Puerto Rico economy shows strength

Puerto Rico’s economy showed strength in May according to the economic activity index released Tuesday.

The index was up 1.8% from a year earlier and 0.8% from a month earlier, according to the Economic Development Bank for Puerto Rico.

Advantage Business Consulting President Vicente Feliciano said Puerto Rico’s economy was strong enough that it would withstand the gradual withdrawal of reconstruction funds.

While federal hurricane, earthquake, and COVID-19 funds are helping the economy and these are all ending or will be scaled back in coming years, “the economy is strong enough that the end of federal funds will not bring a crash,” said Advantage Business Consulting President Vicente Feliciano.

He said the private sector is growing, wages are rising, and labor participation is at the highest level in a decade.

The aging of Puerto Rico’s population is the economy’s greatest problem, Feliciano said.

But he said the Puerto Rico economy is benefiting from enough factors that even as government aid diminishes, the local economy should still expand.

In recent weeks, attorneys for the Oversight Board have told the judge in the Puerto Rico Electric Power Authority bankruptcy, Laura Taylor Swain, that there were signs Puerto Rico’s economy was weakening.

When a Puerto Rico attorney who wished to remain anonymous was asked if these figures might affect PREPA’s bankruptcy, the attorney said, “Neither the [Oversight] Board nor Judge Swain care. The plan of adjustment the board files will be approved with nary a change and it will be up to the First Circuit [Court of Appeals] to decide if that is valid.”

On Monday PREPA bond trustee U.S. Bank N.A. filed a statement on the EMMA web site saying it and the Ad Hoc Group of PREPA Bondholders plan to appeal Swain’s approved plan of adjustment and rulings after one is approved.

Puerto Rico Clearinghouse Principal Cate Long said, “The Oversight Board has misrepresented macro factors since the beginning of the bankruptcy so I expect nothing different now. Of greater importance in this instance is the board filed a motion in limine to preclude any party from challenging any element of the fiscal plan. Essentially the board believes they can put any estimate they want in the plan and it becomes sacrosanct.” Swain will rule on the motion soon, Long said.

Holders of Puerto Rico bonds pay attention to the island’s economy because it affects bond prices on the secondary market. Increased economic activity also leads those holding general obligation bonds to receive more through contingent vehicle instruments based on revenues, which are in turn influenced by economic activity.  

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