Unanswered questions

Who is benefiting who?

Do we want a indebted Puerto Rico full of wealthy investors or do we want a less debted Puerto Rico full of young entrepreneurs?

Where is the real return of investment and the leading opportunity for economic growth?

We don't need intangible money (for most Puerto Rican citizens) to go through our island...what we need is to have our people produce opportunities to develop tangible efficient money. That my friends..is what a long-term economic development is all about.

http://www.bbc.com/news/magazine-32344131

Life Cycle of Emotions

Desired Love
Strained Guilt 
Passionate Flame
Sweet Sorrow

Painful Remorse
Fearless Pursuit
Genuine Faith
Timeless Joy

Hidden Despair
Loving Grace
Settling Fear
Profound Acceptance

Soulful Bliss
Loving Care  
Wisefully Insane
Peaceful Farewell

Puerto Rico, a tax haven for the rich or a tax burden for the middle class?

Millionaires are coming to Puerto Rico to create a "new Puerto Rico" at the expense of the native Puerto Ricans- who apparently are not invited to this novelty.

 

A new Puerto Rico? That’s what Prouty stated investors should expect when moving to the island. The speech that Nicholas gave in the Puerto Rico Summit 2014, sounded lovely….but now in 2015, I ask my fellow friends and family who live in Puerto Rico, and they have no idea what is the new Puerto Rico that Prouty was talking about; maybe that's because they weren't included in it? Just recently, I read in Forbes the header "Puerto Rico Expands Tax Haven Deal for Americans to its Own Emigrants" and thought to myself: "well this might be the new Puerto Rico they were referring to in 2014". As I skimmed through various articles, I couldn't avoid but feeling somewhat deceived by these millioners who say they come to Puerto Rico to help, but in reality they just come to avoid paying taxes and expand their revenue at any cost. If they really cared about our island, they would be proposing projects that seek not only to atract the upper class, but as well the middle class- which seems to be carrying most of Puerto Rico's economic burden.

 

The millions of Puerto Ricans that are leaving for the states are not the upper class but those hard workers from the middle class who need to leave that burden behind. Why do I bring this middle class argument? Well, because now the Puerto Rican government is looking to pass IVA, a 14% "consumption" tax (which could potentially include medicines and other commodities/normal goods); This is going to directly affect small businesses and the middle class. The lower class gets coupons and all sorts of government benefits to pay for their commodity/normal goods so they don't have much to worry about- but what about the middle class? They are not eligible for most of these governmnet benefits, neither for tax cuts or welfare benefits. This is why your middle class (the working class) is leaving...and with measures like the IVA 14% "consumption" tax they will only continue to seek shelter elsewhere. If the government needs revenue why not look into the richman's pocket? Those are the ones who have no burdens and have an excess of capital. Keep the IVU and create a 10-14% IVA on luxury goods. There's where the real money is-; 14% of a milk carton (around $6) will only generate you around 0.84 cents per gallon. Meanwhile, let's say you apply that same IVA to a Ferragamo shoe which is worth around $500 would generate a total of $70 which would be the same as if you generate 14% out of around 84 gallons of milk at around $6 each. Some will say, correct but how many people buy Ferragamo shoes in comparison to milk? Yes, precisely why you cannot increase the price of commodity/normal goods because it is a necessity. If people are not able to afford milk, they will flee the island- but if I can't afford a pair of Ferragamos or high brand products I won't flee the island, I will just look for options that are around my budget. The economic repercussions an IVA tax could have in Puerto Rico could be disastrous.

 

So now back to my argument...does the "new Puerto Rico" Prouty was referring to include the middle class? It does not seem like it. Let's continue to increase taxes for our citizens but create a tax haven for investment/hedge fund managers and high net worth investors (upper class). Yes, I am aware that the upper class are the ones with the money- but tax havens don't always work...specially when there are so many loopholes in tax law; the rich can afford to hire an accountant or lawyer to find those loopholes and give them the recipe for legal tax avoidance and self-enrichment. Acording to Forbes here is a brief description of what these new tax haven measure entail:

 

1) "Act 20, the Export Services Act, offers incentives to certain service businesses, including investment and hedge fund managers, to relocate to Puerto Rico and export their services. It does so by taxing their corporate profits at a flat 4%, while making the dividends paid from profits on exported services 100% tax exempt to individual recipients."

 

2) "Act 22, the Individual Investors Act, was designed to primarily attract high net worth investors to Puerto Rico by providing complete tax exceptions on dividends, interest and capital gains, so long as the individual is present for at least 183 days a year (half the year) in Puerto Rico."

 

To qualify for Act 20 and 1020 incentives, a company has to employ only three people. That sounds like a lot of infrastructure and jobs are going to be created in Puerto Rico (pardon my sarcasm). Don't be fooled by these millionaires, they could honestly care less about the Puerto Rican economy. Tax Havens are not always the route to follow. There's been documentaries and articles written on how big multinational companies have utilized tax haven countries such as Switzerland, Grand Cayman, between others, and promised them infrastructure and more jobs for the economy- but their headquarters (located in the tax haven) is one office with only one person. The rest of the work is done in it's true headquarters. So where's the capital and most of these multinational's gains going to? And how can the government even account for revenue in a situation like this?

Here's another point I'd like to bring up- mentioned in the Forbes article: "due to Puerto Rico's unique status Americans don't have to renounce their citizenship or pay an exit tax of 23.8% on unrealized capital gains when they move to Puerto Rico". This sounds wonderful for them, but for Puerto Rico it seems as if it requires less commitment from these investors; in other words, easier to come and go from Puerto Rico as they wish- specially when things go bad. Puerto Rico needs money, but more than money we need accountability from all the participants of our economy. Instead of creating new tax systems, we should look into restructuring the current loopholes we have, as mentioned by Puerto Rican Congressman Pedro Pierluisi. Puerto Rico can continue to implement taxes on our citizens, but if we don't have a transparent operational system to account for the revenues obtained from these tax initiatives we will continue in an economic slump with continued government mismanagement. Government continues to look for revenue, not acknowledging that if they fix their fiscal budget by restructuring government programs, agencies, municipalities, between many others they will gain revenue and accountability. The source of the problem and what should be our focus is the idea of restructuring the government, its laws and its complex systems- creating a resilient/transparent economy.

Sources:
http://www.forbes.com/sites/janetnovack/2015/01/27/puerto-rico-expands-tax-haven-deal-for-americans-to-its-own-emigrants/
http://www.huffingtonpost.com/2013/06/03/apple-tax-havens_n_3378935.html
http://www.caribbeanbusiness.pr/news/prouty-the-real-story-of-pr-is-positive-96174.html
http://www.indicepr.com/noticias/2015/01/29/news/35808/temen-impacto-del-iva/
http://www.noticel.com/noticia/171731/saca-pecho-zaragoza-sobre-informe-kpmg-tras-silencio-del-tribunal.html#.VM_mk8aBtQ0.mailto
http://elvocero.com/pierluisi-reitera-oposicion-al-iva-2/
http://www.economist.com/news/leaders/21571873-how-stop-companies-and-people-dodging-tax-delaware-well-grand-cayman-missing-20
http://www.globalissues.org/print/article/54
http://www.taxjustice.net/
http://www.irs.gov/Individuals/International-Taxpayers/Expatriation-Tax

The Imperfectly perfect Oxymoron

That gap between being sane and insane is actually quite smaller than we think. How can an oxymoron have two opposites sit so close to one another yet to be defined as something so distant? Is the word oxymoron an oxymoron itself? Are they really oxymorons? Love and Hate are complete opposites, yet how many of us feel we constantly live in love/hate relationships. Without hate there is no love, and without love there is no hate. Life is an oxymoron....there is no perfection, opposites attract and as they attract, they learn to coexist...sitting one beside the other as they do in an oxymoron. If you are not currently going through an oxymoron in your life, you are not living.

Think of life as a puzzle...you start off as one piece and as you start meeting other pieces, you realize that only those that carry the exact opposite borders to yours are the ones that fit (try to visualize it). We seek all the wrong things, we live in search of all the exact same pieces, not realizing that it's the different pieces and the oxymorons in our life that have the most perfectly imperfect fit.

Are you happily happy? happily unhappy?  or unhappily happy? Which one sounds like everyone's reality? (at least everyone who is a human being). Yes,  we live happily unhappy and unhappily happy, there is NO such thing as happily happy unless you live in a perfect world- which if so please pass along the recipe for it. Oxymorons can coexist in most circumstances- as they say opposites do attract. Well it's all about Chemistry! aaaand if you were paying attention to your Chemistry class you will remember that "it is the study of the compositions, structures, properties and changes of matter which is produced by the transformations and interactions between atoms and molecules"...if all atoms and molecules were the same there wouldn't be any chemistry to study. The atoms don't have to be oxymorons...but they sometimes are: like H2O which is the compound of hydrogen in its liquid state (H2) and oxygen which is a gas (two opposites chemically create water a liquid which in certain stages could be gas/liquid or solid.... AH Chemistry!

Oxymorons are a part of our life and here to stay. So, if you feel you are not sane, then my friend you are insanely sane or sanely insane. Society has some rigid standards of how we should measure our state of being, but I think we need to start being realistic because there is no one in this world who is completely SANE (and if you think you are...please do share your recipe). We need to start embracing our oxymorons and we need to start embracing the imperfections of life. There is no medication that is going to cure insanity or depression, the only one who is capable of doing that is one self and the first step to achieving that is to accept your oxymorons and embrace life's imperfections.

Time's mindtricks

What happens when time is not your light of hope
but the burden of your sorrow?

How do you look forward to time
when all you want is for it to stop?

How do you manage to fight the clock
if the ticks makes you feel helpless?

How is it normal to just forget
those memories that time has nourished?

What happens when that day comes?
Is time giving up on us? cause I will never give up on you.

Caged out of our own nature

This morning I stumbled upon an article on BBC Earth titled "Back to Nature" by George Monbiot, and as I started skimming through it, I thought to myself “it is way too long and of no interest to me” but decided to keep reading…and there it was...that phrase:  "Now almost every aspect of our lives is lived within grids, either concrete or abstract"…now George had caught my attention. When you look at how our society has been built, it has been built based on structure and rigidness- which is completely against human nature.

And George continues to amaze me with phrases like “Thus we box ourselves out of the natural world”. We truly do. Think of how we have structured every part of our current way of living, even intervening nature's peace with farming and other domesticated structured practices. Nature inspires freedom, inspires creativity- why wouldn’t we want to inspire that to our current world? Don’t you think that most of our current problems are caused by the way we have organized ourselves and tried to compartmentalize each and every one of our surroundings?  The fictitious interconnectedness we have created among a compartmentalized network is as ironic as the way we interact with nature. We love animals, yet we drink their milk, eat their meat and etc. We love nature, yet we continue to build concrete and seek for that urban progress, that is just a fallacy. Capitalism has led us to forget of our beginnings in this world, which started among rural areas. Before we all looked into being self-efficient by producing our own goods, and working the hours necessary to sustain a comfortable living. Fast forward to now… we are not self-efficient- we depend on capitalism to feed us, train us and lead the way. Material items have gained more value than our own leisure and sanity.

Is this the world we want to continue to live in? Better yet, is this the world we want to leave for future generations? Should we start to look at things from a different perspective? As I  grow professionally, I continue to notice how our values have been misconstrued and mislead by that wonderful free-market which continues to imprison our happiness. It’s ok, if you disagree with my statements… but before you go back to your imprisoned self and to your daily routine please read and ponder on the following paragraph from the article Back to Nature:

“We become resistant to the experiences that nature has to offer; its spontaneity and serendipity, its unscripted delights, its capacity to shake us out of the frustrations and humiliations, which are an inevitable product of the controlled and ordered world we have sought to create. We bully the living world into the grids we impose on ourselves. Even the areas we claim to have set aside for nature are often subjected to rigid management plans, in which the type and the height of the vegetation is precisely ordained and, through grazing or cutting or burning, nature is kept in a state of arrested development to favour an arbitrary assemblage of life over other possible outcomes. Nothing is allowed to change, to enter or leave. We preserve these places as if they were jars of pickles”

Let's get creative and make some pickleback shots!

(All views are my own)

Francoise Mugnano

Beginners chess: Puerto Rican Government vs the Puerto Rican Economic Crisis

The current Government of Puerto Rico has done it yet again...

Since yesterday, the government ceased services for public transportation (train and buses)- since they have no budget. Of course, cutting all public transportation makes complete sense....it's such a luxury good. If you look at the microeconomic definition of the different goods, you have the following:

• Inferior good - Increase in income causes a fall in demand
• Normal good - Increase in income causes an increase in demand
• Luxury good - Increase in income causes an even bigger increase in demand
• Public goods - Non rival and non exclusive goods
• Private goods - Rival and exclusivity
• Common resources - Goods that are rival in consumption but not excludable

According to these definitions, public transportation totally fits in luxury good (sarcasm speaks). I mean it's not rocket science that public transportation is a public good. With the ceasing of these exclusive public goods around 70 thousand passengers that utilize the public transit will be affected. Along with 882 employees of the AMA (bus transit) and 1,600 of the ACT (train transit). To this we should take into account around 3,000 patients and employees that use public transportation to get to one of the top Medical Centers in Puerto Rico (Centro Medico), and not to forget of the inmense amount of students from the University of Puerto Rico Rio Piedras Campus that use the train to get to their respective classes. So, not only are you affecting the transportation sector, but this action can have a domino effect on the education sector, the health sector and of course the labor force; as well, are you leaving without pay around 2,000 public employees and around 70 thousand people with no means or ways to get to their workplaces.

 

But wait! There's more...isn't petroleum prices in PR going up? buuut in the U.S. it is being reported as the lowest petroleum prices since 2010; gas prices are no more than $3 per gallon in the United States, while in Puerto Rico they are 0.87 cents per litre, which is around $4 per gallon. Also, take into account the impact this will have in traffic..currently you have an average of around 2-4 cars per household in Puerto Rico, of a total population of 3.62 million; where the whole island only has 10 expressways.. plus some 66 primary highways (and other secondary/tertiary roads).

 

There's also been some oddly interesting behavior with our current administration towards petroleum. Ever since the Governor took office, he started working on looking for diverse petroleum companies to invest in Puerto Rico (from Latin America, Spain and others). In December 2013, he had already signed contract with PUMA Energy for them to set their regional headquarters in Puerto Rico. This is just a mere assumption (please do not quote me on this), but the fact that this deal happened so quickly after he took office in November 2013, and how now gas prices are going up might lead me to think the following:
Chronological order:

1. Government gets petroleum company to invest in Puerto Rico
2. Gas prices rise
3. Government ceases public transportation in debate of an increase in petroelum tax to 68%

Hence, did the Government of Puerto Rico promise to subsidze PUMA Energy's investment in Puerto Rico with the people's money? Did they sign an agreement on behalf of the citizens? Why are you all of the sudden looking to increase petroleum tax, cease public transportation and have gas prices rise simultaneously? Sure, makes sense...obligate people to use cars by ceasing public transit and raise petroleum prices/taxes to get the revenue you need to account for some sort of a subsidy. All of which, have an IMMEDIATE effect on your citizens.

 

The Government of Puerto Rico is playing a chess match against the Puerto Rican economic crisis, and it's using its pawns to try and win. For those avid chess players, you know that pawns can't really get you too far, you are going to need to move the bishops, knights, queen and king in order to win the match. The Government of Puerto Rico can't keep trying to use its pawns (citizens) to win over this economic crisis- they need to start moving other pieces or looking into other sources of possible revenue besides their pawns.

 

Sources: http://www.metro.pr/locales/tren-urbano-y-ama-cesaran-operaciones/pGXnkx!Zqbb890pBRDSM/http://www.thevwindependent.com/news/2014/11/gas-prices-at-lowest-level-since-2010/http://www.elnuevodia.com/ciudadanosreaccionanaparalizaciondeltrenurbanoylaama-1898724.htmlhttp://www.elnuevodia.com/puertoricoseralasederegionaldepumaenergy-1669219.html