Puerto Rico stands to be affected by proposed policies and initiatives that would alter federal funds programs, higher inflation stemming from tariff hikes on imports, changes in corporate tax rates, a movement toward federal deregulation, especially in the sectors of Puerto Rico stands to be affected by proposed policies and initiatives that may alter federal funds programs, higher inflation stemming from tariff hikes on imports, changes in corporate tax rates, a shift toward federal deregulation, particularly in environmental policy and health, and potential challenges to federal reconstruction, pandemic and Medicaid funds.
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The island may face reduced funding from agencies such as the Federal Emergency Management Agency and U.S. Department of Housing and Urban Development.
By G. Torres and María Miranda
News is my Business Staff
Donald Trump’s return to the White House will likely have a negative impact on Puerto Rico’s economy, according to the preliminary findings of a study conducted by local research and consulting firm Estudios Técnicos.
Puerto Rico stands to be affected by proposed policies and initiatives that may alter federal funds programs, higher inflation stemming from tariff hikes on imports, changes in corporate tax rates, a shift toward federal deregulation, particularly in environmental policy and health, and potential challenges to federal reconstruction, pandemic and Medicaid funds, the study indicated.
The new Department of Government Efficiency (DOGE), an advisory body created by Trump to implement far-reaching structural reforms, will influence key federal agencies that play a significant role in Puerto Rico, including the Department of Housing and Urban Development (HUD), the Department of Transportation, the Department of Agriculture, and the Federal Emergency Management Agency (FEMA).
DOGE’s appointed director, tech mogul Elon Musk, known for some of his companies such as SpaceX, Tesla and X, and currently the world’s richest person, has announced plans to reduce the federal annual budget by $2 trillion.
Trump has expressed his intent to restore to the presidency the authority to require all federal department and agency heads to identify significant budget savings.
“The Trump administration has moved relatively quickly in making key appointments, and we should expect decreased funding for a number of programs,” economist José J. Villamil, CEO of Estudios Técnicos, told News is my Business.
“We have to wait and see what Mr. Musk comes up with in his efficiency committee and what Mr. [Robert F. Kennedy Jr.] in the health area. The latter is a major recipient of federal funding,” Villamil added.
Villamil estimates that Puerto Rico could lose between $7 billion to $9 billion in funds, likely starting after federal fiscal year 2025.
One area of particular concern, given its magnitude and impact, is the future of reconstruction funds still awaiting disbursement.
As of Nov. 15, $89.2 billion had been allocated for reconstruction, with 82% directly related to efforts stemming from Hurricane Maria in 2017 and the earthquakes that struck the island’s southwestern region in 2019 and 2020. Of the $82.1 billion in obligated funds, $37.7 billion, or 46%, has been disbursed, mostly from FEMA, according to the study.
The administration may consider separating portions of the federal reconstruction funds assigned to Puerto Rico, particularly from FEMA and HUD, that remain unobligated, which would still have a significant local impact, according to Estudios Técnicos.
Villamil said Social Security likely will not be affected in the next couple of years because it is not a federal grant but is funded by taxpayers. Medicare may go through adjustments, regardless of the administration in power, and programs like the Earned Income Tax Credit could be eliminated, he noted.
Regarding the state of Puerto Rico’s economy, Villamil pointed out that auto sales are down, bankruptcies are up, energy costs are extremely high and still rising, and real gross domestic product growth is about 1% and likely to remain at that level for the next four to five years.
“Ours is a niche economy with some sectors doing relatively well, but others not so well. This may explain why you see full restaurants, but when you count the number of customers going to these restaurants, it might amount to 5% of the population, and that’s being optimistic,” Villamil said.
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Publish date : 2024-12-25 20:03:00
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