This is taken from the Foreword in the full report.

Our Commitment to Puerto Rico
At the Federal Reserve Bank of New York, we are proud that Puerto Rico is part of the Second District, which we represent in the Federal Reserve System.  We have a deep commitment to the people of Puerto Rico and to the future growth and prosperity of the Commonwealth. Our commitment is reflected in the ongoing work of our Outreach and Education teams with our many partners on the Island, and in the research conducted by our economists, who monitor local economic conditions and analyze issues that affect the Island’s economy.

In support of this work, senior New York Fed officials and I visit Puerto Rico regularly and meet with a wide range of local stakeholders, including business people, community representatives, workers, elected officials, and regional leaders.  On my visit to the Island in 2011 I witnessed some bright spots in the economy but also saw that growth and expansion were not happening broadly enough.  Conditions for many families, businesses, and communities were difficult. At that time, I was asked by a group of business and community leaders to look at what might be holding back economic growth on the Island. In 2012, a team of economists from our Research group and other experts from our Outreach and International teams produced a report that analyzed the challenges facing the Puerto Rico economy and put forward a series of recommendations on how to capitalize on the Island’s strengths to restore competitiveness and growth.

Since that report was issued, positive steps toward reform have been made in some areas. More recently, however, serious fiscal challenges have surfaced that are closely interrelated with the Island’s ongoing weak economic performance.  Persistent deficits in the Commonwealth’s fiscal accounts as well as mounting deficits in the operation of several public-sector corporations have substantially raised the Island’s overall level of public debt and led to considerable concern about the sustainability of the Island’s fiscal position. 

Update of the Report on Competitiveness
In light of the fiscal pressures that have been developing in Puerto Rico, I commissioned a team made up of staff from our Research, Outreach, International, and Markets groups to update the New York Fed’s earlier report, with a special focus on improving Puerto Rico’s fiscal outcomes.  On a recent visit to the Island, members of the team and I met with a range of stakeholders to learn how these fiscal challenges are playing out across the economy and to gain insights that could inform our analysis. This report is the product of the team’s work.  The report was written in the spirit of assisting Puerto Rico in its efforts to address its fiscal challenges, and outlines a number of steps that the Island should consider taking over the next several years in order to restore its fiscal health.  I have read it closely and commend it to your attention.

The report notes that the steps outlined will require changes to a number of past policies and practices as well as some degree of sacrifice by all sectors of the Island’s population.  While these adjustments can be difficult, the experience of New York City suggests that it is possible to tackle fiscal pressures head on and come out stronger.  Puerto Rico clearly has the assets and attributes to do so.

Ongoing Engagement
The steps recommended in the report should be viewed as potential ways to improve Puerto Rico’s public finances over time.  I hope that they prompt a constructive and bipartisan debate that will promote good public policy and a better future for the people of Puerto Rico.

In the months and years ahead, the New York Fed will continue to engage with stakeholders across the Island to discuss the topics raised in this report and others.  We want to continue to hear firsthand the economic and financial issues that are important for businesses and families, and we will continue to do all that we can to support local communities and decision makers in advancing good economic and fiscal outcomes.

William C. Dudley
President of the Federal Reserve Bank of New York
July 31, 2014