How Maria Forges PR s Future

Transcription

1 H.Calero Consulting Group, Inc. How Maria Forges PR s Future Assessment and Forecast

2 An economy in recession Real GNP growth, % High Moderate Negative 8.0% 0% -1.1% Source: PR Planning Board

3 with investment going down Investment, $ billion and % of GNP 30% $12.0 Recession 22% $4.8 $8.3 12% '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 Investment % GNP hcalero.com Source: PR Planning Board

4 Federal funds as a driving force $billion $ % 2% $0.1 13% Net Transfers As % GNP Source: PR Planning Board

5 Trouble with public debt $ billion $ 71% Sec. 936 ends 99% 35% 56% Debt Debt/GNP 2016 hcalero.com Source: PR Planning Board

6 The job challenge Low participation still a major problem 46.6% Feb % 10% 40% Participation Unemployment 18 Source: PR Department of Labor

7 Demographic time bomb in PR PR population, million , 000s % 15% 20% 24% Source: US Census Bureau 16

8 Recurrent fiscal deficits GF net revenues GF budget, $ million 348 (64) (521) (3,180) Source: PR Planning Board

9 Municipalities also with deficit Deficit FY 2016 Rincón Aguada Cabo Rojo Aguadilla Moca Añasco Mayagüez Hormigueros Isabela Quebradillas San Sebastián Las Marías San Germán Lajas Maricao Sabana Grande Guánica Camuy Lares Yauco Hatillo Guayanilla Peñuelas ñ Arecibo Ponce Barceloneta Florida Manatí Toa Alta Trujillo Alto Morovis Ciales Corozal Utuado Aguas Gurabo 46 municipalities Buenas Orocovis Comerío with deficit Caguas Jayuya Barranquitas Adjuntas Cidra San 60% of 78 Villalba Aibonito Lorenzo Juana Díaz Vega Baja Coamo Santa Isabel Vega Alta Dorado Toa Baja Naranjito Salinas Cata ño Bayamon Cayey Guaynabo Guayama San Juan Patillas Arroyo Carolina Loízaí Canovanas Juncos Maunabo Las Piedras Yabuoca Río Grande Humacao Luquillo Naguabo Vieques Fajardo Ceiba Culebra Surplus Deficit Source: OCAM

10 PR debt The end game Source: Press

11 US takes action with PROMESA Restructure debt with Court Approve fiscal plan & budgets Obtain financial audited statements Freeze or reduce pension benefits Issue bonds Review Acts of Legislature Exclude 25yr old from min. wage Subpoena powers Prohibit public strikes Establish new personnel system Not subject to Judicial review

12 A conceptual growth plan Investment opportunities Economic growth Tourism Manufacturing Agriculture Key Services hcalero.com Source: HCCG Energy Ports Infrastructure Highways Telecom

13 A dated infrastructure Electricity generation by source, 2017, % % 20 bn kwh 34 Oil Gas Coal Renewables Source: PREPA

14 Untapped potential of tourism Visitor s expenditures, $ million $3,985 6% 4% $ Visitor's expenditures % of GNP hcalero.com Source: HCCG

15 Manufacturing dominates in GDP but not in jobs, 2016 GDP Jobs 36% 7% 1% 1% $105bn 47% 43% 1m 19% 2% 3% 9% 8% 24% Agric/Min Constr. Mfg. Trade Services Gov Source: PR Planning Board, PRDLHR

16 Agriculture is dormant $ million 9.7% % Agriculture % GDP hcalero.com Source: PR Planning Board

17 Higher education in transition Expense per university student, $ University enrollment trend by sector $25, , ,938 $17,099 73,838 67, Source: PR Council on Higher Education '02 '04 '06 '08 '10 '12 '14 '16 Public Private

18 Healthcare keeps going up Government funds for healthcare, FY, $ million 4,511 2,940 2,016 1, Medicare Medicaid/Mi Salud Source: PR Planning Board, PR OMB

19 Financial system is diversified PR financial system assets, $ million $ 214 bn $ 144 bn Banks IBE's Credit Unions Investment banks Other Source: PR Department of Labor

20 Where is Puerto Rico today? AGUADA AÑASCO MAYAGÜEZ CABO ROJO MOCA Gross Domestic Product 16 $105b TOA VEGA MANATI BAJA VEGA BAJA SAN ALTA ARECIBO JUAN TOA Gross National Product 16 ALTA $70.1b RIO FLORIDA GRANDE SAN Population m SEBASTIAN CIALES GURABO AGUAS LARES UTUADO Share of Manufacturing in GDP 47% BUENAS JUNCOS NAGUABO COMERIO LAS MARIAS OROCOVIS CAGUAS BARRANQUITAS Income Per Capita JAYUYA 16 $17,906 CIDRA ADJUNTAS MARICAO SAN AIBONITO LORENZO Total Employment 2/18 VILLALBA 1.0m CAYEY SAN COAMO YABUCOA GERMAN YAUCO Inflation 2/18 1.5% PONCE JUANA Unemployment rate DIAZ 2/18SANTA SALINAS 10% LAJAS ISABEL GUAYAMA GUANICA Participation rate 2/18 40% CEIBA Source: PR Planning Board, US Census Bureau, PR Department of Labor. 20

21 Economic activity after Maria HCCG quarterly indices, % change over previous year, 4Q % -4.9% -2.0% -2.1% -18.5% -27.3% Coinc. Constr. Cons. Mfg Banking Leading

22 Destruction path of hurricanes Recent hurricanes in Puerto Rico

23 Ten biggest blackouts in US history Million customer hours of lost electricity service Maria ('17) Georges ('98) Sandy ('12) Irma ('17) Hugo ('89) Ike ('08) Katrina ('05) NE Blackout ('03) Wilma ('05) Irene ('11) ,248 1,050

24 FEMA budget hurricane María, federal FY, $ billion FY 2017 FY % $1.6 bn 44% $15.9 bn 56% 74% Assistance Operations & administrative hcalero.com Source: FEMA

25 Methodology of damages Nordhaus: Elasticity between: Wind speed Nominal GNP = Damages Strobl: Model with: Population Wind speed Investment Openness = GNP growth The study quantifies damages by specific sectors

26 Maria set to increase poverty by 8% to 16% % of population below poverty level Base scenario Base scenario hcalero.com

27 Shock reaction model Pessimistic scenario Base scenario Optimistic scenario VAR model I-R Shocks MCS Assumptions Population Recovery funds Distrib. Timing Source: hcalero.com HCCG

28 Scenario definitions Assumptions Base Optimistic Pessimistic Population (2035) Moderate loss (2.6 mn) Smallest loss (3.0 mn) Significant loss (2.4 mn) Recovery funds Most funds in govt. outlays & investment > investment > consumption Funds available $23.8 bn $30.2 bn $16.7 bn Timeline Most funds FY2019 & FY2020, then taper off gradually > Funds FY2019 & FY2020 < Funds FY2019, constant funds during FY FY2023 hcalero.com Source: HCCG

29 Forecast scenarios The study provides: real GNP growth forecasts from 2018 thru 2023 Base, Optimistic, and Pessimistic scenarios

30 Economic recovery will be slow Real GNP, $ million (1954) 8,500 7, yrs 22 yrs 7,351 6,738 6,500 5,500 4,500 6,326 3,500 2,500 1,500 Source: HCCG Optimistic Baseline

31 Two sides after Maria On one hand Severe fiscal austerity Long debt renegotiation Outward migration On the other hand A new socioeconomic fiber Private sector in new emerging activities Access to a high income US market Reconstruction funds to rebuild infrastructure The study identifies specific opportunities in tourism, agriculture, manufacturing, and services.

32 Second chance after Maria To transform the economy To make reforms To rebuild infrastructure To restructure public debt To change the role of PROMESA Board To halt migration

33 Orders for the study thru website hcalero.com