Leadership in Times of

Crisis Luis G. Fortuno

October 2013

Conditions at the Beginning of Term

Worst deficit in the U.S.

5 year local recession

Wall Street Meltdown/ Great Recession in the U.S.

Dramatic loss of local capital (housing and bank crisis)

Lack of liquidity in the banking sector

Bond rating one notch above “Junk”/ Limited access

to the market

Government employee unions demands

Steps Taken

Cut expenses by 20%

Streamlined permitting process

Merged/ eliminated government agencies

Cancelled collective bargaining rights for 2 years

Promoted 3 FDIC-assisted transactions

New tax code

Targeted incentives (exports, attract capital, tourism,

film industry, R&D, housing)

Public-Private Partnerships

2010 2011 2012 2013* 2014* FY 2009

$(3,306)

$(2,500)

$(1,000)

$(610) $(350) ?

Expenses per revenue dollar

2009: $1.44

2012: $1.03

We brought down the deficit by 90%

4 *estimate (amount in millions of dollars)

First time on positive ground since 2006

5

Fiscal mismanagement GROWTH

2009 2008

2012 2013*

2011

0.5%

-2.9%

-3.8%

-1.5%

0.5% ?

FY

Stabilization

2006

*estimate

2007

-1.2%

2010

-3.4%

Government

Shutdown

Indicators showed improvement*

27,000 net jobs (last 14 months)

Housing sales: 13.4% (since Sept. 2010)

Vehicle sales: 6.6% (FY 2012)

Cement sales: 7.3% (FY 2012)

New corporations: 14% (FY 2012)

Retail sales: 2.2% (1st half 2012)

Bank deposits: 6.4% (2nd quarter 2012)

Unemployment: 13.8% (lowest since Dec. ‘08)

Bankruptcies: 10.4% (FY 2012)

6

*by election day

Improved Credit Ratings

7

BBB-

2012 2008 2012 2008

BBB

Baa3

Baa1

S&P Moody’s Fitch

2012 2008

N/A

BBB+

Global Competitiveness

8

2012 2009

31

42

BEST-PERFORMING INDICATORS

2011 2012 Increase

Tax burden 104 58 +46

Government Transparency 112 81 +31

Commercial barriers 54 25 +29

Government spending 101 80 +21

Soundness of banks 95 74 +21

Steps to start a business 65 47 +18

Government regulations 139 122 +17

WEF Global

Competitiveness Index

Construction turnaround

9

r – revised | p – preliminary Fuente: Junta de Planificación de Puerto Rico, Programa de Planificación Económica y Social, Subprograma de Análisis Económico.

(by fiscal year)

Politics vs. Economic Pragmatism

Politics vs. proper administration

How to manage electoral risk

Constant communication/ alternative

media outlets/ creative positioning

Make difficult decisions early

Is Washington listening?

Situation in Washington

Debt ceiling

Funding of government operations

Sequestration

Will Washington fix entitlement

programs? (Social Security, Medicaid,

Medicare)

Agenda for US

1. Control spending/ reduce deficit

2. Simpler/ flatter tax code, lower rates

3. Modernize infrastructure – P3s

4. Strengthen education K-12

5. Enter into and implement Free Trade

Agreements

6. Aggressively pursue energy independence

7. Immigration reform

8. Learn to work across the aisle