Needed: A Few Improvements in Paradise

It was one of those things I read in the middle of the night, and it didn’t tell me much that I didn’t know. And though the article in The New York Times was expansive, it could be more simply put: the island is a mess and people are getting out.

There’s the crime. Yes, we only had 883 murders last year, but the year before? Over 1100—a record for us.  And New York, with at least twice the population, had about half a many murders as we did.

Per capita income: $15,200, which is half that of the poorest state, Mississippi.

Infrastructure: you could swim in some of the potholes in the roads.

Electricity: sky high.

Public schools: can’t even assure the physical safety of the pupils, who are sent out to the streets if their teacher is absent (no one ever hearing of a substitute teacher…).

It goes on and on, the litany of ills affecting us, and so our professional classes are doing the obvious. Unlike the 1950’s, when poor people moved to the states to work in factories, our educated classes are leaving the island. Here’s what the Times had to say:

Puerto Rico’s drop in population has far outpaced that of American states. In 2011 and 2012, the population fell by nearly 1 percent, according to census figures. From July 2012 to July 2013, it declined again by 1 percent, or about 36,000 people. That is more than seven times the drop in West Virginia, the state with the steepest population losses.

All this—however depressing—I get. What don’t I get? Well, check this out:

Un proyecto de ley senatorial que propone otorgar incentivos contributivos a puertorriqueños que han emigrado para que regresen y residan e inviertan en el país, recibió ayer el endoso del Departamento de Desarrollo Económico y Comercio (DDEC) y de varias entidades privadas.

(“A senate law project that proposes to award tax incentives to Puerto Ricans who have emigrated in order for them to return, live and invest in the island received the endorsement yesterday of the Department of Economic and Business Development and various private entities.”)

Guys?

In the first place, we’re broke and the governor has just had to raise taxes. In the second place, has anyone thought of why all those doctors, lawyers, nurses and teachers left the island in the first place? A sudden desire for 20-below zero weather? The joys of shoveling snow? Struggling daily with a language that is not your own, a feeling every day that you’re an outsider?

Listen, guys, it was one of the hardest things I’ve ever done, and one of the three things that neurologists say completely remap your brain (the other two being having children and getting married…). Do you think any of these people, having made such a sacrifice, are going to be lured back by a tax incentive? And by the way, how big a tax incentive will it have to be to compensate for the loss of income with which they’ll be hit by moving back to the island?

More to the point, why did all these people leave in the first place? The crime, the infrastructure, the lousy pay and horrible government—has any of that changed? Everything that prompted people to leave in the first place is not the same—it’s worse.

So what should be done? Well, as I write in the café that is my office, I’m seeing the owner busy rearranging her shop. So I asked her: “what’s the hardest part of running your business?”

She’s stunned, can’t speak, and makes circular gestures with her hands. In short, it’s everything. I give her prompts: the cost of electricity, the regulations, the permits, the…

“The taxes,” she says. “Yeah, that’s the hardest….”

I read recently that Georgia had improved their economy by improving their ease of doing business from a ranking of x to eight. Right—so what was Puerto Rico?

Well, we’re number 40. And our neighbors? Dominican Republic is 112; Haiti is 177. Both Cuba and the Virgin Islands are unranked. Singapore is number 1, the United States is number 4.

The ranking is done by the World Bank; here, drawn from their website, is their description of the ranking:

Economies are ranked on their ease of doing business, from 1 – 189. A high ranking on the ease of doing business index means the regulatory environment is more conducive to the starting and operation of a local firm. This index averages the country's percentile rankings on 10 topics, made up of a variety of indicators, giving equal weight to each topic. The rankings for all economies are benchmarked to June 2013.  

And what are the ten topics?

·      Starting a business

·      Dealing with construction permits

·      Getting electricity

·      Registering property

·      Getting credit

·      Protecting investors

·      Paying taxes

·      Trading across borders

·      Enforcing contracts

·      Resolving insolvency

OK—so how does Puerto Rico do? Here’s the list with Puerto Rico’s rankings

·      Starting a business---------------------------18

·      Dealing with construction permits--------172

·      Getting electricity----------------------------38

·      Registering property-------------------------132

·      Getting credit---------------------------------13

·      Protecting investors--------------------------16

·      Paying taxes-----------------------------------110

·      Trading across borders-----------------------87

·      Enforcing contracts---------------------------101

·      Resolving insolvency-------------------------21

What’s interesting is how skewed these numbers are. Getting credit is 13, our lowest score; dealing with construction permits is a whopping 172. Shouldn’t that suggest something to our lawmakers?

Look, I’m a blogger, I’m a musician. What am I not? An economist. But shouldn’t we be putting our efforts to streamlining the permission permits, clearing up the monumental backload in the Registry of Property, revising the tax structure, and making it easier to enforce contracts?

Maybe, in fact, we could send some guys over to Singapore to figure out how they do it?

Might be money better spent than trying to lure professionals back to the island….