Faced with multiple calls from our multinational member companies informing that their parent companies are concerned about the messages that are being published in the international media about the fiscal crisis of Puerto Rico and the possible impact of the recently published Krueger Report (see attachment) in contractual agreements and taxes, the PRMA held a conference call with local managers of multinationals.
At this meeting, our Executive Director Jaime Garcia said the Krueger report is merely a report of recommendations and that both the Governor and the Chief Of Staff stated that some recommendations are acceptable and others are not. Particularly the issue of increasing corporate taxes was not mentioned in the Governor’s Message. This was included in the report Krueger. The fact that it was not included in the message makes us understand that an increase will not be considered among the options to be incorporated in the work plan to be developed. On the other hand, the Governor has said on multiple occasions that Act 154 will not be amended and that taxes on multinational companies are not going to increase.
The other point is that the PRMA has been emphatic about the impact of increased taxes on corporations, emphasizing that multinationals are those who hold jobs in Puerto Rico, providing 25% of the revenues of the Treasury Department and represent 48 % of GNP.
The Governor is seeking support from the private sector, recognizing that he needs our support. He has begun to hold meetings with representatives of different sectors and PRMA will meet with him soon. Our first approach with the Governor will be that we keep the situation of multinationals unchanged, especially those under the Act 154. Structural problems presented in the Krueger report are widely known and have been undermining the ability of the island to compete over the years. These problems are not new, have been accumulating for decades, and have led us to the crisis we are facing. Quite simply our economy has stopped growing. This fundamentally after the repeal of Section 936. As an example, the manufacturing sector currently employs 80,000 and during the period of validity of Section 936 its workforce reached 178,000. This does not include the indirect and induced employment which represents a multiplier effect of 3.3 jobs for every job created in manufacturing.
Throughout its history, the Puerto Rico Manufacturers Association has made a lot of recommendations included in the Krueger report, although some have been enacted, many have been omitted. These include revisions to the labor laws to remove disincentives to employ and be employed, exemptions from the minimum wage and Jones Act, reduced energy costs, streamlining the permitting process, need to improve transparency in government data, just to name a few.
It is vital that any proposal that develops note that the only way to get out of this quagmire is to stimulate the productive sector to create wealth and develop the economy in a sustainable way.
The PRMA is committed to working with the Governor to promote the welfare of our country and we are confident of being participants in the formulation of options for promoting economic development. Furthermore when manufacturing represents 48% of GNP and manufacturing companies account for 25% of the income of the general fund revenues.
Soon we will have our meeting with the Governor. We will keep you informed of developments as they arise.