corporations. •T he adjudication of contracts for the design and implementation of these processes should be awarded to local companies or those with presence on the island. •T he proposal will be financed for five years
“It does very little good to restructure the debt and obtain incentives to reactivate the economy if we continue with the same governmental framework.” —Ismael Falcón Ortega, president of the Association of Ex-Alumni of Business Administration of the University of Puerto Rico through the creation of a trust with funds that will be deposited in commercial banks using a reasonable part of the resulting savings from the adjustment of this principal and deferrals of payments on principal and interest on Puerto Rico’s public debt that will be restructured. “It does very little good to restructure the debt and obtain incentives to reactivate the economy if we continue
with the same governmental framework that will result in absorbing much of the benefit resulting from these measures and also represents one of the biggest obstacles in rerouting our economic development,” Falcón Ortega stated. He explained that the U.S. Congress approved a special assignment of $750 million to Honduras, Guatemala and El Salvador to tackle poverty, gang violence, improve public security and carry out government reforms. n
Economist: Local Board Will Not be Effective, Chastises Private Sector BY LUISA GARCÍA PELATTI SIN COMILLAS
The government of Puerto Rico has violated all existing controls to prevent the debt and spending from skyrocketing. The government has even ignored controls set in the P.R. Constitution itself. “If at a local level, we have failed in setting controls, a local board will make the same mistakes,” said Carlos Colón de Armas, a professor at the University of Puerto Rico’s (UPR) Graduate School of Planning, during his participation at a conference organized by UPR’s Business Administration Alumni Association. “A local board will not be effective and the only serious alternative would be a federal board,” he said.
Colón de Armas anticipated that if the board’s objective is to decide whether there was compliance or not, the board does not have great possibilities for success. On the other hand, he highlighted that there is no precedent for a fiscal control board at the state level. The boards in New York City and Washington, D.C., were set up in cities. “Public spending must be reduced in Puerto Rico, but public investment has to increase and I am not convinced that these fiscal control boards have the intelligence to know the difference,” said Colón de Armas, who called on the private sector not to be accommodating with the current government.” He added that if the private sector wants to be influential, the first thing it has to do is to set the agenda, instead
Carlos Colón de Armas; professor in Escuela Graduada de Planificación of supporting the government’s agenda, defending particular interests or discussing irrelevant issues on their visits to Washington D.C., in reference to the Private Sector Coalition’s
lobbying efforts there. Colón de Armas’ comments about the private sector were echoed by fellow economist José J. Villamil, chairman of Estudios Técnicos. n
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‘El IVA no va, …for Now’ 60-day Delay in the Implementation of the Value-Added Tax Kicks Can Down the Road
BY JOSÉ L. CARMONA j.carmona@cb.pr
A
t the behest of several business organizations and some politicians and political candidates, Juan
Zaragoza, secretary of the Puerto Rico Treasury Department (Hacienda) postponed last week the implementation of the first phase of the 11.5% value-added tax (VAT or IVA by its Spanish acro-
nym), including raising the 4% business-to-business (B2B) tax to 10.5%, to June 1. The controversial VAT and its 10.5% B2B tax were originally slated to begin April 1, replacing
the 11.5% sales & use tax, or SUT (IVA by its Spanish acronym). The second phase of the VAT, originally set for June 1, has been pushed back to Aug. 1. During his State of the
Commonwealth speech earlier this month, Gov. Alejandro García Padilla requested that the Legislature revisit his original proposal for a VAT and the elimination of income taxes for those individuals
earning $40,000 a year or less, places the government against a financial wall. For one, politicians don’t usually touch taxes Continues on next page
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“In management, if you wait to be 100% ready, you never get things done. We are at a sufficient level of preparation to handle the technological demands of processing, as well as of managing risk, in a reasonable way.” —Juan Zaragoza, secretary of the Puerto Rico Treasury Department
should La Fortaleza have filed one. Economists usually advise against switching to a new tax system when the economy is in bad shape, as they claim it will inevitably make things worse. This year marks the 10th year of economic contraction or flat growth for the island. However, the government’s dire need for additional revenue makes it imperative to fully implement the VAT as soon as possible.
Calls for VAT
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during an election year, in addition to the fact the Legislature’s current session, this year’s last, ends in June, as politicians running for re-election prep
their campaign efforts before the Nov. 8 general elections. Then there’s the Holy Week recess later this month, which means there’s even less time to deal with the approval of a new tax-reform bill,
postponement “The commercial sector has been requesting it. That includes the Puerto Rico Chamber of Commerce, Puerto Rico Manufacturers Association, Made in Puerto Rico and the Puerto Rico Society of Certified Public Accountants (Society of CPAs), which all have asked to delay the VAT,” Kenneth Rivera, former Society of CPAs president and partner at local accounting firm FPV & Galíndez PSC, told Caribbean Business. “The people and Hacienda are not ready.” In Rivera’s view, Hacienda is not ready because it does not have the necessary specialized computerized system in place to process all VAT
credits—deemed an essential component to assure the tax system runs smoothly and there is no fraud, he said. “Without the computerized system, Hacienda would have to process the credits by hand, which opens the door to fraud. The risk is that VAT users could claim a false credit that is not due to them,” Rivera pointed out.
Hacienda 90%
ready However, Zaragoza insisted Hacienda was ready, with a competent system in place to begin the VAT on April 1, although not 100% ready, but viable enough to begin processing the bulk of the credits, he said. “In management, if you wait to be 100% ready, you never get things done. We are at a sufficient level of preparation to handle the technological demands of processing, as well as of managing risk, in a reasonable way,” Zaragoza told Caribbean Business. “People expect you to go full with a system to handle all credits, even from the smallest taxpayers. You don’t need a perfect system in place to act.” What Hacienda was ready to do with the VAT was the same thing the vast majority of countries
have done when implementing it—start with the largest taxpayers, then tackle the smaller ones later, he said, adding the full 100% readiness of the system would have come later in the year. “If there’s a place that justifies the VAT implementation that way is here. We have 280 importers, who import 75% of the merchandise to Puerto Rico. We have fewer than 100 retailers, which are responsible for 80% of the retail sales on the island. Those are the players that generate the credits, but right now are not claiming them under the SUT,” Zaragoza said. “There’s a direct correlation between importers, their sales and the VAT credits claimed.” Zaragoza insisted Hacienda’s deployment of the VAT based on the largest taxpayers first was reasonably ready, as these control 75% of the credits generated through imports and the distribution chain. Even assuming a 50% compliance rate on the remaining 25% that are not large taxpayers, he said Hacienda’s capture rate would be pretty high, around 90%. Hacienda, Zaragoza noted, will use the 60-day delay to fine-tune the processes, as well as complete
the legal process that the agency must comply with relating to the sales taxrevenue bonds issued by the Sales Tax Financing Corp., known as Cofina by its Spanish acronym. Since its inception, Cofina bond payments have been guaranteed with the revenues collected from the SUT. Once the VAT is fully implemented, the SUT will no longer exist. “When you touch the tax base that guarantees the Cofina bonds, you have to comply with certain disclosures. This additional time allows us to comply with these disclosures in a more relaxed way, to tend to the possibility that someone may claim that changing to a VAT is a substantial change in the tax base that guarantees the bonds, which we understand it is not,” Zaragoza explained.
Merchants claim they’re not ready From the numerous merchants Rivera has spoken with recently, the former Society of CPAs president said not a single one admitted being 100% ready to implement the VAT on April 1, as was intended. “The merchants said it would take them between Continues on page 16
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five and 12 months to implement the VAT. That means the vast majority of businesses would not be ready to deal with this on April 1. Had it not been postponed, I’m sure merchants would have ended up dealing with the VAT by putting in their best effort; doing the best they can,” Rivera commented. However, he admitted Hacienda’s staff has been pretty flexible in working with island merchants, even willing to waive fines during the first phase of the VAT’s implementation. At the same time, it should be noted that the agency has been holding regular training seminars with businessowners, as part of an educational campaign on the new system. “We have to bear in mind that if there’s a new government administration 10 months from now, there might be a change in the agency’s focus and philosophy, and they might not necessarily be as lenient,” Rivera added. In a recent letter addressed to the governor, local legislators and the Treasury secretary, Puerto Rico Chamber of Commerce President José Vázquez Barquet urged them to postpone the VAT and the B2B tax increase for 60 days. “During that time period, island legislators should approve a bill that postpones the VAT’s implementation for at least six months, so everyone will have the rules of the game crystal clear. This way, we’ll avoid noncompliance issues, fines, surcharges and penalties,” Vázquez Barquet said. The Chamber of Commerce president listed the high amount of taxes
Thursday, MARCH 17, 2016
already paid by individuals and businesses (called the “productive sector” by many), the government’s delays and/or inability to pay its suppliers, the worsening of the island’s economic situation and the increase in commercial bankruptcy filings as valid reasons to postpone the VAT’s implementation.
Revived tax reform
proposals The 60-day delay comes amid hearings in the Puerto Rico House of Representatives, starting March 29, on several proposals to include a cut in income taxes and measures to counteract the VAT’s alleged regressive effect on consumers, especially those on fixedincomes. One proposal, according to House Treasury Committee Chairman Rafael “Tatito” Hernández, calls for a consumption tax that would range from 5% on services—including the 1% municipal tax—to
a 15% consumption tax on products that would include the 1% municipal tax. Another proposal calls for a 1.5% tollgate tax, while another calls for a
1.5% tax hike on the 4% tax foreign-controlled corporations already pay; and yet another calls for a 10% excise tax at the ports. Hernández, however,
“The merchants said it would take them between five and 12 months to implement the VAT. That means the vast majority of businesses would not be ready to deal with this on April 1.” —Kenneth Rivera, partner at P.R. accounting firm FPV & Galíndez PSC
stated he is open to other suggestions to help bring more than $1.19 billion to the government’s coffers. As for the proposal of a VAT with a cut in income taxes, Society of CPAs President Zulmarie Urrutia said everyone favors the elimination of the income tax for individuals, as long as it is part of an integrated and comprehensive tax reform. “The proposal to eliminate income taxes would be feasible as long as it is replaced by a system that contemplates other revenue alternatives. In other words, we need to define how the government will replace the revenue income it receives from income taxes,” Urrutia commented. The Society of CPAs, she noted, favors a system
that imparts justice to the salaried class, which carries most of the tax burden, by substantially reducing their income taxes. “A consumption-based tax, in this case the VAT, allows the implementation of a substantial reduction in income taxes, while capturing the underground economy,” Urrutia added. Among other things, a tax reform bill should contain a reduction in income taxes for individuals, economic development measures, reduction in government spending, reorganization of the Treasury Department to tend to the VAT’s implementation and consider the elimination of the nonreal property tax on business inventory, Urrutia said.
Bad timing for a VAT?
For José Joaquín Villamil, chairman of Estudios Técnicos Inc., there is nothing wrong with a VAT, as it is a proven tax system used throughout the world. “What is wrong is the moment and the manner chosen to implement it in Puerto Rico,” Villamil told Caribbean Business. “Whether the 60-day postponement is sufficient to make sure all is in place to implement the tax, it remains to be seen. It does not appear to be the case.” Typically, he said, it takes anywhere from 18 to 24 months to fully implement a VAT. The reason for that is the need to change accounting systems, placing new monitoring procedures and educating both businesses and individuals on Continues on next page
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the nuances of the VAT system, he said. “Countries as dissimilar as Great Britain and St. Lucia took a full two years to do so,” Villamil noted. In response to the VAT’s timing issue, Zaragoza said that since Hacienda started collecting the SUT at the ports in 2014, Puerto Rico has essentially been moving toward a VAT. In essence, Puerto Rico already has a hybrid tax system. The SUT, he added, is already being collected at the point of sale, as well
situation at the time of implementing a new tax system. This, he added, is very relevant in the case of Puerto Rico’s economy. “Not only will Puerto Rico be experiencing a new contraction in fiscal 2016, but it also has not had a single year of growth since 2007—with the exception of an anemic 0.5% growth in 2012. What this means is that businesses, particularly local small and midsize enterprises, are in a very precarious condition, particularly since they are facing competition from new entrants in the market with much deeper
“What is wrong is the moment and the manner chosen to implement it [the VAT] in Puerto Rico.”
Heidie Calero, economist & president of H. Calero Consulting Group
José Joaquín Villamil, economist & chairman of Estudios Técnicos Inc.
Juan C. Zaragoza, P.R. Treasury secretary
Kenneth Rivera, former president of the Society of CPAs and partner at FPV & Galíndez PSC
—José Joaquín Villamil, chairman of Estudios Técnicos Inc. as throughout the entire distribution chain, except that merchants now can only claim a credit on the inventory sold, not on all goods and services as with the VAT. “With the current SUT system, we have a 90% VAT,” Zaragoza said. “What is creditable in a VAT is all business inputs—goods and services, for retail sales or not. If I open the gate right now and allow the full credits, the SUT becomes a VAT, end of the story.” Therefore, his comments indicate that the transition to a VAT is not necessarily as complicated as some detractors claim.
VAT’s possible economic impact According to Villamil, a frequently overlooked dimension is the economic
pockets,” Villamil said. “Implementing a new tax system in a no-growth environment, requiring additional expenses, will, at a minimum, increase costs for local firms.” Local economist Heidie Calero, president of H. Calero Consulting Group Inc., agreed with Villamil, adding the VAT would be shifted to consumers through higher consumer prices, and as a result, private consumption will fall. “But perhaps the most troubling aspect of a deficit-reducing VAT is its negative effect on gross domestic product, consumer spending and employment in the face of current weak economic growth, high unemployment and low consumer confidence in Puerto Rico,” said Calero, who
dedicated the entire February 2015 issue of Economic Pulse, her monthly newsletter, to the VAT. “This suggests that the government should be careful regarding the timing of adopting a VAT in order to avoid a deepening recession.” In regard to the possible negative effect the VAT could have on Puerto Rico’s 10-year-old economic downturn, Zaragoza said he believed the
impact would not be as bad as claimed. “I don’t think the VAT’s impact will be that significant, really. There’s been a lot of confusion surrounding the VAT. The VAT is a system designed to handle a consumption tax. People talk about the imposition of a B2B tax. The B2B is not a tax on services. What happens with the B2B is that we’re telling service providers to send Hacienda an
advance payment on what their client will pay them at the end of the month. It’s not a tax, because the merchant will claim a credit against that payment afterward, dollar for dollar,” the Treasury Department secretary explained. Since merchants will be able to claim a credit against any VAT paid, Zaragoza assured there is no cascading effect, noting VAT transactions will
be revenue neutral for businesses. At the same time, several world-renowned institutions, including a United Nations commission, the World Bank and the International Monetary Fund, have conducted studies concluding there has been no cascading VAT effect in countries that have a VAT and that this concern is unfounded. Continues on page 18
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Link between tax system, economy Villamil insisted recent tax measures reflect the lack of understanding about the relationship between a tax system and the economy, and the fact that taxes are instruments of aggregate economic policy-making. “There seems to be a lack of concern for the economic consequences of proposed changes to the tax system. In this respect, economists Joel Slemrod and Christian Gillitzer wrote that taxation changes the reward to work, saving, investing, leaving a bequest and buying a house…it affects the choice of religion, the timing of marriages, birth and even deaths…through its effect on individuals’ and firms’ choices, the tax system affects the level and growth of national income.” Villamil said it is particularly relevant, given the recent proposal by House Finance Committee Chair Hernández to modify the tax system again, the fact that constantly changing the rules of the game introduces additional transaction costs for firms and individuals, and a level of uncertainty that has a very negative impact on the economy.
Rough start for the VAT When the García Padilla administration first introduced its tax reform plan back in 2014, it proposed a 16% VAT and the repeal of most incomes taxes on those earning $50,000 or less. However, the measure failed to garner the support of some key lawmakers last year and fell through.
“But perhaps the most troubling aspect of a deficitreducing VAT is its negative effect on gross domestic product, consumer spending and employment in the face of the current weak economic growth, high unemployment and low consumer confidence in Puerto Rico.” —Heidie Calero, president of H. Calero Consulting Group Inc. In its place, legislators approved an increase in the SUT to 11.5% from 7%, along with the new 4% B2B tax, in effect since last October. The government also approved a tax on transfer pricing, targeted specifically at multinational companies doing business in Puerto Rico. The García Padilla administration has stressed the need to implement
a VAT-based system to replace the current SUT model, in use since November 2006, arguing that it would help reduce tax evasion and increase revenues for the cash-strapped government. Since last December, Hacienda has beefed up efforts to curtail SUT evasion by carrying out a series of stings against dozens of delinquent business
establishments, which had charged the SUT to consumers, but had not remitted the tax to the agency. Responding to critics who claim the VAT is more complex to manage and monitor, and that it does not curb tax evasion, Zaragoza indicated that the VAT’s oversight is in fact much easier than the SUT. “It is not more complex; all the contrary. All I
need is a tool to handle the credits, and the advantage we have implementing a VAT in Puerto Rico is that here we have a high concentration of credits for very few people,” Zaragoza explained. “If this had been Dominican Republic, where there’s a distribution chain structure similar to what Puerto Rico had in the 1950s, then its oversight would be a
lot harder. The longer the distribution chain, the more credits are generated.” As for the VAT’s inability to curb tax evasion, Zaragoza said no tax system can eliminate 100% of fraud and tax evasion. “Fraud is like energy—it can’t be created or destroyed; it is transformed. The good thing about the VAT is that it is a very mature system used around the world, one with a lot of technology already developed, and one can learn from the experience of others with it,” the Treasury secretary said. “The great advantage of the VAT is its first tax collection point, and being that Puerto Rico is an island, that means at the ports. That’s the great value of the VAT over the SUT.” n
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From the Web Check out our ‘Question of the Week’ at cb.pr.
Will U.S. Congress pass a measure dealing with Puerto Rico’s debt crisis?
Editor’s Note: This is an excerpt from the editorial published in the March 10, 2016 edition of Caribbean Business.
One Giant Leap for Debt Restructuring BY PHILIPE SCHOENE ROURA p.schoene@cb.pr
In the feral negotiations with 18 different creditor groups being corralled by the commonwealth of Puerto Rico’s advisers, there are formidable challenges ahead in securing deals among competing claims. This frantic context is what makes the separate initiatives to transform the island’s utility companies so essential. Although the Puerto Rico Electric Power Authority managed to secure passage of the Revitalization Act, formidable challenges remain to achieve an investment-grade rating in the debt exchange contemplated in the Restructuring Support Agreement. And then, there is still the issue of bringing in the retail holdouts that comprise
close to 30% of the creditors that AlixPartners is yet to bring into the fold. On the same level, there is the Puerto Rico Aqueduct & Sewer Authority (Prasa), the revitalization of which is of utmost importance, again, because it includes a securitization mechanism. To the Editors: Why does the author imply that the retail holders of Prepa [Puerto Rico Electric Power Authority] debt will resist the debt exchange terms reached by the agreement of the major bondholders? I own a substantial (for me) amount of Prepa bonds. I will gladly exchange them for the new bonds since their structure should protect the new bonds from both: 1) The possibility of future bankruptcy if Democrats ever gain control of Congress and decide to reward the incompetent, wasteful, corrupt socialist government of Puerto Rico by allowing it access to bankruptcy. 2) The likelihood that Prepa will continue extreme wastefulness and corruption since its management will remain a part of the government. “Errol”
Clarification
Point Guard is an insurance product not a policy endorsement, as mentioned in the article published on March 10, 2016 in the Big Business Profile: Auto Industry Supplement.
Column Why has Bernie Sanders Stumbled on Race? We all do BY CLARENCE PAGE
Did Sen. Bernie Sanders really say white people “don’t know what it’s like to be poor?” Well, yes, he said it, but he didn’t mean it, which only shows how quickly serious presidential debates can turn pretty goofy. In context, the Vermont Democrat’s “ghetto gaffe,” as some headlines quickly branded it, came during the Democratic presidential debate in Flint, Mich. Responding to a question from CNN’s Don Lemon about what “racial blind spots” the candidates had, Sanders said, “When you’re white, you don’t know what it’s like to be living in a ghetto. You don’t know what it’s like to be poor. You don’t know what it’s like to be hassled when you walk down the street or you get dragged out of a car.” With that, Sanders accidentally landed in the ever-shifting sands of political correctness. That’s an etiquette Republican frontrunner Donald Trump loves to flout but it still means something to liberals, among whom the comment touched off a blizzard of ridicule in social media. Sanders tried to clarify his remarks the next day with an obligatory “Beg your pardon....” “What I meant to say is when you talk about ghettos traditionally, what you’re talking about is African-American communities,” Sanders told reporters. “I think many white people are not aware of the kinds of pressures and the kind of police oppression that sometimes takes place within the African-American community.” That’s ironic, since “ghetto” originally referred, I am told, to the part of Venice to which Jews were restricted and segregated—centuries before the word was applied in the 1960s to socially and economically segregated African-American communities. But our language around race is filled with ironies. “Ghetto” has fallen out of fashion, except as a put-down of somebody’s taste or behavior (“That’s so ghetto”). But more seriously, Sanders’ comments touched a nerve with a number of African-Americans with its implication
that most black people are poor and that white people aren’t. In fact, only 26.2% of African-Americans fall below the poverty line, according to the latest census data. That’s a higher rate than the 12.7% of non-Hispanic whites who live below the poverty line or the 23.6% of Hispanics. But since we have almost five times more non-Hispanic whites than blacks in this nation, poor whites outnumber poor blacks by almost three-to-one. If we were being truly honest about race, we would be talking about poverty as a white problem, more than a black burden. But stereotypes die hard, even among liberals who like to think of themselves as more candid about race than conservatives like Trump, who too often view racism as a nonissue unless it discriminates against whites. Sanders’ gaffe in the heat of debate, revealed a not very deeply hidden truth: He primarily views our national political and economic divides through a lens of class, not race. Former NAACP President Ben Jealous rushed to the senator’s defense. He sympathetically described Sanders’ own racial blind spot that has hindered his efforts to reach black voters. “Sen. Sanders is from Burlington,” Jealous said. “He grew up in old Brooklyn, he knows white folks live in ghettos.” Yet Jealous and Sanders both emphasized that the crux of the issue was poverty, not race. As an African-American fortunate enough to earn a bit of the American Dream, thanks to hardworking parents and a decent public school system, I, too, see poverty as a more urgent issue than race, although both are important. Politically, as Harvard sociologist William Julius Wilson has written in “The Declining Significance of Race,” the best way to build a multiracial antipoverty consensus is to focus on class, not race. Yet in today’s presidential cycle, we seem to be more interested in arguing about race and poverty than finding some common-ground solutions.
© 2016 Distributed by Tribune Content Agency LLC
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Labor
Legislature analyzing more than 18 new labor laws that private-sector groups say will increase costs of doing business
Business Groups Say Lawmakers are Passing Antigrowth Labor Laws BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr
Although the report “Puerto Rico: A Way Forward,” also known as the Krueger economic report, states Puerto Rico must repeal local labor laws that magnify employment costs in order to revitalize the economy, the Legislature has more than 18 pending labor bills that would impede economic growth. The bills have received reports recommending their approval or have been passed by one legislative chamber. To be fair, over the years, the Legislature has approved tax incentives for the private sector and, in 2014, a series of tax incentives and credits for small and midsize businesses. However, private-sector groups say more needs to be done. The Private Sector Coalition, an organization composed of more than a dozen business groups, in late 2015 submitted to the Legislature a laborreform bill through Rep. Ángel Matos, Popular Democratic Party (PDP) from Carolina, that eases some labor laws, such as the Unjustified Dismissal Act, but the bill remains in legislative limbo. “The coalition reiterates that Puerto Rico is highly regulated in the labor area, which has a negative impact on the island’s competitiveness level. Our institutional
position is that new labor laws should not be passed without first examining the coalition’s proposal. We must strive to prevent imposing more economic burdens on the private sector in the current fiscal crisis,” said Zulmarie Urrutia Vélez, president of the local Society of CPAs. On the other hand, the Krueger report states that current labor laws make Puerto Rico less competitive. High labor costs relative to the U.S. mainland have proved onerous for many businesses, and this was pointed out in the Krueger report, released June 2015. “Local regulations pertaining to overtime [costs], paid vacation and dismissal [penalties] are costly and more onerous than on the U.S. mainland,” the report stated. “Local labor costs magnify employment costs,” the report added, noting that in Puerto Rico, overtime is paid after an eighthour day rather than the standard 40-hour week on the U.S. mainland. Other recommendations include cutting paid vacation days for public sector workers from 30 days to 15 days, which again, is the standard stateside. The probationary period for new employees should also be extended from the current three months to a much-longer period of at least one year, according to the report. The bills the coalition
denounced as being antigrowth are: c Senate Bill 269: Penned by Sen. Rossana López (PDP-At large), it states that employees of private companies in Puerto Rico are entitled to two business days—at the beginning and end of each school semester, with no reduction in pay or privileges—to meet with their children’s teachers to ascertain their achievements and for other purposes. c Senate Bill 302: Extends to five years the statute of limitations for employees to claim unpaid wages. The measure is authored by Sen. Luis Daniel Rivera Filomeno (PDP-Carolina). c Senate Bill 305: Penned by Rivera Filomeno, the measure sets a time period for employers to liquidate vacation payments to employees who have ceased their jobs. c Senate Bill 407: Prohibits private-sector employers from using sick leave as a criteria to measure employees’ efficiency in yearly evaluations. The measure is penned by PDP Sens. Antonio Faz Alzamora (At-large) and Ángel M. Rodríguez (Guayama). c Senate Bill 588: Authored by PDP Sen. Martín Vargas Morales (Ponce), it would broaden the definition of “dismissal” to include the refusal by a new employer, who has acquired a business, to recognize employees’ seniority.
“[Private business groups] always complain…but when they come to public hearings, they don’t supply substantive evidence to support their claims.” —Senator Luis Daniel Rivera Filomeno, Senate Labor Affairs Committe chairman c Senate Bill 824: Penned by PDP Sens. Ramón Luis Nieves (San Juan) and Ramón Ruiz (Ponce), the bill would restore the double-time salary for working on Sundays. c Senate Bill 1195: Would raise the local minimum wage in phases. Its author is PDP Sen. Cirilo Tirado (At-large). c Senate Bill 1239: Penned by Rivera Filomeno, the measure states that any worker who is part of a staff of 250 or more employees shall be entitled to vacation and sick leave. c Senate Bill 1233: Amends the “Christmas Bonus Act” to change the deadline that employers must notify and submit their requests for exemption and income status reports to the secretary of the Labor & Human Resources Department, to be
exempted from paying in full, or in part, the Christmas Bonus. The bill, whose author is Rivera Filomeno, would also require certain employers to submit audited financial statements to the agency. c Senate Bill 1271: Penned by Sen. Gilberto Rodríguez Valle (Mayagüez-Aguadilla), it would require vacation and sick-leave benefits for part-time employees. c Senate Bill 1451: Would require employers to allow breast-feeding mothers time to either breast feed or extract milk. The legislation is a bipartisan bill from female lawmakers from the New Progressive Party (NPP). c House Bill 79: The “Act to Prohibit Workplace Harassment in Puerto Rico,” it would create a strong and vigorous public policy against workplace
bullying and provides for sanctions. The legislation is authored by NPP Reps. José Meléndez (At-large) and Ángel Peña (District 33: San Lorenzo, Juncos, Las Piedras) as well as PDP Reps. Jesús Santa (District 31: Caguas, Gurabo) and Ángel Matos (Carolina). c House Bill 164: Would clarify that an employee can settle any claims under the Unjust Dismissal Act but the employer cannot ask an employee to renounce his or her right to severance under the Unjust Dismissal Act as a requirement for employment or for continued employment. The bill was filed by NPP Reps. Jenniffer González (At-large) and Urayoán Hernández (District 26: Villalba, Coamo, Orocovis, Barranquitas). Continues on next page
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Labor Continued from previous page
c House Bill 770: Penned by Matos, it would prohibit private-sector employers from using sick leave as criteria to measure employees’ efficiency in annual performance evaluations. It has a twin version in the Senate. c House Bill 1820: Penned by Rep. Santa, the bill would allow employers to seek injunctions on behalf of employees who are being stalked. c House Bill 2143: Would create unpaid medical leave of absence for workers in the private sector who have a serious illness or must take care of a sick relative. The legislation’s author is Rep. Luis “Narmito” Ortiz Lugo (PDP-District 30: Salinas, Guayama, Arroyo). c House Bill 2205: Authored by Majority Leader PDP Rep. Charlie Hernández López (At-large), it would require employers who are going to lay off more than 20 workers for business reasons, to provide notification of the dismissal 30 days before it goes into effect. c House Bill 2389: Penned by Rep. Rafael “June” Rivera (NPP-District 28: Barranquitas, Corozal, Naranjito, Comerío), the legislation would amend the Christmas Bonus Act to allow employers to get back payments for Christmas bonuses deposited in the Bureau of Labor Standards when the employee has not been located after a period of three years. This list does not include bills that are in public hearings, such as one that would prevent restaurants from collecting
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service charges or another one that raises the minimum wage for wait staff. ‘Populist’ bills will harm private sector P.R. Chamber of Commerce President José Vázquez Barquet said that while the bills appeared to be populist, they will do harm to the island’s productive private sector, which provides jobs, since they would increase even more the cost of doing business in Puerto Rico. Rivera Filomeno, who chairs the Senate Labor Affairs Committee, said the private sector always “complains and whines” about changes to labor laws. He said that when he analyzes bills, he always seeks the opinions of the Labor Department and business groups. “They
always complain…but when they come to public hearings, they don’t supply substantive evidence to support their claims,” he said. The senator said some of the claims made by business groups about labor laws are hollow at best. For instance, the salaries of waiters have not been raised in 25 years, and they still make a little over $2 an hour. However, the legislation, which was filed after groups of waiters complained about their salaries to lawmakers, allows the private sector to get a tax credit for anything paid over the salary. “What cannot happen is for us to do nothing because societies must always seek to strengthen their workers’ rights to prosper,” he said. n
“We must strive to prevent imposing more economic burdens on the private sector in the current fiscal crisis.” —Zulmarie Urrutia Vélez, president of the local Society of CPAs
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Thursday, MARCH 17, 2016
Poll
Nearly half are ‘housewives’
Puerto Rico’s Female Population: A 2016 Profile 22% of All Households Headed by Women, Most in Middle to Low Lifestyles, Have Low Education BY ROSARIO FAJARDO r.fajardo@cb.pr
This week’s Gaither International survey is providing an illuminating snapshot of Puerto Rico’s female population. There are around 1,367,531 occupied households in Puerto Rico, according to the U.S. Census Bureau, and single female-headed households account for about 300,000 of them. This translates to 22% of the island’s total households, whereas single maleheaded households only account for 6%. In terms of lifestyle, the majority of women on the island belong to the middle-low (47%) and low (31%) lifestyle tiers, which pertain to socioeconomic indicators. Only 18% of women fall in the middle tier and 4% in the high tier, Gaither reported. In general, most women have at least a highschool education, but 21%
say they never finished high school, while 43% report having completed high school. “About 36% of women say they have a college education, which is a larger number than that of the male population in which 27% report having a college education,� noted Melanie Dederick, a client service associate at Gaither International. Most women are ages 55 and older and this segment accounts for 36% of the female population in Puerto Rico. Another 31% are ages 35-54, 25% are 18-34 years old and 8% report being younger than 18 years of age. Of Puerto Rico’s estimated 3.5 million population, about 52% are female, according to the Census Bureau. Regarding their civil status, 32% of women report being married. On the other hand, 30% say they have never married, 12% say they are cohabiting with a partner,
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10% state they are divorced, 11% report being widowed and 4% say they are separated. In general, when asked their occupation, 46% of women say they are “housewives,� 10% say they are retired, 9% are working as full-time employees, 7% have pensions, 6% are full-time students, 6% are privatesector employees, another 6% are part-time employees, 5% say they are unemployed, 4% are self-employed and 3% are Puerto Rico government employees. “In contrast, the toptwo occupations reported among men were retirement with a total of 22% and being self-employed with 15%. Men’s unemployment incidence is higher than that of women’s, with 10% of the male population,� Dederick added. The top-five sources of income women mentioned they receive in their households are: government aid (50%), Social Security
When asked what financial aid they receive in their households, the majority said Mi Salud (58%), the Puerto Rico government’s health plan for medically indigent people. (35%), salaries with benefits (23%), salaries with no benefits (10%) and income from being self-employed (7%). When asked what financial aid they receive in their households, the majority said Mi Salud (58%), the Puerto Rico government’s health plan for medically indigent
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people, and the federal Nutritional Assistance Program (54%), known as PAN, for low-income families. When asked who is in charge of making decisions on whether something is purchased in their households, both genders viewed themselves highly, as 91% of women identify
themselves as being the main household-purchasing agent, compared with 84% of men. Among preferred hobbies and activities reported within the female population were: watching television, spending time with family, cleaning, listening to music, browsing the internet, resting, hanging out with friends and reading. Gaither said going online ranks pretty high among younger female adults; in fact, it is the No. 1 preferred activity among those ages 18-34, followed by watching television. “But as we look at the older age groups (3554 and 55 plus), both segments prefer to watch TV, as it is the No. 1 preferred activity they report and [these two age groups] are less likely to spend much time browsing the internet,� Dederick said. The results are from Gaither International’s Media Brand Profiles tracking survey, which interviews more than 80 people daily from among a representative sample of Puerto Rico’s population 12 years and older. n
Polling is conducted by Gaither International and the results are reported exclusively by Caribbean Business.
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Thursday, MARCH 17, 2016
Retail/Commerce
San Juan upscale landmark beefs up its retail offerings, topped by El Mercado
Paseo Caribe Puts Finishing Touches on Retail Mix Retail Space Entailed $52M Investment, to Create 1,400 Jobs BY DENNIS COSTA d.costa@cb.pr
For Sam Kirschner, one of the partners at CPG Real Estate, it has been a long five years since being put in charge of Paseo Caribe, a residential and commercial project located in an enviable spot at the entrance to Old San Juan. “It’s been a couple of years of planning, a couple of years of building and now we’re getting the right mix of people involved to turn the special vision that we had of Paseo Caribe into a reality,” Kirschner told Caribbean Business. Such a vision has certainly proved ambitious from the onset: a one-millionsquare-foot luxury mixeduse development featuring a retail center and three residential condominium towers, with the retail center alone comprising some 110,000 square feet of retail, dining and entertainment space. Once completed, the retail space alone will entail an investment of $52 million and create about 1,400 jobs. Now, about a year after finishing construction and selling most of the residential units in the three condos—dubbed Bahia, Laguna and Caribe Plazas—and with two restaurants making their early debut, Rosa Mexicano and Fogo de Chao, it was up to Kirschner and his team to put a bow on the long-indevelopment project.
“We could have done this quickly and cheaply a year ago,” Kirschner said. “But we only have one chance in life to make a special project really special, so we’ve taken the time and been really thoughtful as to what we can do here.” A prime example of this approach has been El Mercado, a 19,000-square-foot gourmet food and dining emporium slated to open over the summer. The concept, touted as unique on the island, has required an investment of about $8 million and is expected to create around 300 jobs once it is fully operating. At the time of this newspaper’s interview, construction was ongoing at the Mercado locale, a cavernous space on the complex’s second floor, with part of the space boasting a 40foot ceiling. “El Mercado will become the centerpiece of Paseo Caribe’s retail offering,” Kirschner said. The venue will include at least 16 different culinary stations, with La Hacienda, a San Juan-based upscale grocery, butcher and charcuterie, heading the list. Over the next year, CPG signed up well-known Chef Martín Louzao, proprietor of the Condado-based restaurant Cocina Abierta, to open a Mercado location featuring rotisserie chicken and pasta concepts, vegetarian fare and a wide variety of produce. Other upscale eateries, such as
Levain Artisan Breads, from the west coast city of Aguadilla, and Double Cake, a bakery and cupcake shop based in Condado, soon joined Mercado’s offerings. Mix of future tenants Other future tenants at El Mercado will include La Lima, a Peruvian/fusion concept from Chris Hemmerling, the creator and owner behind Bartola and Speakeasy (Oveja Negra); Pazzi Pizza, a Guaynabobased pizzeria offering pizzas made from organic ingredients, many procured directly from Italy; The Bar, a drinking establishment from the owners of Craft Beer Industries, one of the largest importers and distributors in Puerto Rico; Señor Paleta, a sweet shop specializing in popsicles, which commands long queue lines in Old San Juan; and Alto Grande coffee shop, a new shop from Puerto Rican Coffee Roasters that will serve superpremium coffee and will offer classes to enable customers to create their own roasts. Then there is the visual aspect of El Mercado itself, topped with a series of murals intended to depict the working men and women of the island. Noted muralist Tom Christopher, has been commissioned to paint the Mercado murals with the assistance of local art students. “These
are four giant walls, starting at 20 feet and going up to 40 feet, and about 1,000 square feet each,” Kirschner said. When it comes to the other retail offerings at Paseo Caribe, several stores have already opened, among them three new retail concepts from the founder of White House/Black Market: BoHo and BoHo Nation, which specialize in bohemian-style apparel, and Chico Mango, a children’s clothing concept. Another store that has opened is ItGirl, a fashion boutique aimed at young women, which relocated from its former locale in Guaynabo. On March 23, the longexpected opening of Blue Martini is scheduled to take place. Once slated to become one of the first retail tenants in Paseo Caribe, the 7,000-square-foot “bar club” was originally scheduled to open in April 2015. However, the idea of building an outdoor terrace took hold, delaying matters significantly. “We could have said ‘open it up, get people in,
start paying rent, get some cash flow and build the terrace after the fact.’ But you promise people a worldclass experience and deliver an average one, that’s very disappointing. We didn’t want that,” Kirschner added. While the initial investment in Blue Martini was $1.2 million, the additional work added at least a couple hundred thousand dollars to the tally. “The trick was building the outdoor patio in a location over a parking garage, with a roof adjacent to the ocean,” Kirschner explained. “From a structural engineering standpoint, there’s only one way to do it right, so we took a lot of time, effort and energy; it was unbelievably painstaking to figure out how to do this properly.” Other establishments slated to open soon include Touro, a tapas restaurant from Cocina Abierta’s Louzao, which will open in the next month or two; Vom Fass, a Germany-based purveyor of fine oils, vinegars, spirits and wines, which is expected to open this month; and
two Guaynabo landmarks expanding to Paseo Caribe, Café Doña Ana and Umai Sushi, both of which will open in June. Other tenants are still in the negotiation phase, among them Aaron Stewart Home, with subsequent announcements expected in the coming months. Strong apartment sales As to the effect that the rapidly developing retail aspect is having on apartment sales, things could not be better. “In the past two weeks, we sold 15 apartments,” said Craig Eddins, a spokesman for CPG. Before Paseo Caribe’s retail boom, the company was selling units at a rate of about six or seven per month. “We have about 30 units left, but we’re selling them out fast,” Kirschner added. “We have people bidding for several flagship units that are very desirable. We’ve gotten into a competitive scenario—that’s the kind of energy we’re seeing around here—and it’s very exciting.” n
Cardinal Health Puerto Rico Essential to our Communities BY CB Staff
Cardinal Health supports employee efforts to make a difference in their communities, unified in a belief that the Company is “all in” for the health and well-being of communities. Chairman and CEO George Barrett, sets the tone for this vision in simple yet powerful terms. “There are so many areas that make communities strong, and we want our communities to be strong,” he says in a corporate web video that explains what the community relations platform “All in for Good” is all about. In Puerto Rico, where Cardinal Health remains the largest and most technologically-advanced distributor of pharmaceutical products and medical supplies, the majority of the 550 employees bring this vision to reality through numerous efforts to support
“Cardinal Health Foundation provides a platform to enable and empower employees to help their own communities through different initiatives,” she said. In fact, the various community support activities that employees conducted allowed Cardinal Health Puerto Rico to donate $35,000 and 500 hours of volMartinez Marrero is described as a unteer work to partner organizations leader in community support initiatives last year. within the company, “I took the lead in Cardinal Health also provides emstructuring the Cardinal Health Foundation’s work locally, which allowed me to ployees the infrastructure to make diput my influencer skills to use beyond rect payroll donations through Giving my own department. I have to admit Station, a platform where the compait has not been that hard, because we ny matches employee donations and believe in what we are doing and in transfers funds directly to non-profit the organizations that we support. I am organizations each month. “Giving Stanot alone in this effort, I have many ac- tion provides these non-profits a steady, complices around me who are as com- predictable stream of income that helps mitted as I am,” said Martinez Marrero. support their work consistently,” said non-profit organizations that share the Company’s purpose to improve health and well-being. Serving as liaison between the Cardinal Health Foundation and the company’s local operation is Mariela Martinez Marrero, Vice President of Information Technology.
Martinez Marrero. “These organizations have a very important role in our society and cover needs that neither the government nor the private sector have the bandwidth to address. It is important for us to continue enabling their work, especially those organizations that are aligned with our purpose as a Company,” she added. In fact, an effort led by Martinez Marrero to communicate the growing need to help fund these non-profits, especially during Puerto Rico’s ongoing economic crisis, influenced the Cardinal Health Foundation to make a $25,000 grant allocation to support organizations working to improve community wellness locally. These funds will be distributed for the first time in Puerto Rico this April, following an open call
that led to Cardinal Health Puerto Rico receiving over 50 proposals. “For many years we’ve been conducting different initiatives to support our communities, and now we are leveraging the [Cardinal Health Foundation] platform, which allows us to bring additional funds in addition to employee donations,” explained Martinez Marrero.
matched by the Corporation through the Cardinal Health Foundation. An example of this is that for the past three holiday seasons, in support of nonprofit Iniciativa Comunitaria’s “Abriga un alma esta Navidad” (Shelter a soul this Christmas) campaign, an average of 80 volunteers were engaged to receive instore donations. This kind of partnership approach helps Cardinal Health The employees are All in for Good provide meaningful support to other (Todos Por El Bien), not just one day a organizations, including Susan G. Komen year but every single day! "Our employ- and the Muscular Dystrophy Associaees are what make our slogan come to tion”, said Martinez Marrero. life (Essential to Care) and we encourage employees to get involved and give Another component of the compaback to communities where they live ny’s community support is an educaand work", Martinez Marrero noted. In tional and awareness campaign called addition to providing financial support, GenerationRx.This campaign was develthe hours invested by employees are oped in response to alarming statistics
that say more than 200,000 Puerto Ricans age 15 and older have misused prescribed medication at least once in their lifetimes. The program aims to prevent the misuse and abuse of prescribed drugs through culturally-adapted educational materials, developed in partnership with pharmacy professionals, associations, universities and the local Board of Pharmacy. The first step to help prevent this epidemic is to visit the GenerationRx web site www.generationrx.org to download the free online materials to educate others. Later this year, Cardinal Health is working with the Colegio de Farmacéuticos de Puerto Rico to develop an award that recognizes a local pharmacist that has demonstrated excellence in community-based prescription drug abuse prevention.
Mar tinez Marrero looks forward to continue suppor ting Cardinal Health Foundation’s work in Puer to Rico. She has set aggressive goals for Cardinal Health Puer to Rico’s community effor ts and desires to increase employee par ticipation in Giving Station and the access of grants to Puer to Rico organizations. She also expects GenerationRx to become viral, and plans to roll out a signature program focused on the physical and social well-being of children called Good4Growth™. “Our team of employees brings for th ideas and roll up their sleeves to maximize Cardinal Health Foundation’s resources and ensure we provide the greatest suppor t possible to our par tner organizations,” she said. n
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Thursday, MARCH 17, 2016
Politics María de Lourdes Santiago: ‘Establish United Front for P.R. Independence’ BY ISMAEL TORRES i.torres@cb.pr
She is the youngest of two daughters, whose parents were both teachers in the public education system and followers of the Popular Democratic Party (PDP). She studied drama at University of Puerto Rico’s Río Piedras campus, and jokes that after accepting that she did not have the talent for acting, studied and graduated from the UPR’s School of Law. For a while, she went into private practice but soon realized it was not her passion. While she had worked in the general elections as a voting center functionary for the Puerto Rican Independence Party (PIP), she arrived at politics in a kind of accidental manner when she joined the office of then-PIP Rep. Víctor García San Inocencio as a legislative adviser. The rest is history From her legislative adviser position, the PIP nominated her for an atlarge Senate seat, where she became the first PIP woman elected to the Legislative Assembly where she is now serving her second term. This year, the PIP selected her as its candidate for governor for the 2016 general elections, with Hugo Rodríguez as her running mate for resident commissioner in Washington, D.C., and Juan Dalmau Ramírez and Dennis Márquez Lebrón
as at-large candidates for the Senate and House, respectively. “I came to politics in a more or less accidental manner because when I was an attorney in private practice I wanted to do something that had more meaning to me, and that is how I went to work with Víctor García San Inocencio,” Santiago said. “And one thing lead to another.” She added, “Now I am in politics because I have the moral conviction that I can contribute to the struggle for Puerto Rico’s independence, and also that through my legislative work, I have been able to contribute to issues that are essential to me such as education.” She credited her independentista origins to the values instilled in her since she was little by her parents, both PDP activists in Adjuntas. She said that as a woman, she has felt more discrimination from the media than in the political environment. “It was very difficult for me to have access to media outlets, and it is still very difficult,” she said. “It’s not because I am a woman, but because I am an independentista woman.” Santiago said that the little progress of the independence movement, in comparison to other political movements such as statehood, is due to Puerto Rico’s colonial condition
and because there has been well-designed and -structured persecution against the independence movement, to which corporate communications media contributed in regards to how the movement is made invisible. “How many programs [on radio or TV] are there today with statehood and colonial representation and without representation of the independence movement?” she asked. She recalled the countless number of times that the media has reported on public hearings for Senate debates, but her active participation was not mentioned. “Today, the strategy, more than persecution, is about making the independence movement invisible,” she said. Santiago added that there have been times when polls on candidates for governor were conducted and she is not included, and other times when panels are organized with invitations to all candidates, including those who have not been certified, except for her. Many questioning arguments against independence “This is a way of making the independence movement invisible,” she reiterated. Santiago said that the tough changes in Puerto Rico, in light of the fiscal and economic crisis, have led many people to
On the campaign trail
question the old arguments that have been used against independence as a political option for Puerto Rico. “The people leave the country in mass, they lose their houses, they do not have jobs, and the government does not have the money to pay for the services it provides. They used to say that that is what would happen if Puerto Rico were independent. Now they see the reality,” she said. “This is fundamental change. When people see that there are not any fundamental changes in the colony, they start to ask themselves fundamental questions. All that apocalyptic panorama is now becoming a reality with the commonwealth.” As for her legislative experience as an adviser and then as a senator, she said that more than unsatisfied, she feels indignant because the Legislative Assembly does not do even the least, which is the function of oversight. “The public hearings are
superficial, the functionaries go to the Legislature, do a few foolish things that no one cares about, and that is how the work goes along,” she said. She maintained that the important legislative issue is the tax issue, and is something handled with a great lack of capacity. As an example, she cited the number of tax reforms that are running at the same time, when it is known that a tax on consumption does not have any possibility of repairing Puerto Rico’s fundamental problems. “The Legislative Assembly’s reaction to the crisis is absolute paralysis,” she said, adding that in the middle of the crisis, the Legislative Assembly barely meets, “and the public hearings, with rare exceptions, are very superficial. I had never seen a Legislative Assembly so closed to the outside world, not only on the fiscal crisis issue.” One of the independence leader’s preferred issues is education; she
has a son in a special education program. She said the public hearing on educational reform held by the Senate was a script written the moment they started, “and then the legislative process becomes a function of a majority legislator.” She made an exception about the public hearings currently being held on the purchase of oil by the Puerto Rico Electric Power Authority, which up to now have progressed adequately, with effective participation of the legislative minorities. On the issue of the fiscal crisis, she said that on a legislative level, the problem is not that a special commission to study it and provide results has convened, but it is something that is not talked about. “It seems it is not a concern on the minds of majority legislators,” she said. She believes that no one in Puerto Rico expected the attitude of inactivity Continues on next page
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Thursday, MARCH 17, 2016 ‘When people see there are not any fundamental changes in the colony, they start to ask themselves fundamental questions.’
Continues from previous page
that was assumed by the PDP government and majority legislators before the crisis. She stated that the federal control board is something that is just around the corner and that neither the executive nor the legislative branches have done anything in response to the actions of the federal government. “One would have expected some kind of concerted action from the legislative assembly, as a response before what seems will happen, but we do not see a thing,” she said. Santiago, who is campaigning across the island, thinks that official idleness is proof of Puerto Rico’s illustrious bureaucracy, where people with whom one could have a difference of opinion has disappeared, “but now you don’t even have that. Now what prevails is the piñata theory; let’s hit it and see what falls. That is how the fiscal issue is being handled in Puerto Rico.”
Programing nonpayment essentially committing default On the issue of public debt, she said the PIP has proposed nonpayment because things have to be taken to a point where the government of the United States must respond, “and has to participate in [resolving this crisis], too.” She expressed her concern because, what has been proposed up to now by the U.S. does not provide anything for economic development, does not add much toward the solution of the crisis Puerto Rico faces. She said that in the political aspect, a federal fiscal-control board would represent a return to the beginning of the past century, which is in line with what President Barack Obama’s administration has stated in the Sánchez Valle case, where the Commonwealth’s colonial condition is revealed. She added that the U.S. has to tell Puerto Rico the conditions under which it would
Politics accept statehood, independence and commonwealth proposals to begin working on a decolonization process, just as her party has proposed. She said that at the end of the current process, the U.S. would opt for independence, given that Puerto Rico has lost all strategic, political and military value in the region, and as an economic enclave, besides the existence of an independence movement. She added that a triumph in the next general elections by the U.S. Republican Party, added to the legislative control of that party and a victory of the New Progressive Party in Puerto Rico, make it imperative that now, more than ever, the independence sectors establish a united front, because that unfolding scenario could mean an important advance for statehood. “A “Statehood: Yes or No” referendum is possible, and we have to get ready to face that,” she said. n
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Bio Data Political party affiliation: Puerto Rican Independence Party (PIP) Alma mater: University of Puerto Rico - B.A. in Drama University of Puerto Rico Law School - J.D.
Name: María de Lourdes Santiago-Negrón Date of birth: Nov. 13, 1968 (age 47) in Ponce
Professional experience: Legal Counsel for PIP Rep. Víctor García-San Inocencio (1997-2001) Chief of Staff for PIP Sen. Manuel RodríguezOrellana
Chief of Staff for PIP Sen. Fernando Martín Attorney at law- solo practitioner, civil law Senator at-large of the 23rd (2005-2009) and 25th Legislative Assembly of Puerto Rico In the current 25th Senate (2013-Present)
Auto Attendant La opción de Recepcionista Virtual de Liberty te permite transferir las llamadas entrantes a una extensión o hacia un número externo (fijo o móvil) sin la intervención de una operadora o recepcionista, un mensaje grabado les guiara por el menú de opciones. Te facilitamos el manejo del servicio vía un portal web para que configures tus rutas y mensajes de bienvenida de forma sencilla.
Spokesperson and V.P. for the Puerto Rican Independence Party Member of all Senate Committees
Llama hoy al 787.963.1000 vía email a ventas.negocio@libertypr.com o visítanos en www.libertypr.com/business
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Thursday, MARCH 17, 2016
Politics
Candidates pound pavement, resort to social media
Gubernatorial Candidates Face Intense Campaigns an expensive media campaign and some days she heads out to busy avenues to greet drivers and hand out campaign information. “We have been able to personally greet thousands of people and the reception has been very good,” Santiago said of her campaigning-without-money efforts. At the NPP, there is an intense “in-house” competition since the two candidates for governor,
Candidates to ramp up use of social media Candidates in the race for La Fortaleza are showing signs that they will make more intense use of social media to communicate their campaign messages and let people know about their events. Great activity is also seen in terms of campaign walks and visits to places frequented by residents, as all the candidates are seeking direct
a lower profile and her activism is decidedly less. Meanwhile, Bernier, just two months after officially announcing his campaign en route to the November general election, focuses his campaign on achieving direct contact with voters. Liza Ortiz, Bernier’s campaign director, said from the beginning, the PDP candidate has focused on building his team and tending to his party’s internal affairs, and then would focus on the actual campaign after that. She said that in light of that strategy, two operations—Operation PDP and the Colorao Tour—
Pedro Pierluisi NPP
David Bernier PDP
Ricardo Rosselló NPP
María de Lourdes Santiago PIP
Ricardo Rosselló and Pedro Pierluisi, are headed to the June 5 primary. After that day we will know who will become the NPP’s official candidate and the winner’s official run for governor will begin. However, the winner will already have done some legwork because during the primary race, both candidates have been presenting their respective government platforms heading toward the general election.
contact with voters. Add to this the traditional walks and political caravans, rallies and community meetings candidates hold so they can listen to the public’s concerns, mainly in areas related to the local economy, environment and health. Cidre, who has a little more exposure because he is a well-known businessman, can be seen in shopping malls and he takes advantage of forums to which he is invited. Lúgaro, however, maintains
were organized and are running right now. A third phase, Ortiz said, includes the electoral aspect that seeks to identify voters and make sure they are up-to-date so they can vote in the primaries and then in November’s general election. According to Ortiz, Bernier has a great advantage over aspiring NPP candidates because not having a primary allows him to work on his own schedule without interruptions because NPP
presence, but mainly in regional media and social networks. Both candidates, however, are maintaining and strengthening their electoral team ahead of the primaries, where local pundits believe the winner will become the next governor of Puerto Rico. Similarly, both teams believe that if they prevail, the gubernatorial campaign of the candidate who wins the primary will not be very different from what it has been so far.
Seven vying for La Fortaleza BY ISMAEL TORRES i.torres@cb.pr
In an election year, political parties and their candidates for governor usually begin campaigning openly as of January 1. This year seems somewhat atypical because the Popular Democratic Party (PDP) chose its candidate shortly after January and the New Progressive Party (NPP) gubernatorial candidate will be chosen in the June 5 primaries. The Puerto Rican Independence Party (PIP) and the Party of the Working People (PPT by its Spanish acronym) have already chosen their candidates for governor. As for the two independent candidates for La Fortaleza, businessman Manuel Cidre and Alexandra Lúgaro have been certified. Gubernatorial candidates David Bernier (PDP) and María de Lourdes Santiago (PIP) are out on the street on a daily basis, actively campaigning. Rafael Bernabe, the gubernatorial candidate for the PPT, is campaigning on a more limited basis, attending forums to which he is invited, but he is often seen in public events, including union protests and student events. While Bernier usually covers a route to meet and greet voters that begins in the north, and continues toward the western region and then to the south, the PIP candidate lacks the funds necessary to finance
candidates will remain immersed in the primary process until June. “This allows us to concentrate on this stage without having to respond to attacks or proposals presented by any of the two NPP candidates,” she said. As a calling card, Bernier has a great ability to seek unity, Ortiz said. Meanwhile, NPP candidate Pierluisi, due to his position as resident commissioner, seems to have a media advantage over his opponent Rosselló, whose active campaigning includes visits and political events throughout the island, accompanied by a strong media
Focusing on staying relevant The PIP’s campaign relies on achieving the political goals they have set: having legislatorsat-large in the House and Senate and remaining registered as a political party, something they have failed to accomplish during the past two elections. Commenting on her campaigning directly to the people, Santiago points out that with this plan, “we have not only strengthened direct contact with our party’s base, but we have also extended that contact to a greater number of people.” Under the slogan, “Together for Independence,” the PIP expects ample electoral support to further strengthen the third political force the island needs, Santiago said. Meanwhile, businessman Cidre insists on his independent candidacy in order to present nonparty affiliated people’s issues, who he says have no forums in which to present their ideas. Like Cidre, independent candidate Lúgaro aspires to become governor without the help of political or electoral machines. The PPT’s candidate for governor, University of Puerto Rico professor Bernabe, believes the election is a good opportunity to take a message to the people so they can understand the problems before them and consider different, non-traditional options. “For us, the electoral process is not a merchandise offer in which you have to accommodate consumers’ tastes,” he said. n
Special Feature March 17, 2016 Pages 29-35
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FPV Galíndez ensures its clients stay abreast of the latest tax changes BY B.G. DOYLE
As a full service firm, FPV Galíndez CPAs PSC has been providing a broad array of audit work, tax consulting and tax preparation services since 1994. “Changing times require service companies to be flexible and remain relevant to their existing and prospective client base,” said Kenneth RiveraRobles, one of the firm’s tax partners. “Given the many changes to local fiscal and tax laws during the past couple of years, we make sure our clients know what is taking place and how it affects them, so they will have an opportunity to react to these changes in a timely way.” He also pointed out that to do this, a lot of time and effort is invested in training the firm’s personnel, which includes internal seminars and in-depth discussions and analyses of technical issues among peers. “Due to the large amount of recent changes in our tax system, this has been
very challenging over the last couple of years,” he said. “However, our clients and peers recognize our ability to quickly adapt to the various tax changes, which in turn has enabled us to minimize any impact these changes could have.” Given this perspective and vision, FPV Galíndez has succeeded in increasing its client base throughout the years, which includes a large number of highprofile clients. “Over the years, we have developed various niches to support our growing client base, which include the addition of several industries and services to our core areas,” said tax partner Axel Ramírez-Santana. This includes litigation support, construction, healthcare, telecommunications, education, wholesale distribution and publicprivate partnership projects. “In these areas, we provide all types of services, including tax consulting, attestation and general consulting work,” he said.
As members of Puerto Rico’s premier professional organizations, the firm has also participated in their governing bodies and has been widely recognized for its expertise in the healthcare sector. In addition, the firm has provided more than 100 seminars and talks related to consumption taxes and proposed changes. Recognizing the firm’s 75 employees as its most important asset, Rivera-Robles pointed out that the flexible work environment is another key to the firm’s success. “We encourage and support a decision-making environment and give our team members the tools and knowledge they need to make and act upon their own decisions,” he said, noting that this is in line with the firm’s goals to establish a company brand that reflects teamwork rather than individual achievements. “Even though these achievements are very important and promoted within the firm, we
“Given the many changes to local fiscal and tax laws during the past couple of years, we make sure our clients know what is taking place and how it affects them, so they will have an opportunity to react to these changes in a timely way.” —Kenneth Rivera-Robles, tax partner at FPV Galíndez
strive to have a company in which the recognition and importance of our name alone is seen as a symbol of a quality service provider,” he said. Given the firm’s success in Puerto Rico, FPV Galíndez has begun branching out to other
markets, while partnering with peers in the U.S. mainland and the Dominican Republic. “We have also entered into agreements with our affiliate in Mexico to bring their expertise in transfer pricing to our clients,” he added. n
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Universal’s Offerings Provide Retirement Peace of Mind BY CB STAFF
This year, Universal Life began its IRA campaign with a focus on helping local consumers better plan for their retirement goals. As part of this effort, the company has undertaken various campaigns and coordinated focus groups with consumers and financial advisers to better understand local consumer needs, while taking into consideration the local economic environment and uncertainty regarding the future. The ongoing educational seminars, which started late January to Universal’s independent sales force of more than 1,200 authorized representatives, is themed “The New Era of Financial Planning in Puerto Rico,” and aimed at helping consumers take a more informed approach when purchasing IRAs, in order to tie
their IRA savings to their retirement goals. For example, all of Universal’s IRAs offer an Income for Life rider, which could convert retirement savings into a stream of lifetime income that cannot be outlived, without losing control of one’s savings. The introduction of these benefits by Universal Life not only tackles the concern many consumers have about running out of money during retirement, but also creates certainty in an otherwise uncertain environment. The Universal Bonus Index Annuity is another new development that has gained wide acceptance since its launch a month ago. This offering provides clients the opportunity to participate in S&P 500 returns up to a maximum cap, while providing protection from negative market returns. The product can offer up to a 5% bonus, which is
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The introduction of these benefits by Universal Life—such as an Income for Life rider—not only tackles the concern many consumers have about running out of money during retirement, but creates certainty in an otherwise uncertain environment as well.
vested throughout the surrender period of the contract. The index option also provides consumers the opportunity to keep up with or even outpace inflation in the current low-interest rate environment, while receiving protection from potential market downfalls. And while Universal Life continues to emphasize the need for local consumers to discuss their retirement needs with a knowledgeable financial adviser, the company’s newly launched retirement calculator also helps consumers estimate their retirement goal progress and can be accessed from any
device, including smart phones at calculadoraderetiro.com. To alert local consumers to the various IRA products and services it has launched this year, the company has invested significantly in various TV, radio, social network and print ads, which started on March 1, and will continue until the end of the IRA season. The three main branding messages are: Consolidate your IRAs and Earn More, Protected Growth and Guaranteed Income for Life. Through this effort, Universal Life will be educating, supporting and assisting local consumers to be in a better
position to withstand the challenges of retirement planning, while contributing to the local community’s quality of life. Given the company’s financial strength rating of A- (Excellent) with a stable outlook from A.M. Best, Universal Life, which is part of Universal Group, is focused on maintaining its financial strength and is well capitalized to meet its current and future financial obligations. Responsible underwriting, competitive pricing, sound financial management and solid reinsurance make Universal Group’s companies stand among the best insurance companies as best-managed service providers through their three products and service channels: insurance, finance and investments. n
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Kevane Grant Thornton Looks out for Corporate Clients During Tax Season BY MARIO BELAVA DÍAZ
With tax season looming, the airwaves are already rife with what Lina Morales, tax partner in the Tax Department of Kevane Grant Thornton in Puerto Rico, described as the “IRA Wars,” referring to financial institutions promoting products such as individual retirement accounts, known by the initials IRAs. However, she said that while the emphasis during tax season tends to be on income tax filed by individuals, there are other taxpayers, such as corporations, that must consider the requisites they have to comply with and should not be overlooked. “All owners of businesses and corporations have to always consider these requisites,” Morales said, “especially when preparing their annual budgets and particularly during these times of economic austerity.” Morales explained that unlike the majority of individuals, corporations may have a tax year that is different from the calendar year. The deadline for filing corporate income taxes is on the 15th day of the fourth month after the company closes its tax year. “For example, in the case of a corporation with a closing date of Dec. 31, the deadline would be April 15, but for a corporation with a closing date of June 30, the deadline is Oct. 15,” Morales explained, adding that the law allows a three-month extension to file in most cases. A corporation pays taxes on its income as a corporation and generally when it distributes dividends among its owners,
who pay a tax that can reach to up to 15%, which is known as double taxation. “The income-tax law provides alternatives to reduce or eliminate this double taxation,” Morales said. “These can be done through other ways of doing business, such as a partnership, special partnership or corporations of individuals, where the owners pay taxes, and not the entity.” Regular corporations determine their income tax through two steps: a regular tax, where the total net income subject to tax is multiplied by 20%, and then an additional tax is added for the excess of that net income subject to tax that is over $25,000. This additional tax is determined by parameters that have already been set. In addition to the income tax, corporations have to file and pay a host of other taxes, which includes a declaration on the volume of business (municipal business tax, or patente), which should be filed with municipalities within five days after April 15; and the tax on personal property, which has a May 15 deadline. In addition, if a corporation’s business volume exceeds $3 million, it must submit audited financial statements from a certified public accountant authorized in Puerto Rico. “All in all, the taxes and requisites that have to be complied with are many, and that is beside the already great responsibility of running a business,” Morales said. “That is why [businessowners] should seek orientation from their tax and financial adviser so they can invest their time in what really matters: moving business forward and prospering.” n
CUANDO OTROS TE DICEN QUE TÚ NO PUEDES, TE ESTÁN MOSTRANDO SUS LIMITACIONES, NO LAS TUYAS. ¡VAMOS POR MÁS!
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The Value of IRA Accounts By Laura M. Torres, Esq. Financial Planner, Banco Popular de Puerto Rico
We usually think about Individual Retirement Accounts (IRA) when we are close to filing our income tax returns. That is because IRA accounts allow you to claim a deduction on individual income tax for contributions made. They also serve as an important vehicle to accumulate savings for retirement, complementing a retirement plan. There are two types of IRAs: Traditional IRA (deductible): allows you to deduct contributions made from tax returns, up to a maximum $5,000 per taxpayer per year. Early withdrawals
of funds from the IRA will be treated as ordinary income and will be subject to taxes. Nonexempt interest generated by the funds on the IRA will pay taxes at a special rate of 17%, if you choose a withholding to apply. Roth IRA (non-deductible): Contributions are also limited to $5,000 per taxpayer per year, but they are not deductible from tax returns. However, when withdrawn, funds are taxexempt. Benefits Taxpayers are allowed to take advantage of tax benefits available from IRA accounts and retirement plans as defined by the Puerto Rico Internal
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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. A married couple filing jointly could contribute up to $40,000 per year to their retirement. The IRA account allows rollovers of funds from a qualified retirement plan without a tax impact, thus consolidating the assets available for retirement. Prepaid balances in contributions should be transferred to a Roth IRA account so that any growth can be tax-exempt. The purpose of an IRA account is to save money for retirement;
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therefore, if funds are withdrawn before age 60, a penalty will apply. There are several reasons
under which early withdrawals are penalty-free, such as: Chronic, degenerative or terminal illness, disability, unemployment and purchase of the first principal residence in Puerto Rico, among others. Certainly, IRA accounts provide benefits beyond a deduction in income tax returns. As part of a comprehensive financial-planning process, you should maximize tools that offer shortand long-term advantages. Not all IRA accounts offer the same guarantees, terms and yields. It is important to contact your financial adviser to help you choose the type of IRA account that best suits your needs and maximize its benefits. n
SPECIAL FEATURE March 17, 2016
Pages 37-43
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Insignia Senior Living Offers ‘Best Practices’ to Puerto Rico BY LUIS VALLDEJULI
After several years in the hospital business and following their passion for care giving— especially to senior citizens— Milton Cruz and his wife, Aileen Rosso, founded in 2002 a company called Insignia Senior Living, with Cruz as CEO and Rosso as president. Since then, Insignia has continuously grown and now has 350 employees. “There is a limited market for private pay-assisted care services for the elderly in Puerto Rico. The only way to achieve growth in this market is by providing the best possible service. We have been able to bring the best practices of our senior communities in the southeast United States. In addition, we have a strong corporate culture, which emphasizes relationships, communication and responsiveness. All our employees are focused on fulfilling our mission of providing safe and joyful environments where seniors are loved and valued,” Cruz said. Miramar Living, a 77-unit senior living community, is Insignia’s latest creation, located in the historic neighborhood of San Juan. There, as in their other facilities, the staff provides three types of services, such as
assisted care for seniors who want to live independently, but need assistance in some dailylife activities, such as bathing, meal preparation and medication management. There is also a specialized area of memorycare services, whereby the staff is well-prepared to treat patients with conditions like Alzheimer’s. And, lastly, there is also care for bed-ridden patients. The industry has evolved greatly in the past few years. Whereas such residences were considered more as institutions and handled like hospitals, Insignia’s properties today have been designed as residential or home-like spaces where the staff, residents and their relatives form a community. Always keeping the best interests
of residents at heart, the staff tackles any situations immediately and respectfully. For this, the communication lines are always open among all parties. Some of the residents are actually friends and relatives, so
“We have a strong executive team based in Atlanta, focused on continuing to export our services in the southeastern U.S.” —Milton Cruz, CEO Insignia Senior Living
for their comfort and that of the other residents, Cruz and Rosso have taken great care in providing the best practices, all the amenities and most modern facilities available. What is viewed as a labor of love by those at Insignia is quite an intense undertaking since they provide services 24/7, while keeping costs on par with Puerto Rico’s general economic situation. “We love that we work in a service industry where people help those in need. It is extremely satisfying that the seniors we serve can spend their days in a way they deserve,” Cruz said. “We have a strong executive team based in Atlanta, focused on continuing to export our services in the southeastern U.S.”
Miramar Living opened a few months ago. Each suite has its own bathroom and kitchenette. The community has a chef that serves three meals a day in a restaurant environment. Additionally, there is a beauty salon; daily coordinated activities (including outings); a medical director who is an internist specialized in geriatrics; nursing staff; a nutritionist; physiologist; and social worker. The staff also coordinates doctors’ appointments for residents. n
PeaCe oF minD “thanking our Clients For 30 years oF trust”
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When it comes to expert, efficient and cost-effective solutions for your insurance needs, you can rely on our proven track record as purveyors of the highest standards of quality and global excellence. Our broad understanding of our industry’s intricacies allows us to deliver trustworthy advice to safeguard your company’s assets and promote its progress. Furthermore, our partnerships with world-class insurers enable us to procure the best insurance products and optimal coverage alternatives.
For your insurance needs, call us today
787-751-7610 Fax: 787-763-2810 • www.vidalrodriguez.com Capital Center Building, 239 Arterial Hostos Ave. Suite 501, San Juan, Puerto Rico 00918-1478
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Caribbean Display & Construction Succeeds on Time and Within Budget BY MARIO BELAVAL DÍAZ
Caribbean Display & Construction’s success stems from surpassing expectations when it comes to two essential elements in retail construction: on-time delivery and cost effectiveness. However, Ralphie Pagán González, president of Caribbean Display & Construction Inc. said that throughout the 27-year history of the company, there has been a vital partner in Caribbean Display & Construction’s performance as a leader in the industry. “Our clients,” he said. “They believe in Puerto Rico and continue their growth on the island, and they believe and put their trust in us to provide them with services that will help them achieve their goals.”
Caribbean Display & Construction’s impressive roster of clients reads like a “Who’s Who” of major players in the retail and services segments in Puerto Rico, and include longterm clients such as Novus Inc., Empresas Caparra (San Patricio Plaza, Galería San Patricio and Santander Tower), El Mesón, Empresas Fonalledas (Plaza Las Américas and Plaza Del Caribe Mall), Baskin-Robbins / Dunkin Donuts, Banco Popular de Puerto Rico, T-Mobile P.R., La Gran Vía and Zara. More recent high-profile clients include McDonald’s, L’Oréal, DirecTV, 3M Puerto Rico, Aerostar and Group M. “Our long-term clients know us and new clients are aware of our experience in the business in managing a retail project where timing and being able to have a
OnNet Gets Clients Close and Fast to Their Applications BY MARIO BELAVAL DÍAZ
There is a growing trend in the information technology arena as providers are searching for ways to bridge the gap even more between application availability and users. “Providers and developers are constantly working to reach users in such a way that they feel they have access to applications within easy and expedient reach,” said William Cuebas, vice president of sales & marketing for OnNet Fiber Powered Networks. “This is especially so nowadays when businesses, with the advent of cloud technology, trust their applications to
facilities outside their premises, in some cases not even knowing where these facilities are.” One trend that aims at closing the gap even more between application and users is known as regionalization of services, or basically placing services in the region where the users are located. “This requires a good data network, with good capacity and internet service so that the experience of the user is a satisfactory one,” Cuebas said. “As the only network and infrastructure in Puerto Rico that is fully optimized to support all the applications our clients need, we can help bring them
project on time is everything,” Pagán González said. “Obviously, there is the fact that we adjust to clients’ budgets and deliver top-quality results.” He explained that timing is essential because a retail operation needs to open according to a set schedule in order to be able to sell and pay rent. While the company has had to adjust its margins and remain competitive in the challenging local economy— as is the case among many others—Caribbean Display & Construction has experienced significant growth in the past years. In fact, in 2014, the company reported earnings of $8.4 million and in 2015 it reached the $10 million mark. “We have many projects underway as well as future projects, and we are grateful for
the work and the opportunity to, alongside our clients, help Puerto Rico’s economy move forward,” Pagán González said, adding that Caribbean Display & Construction could expand into the mainland U.S., especially in the state of Florida through local clients who are looking to
closer to their applications.” Recently, OnNet Fiber and sister company PrepaNet strengthened the concept of regionalization through the completion of construction of a new data center in the Isla Verde sector of Carolina. The new data center is the most advanced of its kind in Puerto Rico and the Caribbean. At an investment of $20 million, the new 30,000 square-foot, Tier 3 center, housed at the location of the old hotel school in Isla Verde, features a three-story building, commercial space on the ground floor, a four-level parking garage, rental space for its partners and a secure cable station. The new facility will further increase OnNet’s capabilities to serve the island’s needs and beyond, allowing the company to extend its services to the U.S. mainland and other regions of the Caribbean and Latin America, aided by the fact that it is strategically located near the largest fiber-optic submarine-cable
landing point on the island. Established in 2013 as a subsidiary of Prepa Networks, OnNet Fiber Powered Networks is at the top of the list when it comes to providing the most comprehensive spectrum of communications and technology services that Puerto Rico has seen to date. While PrepaNet was originally developed to provide a highspeed, sophisticated fiber-optic infrastructure for local telecommunications companies at a wholesale level, it eventually became apparent that this technology could greatly benefit the business and government sectors as well. Thus, OnNet was created with the objective of providing the best fiber-optic-quality solutions on the island and making them available for businesses, government and any other organization that requires high-speed transmissions, air-tight security and a superior platform on which to run their applications.
Ralphie Pagán González, president, and Víctor E. Braegger Semanaz, vice president, of Caribbean Display & Construction
expand their operations there. The company also has clients in the U.S. Virgin Islands. Located in San Juan’s Mario Julia Industrial Park, the company currently has 48 employees. Founded by Pagán González in 1989 as a slatwall manufacturer, the company is still the only slatwall panel manufacturer in Puerto Rico and the Caribbean, with slatwall panels recognized as some of the most versatile display options on the market. The company provides a superior array of interior and exterior retail construction, commercial turnkey remodeling, woodworking and lighting fixture services. The company has three divisions: construction, electrical and woodworking. In all three, Caribbean Display & Construction has one if its greatest assets that have been key in the company’s success: employees who are trained and knowledgeable in their respective fields. n
William Cuebas, vice president of sales & marketing for OnNet Fiber Powered Networks
Among OnNet products and services are top-of-the-line VoIP (voice-over Internet Protocol) and other telephony products and services, to cloudbased products, software-as-aservice, private networks and a highly advanced video conferencing offering. n
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Packaging Solutions: 40 Years Packaging Success
Waleska Canting, quality manager, Maritza Torres, operations manager, Carlos Casellas, president, and José Calderón, plant manager.
BY CB STAFF
“Besides providing packaging solutions that answer to the requirements of key areas of the island’s economy, our performance in terms of service and quality has been essential to our success,” said Carlos A. Casellas, president & founder of Packaging Solutions. “Our valued customer service is a 24/7 operation and our emphasis on quality is protected by aggressive monitoring and documenting.” With headquarters at PR174, 5.1 km, in the Guaraguao sector of Bayamón, Packaging Solutions provides packaging materials for an impressive roster of clients in the medical, electronic, food and construction industries. Casellas added that a committed and experienced work force keeps Packaging Solutions on the move, meeting the demands of the company’s clients. “We constantly monitor performance and instill the importance of customer satisfaction, on-time delivery and flawless products with our workers,” Casellas said.
“We are always willing to go the additional mile, providing alternatives both in price and complexity of products. Casellas added that the company plans to continue its growth in part by targeting emerging packaging markets such as the food industry and strengthening growth within its local and multinational customers. “For the future, you aim to be and remain the only and first supplier of quality, specialized packaging,” Casellas said. Packaging Solutions has four divisions mainly dedicated to packaging. In the company’s Las Piedras plant, paper is made into corrugated carton that then goes to the conversion area to be turned into corrugated boxes and boards. Also at Las Piedras, the company operates its own corrugator as well as a design studio and a state-of-the-art lab, where converted boxes and sheets can be tested for anything from compression and stacking, to humidity effect. We also have the capacity to print boxes with multiple colors. n
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Riax Builds Quality Craftsmanship Into Interiors BY CB STAFF
At a time when off-the-shelf technologies dominate, Riax Interiors General Contractors Corp. takes an artisan’s approach to delivering fine and precise craftsmanship to construct interiors for clients across the spectrum of top-ofthe line businesses and other facilities on the island. Attention to detail has been the hallmark of the company’s success for decades, according to its president, Axel Rivera. “This is a family business that was started by my father, a cabinet-maker, more than 40 years ago,” Rivera recalled. “Today, we have a great variety of clients,
from offices, banks, retail stores, medical facilities and hotels to residences.” Among the interior general contractor’s current projects are new offices for Bancredito International Bank at American International Plaza, a new store for Tiffany & Co. at Mall Of San Juan, a renovation of the Tiffany store at Plaza Las Américas and the interior construction of a large luxury apartment at Paseo Caribe. The company has come a long way from the high-end cabinet making that Rivera’s father started. “But we have kept that tradition,” starting as a woodworking shop and evolving into a full service general contractor for interiors, he said. “We have one
of the best woodworking shops on the island with more than 20 skilled craftsmen.” Artisans and technology The application of specialized technologies enhances the workmanship for which the company has become known. “Better computers and more precise machines help us a lot,” Rivera noted. “But our best technology relies on our employees’ expertise. Some of our woodworkers have more than 25 years of experience in the field of cabinet making.” Riax works hand in hand with some of the most prestigious architects, engineers and interior designers on the island, Rivera explained. “We have earned
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a reputation for staying true to plans and specifications, as well as maintaining close control of every stage of the process.” This is a “one stop service,” he went on, emphasizing that Riax performs every aspect of interior construction from the demolition phase, up to general concrete work, drywall partitions, ceilings, all type of finishes (ceilings, walls and floors), and all types of electrical and mechanical work, including air conditioning, plumbing and sprinklers. “We believe that every construction project is a partnership among the owner, designer and contractor, and it has to be a win-win situation for everyone involved,” he said. This philosophy has kept Riax among the top-three interior contractors on the island for a very long time. “We are very proud of the fact that 80% of our projects come from repeat business,” he said.
Axel Rivera, president of Riax Interiors General Contractors Corp.
Looking ahead, Rivera sees Puerto Rico climbing out of the current economic slump “sooner than expected. That is why we are increasing our labor force and investing in new machines to be prepared for future growth. n
Extreme Graphics Moves Forward With Top Printing Solutions BY CB STAFF
Extreme Graphics Inc. started operations in 2007 and since then, it has grown exponentially to become one of the few elite commercial printers in Puerto Rico. With 32 employees and 16,000 square feet of manufacturing space, the company serves the entire island of Puerto Rico and exports some of its products to the U.S. mainland. Despite the economic and technological challenges that exist in the local economy today, Extreme Graphics has been able to grow its market share and sales, every single year, by focusing on opportunities rather than being discouraged by any possible threat. Although the company’s strength has always been in the
production of textbooks, novels, full color magazines, brochures, posters and other commercial printing products, for the past three years, Extreme Graphics has expanded its product-mix offering to include promotional products, banners, signs, T-shirt printing, embroidery and labels. On the other hand, Javier Maldonado, owner & CEO of the corporation, believes that although growth is an important goal in any organization, customer service and customer satisfaction should come first. “We treat our customers as business partners by focusing on their needs and potential for growth,” Maldonado emphasized. “We want our customers to use their budgets wisely, thus we aim to help them maximize their marketing resources, but
ultimately we seek to be an integral part of their growth and success,” he added. Moving forward into the future, Maldonado is very proud to announce the recent appointment of Noel Huertas as president and Leyshla Rivera as vice president of Extreme Graphics. Maldonado will remain as CEO in charge of financial affairs, medium- to long-term planning, personnel recruitment and new technological developments. The new, younger and experienced administration, Huertas and Rivera, will be in charge of daily operations, including boosting employee productivity and improving customer service and customer satisfaction. In the past three years, the company has invested nearly $1 million in machinery and
Pedro Sevilla, Noel Huertas, Javier Maldonado, Delma Reyes, Leyshla Rivera, Aixa Orlando and Susyines Moliere
infrastructure, thereby doubling its production capabilities and better positioning itself to gain a greater market share. Right now, with its newly improved capacity, the company is looking for a few good customers with growth potential to aid them in their endeavors. “We know how important it is for businesses to market themselves and their products, and that is why we offer our help during the planning stage, the budgeting and eventual launching
of their product,” Maldonado stated. Extreme Graphics uses many means of communication to ensure customers are heard: via telephone, email, Facebook and through its newly renovated website, www.extremegraphicspr.com. The company is also working to create individually designed storefronts to facilitate the reordering process. As far as companies in motion go, Extreme Graphics can’t stand still, and is constantly in motion! n
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Colegio San Ignacio De Loyola Hosts Important Jesuit Educational Gathering BY RICARDO IMBERT FERNÁNDEZ
Last February, the biannual U.S. Central & Southern Province (UCS) High School Leadership Group Meeting was held at San Juan’s prestigious Colegio San Ignacio de Loyola for the first time in the history of the all-boys high school. Principals, presidents, board chairs and Jesuit superiors from all Jesuit high schools in the U.S. Midwest and South, as well as parts of the Caribbean such as Puerto Rico and Belize, visited San Ignacio for the congregation. UCS Provincial Father Ronald Mercier S.J. and executive director of the Jesuit School Network of the U.S., Father Bill Muller S.J., were also in attendance. Since San Ignacio joined the UCS in 2014, the province has been keen on bringing the event to Puerto Rico. “From the perspective of the rest of the province, this is seen as an incredible benefit to all of us. We view Puerto Rico as a really critical platform for Jesuit education and the Jesuit mission,” said Sean Agniel, provincial assistant for secondary & pre-secondary education at Jesuits of the UCS. “It was important to us that as soon as possible we gathered our school leadership here so leaders in our other Jesuit schools can gain an appreciation of what Puerto Rico and Colegio San Ignacio have to offer.” Citing Pope Benedict XVI, Agniel said Jesuits are sent to the frontiers, to places that are hard to get to both geographically and spiritually, emphasizing that there is a sense that the Jesuit mission is most effective on frontiers and borders. “What we’ve witnessed at Colegio San Ignacio is that alumni here are people who see beyond frontiers, that easily move across borders,” Agniel said. “Their facility in languages and cultures is a remarkable asset and is a paradigm for the way we hope all our educational programs prepare students for the world.” Jesuit vision starts with excellence in every act. San Ignacio pursues a holistic formation of students that goes beyond
U.S. Central & Southern Province (UCS) High School Leadership Group
Sean Agniel, provincial assistant for secondary & pre-secondary education at Jesuits of the UCS.
academic excellence to forming students who are loving, committed to justice, open to faith and eager for growth, Agniel said. Because of that approach, alumni of Jesuits schools are men and women of conscience, competence, compassion and a commitment to justice. Interim Principal Mildred Calvesbert emphasized that while San Ignacio is unique as the only Jesuit school in Puerto Rico, the institution is also part of a larger group of schools around the world. “We want to get across to our students that there is a need for the pursuit of excellence in many ways, not just excellence in academics—which we provide— but also excellence as a human being. We want our students to understand the sense of value they have as a person and put that in the service of others,” Calvesbert said. “Many schools can give you good academics, but not many can give you an integral formation in values and spirituality that can actually transform a human being.” For Agniel, a key educational goal at San Ignacio and all Jesuit schools consists of attempting to disrupt the dehumanizing structures that exist in the world. He said it is crucial for young people to notice the social structures that make it impossible for people to thrive. “That’s what we’re up to,” Agniel said.
“To teach our students to be able to recognize those dehumanizing structures and then be able to rise into positions where they can be constructive.” Both Calvesbert and Agniel emphasized San Ignacio’s long and prestigious history, and the school’s uniquely Puerto Rican tradition of which the Society of
Jesus is very proud. “San Ignacio truly is a brotherhood,” Calvesbert said. “It’s beautiful to see the bonds that our students form and the sense of pride they develop, which is connected to a global network of Jesuit schools, and that they carry with them wherever they go.” n
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Thursday, MARCH 17, 2016
Autos
Fleet sales fell 20.8% last month, while retail sales were down 2.8%
Puerto Rico New-Auto Sales Slide 4.3% in February Still off 8.2% for the Year with 11,734 Units Sold to Date BY JOSÉ L. CARMONA j.carmona@cb.pr
The auto-sales slump that began more than two years ago continues unabated, with sales slowing down 4.3% in February versus the same month last year, after a very disappointing January, the United Automobile Importers Group (GUIA by its Spanish acronym) announced last week. According to GUIA, some 6,152 new units were sold last month, which was 4.3%, or 278 fewer units than February 2015. Yearto-date sales as of last month were 11,734 units, down 8.2%, or 1,050 fewer units, than same period last year. In January, new-auto sales fell a whopping
12.1%, the worst January ever on record for the local auto industry. The island’s auto distributors closed last year down 7.8%, with 81,357 units sold. Fleet sales were down 20.8% last month, while retail sales fell 2.8%. Industry concerned GUIA President Ricardo García said the island’s automotive industry is concerned about the continuing new-auto sales slump amid a 10-yearlong economic downturn and the threat of a government shutdown in the coming weeks. “We are facing the 25th month out, of the last 27, of decreased sales over the same month the previous year. Not only that, this was the second-worst
February on record, and the worst February since 2009,” García indicated. “The industry has had to make big adjustments to stay afloat. We hope to eventually see some stabilization in auto sales, but the uncertainty, as a result of the prevailing economic situation, has not allowed that.” Japanese brands fall 14% Japanese automakers, the dominant group in the local market, reported 3,504 total units sold in February, a 6.5%, or 242-unit, decrease from the same month last year, with 57% of the market, despite a boost for Honda, Nissan and Scion, which were up 9.4%, 3.6% and 156.8%, respectively,
Sales of the Nissan brand were up 3.6% in February versus the same month last year.
versus the same month last year. Domestics up 0.1% Cumulative February sales by domestic automakers FCA Group (Chrysler, Dodge, Jeep and Ram), General Motors (GMC, Chevrolet, Buick and Cadillac) and Ford (Ford and Lincoln) reached 1,034 units, up 0.1% from same month in 2015, with a 16.8% overall share of the market.
Of the three domestic automakers, only FCA reported positive sales, up 6.1% against the same month last year. Koreans down 2.8% Korean carmakers Hyundai and Kia together sold 1,228 units last month, down 2.8% from same month last year, with a combined 20% market share. Of the two, only Kia posted positive sales, up 4.5% versus
February of last year. Europeans down 0.3% European brands sold a combined 386 units during the second month of the year, down 0.3% from February 2015, with a 6.3% market share. Audi, BMW, Jaguar, Mercedes-Benz and Maserati reported higher sales in February than the same month last year, up 46.7%, 2.1%, 33.3%, 24.3% and 300%, respectively. n
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Thursday, MARCH 17, 2016
New 3.0-liter, six-cylinder inline turbocharged engine
2016 BMW M2
The new Entry-Level Model of the BMW M Brand BY JOSÉ L. CARMONA j.carmona@cb.pr
The first-ever BMW M2 made its highly-anticipated world debut in January during the North American International Auto Show in Detroit. The rear-wheel drive, 2016 M2 coupe features the renowned BMW M performance complemented by a sleek interior and exterior design, plus a long list of exclusive features. Inspired by its motorsport roots, the German automaker says the new entry-level model of the BMW M brand is perfectly aligned with the M tradition, ensuring unbeatable driving dynamics on the road and the track, while embodying the true DNA of BMW M vehicles. All-new engine The newly-developed M TwinPower Turbo 3.0-liter, six-cylinder inline engine produces 365 horsepower and 343 pound-feet (lb.-ft.) of torque. An over-boost function raises torque to 369 lb.-ft., catapulting the high performance vehicle from zero to 60 miles per hour (mph) in 4.2 seconds (with the optional M double clutch transmission or M DCT) and an electronically limited top speed of 155 mph. The all-new six-cylinder engine features a twin scroll turbocharger, high-precision direct injection, variable camshaft timing (Double-VANOS) and Valvetronic variable valve-lift control. This engine has gained selected components from the high performance units in the BMW M3 and M4 presented in 2014. These include the pistons, crankshaft main-bearing shells and high-performance spark
plugs designed to optimally work at higher temperatures. To ensure oil reaches all engine components at all times under limit-pushing driving, an additional oil sump cover helps to limit the movement of oil under powerful acceleration. At the same time, an extra oil suction pump sends the oil back to the rear part of the oil sump when the driver brakes heavily. To deal with extreme cooling requirements under hard driving, the BMW M2 benefits from an additional oil cooler for the transmission oil and an extra water radiator for the engine. Custom wheels, tires To transfer the car’s dynamic potential to the road as effectively as possible, the development of specific tires for the allnew BMW M2 was incorporated into the rear axle construction from the beginning of its development. The lightweight 19-inch forged aluminum wheels, together with the exclusive Michelin Pilot Super Sport tires measuring 245/35ZR 19 in the front and 265/35/ZR 19 at the rear make a considerable contribution to the dynamic properties of the new M2, while ensuring everyday ride comfort. The high-performance brakes feature large perforated and inner-vented disk rotors with four-piston fixed calipers in the front, two-piston fixed calipers in the rear—painted in a blue metallic finish and displaying the M logo at the front calipers. The lightweight aluminum M Sport suspension in the 2016 BMW M2 shaved 11 pounds from the vehicle. The 2016 BMW M2 will be available at authorized BMW centers nationwide in April. n
46
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A new take on a classic
Café Yaucono Revives a Classic for its New Campaign
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Thursday, march 17, 2016
BY MARIO BELAVAL DÍAZ m.belaval@cb.pr
Café Yaucono, the popular coffee brand, has launched a new advertising campaign that adds a modern musical twist to its classic jingle “Por el gustito yo lo sé” (roughly translated as “I know by the taste…”), which was synonymous with the brand for years, through more than one generation. For the campaign, developed by local advertising agency Arteaga & Arteaga, and salsa orchestra Orquesta El Macabeo, whose style has been described as salsa dura (hard salsa), which harks back to the 1970s style of salsa music that is heavy on brass and percussion instruments, was tasked with creating a new version of the jingle. Stephanie Matos, Yaucono brand manager, explained that the goal of the new campaign is to highlight among consumers that with its more than 100-year history on the island, Yaucono “has the same great taste since that first day.” The campaign will be broadcast on radio, print and digital mediums. “Café Yaucono is refreshing the brand, but without leaving behind its origins with Mamá Inés and the essence of the brand,” said Matos, referring to the iconic character of Mamá Inés, an animated character, which in a way is the face of the brand and which has been brought back for this campaign.
“We all know that times change and this new project, which includes recreating our song, aims to transport people to the exquisite taste of Yaucono, the same one that has been with them for years,” she said. While Matos explained that the lyrics emphasize everything that
iconic jingle. “It was a challenge to be able to re-create such a successful [piece] of audio, which really made a mark on people back then, and we recognize that it will also mark a new generation that can enjoy it,” Ibañez stated. “We grew up with Mamá Inés of Café Yaucono, and
“Café Yaucono is refreshing the brand, but without leaving behind its origins with Mamá Inés and the essence of the brand.” —Stephanie Matos, Yaucono brand manager
can go with a cup of coffee, José Ibañez, bassist and director of Orquesta El Macabeo, said it was quite the challenge to re-create such an
it is an honor that we were given this task; we are sure that this new version will transcend a few more generations.” n
Creative Corner Client: Café Yaucono Agency: Arteaga & Arteaga Concept: “Por el gustito yo lo sé…” (“I know by the taste”) Creative Director: Laura Figueroa Copywriter: Mara Marrero, Edgardo Cartagena Art Director: Héctor Soto, Edward Quigley Account Director: Winifred Toro Public Relations: Angeline Salado Jingle: Orquesta El Macabeo, Monopolio Records
Production House: Chat Producers: Rafael Arteaga, Irka Pardilla Director: Juanchi González Audio: Ferdy Valls Editor: Gabriel Maldonado Media Used: Digital, Radio, Outdoor, TV Integrations, Print, Point of Purchase (POP) Target Audience: Women 18-39 When did it Kick Off? March 7, 2016