Exporting Services and Economic Development Update

Exporting Services and
Economic Development Update
José R. Pérez-Riera
Secretary
Department of Economic
Development and Commerce (DEDC)
Government of Puerto Rico
R ESTOR ING
G R O WTH
THR OUGH
FISCAL
R ESPONSIB IL ITY
1
Agenda
1
Strategic Model for a New Economy:
Puerto Rico’s Path Towards Economic Diversification and Growth
2
Act to Promote the Exportation of Services
3
Economic Indicators
2
Agenda
1
Strategic Model for a New Economy:
Puerto Rico’s Path Towards Economic Diversification and Growth
2
Act to Promote the Exportation of Services
3
Economic Indicators
3
RESULTS
SMNE Objectives
CRECIMIENTO
Growth
SMNE
Structure
Competitiveness
Printed
Version
Jobs
USER
GUIDE
Digital
Version
RESTAURAR
RESTORE GROWTH
CRECIMIENTO
SMNE Implementation
Continuity
INTRODUCTION
Indicators
GENERAL
INFORMATION
Validation
Solid Base
for Growth
INFRAESTRUCTURA
INFRASTRUCTURE
Modern
Infrastructure
Diversified
Economy
REFORMAS
REFORMS
MEDIDAS
GROWTH
DE
CRECIMIENTO
MEASURES
STRATEGIC
SECTORS
INFRAESTRUCTURA
PHYSICAL
INFRASTRUCTURE
FÍSICA
PROYECTOS
STRATEGIC
ESTRATÉGICOS
PROJECTS
REFORMAS
KEY
REFORMS
CLAVE
ADDITIONAL
MEDIDAS
ADICIONALES
MEASURES
Plan de Estímulo
ARRA
Federal (ARRA)
Manufacturing
Manufactura
APPs
P3s
Triángulo
Golden Triangle
Dorado
Reforma
P3 Reform
de APPs
Marcas y
Corporations
Corporaciones
Plan de Estímulo
PEC
Criollo (PEC)
Agriculture
Agricultura
Water
Agua
Triángulo
Green Triangle
Verde
Reforma de
Permits Reform
Permisos
Reforma
Mi Salud
(Health
Mi Salud
Care)
Promoción
Promotion
Tourism
Turismoand
y
Entretenimiento
Entertainment
Energía
Energy
Distrito de
Science District
Ciencias
Executive
Reforma Branch
Rama
Ejecutiva
Reform
Reforma de
Retirement
Sistema
Systems
de Retiro
Incentives
Commerce
Comercio
Trasportación
Trasportation
Puerto
Port ofde
the
las
Américas
Americas
Reforma
Energy Reform
Energética
Legislative
Reforma
Legislativa
Reform
Inserción
Global Insertion
Global
Banking,
Banca, Seguros y
Insurance and
Cooperativismo
Credit Unions
Puertos
Ports
Mayaguez 2010
Reforma
Tax Reform
Contributiva
UCC
Knowledge-Based
Economía del
Conocimiento
Economy
Film
Cineand
y Servicios
Creative
Creativos
Services
Banda
Broadband
Ancha
Aeropuerto
Aguadilla Airport
Aguadilla
Reforma
Labor Reform
Laboral
Professional
Reforma
Profesional
Reform
Updated
Información
Economic
Actualizada
Information
Economic
Crecimiento
Growth
Económico
Projections
Revenue and
Recaudos y
Expense
Gastos
Projections
Websites and
Servicios en
Online
Línea
Services
Conferencias
Websites andy
Online
Discusos
Services
Plan
Clear
Claro
andy
Coherent
Coherente
Plan
RESPONSABILIDAD
Fiscal Responsibility
FISCAL
TRANSPARENCY
TRANSPARENCIA
AND
Y
COMMUNICATION
COMUNICACIÓN
FISCAL
ESTABILIZACIÓN
AND CREDIT
FISCAL
STABILIZATION
Y CRÉDITO
Emergencia
Fiscal
Emergency
Fiscal
Presupuesto
Balanced
Balanceado
Budget
Mejoría
Improve
del
Credit
Crédito
Rating
Contribuciones
Balance the
Balanceadas
Tax Burden
Strategic Model for a New Economy
Arreglar
Fix the
Retirement
Sistema de
System
Retiro
Comparación
Global
Comparison
Mundial
4
We have approved incentives to stimulate
economic activity in strategic sectors
Incentives
Housing
Incentives
International
Insurance
Promote Puerto Rico’s incentives to attract new investments to our Island
• Objective: Act 132-2010 / Act 115-2011 / Act 216-2011: Create an incentives
program for purchasing residential and commercial properties
• Objective: Act 98-2011: Amend the Insurance Code of Puerto Rico to secure a tax
regime that will apply to international insurers
Tourism
Comercio
Incentives
• Objective: Act 74-2010 / Act 118-2010: Lay the groundwork to expand our tourism
development in strategic locations to improve our position as a premier
tourist destination
Development of the
Cruise Industry
• Objective: Act 113-2011: Expand the cruise incentives package with a focus on job
creation to reaffirm and strengthen the importance of Puerto Rico as a
regional and world homeport, boost cruise traffic and room nights
Development of the
Film Industry
• Objective: Act 27-2011: Provide a framework for continued development of film
industry infrastructure and tax incentives to attract foreign capital
Renewable
Energy
• Objective: Act 83-2010: Create measures to stimulate the development of
sustainable energy systems by establishing the Green Energy Fund
5
We have seen clear results from the approved incentives
to stimulate economic activity in strategic sectors
Incentives
Housing
Incentives
International
Insurance
Tourism
Comercio
Incentives
Development of the
Cruise Industry
Development of the
Film Industry
Renewable
Energy
Promote Puerto Rico’s incentives to attract new investments to our Island
• Results:
• Examples:
Act 132-2010 / Act 115-2011 / Act 216-2011: “The Act for the Transition of the Program for the Housing Stimulus”
(1) Last 12 months (April 2011-March 2012)15,003 new and existing units sold, representing an increase of 18.1%
(2) Last 12 months (April 2011-March 2012) total value in home sales of $2.34 billion, representing an increase of 6.5%
(3) Incentives are being phased-out until December 2012
• Results:
• Examples:
Act 98-2011: Amendment to the Puerto Rico Insurance Code
(1) 2011: Captive insurance company, Ryan LLC, largest tax advisor in US
(2) 2012 disclosed pipeline: 1 Catastrophic Risk Reinsurance Company, 2 Life and Health Reinsurance Company, 1 Life and
Health Reinsurance Company (securitization of insurance risk) and 1 Property and Casualty Reinsurer
(3) Total expected assets of current disclosed pipeline: $250-$300 million
• Results:
Act 74-2010: “Puerto Rico Tourist Development Act”/ Act 118-2010: “Municipal Economic and Tourism
Development Act
(1) Since Jan. 2009 – Mar. 2012, opening of 29 hotels and inns, representing an investment of $791.2 MM, 1888 new
rooms and 1,705 jobs
(2) Hotel pipeline of 30 projects representing an investment of $1,648 MM and 3,111 jobs
(3) The Government of Puerto Rico will obtain the property titles for the 1,350 acres of Roosevelt Roads
• Examples:
• Results:
• Examples:
Act 113-2011: “Act for the Promotion & Development of the Cruise ship Industry”
(1)Arrival of new cruise ships such as Celebrity Solstice and Azamara Journey
(2) The celebration of the Florida Caribbean Cruise Association Convention in Puerto Rico
(3) New incentives that expand the cruise incentives package and strengthen the importance of Puerto Rico as a
regional and world homeport
• Results:
• Examples:
Act 27-2011: “Puerto Rico Film Industry Incentives Act of 2011”
(1) Great interest and coverage in national media and film industry outlets of new incentives
(2) Since Jan. 2009-Apr. 2012, 46 film projects with an investment of $181 MM and 44,331 jobs during filming stage
(3) Numerous incentives for the development and operation of related infrastructure, specifically high-capacity
production studios
• Results:
• Examples:
Act 83-2010: “Green Energy Incentives Act”
(1)Creation of a Green Energy Fund of $290 MM for 10 years
(2) $15.5 MM in assigned incentives ($3.5 MM leftg to assign in FY 2011-2012)
(3) 113 projects, $39.4 MM in total investment and 7MW of installed capacity
(4) 30,400 solar panels installed (assuming 230 W per panel)
6
We have developed new incentives to diversify the sources of
economic growth and the attraction of financial and human capital
Incentives
Promote Puerto Rico’s incentives to attract new investments to our Island
Export
Services
• Objective: Act No. 20 of 2012: Turn Puerto Rico into
an international hub of services, retaining local talent
and attracting foreign talent and foreign capital
Relocation of
Individual
Investors
• Objective: Act No. 22 of 2012: Mobilize investments
that are outside of Puerto Rico to Puerto Rico
stimulating the economy through consumption and
investment
7
Agenda
1
Strategic Model for a New Economy:
Puerto Rico’s Path Towards Economic Diversification and Growth
2
Act to Promote the Exportation of Services
3
Economic Indicators
8
Trade in services has grown in importance in the
world economy
Global trade in services (% of world GDP) from 1975-2010
Services as a % of economy (GDP):
12.4%
45% of GDP in low-income countries
55% of GDP in middle-income countries
70% of GDP in high-income countries
–
–
–
11.7%
10.0%
$7.4
Trillion
Services sector contributes:
2/3rd of world production
1/3rd of global employment
1/5th of global trade
–
–
–
9.0%
7.6%
7.8%
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
6.4%
1975
Global Financial and
Economic Crisis
6.5%
Note: Trade in services is the sum of service exports and imports divided by the value of GDP, all in current U.S. dollars.
Sources: International Monetary Fund, Balance of Payments Statistics Yearbook and data files, and World Bank and OECD GDP estimates.
9
There is a strong correlation between GDP per capita
and the service sector as a percent of GDP
* OECD: Organization for Economic Cooperation and Development
10
Puerto Rico must increase its share of services as a
percent of GDP to keep pace with its competitors
Agriculture
Manufacturing
Services
20%
Puerto Rico
United States
18%
Singapore
Ireland
16%
14%
12%
10%
8%
6%
4%
2%
0%
1960 1970 1980 1990 2000 2010
Puerto Rico
50%
United States
Singapore
45%
Ireland
40%
35%
30%
25%
20%
15%
10%
5%
0%
1960 1970 1980 1990 2000 2010
85%
80%
75%
70%
65%
60%
55%
Puerto Rico
50%
United States
Singapore
45%
Ireland
40%
1960 1970 1980 1990 2000 2010
Sources: World Bank; Planning Board
•
•
Sources: World Bank; Planning Board
Sources: World Bank; Planning Board
Natural Resources
Efficiency
Innovation
Traditional agriculture has a
smaller weight in the global
economy
Its natural evolution, with the
objective of increasing its
productivity, rests in
biotechnology industries
• The world’s factories are located
in jurisdictions whose labor costs
are much lower than in developed
economies
• Its natural evolution, with the
objective to increase productivity,
is in Research and Development
• Developed economies compete to
create comparative advantages as
service hubs
• Its natural evolution, with the
objective to increase productivity,
is in the export of services
11
Puerto Rico is set to become another Global Service Hub
Silicon Valley
Global Technology Services
Center
Hollywood
Film and Creative Services
Industry Center
New York
Global Financial,
Professional and Insurance
Center
Zurich / Geneva / London
Global Financial and
Insurance Center
Paris / Milan
Global Fashion and
Design Center
Bermuda
Global
Insurance Center
Shanghai / Hong Kong
Global Financial and
Insurance Center
Singapore
Global Logistics and
Transport Center
Dubai
Global Financial
Center
Panama
Global Logistics and
Transport Center
Miami
Global Health
Services Center
India
Global Information
Technology Services
Center
12
Puerto Rico’s economic structure has shifted from being a modern
industrial economy to an increasingly service-oriented economy
<1940
1950
1960
1970
1980
1990
2000
2010
13
Puerto Rico is ready to export it’s globally competitive
professional services to the world
Current
Growth of Export Services
Via Act 20-2012
Globally competitive professional services
geared primarily towards multinational
corporations (MNC) in Puerto Rico
Future
Globally competitive professional services
geared towards the US, Latin America and other
markets abroad
14
Act No. 20 of 2012: Act to Promote the Exportation of Services
Incentives
Promote Puerto Rico’s incentives to attract new investments to our Island
Sample Export Services
Incentives for export services
4% corporate tax rate, which
may be reduced to 3%
100% tax exemption on
dividends from export
services businesses
Decree of 20 years,
renewable for an additional
10 years
Research and Development
Advertising and Public Relations
Consulting
Commercial Arts and Graphics
Architecture and Engineering
Legal, Tax and Accounting
Education and Training
Hospitals and Laboratories
Investment Banking
Asset Management
15
Almost all services sectors are eligible for the new tax
incentives
Incentives
Promote Puerto Rico’s incentives to attract new investments to our Island
•
Research and development
•
Advertising and public relations
•
Consulting
•
Advise on matters relating to any trade or
business
•
Commercial arts and graphic services
•
Production of construction drawings,
architectural and engineering services
and project management
•
Development of computer programs
•
Telecommunications voice and data
between persons located outside of
Puerto Rico
•
Call centers
•
Shared services centers
•
Storage and distribution centers
•
Educational and training services
•
Hospitals and laboratories
•
Professional services, such as legal, tax
and accounting
•
Investment banking and other financial
services
•
Centralized management services
•
•
Centers for electronic data processing
Any other service that is later decided to
be treated as an eligible service because
it is in the best interest of Puerto Rico
16
Lower tax rates than in the U.S.
Incentives
Promote Puerto Rico’s incentives to attract new investments to our Island
Average U.S. Company
• Average State Corporate Tax Rate:
• Federal Corporate Tax Rate:
Export Services Company in P.R.
7%
35%
Average U.S. Shareholder
• Average State Dividend Tax Rate:
6%
• Federal Qualified Dividend Tax Rate: 15%4
Potential Increase in Rates with the
Upcoming Expiration of Bush Tax Cuts
• Puerto Rico Corporate Tax Rate:
• Federal Corporate Tax Rate:
4%1
0%2
P.R. Shareholder
• Puerto Rico Dividend Tax Rate:
• Federal Dividend Tax Rate:
0%3
0%2
Certainty in Rates for 20 Years
with Tax Exemption Decree
_________________________________________
1
Municipalities in Puerto Rico have the right to levy a gross receipts tax of up to 0.5%, which applies in addition to the applicable Puerto Rico corporate tax rate.
individual residents do not pay federal taxes on Puerto Rico source income.
3 Rate applies to shareholders of export services companies exempted under Act 20 who are residents of Puerto Rico.
4 This preferential rate is set to increase to as much as 39.6% after December 31, 2012.
2 Puerto Rico companies and
17
Act No. 22 of 2012: Act to Promote the Relocation of
Individual Investors
Incentives
Promote Puerto Rico’s incentives to attract new investments to our Island
• Act 22-2012: Those considering moving their businesses to Puerto Rico under the Act to
Promote the Exportation of Services can also take into account these benefits
–100% tax exemption on interest and dividend income for New Residents of Puerto
Rico
–100% tax exemption on long-term capital gains accrued after becoming a New
Resident
• Qualification Requirements:
–Act applies to any New Resident that had not been a resident of Puerto Rico at any
time during the 15-year period preceding the effective date of Act 22-2012 (January
16, 2012)
• U.S. Federal Tax Considerations:
–Puerto Rico Residents pay no U.S. federal taxes on Puerto Rico source income in
accordance with Section 933 of the Internal Revenue Code of the United States
–When investing through certain Puerto Rico investment vehicles, New Puerto Rico
Residents may reduce the tax rate applicable on their interest and dividend income
from sources outside Puerto Rico to 0% and 10%, respectively
18
Act No. 22 of 2012: Act to Promote the Relocation of
Individual Investors
Incentives
Promote Puerto Rico’s incentives to attract new investments to our Island
Act No. 22 of 2012
Individual Resident
Investors: IRI
Investments
•
•
•
•
•
•
Mutual Fuids
Shares
Bonds
Interests
Dividends
Capital Gains
Benefits for Puerto Rico:
•
Stimulates the housing market
•
Investment in the real economy through
consumption and capital investments
•
Improve the credit conditions of Puerto Rico’s
banking system
•
Offer more sophisticated investment
products
•
Incentives for the generation of investment in
private equity and venture capital that
professionalizes the local industry
•
Offer high value-added professional services
19
Agenda
1
Strategic Model for a New Economy:
Puerto Rico’s Path Towards Economic Diversification and Growth
2
Act to Promote the Exportation of Services
3
Economic indicators
20
The SMNE looks to promote sustained economic growth,
elevate our competitiveness and create more and better jobs
SMNE
Objectives
• Manufacturing Initiatives
Growth
The SMNE’s objective is growth, competitiveness and jobs
(1) The Economic Activity Index of the Government Development Bank (EAI-GDB) continues its path towards
sustained economic growth, registering a 0.2% year-over-year increase in March 2012, the third consecutive
month of year-over-year growth
(2) In fiscal year (FY) starting on July 2011 (FY 2012) and for the first time in 6 years, the economy of Puerto Rico
will be experimenting positive economic growth, with a projected growth of 0.9%
(3) In fiscal year (FY) starting on July 2013 (FY 2013), the economy of Puerto Rico is projected to growth by 1.1%
Competitiveness
Jobs
(1) Puerto Rico scaled up 6 notches to the 35th position out of 142 jurisdictions evaluated in the 2011-2012 edition
of the World Economic Forum’s (WEF) Global Competitiveness Report. Puerto Rico was the jurisdiction that
showed the most improvement among the top 35 economies in the world. This is the highest ranking Puerto Rico
has obtained in this report in its history
(2) Puerto Rico scaled up 7 notches to the 36th position out of 142 jurisdictions in the 2012 edition of the Global
Information Technology Report published by the WEF
(3) Puerto Rico scaled up 8 notches to the 45th position out of 139 jurisdictions in the Travel and Tourism
Competitiveness Report published by the WEF, the highest ranking Puerto Rico has obtained in this report in its
history
(1) Total employment remained in positive territory on a year-over-year basis in March 2012, the fourth
consecutive month of year-over-year increase, a trend not seen since March 2007 (60 months)
(2) Total employment increased by 28,000 jobs in March 2012 when compared to March 2011, the second highest
increase since April 2006 (71 months)
(3) The unemployment rate in March 2012 registered 15% and decreased by 1.2 percentage points when compared
to March 2011
(4) The unemployment rate has remained in negative interanual growth territory on a year-over-year basis for the
last 13 consecutive months, a trend not seen since February 2007 (61 months)
21
GDB-Economic Activity Index continues positive trend,
registering three consecutive months of year-over-year growth
Growth
The SMNE’s objective is growth, competitiveness and jobs
GDB-Economic Activity Index – March 2012
4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
FY 2006
FY 2007
FY 2008
FY 2009
Economic Activity Index – GDB
FY 2010
FY 2011
FY 2012
Year-over-year change of EAI (%)
22
After a period of economic contraction, followed by
stabilization, the Planning Board projects economic growth for
fiscal years 2012 and 2013
Growth
The SMNE’s objective is growth, competitiveness and jobs
Real Gross Sate Product Growth Rate
r - revised
p – preliminary
* - projected under “base” scenario;
under “maximum” scenario, growth could
reach 2.0% and 2.3%, respectively
23
In 2011, Puerto Rico ranked 35th in the WEF’s Global Competitiveness
Report, 6 notches higher than the year before, the highest ranking in
its history
Competitiveness
The SMNE’s objective is growth, competitiveness and jobs
GLOBAL COMPETITIVENESS
September 2011: 35 / 142
September 2010: 41 / 139
September 2009: 42 / 133
September 2008: 41 / 134
PR: +6
TRAVEL AND TOURISM
March 2011: 45 / 139
March 2009*: 53 / 133
March 2008: 46 / 130
PR: +8
INFORMATION TECHNOLOGY
April 2012: 36 / 142
April 2011:
April 2010:
April 2009:
April 2008:
43
45
42
39
/
/
/
/
138
133
134
127
PR: +7
24
Total employment remained in positive territory on a year-over-year basis in
March 2012, the fourth consecutive month of year-over-year
increase, a trend not seen since March 2007 (60 months)
Jobs
The SMNE’s objective is growth, competitiveness and jobs
Total Employment* – March 2012
Total employment increased by 28,000 jobs in March
2012 when compared to March 2011, the second
highest increase since April 2006 (71 months)
Partial government
shutdown in May 2006
6%
4%
March 2007, +0.7% YoY
2%
0%
-2%
-4%
-6%
-8%
-10%
FY 2005
FY 2006
FY 2007
FY 2008
FY 2009
Total Employment
(Household Survey)
FY 2010
FY 2011
FY 2012
% Year-over-year Growth
* Seasonally Adjusted
25
The unemployment rate has remained in negative territory on a
year-over-year basis for the last 13 consecutive months,
trend not seen since February 2007 (61 months)
Jobs
The SMNE’s objective is growth, competitiveness and jobs
Unemployment Rate* – March 2012
The unemployment rate in March 2012
registered 15%, a decrease of 1.2 percentage
points when compared to March 2011
6.0%
5.0%
4.0%
3.0%
Partial government
shutdown in May 2006
15.0%
February 2007,
-0.4% YoY
2.0%
1.0%
0.0%
-1.0%
-2.0%
-3.0%
FY 2005
FY 2006
FY 2007
FY 2008
FY 2009
Unemployment Rate
(Household Survey)
Fuente: Departamento del Trabajo y Recursos Humanos
* Seasonally Adjusted
FY 2010
FY 2011
FY 2012
% Year-over-year growth in
percentage points
26
The main economic indicators of Puerto Rico show a clear
improvement in the general economy and in consumer confidence
The effective and efficient implementation of the SMNE will result in an ample improvement of
the economic indicators of Puerto Rico
• Manufacturing Initiatives
Indicators
Government
Revenues
Housing and
Construction
• Sales and Use Tax Revenues (IVU by its Spanish acronym):
(1) Sales and Use Tax (SUT) collections continue to show a positive trend in 2012, increasing by 1.5% in the first two months of 2012 when
compared to the first two months of 2011
(2) In 2011, sales and use tax revenues totaled $1.14 billion, showing an annual increase of 2.8% when compared to CY 2010
(3) January 2011 was the month with the highest sales and use tax revenues for any given month in Puerto Rico’s history
• General Fund Net Revenues:
(1) General Fund Net Revenues continue to show a positive trend in 2012, increasing by 29% during the first two months of 2012 when compared
to the first two months of 2011
(2) In 2011, general fund net revenues showed a 13.2% increase when compared to 2010. This is the first time there is an increase in this time
period since 2007.
(3) General fund net revenues in the month of April 2011 were the highest in Puerto Rico’s history
• Home Sales:
(1) Home Sales in the last 12 months (Apr. 2011-Mar. 2012) totaled 15,003 new and existing residences, representing a 18.1% increase when
compared to the same previous period
(2) The total value of home sales in the last 12 months (Apr. 2011-Mar. 2012) totaled $2.34 billion
• Cement Sales:
(1) Cement sales continue to show a positive trend in 2012, registering a 5.7% increase during the first three months of 2012 when compared to
the first three months of 2011
(2) In December 2011 cement sales totaled 1.62 million bags (94 lbs.), the fourth consecutive month of year-over-year increase in cement sales
(3) In 2011 cement sales increased by 5.2% when compared to 2010
• Bankruptcy Filings:
Bankruptcy
Filings and
New
Corporations
(1) In March 2012 total bankruptcy filings decreased by 8%, the 12th consecutive month of year-over-year decrease
(2) In 2011 total bankruptcy filings decreased by 9% when compared to 2010, first decrease since 2006
• New Corporation:
(1) In the first three months of 2012, 4,010 corporations were registered, representing an increase of 11.1% when compared to the first three
months of 2011(3,610)
(2) In 2011, 14,716 New Corporations were created, showing a 14% increase when compared to 2010
27
Home Sales in the last 12 months (Apr. 2011-Mar. 2012) totaled
15,003 new and existing residences, representing a 18.1% increase
when compared to the same previous period
The effective and efficient implementation of the SMNE will result in an ample improvement of
the economic indicators of Puerto Rico
Indicators
Home Sales (Units)
New Residences
Existing Residences
(Units)
(Units)
11,898
2,844
+9.2%
3,105
+20.6%
9,864
Apr. 2010 Mar. 2011
Apr. 2011 Mar. 2012
-
Apr. 2010
Mar. 2011 -
Apr. 2011
Mar. 2012
Source: : Office of the Commissioner of Financial Institutions (OCIF by its Spanish Acronym
28
Cement sales continue to show a positive trend in 2012, registering a
5.7% increase during the first three months of 2012 when compared
to the first three months of 2011
The effective and efficient implementation of the SMNE will result in an ample improvement of
the economic indicators of Puerto Rico
Indicators
Cement Sales (millions of 94 lb. bags)
37.08 MM
32.06 MM
-13.5%
22.56 MM
(-5.02 MM)
-29.6%
18.06 MM
(-9.50 MM)
+5.2%
-20.0%
(- 4.50 MM)
CY 2007
CY 2008
CY 2009
18.99 MM
CY 2010
(+0.94 MM)
CY 2011
Source: Government Development Bank
29
In March 2012 total bankruptcy filings decreased by 8%,
the 12th consecutive month of year-over-year decrease
The effective and efficient implementation of the SMNE will result in an ample improvement of
the economic indicators of Puerto Rico
Indicators
Total Bankruptcy Filings (YoY change)
15%
3%
-13%
Sep-11
-16%
Aug-11
Jul-11
Jun-11
May-11
-15%
-14%
-19%
Apr-11
Mar-11
Feb-11
Jan-11
Dec-10
Nov-10
Oct-10
Sep-10
Aug-10
Jul-10
-10.0%
-5%
-8%
-8%
-10%
-19%
Mar-12
-3%
Feb-12
2%
Jan-12
6%
Dec-11
5%
10%
Nov-11
10%
9%
Oct-11
18%
12 consecutive months of YoY
decrease in
Total Bankruptcy Filings
Source: U.S. Bankruptcy Court for the District of Puerto Rico; Puerto Rico Bulletin
30
In 2011, 14,716 New Corporations were created, showing
a 14% increase when compared to 2010
The effective and efficient implementation of the SMNE will result in an ample improvement of
the economic indicators of Puerto Rico
Indicators
New Corporations
13,731
14,716
13,628
-0.8%
12,071
-11.4%
+0.3%
+6.6%
(-1,557)
AC 2006
12,911
12,866
(-103)
AC 2007
AC 2008
+14.0%
(+1,805)
(+45)
(+795)
AC 2009
AC 2010
AC 2011
Source: Puerto Rico Department of State
31
The main economic indicators of Puerto Rico show a clear
improvement in the general economy and in consumer
confidence
Indicators
Manufacturing
and External
Trade
The effective and efficient implementation of the SMNE will result in an ample improvement of
the economic indicators of Puerto Rico
• Puerto Rico Manufacturing – Purchasing Managers Index (PRM-PMI):
(1) The Puerto Rico Manufacturing - Purchasing Managers Index (PRM-PMI) has been above the expansion threshold of 50 in seventeen (17) of the
last twenty three (23) months, reflecting a manufacturing sector in an expansionary phase
• Exports:
(1) In FY 2011 exports totaled $64.9 billion, representing an annual growth of 5.2%
(2) Exports of $64.9 billion represent the highest value for any given fiscal year during Puerto Rico’s history
• Imports:
(1) In FY 2011 imports totaled $44.7 billion, representing an annual growth of 9.5%
Retail Sales and
Auto Sales
Tourism
• Retail Sales:
(1) Retail sales continue to show a positive trend in 2012, increasing by 4%, according to preliminary figures, during the first two month of 2012
when compared to the first two months of 2011
(2) In 2011 sales totaled $35.4 billion, representing a 2.9% increase when compared to 2010
(3) Retail sales increase by 4% on December 2011 when compared to December 2010
• Auto Sales:
(1) Auto sales continue to show a positive trend in 2012,
(2) In 2011 auto sales totaled 91,052 units, representing a 1.5% increase when compared to 2010, second annual increase since 2005
(3) In 2010 auto sales increased by 17.3% when compared to 2009, first annual increase since 2005
• Hotel Occupancy Rate:
(1) In 2011 the hotel occupancy rate reached 66.7%, an increase of 1.3 percentage points when compared to 2010 (65.4%)
(2) In 2011 we saw the highest rate of hotel occupancy since at least 2007
• Average Daily Rate:
(1) In 2011 the average daily rate reached $120.40, an increase of 2.0% when compared to 2010
(2) In 2011 we have seen the highest average daily rate since 2008
32
The Puerto Rico Manufacturing – Purchasing Managers Index
(PRM-PMI) has been in expansionary terrain (above 50) in 17 out
of the last 23 months
The effective and efficient implementation of the SMNE will result in an ample improvement of
the economic indicators of Puerto Rico
Indicators
65
60.6
60
53.8
51.1 50.550.8
55.1
45
50.0
54.4 54.4
51.4
49.2
48.5
45.7
56.6
52.1
52.1
50.9 50.9
48.2
Mar-12
Feb-12
Jan-12
Dec-11
Nov-11
Oct-11
Sep-11
Aug-11
Jul-11
Jun-11
May-11
Apr-11
Mar-11
Feb-11
Jan-11
Dec-10
Nov-10
Oct-10
Sep-10
Aug-10
35
Jun-10
• First frequent barometer (monthly) of the productive sector of the economy of Puerto Rico
• It is a diffusion index in contrast to composite indexes such as the GDB-EAI
• It is constructed using 5 questions: new orders, production, employment, supply deliveries
and inventory
• Non-seasonally adjusted
40
30
55.1
51.1 51.4
49.1
Jul-10
55
50
50 – contraction
PR Manufacturing – Purchasing Managers Index (PRM-PMI)
May-10
50 + expansion
70
Source: Puerto Rico Statistics Institute
33
Retail Sales and Auto Sales data demonstrate that
consumer Confidence is picking up
Indicators
The effective and efficient implementation of the SMNE will result in an ample improvement of
the economic indicators of Puerto Rico
Retail Sales
Auto Sales
(MM)
(units)
$35,377
$34,453
$34,384
91,052
89,745
1.5%
2.9%
17.3%
76,477
0.2%
CY 2009
CY 2010
Source: Trade and Export Company; Automobile Industry Retail Sales Report
Note: *DEDC forecast ** Preliminay Data for November 2011
CY 2011
CY 2009
CY 2010
CY 2011
34
Cruise Passenger Movement, Hotel Occupancy and Average
Daily Rate showed a positive trend in 2011
Indicators
The effective and efficient implementation of the SMNE will result in an ample improvement of
the economic indicators of Puerto Rico
Cruise Passengers (“Homeport”)
Average Daily Rate
(First 10 months)
426,827
419,053
$124.98
$118.25
+1.9%
+21.5%
$120.40
$118.03
+2.0%
337,457 +2.2%344,978
-5.4%
-0.2%
CY 2008
CY 2009
CY 2010
CY 2011
CY 2008
CY 2009
Hotel Occupancy Rate
(annual change in percentage points)
66.7%
65.8%
CY 2011
RevPAR*
$82.24
$80.31
65.4%
64.8% +0.6
$76.63
+1.3
$77.19
+0.7%
+4.0%
-6.8%
-1.0
CY 2008
CY 2010
CY 2009
CY 2010
2011
CY 2008
CY 2009
CY 2010
CY 2011
Source: Puerto Rico Tourism Company
Note: *RevPAR, or revenue per available room, is calculated by multiplying a hotel's average daily room rate (ADR) by its occupancy rate
35
The Economist, one of the main critics of Puerto Rico’s financial
and economic standing in recent years, recently published an
article about Puerto Rico’s economic progress
Validation
Increase in confidence with respect to the economy and support for the plan from economists,
analysts and businessmen
“After many years of recession, Puerto Rico's economy appears to
have hit bottom and is now on a slow road to recovery.”
“We forecast that Puerto Rico's GNP will grow by a modest 0.5%
in fiscal 2012, although we expect a pick-up to1.4% in 2013, as
credit conditions improve and trends in several domestic sectors
continue in a positive direction.”
Economist Intelligence Unit (EIU)
March 2012
36
Exporting Services and
Economic Development Update
José R. Pérez-Riera
Secretary
Department of Economic
Development and Commerce (DEDC)
Government of Puerto Rico
R ESTOR ING
G R O WTH
THR OUGH
FISCAL
R ESPONSIB IL ITY
37