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Leadership in Times of
Crisis Luis G. Fortuno
October 2013
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Conditions at the Beginning of Term
Worst deficit in the U.S.
5 year local recession
Wall Street Meltdown/ Great Recession in the U.S.
Dramatic loss of local capital (housing and bank crisis)
Lack of liquidity in the banking sector
Bond rating one notch above “Junk”/ Limited access
to the market
Government employee unions demands
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Steps Taken
Cut expenses by 20%
Streamlined permitting process
Merged/ eliminated government agencies
Cancelled collective bargaining rights for 2 years
Promoted 3 FDIC-assisted transactions
New tax code
Targeted incentives (exports, attract capital, tourism,
film industry, R&D, housing)
Public-Private Partnerships
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2010 2011 2012 2013* 2014* FY 2009
$(3,306)
$(2,500)
$(1,000)
$(610) $(350) ?
Expenses per revenue dollar
2009: $1.44
2012: $1.03
We brought down the deficit by 90%
4 *estimate (amount in millions of dollars)
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First time on positive ground since 2006
5
Fiscal mismanagement GROWTH
2009 2008
2012 2013*
2011
0.5%
-2.9%
-3.8%
-1.5%
0.5% ?
FY
Stabilization
2006
*estimate
2007
-1.2%
2010
-3.4%
Government
Shutdown
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Indicators showed improvement*
27,000 net jobs (last 14 months)
Housing sales: 13.4% (since Sept. 2010)
Vehicle sales: 6.6% (FY 2012)
Cement sales: 7.3% (FY 2012)
New corporations: 14% (FY 2012)
Retail sales: 2.2% (1st half 2012)
Bank deposits: 6.4% (2nd quarter 2012)
Unemployment: 13.8% (lowest since Dec. ‘08)
Bankruptcies: 10.4% (FY 2012)
6
*by election day
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Improved Credit Ratings
7
BBB-
2012 2008 2012 2008
BBB
Baa3
Baa1
S&P Moody’s Fitch
2012 2008
N/A
BBB+
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Global Competitiveness
8
2012 2009
31
42
BEST-PERFORMING INDICATORS
2011 2012 Increase
Tax burden 104 58 +46
Government Transparency 112 81 +31
Commercial barriers 54 25 +29
Government spending 101 80 +21
Soundness of banks 95 74 +21
Steps to start a business 65 47 +18
Government regulations 139 122 +17
WEF Global
Competitiveness Index
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Construction turnaround
9
r – revised | p – preliminary Fuente: Junta de Planificación de Puerto Rico, Programa de Planificación Económica y Social, Subprograma de Análisis Económico.
(by fiscal year)
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Politics vs. Economic Pragmatism
Politics vs. proper administration
How to manage electoral risk
Constant communication/ alternative
media outlets/ creative positioning
Make difficult decisions early
Is Washington listening?
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Situation in Washington
Debt ceiling
Funding of government operations
Sequestration
Will Washington fix entitlement
programs? (Social Security, Medicaid,
Medicare)
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Agenda for US
1. Control spending/ reduce deficit
2. Simpler/ flatter tax code, lower rates
3. Modernize infrastructure – P3s
4. Strengthen education K-12
5. Enter into and implement Free Trade
Agreements
6. Aggressively pursue energy independence
7. Immigration reform
8. Learn to work across the aisle