Puerto Rico Suffering Crisis Due to Obsolete Economic Model

Puerto Rico Suffering Crisis Due to Obsolete Economic Model - HispanicBusiness.com - 30/10/08

After three years of recession and with no prospects for recovery in the short term, Puerto Rico's economy is going through one of its most critical phases as a result of the exhaustion of an obsolete growth model.

The macroeconomic data leave no doubt: since 2006 there has been negative growth in this U.S. commonwealth, inflation this year will be around 12 percent, the unemployment rate is 12.1 percent and public indebtedness has reached unprecedented levels.

Economists and representatives of business organizations consulted by Efe agree that with the new government and legislature to be elected on Nov. 4, Puerto Rico will be forced to put in place a joint plan between the public and private sectors to establish a new economic model.

"We've got an obsolete institutional framework and an economic model that doesn't work anymore. The world has changed and we're continuing to work with models from the (19)50's and '60s that don't work anymore," Joaquin Villamil, president of the firm Estudios Tecnicos, told Efe.

Villamil said that the Caribbean island is suffering an endemic problem due to "the excessive dependence of politicians in making economic decisions."

The island's gross domestic product fell 1.8 percent in 2006, 2.1 percent in 2007 and authorities calculate that it will fall another 2.5 percent this year, adding that there is no chance that there will be any growth next year either.