A University of Arizona analysis ranks the capital city last out of 83 cities in the U.S. What does it mean and why are we doing so poorly?
San Juan, Puerto Rico ranks 83rd among major U.S. cities in terms of ease of doing business (El Nuevo Dia, Archive).
It is an everyday thing to put "ranking" or "rating" to things, to people, to companies. In a certain way, it is a way of approaching subjects, weighing ideas or ordering the avalanche of information that surrounds us.
When the "ratings" favor the evaluated, the praised celebrate. When the opposite happens, it must be because of the methodology, because of "the motivation" behind the fact ....
No analysis methodology is perfect and some -frankly flawed- have ended up discredited and discarded. The most eloquent case, perhaps, revolves around the World Bank's "Doing Business" report scandal.
This week, the Institute for Economic Liberty (ILE) released the results of the Doing Business North America Report, published by the Center for the Study of Economic Freedom at Arizona State University (ASU).
The research published by ASU analyzed 83 cities in the United States, including San Juan, Puerto Rico. It should surprise no one that the city that could be described as the oldest under that banner (given the island's legal-political relationship, like it or not) has fallen to the bottom.
San Juan Mayor Miguel Romero Lugo took exception to the report. He asserted that ASU analysts used data corresponding to the years 2019 and 2020. That is, before his arrival at City Hall. He also said that the business environment in San Juan is improving and that his administration is making several efforts to make it so.
It is not our role to question the initiatives that can be carried out, but I am afraid there is little that San Juan can do, on its own, to improve its condition.
When you dissect the report, in reality, there is not much difference between the hourly wage that at the time the report portrays, San Juan workers earned and those in Salt Lake City (Utah), the best city to do business in the United States, according to ASU. Nor are there major differences in terms of the paperwork involved in setting up a business or changing the zoning of a property.
Where there seems to be a gulf is in other areas. Electricity in San Juan, the report notes, is triple what it costs in Salt Lake City -and Boise, Idaho, the second-best city for doing business, for example. In those cities, power outages average 92 and 130 minutes, respectively. In San Juan, the average for each interruption reached, in those years, about 778 minutes, almost 13 hours.
The other variable that "sinks" San Juan relative to its peers is related to taxes, but with the exception of property taxes, everything else is the jurisdiction of the central government. In Salt Lake, Boise and the other three best cities for doing business, according to ASU - Atlanta, Raleigh and Charlotte- federal, state and local taxes are paid, but the rates pale in relation to San Juan. In Atlanta, for example, the effective rate on commercial property is around 1.6%, versus over 10% in San Juan, not to mention corporate rates, even though federal taxes are paid there.
Perhaps, the criterion that could hurt the retina of many in Puerto Rico is knowing that, from ASU's perspective, the best cities for doing business do not pay vacation or sick leave, nor do they compensate women when they are on maternity leave. On that criterion, zeros jump out versus the average of 10 days paid for various leaves to workers or the eight weeks of paid maternity leave in San Juan.
For good measure, in San Francisco, California, which ranked 78th, the 60 days of paid sick leave a worker can receive or the 25 weeks of paid maternity leave provided jump out.
San Juan and Puerto Rico - especially its elected officials and business and non-governmental voices - have two choices.
To find fault with the report unveiled by the ILE or to take advantage of the juncture to truly reflect on our institutional framework and the set of public and private policies that have been adopted. In this exercise, it will become evident that competitiveness or welfare is not merely a matter of reducing the number of permits, lowering the cost of electricity or adding or removing labor benefits. Rather, it would seem that what is urgent is to find that combination of strengths that make possible a society that fosters the creation and sustainability of businesses and where its residents can progress and ensure their well-being.