Our Commitment to Puerto Rico
At the Federal Reserve Bank of New York (popularly known as the New York Fed), we are proud that Puerto Rico is part of the Second District, which we represent in the Federal Reserve System. We are deeply committed to the people of the Island and to its growth and prosperity. Our commitment is reflected in the ongoing work of our Outreach and Education teams with partners on the Island and in the research by our economists, who monitor and analyze local economic conditions. This analysis—along with similar analysis from other regions across our nation—feeds into the decisions the Federal Reserve makes on monetary policy and regulation of the financial system.

In support of this work, I and other senior New York Fed officials visit Puerto Rico regularly and meet with a wide range of local stakeholders, including business people, community representatives, workers, and regional leaders. In these visits, I have witnessed some of the bright spots for the economy. I have seen examples of expansion and growth. This gives me confidence that Puerto Rico has the capability to be a true economic success story, provided that the talents of its people are supported by sound public policy and good private sector decision making.

Nevertheless, these local engagements and analysis of economic conditions also confirm that growth and expansion are not happening broadly enough. Conditions for many families, communities, and businesses remain difficult. The task of putting the Island on a path of robust, sustainable, and inclusive growth remains a work in progress. The New York Fed will do all that it can, in keeping with its responsibility to promote community development in its District, to support these efforts, and this report is part of our commitment to do so.

Report on Competitiveness
On a visit to the Island in March 2011, I was asked by a group of business and community leaders to look at what might be holding back economic growth on the Island. While recognizing the sophisticated analysis that many local thinkers and institutions have already provided on this subject, they believed it would be helpful for the New York Fed, as an independent third party, to evaluate what might be done to promote competitiveness and productivity. I agreed that we would do so. Upon my return to New York, I commissioned a team of economists from our Research group and other experts from our Outreach and International teams to analyze the challenges facing Puerto Rico and to put forward some recommendations on how to capitalize on the Island’s strengths to restore growth.

In doing so, they consulted widely with local, national, and international experts, as well as stakeholders on the Island itself. As we know all too well, real insight requires on-the-ground experience. This report is the product of their work. I have read it closely and commend it to your attention. The report represents nonpartisan technical analysis and should be viewed in that vein. Even those who do not agree with every piece of the analysis, I hope, will acknowledge that this is a serious effort to frame a number of issues that are worthy of consideration. Of course, many of these issues would need to be considered as part of the political process, and it is for the people of Puerto Rico to judge the trade-offs involved.

Ongoing Engagement
I do not view this report from my staff as the last word on these important questions. We do not presume to claim that we have the answers. Rather, I hope that it will prompt a constructive and bipartisan debate that will advance good public policy and a better future for the people of Puerto Rico.

I also hope that it will be read and considered beyond the business and government community, across the society at large. The goal we all seek is not simply business success and expansion, but broad-based prosperity, with rising standards of living and enhanced opportunities for all Puerto Ricans to pursue their ambitions and realize their dreams—here on this beautiful island.

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 the report and others. We will continue to hear first-hand the economic and financial issues that are important for businesses and families and will continue to do all that we can to support local communities and decision makers in advancing good economic outcomes.

William C. Dudley
President of the Federal Reserve Bank of New York
June 29, 2012