SAN JUAN, Puerto Rico – Economists warned on Friday that Puerto Rico's decade-long recession will only deepen if it does not attract investors and stimulate its economy to offset an austere new fiscal plan.
The warning came during a meeting by a federal control board that oversees the island's finances to explore ways to revive the economy.
The austerity measures it has imposed "will not in themselves be enough to pull Puerto Rico out if its economic crisis," said board chairman Jose Carrion. "Economic development must be a priority."
Economists told the board that the austerity measures could shrink Puerto Rico's economy by 4 percent. They said the island needs to reduce its power bills and regain access to the capital markets amid multimillion-dollar defaults, but warned that the benefits of planned infrastructure and tax reforms will not be seen for five to 10 years.
Economist Gustavo Velez said Puerto Rico needs up to $8 billion in private sector investment a year to help pull the island out of its crisis as it seeks to restructure some $70 billion in public debt.
It won't be an easy feat, said economist Joaquin Villamil. "We're not starting from zero, we're starting from below zero," he said.
Gov. Ricardo Rossello told the board that he plans to expand the island's manufacturing sector, which represents nearly 50 percent of the GDP, and stimulate its tourism sector, which represents 7 percent.
He also said he expect to privatize some of the 340 services that the government provides, and he urged U.S. Congress to take action on recommendations presented by a group that it created to help find ways to stimulate the economy.
"If those (recommendations) are ignored ... this entire experiment will be a complete failure," he said of a rescue package Congress approved last year that included creation of the board.
Friday's meeting is the first the board has held in the capital of San Juan, and it drew hundreds of students out of tens of thousands who went on strike last week to protest $450 million in proposed cuts at Puerto Rico's largest public university. Dozens of police officers were stationed outside the meeting's venue.
Nearby, 45-year-old telemarketer Wendy Almonte sold T-shirts out of her car that featured protest slogans and a black Puerto Rico flag.
"I started doing this because I don't make enough money," she said, adding that one of her two sons requires expensive medical care that she struggles to find amid an exodus of doctors to the U.S. mainland because of the crisis.
She said that while she fears the upcoming austerity measures, she doesn't blame the board.
"We got ourselves into this mess," she said. "The creditors aren't guilty ... It's those (expletives) in the government who invested in so many things and made us believe there was enough money available."