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Will the juicy bonuses that government employees will receive help the local economy?

What will be the impact on the local economy of the $475 million that will be distributed as a bonus to public servants, as contemplated 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 government employees who will receive the incentive on December 1. It is important to clarify that this money is different from the Christmas bonus -which totaled $128.3 million- that was granted to government employees last week.

Governor Pedro Pierluisi explained that 98,270 public servants from different agencies will receive a bonus of $2,954, while 9,452 employees represented by the Union of United Public Servants (SPU) will receive $11,360 because they supported the Adjustment Plan. This payment stipulated in the PAD is a consequence of the fact that the government exceeded the collection expectations, so it can pay its creditors additional money.

Although within the government, the president of the Economic Development Bank for Puerto Rico (BDE), Luis Alemañy González, has publicly stated that the early disbursement of the Christmas bonus to central government employees, public corporations, municipalities, pensioners, and eligible retired beneficiaries could be used “entirely” or in large part for the consumption of goods and services, the truth is that it remains to be seen how the consumer will behave as of this week when “Black Friday” or “Early Bird Sale” takes place, as well as the consequent days and close to the Christmas festivities.

Those who use the bonus to improve their financial situation, say to lower their debts, would also have a positive effect.
Those who use the bonus to improve their financial situation, say to lower their debts, would also have a positive effect. (Shutterstock)

The economist José Caraballo Cueto explained that the consensus is that if the recipients of the bonus use it on imported products or on purchases from multinationals -almost all online- the impact on the local economy will be minimal since the money leaves Puerto almost immediately. Rico, except for the collections that are made through the IVU (Sales and Use Tax).

“But if those 100,000 employees spend the money, for example, to remodel their homes or in local products or stores, then the money continues to circulate in the Puerto Rican economy and generates what we call a multiplier effect. But to know the impact that those $475 million will have, we will have to see consumer behavior, ”he pointed out.

He added that those who use the bonus to improve their situation, say to lower debts, would also have a positive effect.

“That they save part of the money is also positive for the local economy,” he stressed, mentioning that contrary to what was experienced with the “936 generation” when there was an economic boom on the island and people spent what they earned, now they are see different behavior.

“In the last decade we see that people are saving a little and that is favorable. Whether they save or pay off debt, it’s positive. What needs to be evaluated is who will really receive that bonus, especially the one that is almost $12,000, because in the government there are people who really earn very poorly and need that money to cover or update current expenses that have increased drastically with inflation. , while there are others who charge well and perhaps can save them,” he said.

He also emphasized that the impact of the bonds will be greater in the towns of the metropolitan area since it is where most of the government entities that will receive the largest amount of the incentive are concentrated. “It is unlikely that, for example, the merchants of Cabo Rojo, Rincón, Yabucoa will receive or feel the impact of this bonus,” he said, emphasizing that he has recommended for the past seven years

Low expectations among small and medium merchants.

For her part, the president of the United Retail Center (CUD), Lourdes Aponte, stressed that although the “Early Bird Sales” and Christmas are a kind of bonanza for merchants, this year the expectations are, at least, to balance the losses or investments in which they have incurred due to emergencies caused by hurricanes, pandemics and inflationary effects.

“It is not that we are unmotivated, but we are waiting to see if we can balance a little all the economic faults and expenses incurred due to past situations,” he said.

He explained that the analysis they have done in the CUD, taking into account the behavior of consumers, 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 that that peso that you invest in the small and medium business is income that stays in Puerto Rico. In addition, we are the largest employer on the island, we are the engine of what is development and growth,” Aponte urged, recognizing that this year the consumer is more cautious when making purchases, due to the rise in product prices, food and interest

On the other hand, the press spokesman for the multinational companies Sam’s and Walmart, Iván Báez, highlighted the consumption patterns of customers as “positive”.

In fact, he predicted that at the end of the year sales could be 1% higher than last year.

In terms of offers for the “Black Friday” wikén, Báez said that unlike the dynamics that occurred in the pandemic – when special merchandise could be separated online – this year the shopping experience will return to being one physically in the stores.

However, it does not predict crowds or the chaos of yesteryear, since the offers began in the past few days and will vary during the weekend.

“I think electronics will continue to be king. I cannot say how the consumer will behave, but I am almost sure that the electronic ones will attract attention, ”he projected.

“Honestly, between the Christmas bonus that was granted last week by the government and the PAD bonus that will be given on December 1, we are projecting a good sales season because there will be ‘cash flow,'” Báez decreed.

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