Puerto Rico's economic challenges become visible

They identify labor participation and energy issues as threats to economic growth.

From left to right, Segundo Castro, professor at the UPRRP Graduate School of Business Administration; Jorge Rodríguez, founder of ILE; and Humberto Mercader, assistant undersecretary of the DDEC. >Efraín Montalbán Ríos/EL VOCERO

Leaders from different economic sectors identified low labor participation and energy issues as two of the main challenges to achieving economic freedom and competitiveness in Puerto Rico.

Humberto Mercader, Deputy Assistant Secretary of the Department of Economic Development and Commerce (DDEC), emphasized the need to invest in the Island's talent, which will allow Puerto Rico to develop the creation and technological evolution that is on par with other states and countries.

"I believe that the president (of the UPR, Dr. Luis A. Ferrao) is one of the most important people in the government of Puerto Rico. I say this because we have some very aggressive initiatives to develop digital and technical talent," said Mercader, during the forum Analysis of Economic Freedom and Competitiveness of Puerto Rico, organized by the Alumni Chapter of the University of Puerto Rico School of Business Administration.

The official reiterated the difficulty of doing business in Puerto Rico, caused mostly by the requirement of multiple permits, issues that DDEC Secretary Manuel Cidre has previously pointed out.

"We recognize that the 'ease of doing business' is everyone's headache in the department, from the issue of permits to the issue of regulations. It is difficult to move a business forward, but I must say that the issue of 'ease of doing business' requires a lot of effort from both the legislature and the private sector," Mercader emphasized.

Another challenge that the official explained was the fragility of the island's energy infrastructure, which is why they have strengthened their Energy Public Policy Office, which seeks to help in the efficiency of investments for the energy system.

"On the energy side, we have been very aggressive in helping companies to invest in more resilient energy, but we recognize that given the weakness we have in Puerto Rico in that sector (energy infrastructure), we have to be a little more productive," Mercader said.

On the situation, Segundo Castro, professor at the Graduate School of Business Administration at the UPR in Rio Piedras, insisted that one of the items affecting the island's competitiveness is the cost of electricity.

According to the cost structure of goods and services companies in Puerto Rico, the cost of electricity accounts for between 15% and 30% of the total. "We have the highest cost of all the states (in the United States) with the exception of Hawaii. This is a serious issue that we have to address, it is urgent," Castro said.

Likewise, the professor insisted that action must be taken to increase the labor participation rate, since in the last five years "we have not exceeded 41%" of participation. In this regard, Mercader indicated that one of the factors affecting the labor participation rate is the growing participation of consumers in the informal economy.

However, Castro noted that the increase in the informal economy may be a response to the high cost of taxes for traders.

"We made a correlation, as taxes increased, it is statistically proven that the informal economy increased significantly," said the professor, who pointed out that the subway economy represents 33% of the Gross Domestic Product (GDP).

Meanwhile, Jorge Rodríguez, founder of the Institute for Economic Freedom for Puerto Rico (ILE), pointed out that another challenge for the economy is the labor market regulations, tied to federal transfers for aid such as the Nutritional Assistance Program (PAN), where you are not required to enter the workforce.

"Puerto Rico is the only one, along with the Mariana Islands and Guam, that still has the federal transfer block that does not require them to work, people who are able to work and have no dependents. The problem is that you work to be able to feed yourself, so for me that policy of you keeping someone who can morally secure themselves in society and doesn't have to because their basic needs are taken care of is a problem," Rodriguez said.

The executive insisted on the change from the PAN to the Supplemental Nutrition Assistance Program (SNAP), which requires its beneficiaries to work.

This article was originally publish in Spanish in El Vocero.

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