Presentation to the FOMB

Dear Members of the Fiscal Oversight and Management Board for Puerto Rico,

Thank you and the rest of the Fiscal Oversight and Management Board for Puerto Rico (“FOMBPR”) for the opportunity to present our views regarding Puerto Rico’s economic development. Since its establishment, the Puerto Rico Builders Association (ACPR) has represented a wide array of professionals in the real estate development and construction industries. From developers, contractors, builders, remodelers, architects, engineers, lawyers, bankers and realtors, we work towards a business and investment healthy ecosystem, driven by the private sector, to achieve safe and sustainable communities in Puerto Rico.

Our vision for Puerto Rico must be clear: to facilitate a business environment so that it becomes a top 10 in the competitiveness & ease of doing business indexes. Without a true and sustainable economic development, our society will not come out of a decade’s long depression. This has to be of utmost importance.

Adopting actions and reforms that towards that goal is the best way to secure getting our government out of bankruptcy and ending PROMESA’s application in our island. Having a strong, vibrant and sustainable economy is also key to environmental protections and mitigation due to climate change. In general, stronger economies have greater environmental protections in place also.

September is a month to meditate on lessons learned, the reconstruction after a natural disaster and resilience. In recent days we commemorated 30 years since that hurricane Hugo, 21 years since hurricane Georges and two years since hurricane María, natural phenomena that rattled the island with an incredible precision. The impact in these past 30 years have been very similar, as well our inability of having the necessary will to implement recommendations and the lessons learned. However, this time, the delay in the beginning of the reconstruction of our infrastructure have represented our biggest challenge. In terms of reconstruction, the delay in the process of accessing federal funds is a challenge we need to overcome. It is important to ensure compliance with the requirements of the Robert T. Stafford Federal Act, by accepting the submission of project cost estimates prepared by licensed professional engineers for government agencies and municipalities.

FEMA, on its part, would validate that these estimates comply with the guidelines and that the costs are reasonable in addition to being eligible. Puerto Rico is the only jurisdiction in FOMBPR September 26, 2019 Page 2 of 3 2 which FEMA does not take these estimates into consideration as required under Section 428 of the Stafford Act. Accepting them will allow the process to be a more collaborative and expedited as it is the spirit of the program. All the above will allow us to move to new hiring models, which in turn, will allow projects to be more agile.

The reconstruction of our infrastructure is so necessary and of such scale that it is necessary to implement creative solutions that result in the achievement of the established goals while optimizing processes and costs.

Let us dare to use our will and a different mentality from what has caused us our historical problems by implementing the lessons learned from the past 30 years. Prompt payment and contract compliance is another challenge expressed in the ease of doing business study. We need to make sure the local government does its part in a compliant, transparent, prompt and agile payment process to its contractors.

Besides implementing strategies that will ease the way Puerto Rico access reconstruction funds and conduct businesses, it is important for our government system to address corruption charges and the lack of transparency. Although construction bidding processes are highly regulated, it is important to establish a platform in which the transparency of the process is ensured. Lobbyist intervention should be banned at the time of seeking tender opportunities.

Preventing corruption is as important as to fight it, this is why companies (and the government) that are involved in the reconstruction process should have managerial systems implemented in way to prevent bribery and extortion situations. We suggest the implementation of ISO 37001 for its proven success in several countries, although there are alternatives that can be evaluated. The important thing is that, in the same way there are plans establish to guarantee quality control and security among other things, it is required to have a system to prevent these situations.

In this context, it is worth mentioning that ten years ago, Puerto Rico was placed in the 144th position in the World’s Bank ease of doing business index in terms of the building permit obtention. At that time, there was an environment of great uncertainty in the process of obtaining permits. In response to this problem, which created an environment of uncertainty in the investment, Puerto Rico passed the Puerto Rico Permit Process Reform Law (Law 161-2009). This law specifies that permits already granted are considered correct unless it is evidenced that they were issued with false or fraudulent information.

In addition, certain professionals from the private sector were empowered to issue some specific permits that do not require state discretion. Among other reasons, and although the World Bank acknowledges that many advances have been made on this matter, Puerto Rico still places itself in the 141 position in terms of handling the construction permits application. It remains to be seen how the adoption of the new Joint Regulation to implement Law 17 of 2019 will alter this qualification.

Also, we are worried about the finality of decisions as some groups now have looked to the legislative branch to oppose projects contrary to following what Act 161 requires. We are quite concerned about the cost of energy. The PRBA has fully supported private sector calls to implement measures that minimize the cost of energy. We feel the target cost should be around 17 cents per KW*hr. It is imperative that we substitute a public and inefficient public monopoly with an efficient market solution. We must work so that the procedures established for the permits obtention do not become an obstacle for the projects to be executed.

Under Law 19 of 2017, infrastructure reconstruction projects must be classified as strategic so that evaluations have an expedited process. Infrastructure agencies need to be agile in issuing authorizations for interconnections. These processes can take years sometimes. Also, permits under the Department of Environmental and Natural Resources need to be integrated to OGPe’s system as Act 19-2017 requires.

Processes under DNER jurisdiction also take years to complete. FOMBPR September 26, 2019 Page 3 of 3 3 Finally, we need to professionalize our workforce by having a strong workforce development and certification process. Under WIOA, significant federal resources are available for employers. This is important in order to secure manpower for economic drivers needed to achieve a sustainable environment. It is important to focus incentives on affordable workforce housing, knowledge economy, agriculture and tourism in order to grant access to our workers to better living possibilities.

For this, HUD needs to review its income limits so that it makes sense to much of our population to transition into the formal economy. It is important to achieve that these limits are above the National Poverty Line as it is in the States. Thank you very much Mr Chairman for the opportunity to present. A copy of our letter sent last December 4th 2017 on the time of the other economic development hearing the Board held in New York City is enclosed as it is still current. We are more than available to answer any questions or concerns you may have.

Respectfully submitted,

Emilio Colón Zavala, PE, Chairman – PRBA

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