Report on the Competitiveness of Puerto Rico’s Economy
James Orr
Federal Reserve Bank of New York
May 10, 2013
The views expressed here are those of the presenter and do not necessarily represent the
views of the Federal Reserve Bank of New York or the Federal Reserve System.
Regional Economic Activity:
Index of Coincident Economic Indicators (CEI)
Index (Dec 2007=100)
Index (Dec 2007=100)
120
120
115
115
110
110
New York City
105
105
Nov05
Apr08
100
100
Oct09
95
95
Puerto Rico
90
90
85
85
2007
2008
2009
2010
2011
2012
2013
Source: Federal Reserve Bank of New York; Government Development Bank for Puerto Rico
Notes: The Puerto Rico composite index is based on a different methodology than the indexes
produced by the FRBNY.
Real GNP Growth: Puerto Rico and the United States
Percent
Percent
10
8
6
4
10
Puerto
Rico
8
United
States
6
4
2
2
0
0
-2
-2
-4
-4
-6
-6
1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009
Sources: Puerto Rico Planning Board; U.S. Bureau of Economic Analysis.
Real GNP Per Capita: Puerto Rico
Index (1987=100)
150
Index (1987=100)
150
140
140
130
130
120
120
110
110
100
100
90
90
80
80
70
70
60
60
50
50
1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009
Source: Puerto Rico Planning Board.
Unemployment Rate: Puerto Rico and the United States
Percent
Percent
30
30
25
25
20
Puerto Rico
20
15
15
10
10
5
5
United States
0
0
1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013
Source: U.S. Bureau of Labor Statistics.
Notes: Data are seasonally adjusted. Shading indicates periods designated recessions by the
National Bureau of Economic Research (mainland). Puerto Rico unemployment data unavailable
prior to 1976.
Challenges facing Puerto Rico
Challenges facing Puerto Rico
• Improving Labor Market Opportunities
Challenges facing Puerto Rico
• Improving Labor Market Opportunities
• Developing Human Capital
Challenges facing Puerto Rico
• Improving Labor Market Opportunities
• Developing Human Capital
• Reducing the Costs of Doing Business
Challenges facing Puerto Rico
•
•
•
•
Improving Labor Market Opportunities
Developing Human Capital
Reducing the Costs of Doing Business
Mobilizing Finance for Business Development
and Growth
Challenges facing Puerto Rico
•
•
•
•
Improving Labor Market Opportunities
Developing Human Capital
Reducing the Costs of Doing Business
Mobilizing Finance for Business Development
and Growth
• Lowering Dependence on a Shrinking Industry
Figure 6. Unemployment Rates: Puerto Rico
and the United States
Percent
2010
United States
Puerto Rico
Difference
10.7
19.2
-8.4
16-24
20.4
39.0
-18.7
25-34
10.9
20.3
-9.4
35-44
8.9
17.1
-8.2
45-54
8.5
14.9
-6.4
55-64
8.2
10.8
-2.6
Less than high school graduate
16.5
30.8
-14.3
High school graduate
11.8
21.9
-10.2
Some college
8.8
14.9
-6.1
Bachelor's degree or more
4.9
8.0
-3.0
Total
By age cohort
By education level (ages 25 to 64)
Sources: 2010 Census (American Community Survey); Puerto Rico Community Survey.
Figure 7. Labor Force Participation Rates: Puerto Rico
and the United States
Percent
2010
United States
Puerto Rico
Difference
65.4
47.5
17.9
16-24
58.2
35.5
22.7
25-34
83.9
74.3
9.5
35-44
84.0
75.0
9.0
45-54
81.7
62.7
19.0
55-64
64.8
35.1
29.7
Less than high school graduate
62.9
39.1
23.8
High school graduate
75.8
56.5
19.3
Some college
81.6
70.2
11.4
Bachelor's degree or more
86.3
81.2
5.2
Total
By age cohort
By education level (ages 25 to 64)
Sources: 2010 Census (American Community Survey); Puerto Rico Community Survey.
Figure 8. Educational Attainment: Puerto Rico
and the United States
2010
United States
Puerto Rico
Difference
13.5
12.5
1.0
Less than high school graduate
10.9
21.0
-10.1
High school graduate
35.0
30.4
4.6
Some college
24.2
23.3
0.9
Bachelor's degree or more
29.9
25.3
4.6
Less than high school graduate
7.7
6.9
0.8
High school graduate
12.1
12.0
0.1
Some college
13.7
13.7
0.0
Bachelor's degree or more
16.8
16.7
0.2
Average years of education
(ages 25 to 64)
Percentage distribution,
by education level
Average years of education,
by education level
Sources: 2010 Census (American Community Survey); Puerto Rico Community Survey.
Figure 9. Human Capital and Income Per Capita:
Puerto Rico and the Fifty States
Income (dollars)
Income (dollars)
70,000
70,000
Massachusetts
60,000
60,000
Connecticut
New Jersey
50,000
50,000
40,000
40,000
30,000
West
Virginia
20,000
30,000
Correlation: 0.71
20,000
Puerto Rico
10,000
10,000
0
12.0
12.5
13.0
13.5
14.0
14.5
Average years of education of adult working age population
Sources: 2010 Census (American Community Survey); U.S. Bureau of Economic
Analysis; Puerto Rico Planning Board.
Figure 10. Types of Financial Institutions: Puerto Rico
Percentage of System Assets, Except As Noted
2011
2010
2007
2000
1997
Commercial banks
39.6
43.1
41.6
38.2
35.8
International/offshore bank entities
25.5
24.1
35.9
35.8
31.5
Government banks
11.2
9.8
5.3
5.7
7.9
Investment companies
8.9
8.4
6.7
1.9
1.9
Credit unions
4.6
4.5
3.1
3.6
4.6
Securities brokers
3.2
3.5
0.6
4.2
7.1
Mortgage institutions
3.2
2.8
2.8
3.8
2.7
Finance companies
2.4
2.3
2.2
3.8
4.0
Leasing companies
0.9
1.0
1.3
1.0
1.4
Small loan companies
0.4
0.4
0.7
1.8
3.0
Venture capital funds
0.0
0.0
0.0
0.1
0.1
172,029 168,214 211,437 123,534
83,637
Total assets (millions of U.S. dollars)
Source: Office of the Commissioner of Financial Institutions.
Figure 13. Commercial Bank Nonperforming Loans: Puerto Rico
As a Percentage of Total Loans, by Segment
Percent
Percent
25
25
20
20
Real
estate
15
Commercial,
industrial, and
agricultural
10
Total
15
10
Individuals
5
5
0
0
1996
1998
2000
2002
2004
2006
Source: Office of the Commissioner of Financial Institutions.
2008
2010
Figure 15. Employment within the Manufacturing Sector:
Puerto Rico
Thousands
Thousands
35
35
Chemical
30
30
25
25
Apparel
20
20
Computer and
electronic
production
15
10
Plastics and
rubber
5
15
Fabricated
metals
10
5
0
0
1990
1994
1998
Source: U.S. Bureau of Labor Statistics.
Note: Data are annual.
2002
2006
2010
Figure 16. Balance of Payments: Puerto Rico, 2009
Exports
Merchandise
Transportation
Visitors' expenditures
Miscellaneous services
73,739.2
66,077.6
475.9
3,472.8
2,554.3
Income on investments
1,158.6
Imports
Merchandise
Transportation
Travel expenditures
Miscellaneous services
87,629.8
48,285.6
2,195.6
1,106.1
1,226.5
Income on investments
34,816.0
Balance on merchandise transactions
Balance on services
Balance on investment income
Source: Puerto Rico Planning Board.
17,792.00
1,974.80
(33,657.40)
Recommendations:
Recommendations:
• Reduce Barriers to Job Creation and Labor Force
Participation
Recommendations:
• Reduce Barriers to Job Creation and Labor Force
Participation
 youth sub-minimum wage
 design of benefit programs
Recommendations:
• Reduce Barriers to Job Creation and Labor Force
Participation
 youth sub-minimum wage
Recommendations:
• Reduce Barriers to Job Creation and Labor Force
Participation
 youth sub-minimum wage
 design of benefit programs
• Reform the Energy Industry
Recommendations:
• Reduce Barriers to Job Creation and Labor Force
Participation
 youth sub-minimum wage
 design of benefit programs
• Reform the Energy Industry
 Regulatory commission
Recommendations:
• Reduce Barriers to Job Creation and Labor Force
Participation
 youth sub-minimum wage
 design of benefit programs
• Reform the Energy Industry
 Regulatory commission
• Lower the Costs of Doing Business
Recommendations:
• Reduce Barriers to Job Creation and Labor Force
Participation
 youth sub-minimum wage
 design of benefit programs
• Reform the Energy Industry
 Regulatory commission
• Lower the Costs of Doing Business
• Foster Partnerships between Industry and Higher
Education
Recommendations:
• Reduce Barriers to Job Creation and Labor Force
Participation
 youth sub-minimum wage
 design of benefit programs
• Reform the Energy Industry
 Regulatory commission
• Lower the Costs of Doing Business
• Foster Partnerships between Industry and Higher
Education
 promote innovation and commercialization of research
Recommendations:
• Reduce Barriers to Job Creation and Labor Force
Participation
 youth sub-minimum wage
 design of benefit programs
• Reform the Energy Industry
 Regulatory commission
• Lower the Costs of Doing Business
• Foster Partnerships between Industry and Higher
Education
 promote innovation and commercialization of research
• Promote Independent Policy Evaluation