Tuesday, August 24, 2010

Housing Market Woes

Between 2007 and 2009, the value of Puerto Rico's residential housing market experienced an average drop of 25%. In comparison, housing values in in many parts of the U.S have also seen double-digit depreciation. Unlike many parts of the mainland U.S, the island has not seen an alarming number of foreclosures. However, the major problem is the large amount of inventory available. For the past ten years or so, the island underwent a construction boom of residential homes and condominiums. Evidently, this was made possible by cheap credit. Although mortgage rates are very low, people are not buying homes because of the economic conditions facing the island. Puerto Rico's economy has been in a recession for the past five years, and unemployment is above 16%.

In an attempt to stimulate the housing market and make it more attractive for would-be homebuyers, Gov. Luis Fortuño has proposed several ambitious plans to help rescue the housing market. Capturing the attention of most is the "Estímulo de Vivienda 2011" ("The 2011 Housing Stimulus"). Those who purchase a property between Sept. 1st, 2010 and June, 30th, 2011, would be able to take advantage of the following:
  • Zero payment of municipal property taxes (CRIM) for five years.
  • If puchasing a newly constructed home, the purchaser would also be exempt from paying most bureaucratic costs, the so-called "stamps and seals" ("sellos y comprobantes").
  • Those purchasing an existing home will be exempted from paying 50% of the stamps and seals. This could save homebuyers thousands of dollars, depending on the value of the property.
As the island's economy is inextricably tied to that of the mainland U.S, which has just seen sales of homes last month hit the lowest point in over a decade, it not surprising to see the island facing problems in the housing sector. Needless to say, the effects of the financial crisis are quite palpable in the island of Puerto Rico.

Wednesday, August 18, 2010

Living Simply

It is no secret that the U.S' economy is driven by consumer consumption, Americans love to buy. This culture of consumer frenziness also applies to Puerto Rico. Just as in many other parts of the world, a luxury car is the ultimate status symbol here. When a new product arrives in the island, like the iPad or iPhone, you'll also see lines out the door at most Best Buy stores. Just like the mainland U.S, some Puerto Ricans will spend the night outside department stores in hopes of getting hold of some great bargains on Black Friday. I read a very interesting article recently published in The New York Times titled, "But Will it Make You Happy?" It talks about the growing trend amongst Americans to downsize and cut back on spending, as the economy continues to stagnate. People are now buying less and saving more. According to the article, spending is going more towards things which would maximize their "emotional efficiency."

Material things can only bring us so much satisfaction, as the novelty of it wears off soon thereafter. I've never been one to spend a fortune on clothes, shoes or makeup. I'd much rather spend my money on traveling. Most consumers on the island, like their counterparts on the mainland, have also been more conscientious of their spending. While the personal savings rate in the U.S is estimated to be between 1%-3%, I suspect it's even lower here. Unfortunately, many people on the island live on credit cards and loans. The average household credit card debt in the U.S is an astounding $8,000. Most families on the island are in similar financial straits, if not worse. Adopting a more simplistic and minimalistic way of life is the way to go. I recommend reading "Becoming a Minimalist," an excellent blog focusing on living more with less. This is an old adage which seems to resonate with many people these days. One of the lessons from this difficult economic downturn is that it forces many of us to re-examine our lifestyles, and re-prioritize on the things which truly matter in life.

Wednesday, August 11, 2010

Failing Public Schools

The Department of Education of Puerto Rico has had three different secretaries in less than two years. From crumbling school buildings to corrupt officials, the turmoil facing the public education system on the island is nothing new. Furthermore, it is also in danger of losing federal funding since less than 50% of public school students passed the standards set by the No Child Left Behind Act (NCLB) this past school year. In order to avoid this scenario, all students must pass the Spanish and mathematics exams by 2014. The island's public education system received an estimated $727 million in federal money last year.

Should Puerto Rico lose federal funding for its public schools, those who stand to lose the most would obviously be its students, many of whom come from lower-income families. Some of the reasons why the island's Department of Education is in such dire straits can be attributed to the lack of strong leadership and vision, poor management, and friction between the teacher's union and the administration. According to the Website of Sapientis, a non-profit organization working to improve Puerto Rico's public education system, 78% of public school students are not proficient in mathematics, and about 60% are not performing at grade level in neither Spanish nor English. The interim Secretary of Education, Jesús Rivera, is currently facing senate hearings on his confirmation. Unfortunately, his prospects look quite dim. Meanwhile, for most families who can afford it, the best solution is to enroll children in a private school, usually a Catholic school.

In Puerto Rico, unlike the U.S, a private school education is not considered to be elitist, or something relegated to the very well-off. Sadly, it is deemed as a necessity, as public schools are considered by most as a complete failure. The result is a growing disparity between the rich and poor. Education is perhaps one of the best tools to fight poverty, which an estimated 45% of the island's population lives under. Moreover, in today's world, a well-educated workforce is absolutely necessary in order to stay competitive. When the public education system cannot provide a decent education for children, something which should be a universal right, society as a whole suffers in many different ways.

(Update (9/19/10)- Jesus Rivera was officially named the Secretary of the Department of Education of Puerto Rico on September 15th.

Tuesday, August 3, 2010

Destination: Cabo Rojo

Located in the Southwest corner of Puerto Rico, Cabo Rojo is truly a hidden gem in an island with thousands of miles of beaches. Unspoiled, secluded, and relatively undiscovered by tourists, this is a spot which I would re-visit in a heartbeat! It took us almost two and a half hours to get there from San Juan, via Ponce. We stayed at the Bahía Salinas Beach Resort & Spa, which I do recommend. It's actually the only hotel in its area. Although they were unable to provide us with the two tickets to the Central American and Caribbean Games, which were part of our reservations, I was very happy with the hotel. They did compensate us with two therapy sessions at their spa.

Cozy, charming and with a lovely view of Bahía Sucia, Bahía Salinas Beach Resort has about 28 rooms and villas. It is what we call on the island, a parador, a local-owned small hotel establishment. One of the things I loved most about the hotel was its location, which is in close proximity to Cabo Rojo's two most famous attractions: Playuela Beach (also known as Playa Sucia, it literally means "dirty beach" in Spanish) and the Cabo Rojo lighthouse, or Los Morrillos. In order to get to both sites, which lie on the same unpaved road, I would recommend going in a jeep or SUV. Better yet, if you like biking, go on two wheels! This is an area with many trails where people can walk, bike or run.

In fact, we did see many cyclists and I watched with envy as they easily passed us by. Nevertheless, we were able to slowly navigate giant potholes and reach the very end of the road, past the lighthouse, where Playa Sucia is located. The beach is not visible from where we parked our car, but it was just a short walking distance away. Small and crescent-shaped, I can see why many people have ranted and raved to us about it. However, I still find Flamenco Beach in Culebra to be the best in Puerto Rico. Playa Sucia seems to be more popular amongst the locals though, as we saw no tourists. Our next stop was the lighthouse, which sits atop a gorgeous cliff with a spectacular view. This trip was definitely the perfect weekend getaway.