What will be the impact on the local economy of the $475 million that will be distributed as a bonus to public servants, provided for in the Government’s Debt Adjustment Plan (PAD)?
Experts consulted by Primera Hora agree that the final impact will depend on the consumption behavior of the 107,722 public employees who will receive the stimulus on December 1. It is important to clarify that this money differs from the bonus -which totaled $128.3 million- that was delivered to government employees last week.
Governor Pedro Pierluisi explained that 98,270 government employees from various agencies will receive a bonus of $2,954, while 9,452 employees represented by the United Service Employees Union (SPU) will receive $11,360 for supporting the amendment plan. These payments provided for in the PAD are the result of the government having exceeded collection expectations, so it can pay extra money to its creditors.
Although within the government, the president of the Economic Development Bank of Puerto Rico (BDE), Luis Alemani González, has publicly stated that the early disbursement of the Christmas bonus to central government employees, public corporations, municipalities, retirees and eligible retirees The beneficiaries they can be used “in their entirety” or in large part for the consumption of goods and services, and the truth is that it is still not clear how the consumer will act as of this week when “Black Friday” or “advance sales” occur. ”, as well as the days following and close to the Christmas celebrations.
Economist José Caraballo Cueto explained that the consensus is that if the recipients use the reward on imported products or purchases from multinational corporations, almost all online, the impact on the local economy will be minimal since the money leaves Puerto Rico almost every immediate. Ricoh, except for the collections made through the IVU (sales and use tax).
“But if those 100,000 employees spend the money, say, on remodeling their homes or on local products or stores, the money will continue to circulate in the Puerto Rican economy and generate what we call the multiplier effect. But to see what impact that $475 million will have, we’ll have to look at consumer behavior.
He added that those who use the reward to improve their situation, such as debt reduction, will also have a positive impact.
And he stressed that “saving part of the money is also positive for the local economy”, pointing out that unlike what happened with the “936 generation” when there was an economic boom on the island and people spent what they earned now. They see different behavior.
“In the last decade, we have seen that people save a little and that is beneficial. Whether they save or pay off debt, it’s positive. What needs to be evaluated is who really receives this bonus, especially the one close to $12,000, because there are people in the government who earn very poorly”. And they need this money to cover or update current expenses that have increased dramatically with inflation. While there are others who are earning a good alimony and maybe they can save them.
He also highlighted that the impact of the bonds will be greater in the cities of the metropolitan area, where most of the government agencies that will receive the greatest amount of incentives are concentrated. “It is unlikely, for example, that the merchants of Cabo Rojo, Rincón and Yabucoa will receive or feel the effect of this bonus,” he said, noting that he has recommended for the last seven years
Low expectations among small and medium businesses.
For her part, the president of the United Retail Center (CUD), Lourdes Aponte, stressed that although the “early morning sales” and Christmas represent a kind of wealth for merchants, expectations this year, at least, are to compensate for the losses . . or investments made due to emergencies caused by hurricanes, epidemics and inflationary effects.
“It’s not that we’re not excited, but we’re waiting to see if we can even out a little bit of all the economic disadvantages and expenses that we’ve incurred because of past situations,” he said.
He explained that the analysis they did in CUD, taking into account consumer behavior, is that profits will remain “more or less the same” as last year.
“Our call to consumers is to support local commerce. Small and medium-sized merchants have Orange Wednesday, with offers that will run from this week until December. Remember, the pesos that you invest in small and medium-sized businesses is the income that stays in Puerto Rico. Also, we are the largest employer.” On the island we are the engine of development and growth,” Aponte urged, recognizing that this year the consumer is more careful when buying, due to the high prices of products, food, and public services.
For his part, Evan Báez, press spokesman for the multinationals Sams and Wal-Mart, highlighted the consumption patterns of customers as “positive”.
In fact, expect year-end sales to be 1% higher than last year.
Regarding Weekin’s “Black Friday” deals, Baez said that unlike the dynamic that occurred in the pandemic, when specialty merchandise could be segregated online, this year the shopping experience will once again be a physical experience in the stores.
Don’t expect crowds or chaos last year though, as the shows started in the last few days and will vary over the weekend.
“I think electronics will continue to be king. I cannot say how the consumer will behave, but I am sure that electronics will attract attention, ”he predicted.
“Frankly, between the Christmas bonus that the government delivered last week and the PAD bonus that will be delivered on December 1, we expect a good sales season because there will be cash flow,” Bayes decreed.