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PuerTo riCo iS Too exPenSive for BuSineSS
Manuel Cidre, Secretary of the Department of Economic Development and Commerce >Nahira Montcourt/The Weekly Journal
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Efraín Montalbán Ríos, The Weekly Journal
At a time when the island’s business sector has suffered an increase in its operating expenses as a result of the spiraling inflation, the cost of doing business in Puerto Rico continues to threaten the country’s businesses, said Manuel Cidre, Secretary of the Department of Economic Development and Commerce (DDEC, for its Spanish acronym). Cidre assured that among the factors making it more expensive to establish and maintain a business on the island are the high cost of energy, the difficulty in obtaining permits, access to economic incentives and employee training.
“A big threat —and the governor is very aware of it— is the cost of doing business in Puerto Rico. Many times we believe that the cost of doing business in Puerto Rico are specialized conditions… but the cost of doing business impacts, among many other things, permitting processes, access to [economic] incentives, workforce training, talent retention, the cost of energy, and yes —why not?— the cost of labor,” said Cidre. The Secretary was referring to the impossibility of business owners to offer more competitive wages given the cost of essential services such as electricity and water. “It hurts me —as it hurts each one of you— that, instead of putting the profits into providing much more attractive payroll [benefits] for our employees, we have to invest much of our money in into paying 30 cents per kilowatt/hour and in a higher water cost,” said the secretary of the DDEC. “When I started out in business 48 years ago, I was very upset to go to the parking lot of my businesses and
In fact, see that the most dilapidated cars there belonged to my employees, because I couldn’t pay them more. Among the I couldn’t, because electricity was factors making expensive, because the regulations it more expensive to were difficult, because I had to pay do business in the an agent to get me a permit,” Cidre island are the high recalled. cost of energy, the The Secretary assured his difficulty in obtaining agency is committed to promoting permits and access to the creation of new businesses economic incentives. in Puerto Rico. “That is what you [restaurant and hospitality entrepreneurs] are demanding from me today... to make Puerto Rico an attractive place to do business,” he said. Cidre’s remarks came after the presentation of the Puerto Rico Restaurant Association (Asore, for its Spanish acronym) study on consumer trends and the inauguration of its Bakery & …the cost of doing business impacts, among many other things, permitting processes, access to [economic] incentives, workforce training, talent retention, the cost of energy, and the cost of labor.
Manuel Cidre, DDEC Secretary
Restaurant Show. Asore’s president, Mateo Cidre, a vocal critic of the administration of which his father is the Economic Development Secretary, has consistently denounced that more often than not, the industry feels as if the government is hindering the business activity of the sector, especially when the cost of living is at its highest, and urged that the objectives of both be aligned. “I definitely think that food businesses have to go hand in hand with the government, and the government has to be a facilitator and not a hindrance, as we often feel [it is]. Right now we are living a historic moment, with electricity, water, gas, the food you buy to resell at their highest… and if on top of that, you legislate to continue making it more expensive to do business in Puerto Rico… Well, the only one am worried about is the consumer,” a distrustful president of Asore said.
In fact,
Bank CEOs increasingly turning pessimistic on economy
Many CEOs that trumpeted the strength of U.S. economy are now cautious
Ken Sweet – The Associated Press
NEW YORK — The outlook for the U.S. economy from Wall Street’s biggest banks is getting gloomier, with many top executives saying they’re preparing for a potential downturn or a recession.
Following the short but potent pandemic recession in 2020, many bank CEOs have spent the past year and a half trumpeting the strength of the U.S. economy and the resilience of the U.S. consumer. Many did so again Friday after reporting their quarterly results, but this time with an overriding sense of caution.
“We recognize the pressure points are building in several areas of the economy that could lead to stress in the future,” said Andy Cecere, CEO of U.S. Bank. Such comments reflect the growing evidence that the U.S. and global economy is weakening in the face of worldwide inflation and the war in Ukraine. On Tuesday, the International Monetary Fund lowered its forecast for 2023 global economic growth to 2.7% from 2.9%.
Half a dozen banks reported their quarterly results on Friday, ranging from behemoths JPMorgan Chase and Citigroup to super regional banks like U.S. Bank and PNC Financial. In calls with journalists and investors, bank executives painted a bifurcated picture of the economy.
On one hand, they noted a low level of delinquencies, solid consumer spending and healthy activity among their business clients. At the same time, they acknowledged multi-decade high levels of inflation, a housing market that is slowing down quickly, and a Federal Reserve that is raising rates at an unprecedented pace, which will make it more difficult for businesses to borrow. “Inflation is casting a long shadow on these banks’ future outlooks,” said Peter Torrente, U.S. national sector leader for banking and capital markets at accounting giant KPMG. Inflation has been persistently high for months, with last week’s reading of consumer prices showing an 8.2% rise in costs in September from a year earlier. Fed officials have pushed up their short-term rate by a hefty three-quarters of a percentage point three times in a row, bringing it to a range of 3% to 3.25%, the highest in 14 years. Wall Street is expecting another 0.75 percentage point hike in November. Reflecting the dimmer macroeconomic view, Citigroup, Wells Fargo and JPMorgan socked away cash in their loan-loss reserves. These reserves are set aside to cover potentially bad loans. During the pandemic, banks put tens of billions of dollars into these reserves but had released the bulk of those funds in 2021 reflecting the improvement in the economy.
Now the banks are again fortifying the reserves. JPMorgan set aside roughly a $1 billion in its loan loss reserves, while Citigroup and Wells both roughly put $400 million into their reserves this quarter. The pace of additions is slower than at the onset of pandemic when, for example, JPMorgan put more than $10 billion into its reserves in one quarter.
The goal of the Fed’s rate increases is to slow the economy and bring down inflation. The possibility of going too far and causing a recession is a big concern for economists, Wall Street analysts and bank executives.
Wells Fargo CEO Charlie Scharf told investors on a conference call that the bank expects broader economic conditions to weaken, resulting in increases in delinquencies and credit losses.
Cecere, the U.S. Bank CEO, said, “While the backdrop is favorable today, it would not be surprising to us to see an economic slowdown develop at some point driven by lower confidence levels, which may lead to reduced spending and business investment.”
JPMorgan Chase CEO Jamie Dimon made headlines Monday when he said a “very, very serious” mix of concerns could lead to a recession in the next six to nine months.
On Friday, Dimon talked up the fact U.S. consumer health remains strong. Investors pushed to get clarity.
“I’m trying to reconcile your comments before and now,” Mike Mayo, an analyst with Wells Fargo Securities, said to Dimon.
In response, Dimon described the current economic environment as “odd,” reflecting the fact delinquencies are low and consumer spending remains strong despite the inflationary headwinds. But he predicted that the extra savings U.S. households socked away during the pandemic would likely be exhausted by mid 2023, if inflation is not brought under control.
One thing supporting Dimon’s comments is the amount of spending consumers are doing with their credit cards. Wells Fargo, Citigroup and JPMorgan all reported double-digit increases in consumer credit card spending compared to a year earlier.
While JPMorgan executives said that some of that spending might be consumers returning to pre-pandemic spending trends, inflation might simply be stretching household budgets.
Andy Cecere, CEO of U.S. Bank.
También vemos a un gobernador altamente activo en la promoción de Puerto Rico como destino de inversión. El gobernador se ve altamente activo en atraer industrias para Puerto Rico, se le nota reuniéndose con cientos de ejecutivos mientras participa de importantes foros en -y particularmente- fuera de Puer-
A ello se suma la implementación del Earned Income Tax Credit (EITC) —$612 millones en fondos anuales por diez años ($6,500 por trabajador con ingresos inferiores a $44,000 anuales)— y la implementación del Child Tax Credit (CTC) —$1,500 millones ($3,600 por niño de seis años o menos, y $3,000 de 6 a 17 años por contribuyente)— y el otorgamiento del aumento permanente del Programa Asistencia Nutricional (PAN), que ahora aumenta a unos
La respuesta gubernamental al covid-19, además del enfoque en vacunación sin haber politizado el proceso, es uno de los más grandes aciertos de la administración. Tomar control de la pandemia del covid-19 y relajar las medidas cuando se justifique, y endurecerlas cuando sea necesario como ocurrió durante ómicron, ha sido un gran acierto. La tasa de vacunación se sitúa en de mayor importancia para el Fondo General y ya el Departamento del Tesoro de Estados Unidos otorgó un año de transición adicional a las empresas bajo la Ley 1542010. Dicha ley representa alrededor de $1,700 millones anuales al erario. Resulta apremiante proteger la base contributiva que representan estas empresas. La clave no es ver más impuestos; la idea debe enfocarse en migrar lo que produce el impuesto de la Ley 154 a otro tipo de impuesto, que sean similares en recaudo y a la vez pueda ser acreditable por las empresas a su tributación federal; así se minimiza la pérdida de empresas y empleos. Falta consenso en materia contributiva. La falta de establecer un sistema holístico que alivie la política pública del gobierno en todos los temas de índole contributivo y con la realidad económica del País, puede provocar una mayor presión inflacionaria.
Riesgos que impactarán la economía:
Reducción en el ingreso por la terminación de las ayudas relacionadas a la pandemia.
Los altos niveles de inflación están afectando a todos los consumidores, afectando sus ya ajustados presupuestos, e impacta a todos los micro y pequeñas empresas mayoritariamente. Los cambios en la política monetaria del Banco de la Reserva Federal, el cual ya aumentó 25 puntos base, y se estima que ahora en mayo aumente otros 50 puntos base, lo que encarecerá los costos de créditos comerciales y del consumidor.
La disminución de la población de Puerto Rico es motivo de gran preocupación, ya que la tasa de mortalidad hoy día es más alta que la de natalidad. Se proyecta que la población para 2025 ronde los 3.1 millones de acuerdo con la encuesta de la Comunidad del Censo federal.
/ Wednesday, October 19, 2022 9
We can safely state that investors have been rattled to their core. With high volatile swings in both the gain and loss column, there is little room for most of them markets began the new quarter on a more positive note as S&P 500 recorded its most significant twoday rise since April 2020. While the strong job growth could steer the Fed directly into an additional 75 basis points rate increase, there is mounting evidence that the economy is slowing faster than expected. This to maneuver.
We saw a week that swung in both directions, ending with more losses amid continued strong job growth in the U.S. This news turned out was the opposite of what investors wanted. The very second the U.S. Bureau of Labor Statistics reported that the private sector added 263,000 new jobs and that the unemployment rate had dropped to 3.5% –quite unexpectedly– the market tanked. Not only did the U.S. economy created more jobs, but the job growth was also ahead of estimates by 4.94% or 13,000 jobs. So far this year, the U.S. economy has added 3,778 million new jobs, an average of 419,777 per month.
While jobs were broadly above expectations, which typically is excellent news, in this case is bad news because markets had hoped for a contraction in job growth. But, since it did not happen, it could be expected rates will increase, by at least 75 basis points, during the next FOMB meeting.
However, the week was not a total loss; when compared to the previous week. Overall, the could provide the Fed with a basis to slow down its aggressive interest rate campaign. But, while the Fed is expected to pivot into a change in policy to avert a recession, this is unlikely due to the still high inflation rate in the U.S. As the interest rate yields on the U.S. treasury 2-year note closed this week at 4.30%, the highest in the last ten years, we also saw most stock valuations down with double-digit negative yearto-date returns. Even though the market did not expect, but rather hoped, for the Fed to pivot into an easing mode, this would not be likely since the Fed pledged to fight inflation until it reaches its 2% target rate. So, the unexpected job growth was the last nail in the coffin for those hopeful souls wishing for the Fed to steer away from further increasing rates. Still, we see rates peaking next year between 4.25% to 4.50%, and the possibility of the Fed taking a break, should the economy record three consecutive months of decreasing inflation. One last nugget to consider is that, while
Francisco Rodríguez-Castro President and CEO of Birling Capital Advisors, LLC. What used to be Good News is Now Bad News; taking Another Look at Markets unemployment unexpectedly dropped to 3.5% –matching a fifty-year low– we also saw a gradual
Francisco decrease in job growth. The total Nonfarm job openings fell from 11.17 million to 10.05 million, RodríguezCastro a decrease of 1.12 million or 10%. Meanwhile, the number of job seekers fell from 5.39 million to 4.99 >frc@birlingcapital. com The Fed is expected to pivot into a change in policy to avert a recession, but this is unlikely due to the still high inflation million, a 7.31% decrease. However, there is still a La ayuda no puede esperar rate in the U.S. deficit between job openings and job seekers of 50.25%. In other interest rate cycles, unemployment tends to rise more than a year after the Fed’s first rate increase, showing the long overhang between rate increases and Fed action to spread thru the economy. después de un desastre.
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