william c dudley : the competitiveness of puerto rico ’ s economy – reducing the cost of doing business and improving labor market opportunities remarks by mr william c dudley, president and chief executive officer of the federal reserve bank of new york and chairman of the committee on the global financial system ( cgfs ), before the puerto rico chamber of commerce annual convention, fajardo, puerto rico, 29 june 2012. * * * good morning and greetings from new york city. i sincerely thank the chamber for giving me the opportunity to address your annual meeting. unfortunately i am unable to be in puerto rico in person, because i have a broken leg and am under doctor ’ s orders not to fly. the good news is that i am on the mend and that i have this opportunity to speak to you via video. we at the new york fed are pleased that puerto rico is part of the second federal reserve district that we represent in the federal reserve system. we are committed to the people of the island and to its growth and prosperity. our commitment is reflected in our ongoing work with our many partners on the island. last spring, with the puerto rico chamber of commerce and other local partners, we co - sponsored a forum aimed at helping small businesses in puerto rico learn about export opportunities. we have been involved with education on the island for two decades, including by helping to set up the alianza. today we help promote financial literacy through a video competition in partnership with the puerto rican bankers association. our banking supervisors work to strengthen the financial system so it can readily supply credit to families and businesses, while our research economists monitor and analyze local economic conditions. this analysis – along with similar analyses from other regions across our nation – feeds into the decisions the federal reserve makes on monetary policy. in support of this work, i and other senior officials have traveled to puerto rico a number of times in recent years and met with a wide range of stakeholders, including university officials, students, business leaders, entrepreneurs, bankers and government officials. what we learn during these engagements helps to shape our understanding of the puerto rican economy and our efforts to support it. i have seen numerous examples of expansion and growth. this gives me confidence that puerto rico has the capability to be an economic success story. nevertheless, these local engagements have also confirmed to me that conditions are not what we want them to be – in particular, growth and expansion are not happening broadly enough. the task of putting the island on a path of robust,

sustainable and inclusive growth remains a work in progress. during my visit here in march 2011, a number of business and community leaders expressed their concern that the economy had loss competitiveness. these local leaders asked if we would look at what might be holding back growth on the island. much high quality work has already been done on this subject by local experts. however, they thought it might be helpful for the new york fed, as an independent third party, to evaluate what might be done to promote competitiveness and productivity on the island. i readily agreed that we would do so. i commissioned a team of economists from our research group and other experts from our international and outreach teams, to analyze the challenges facing puerto rico. i asked them to put forward some recommendations on how to capitalize on the island ’ s strengths and restore growth. the report released today on the competitiveness of puerto rico ’ s economy, is the product of their work and extensive consultation with local, national and international experts. i have bis central bankers ’ speeches read it closely and commend it to your attention. the report is intended as nonpartisan technical analysis and should be viewed in that vein. even those who do not agree with every aspect of the analysis, i hope, will acknowledge that this is a serious, good - faith effort to examine, in detail, a number of important issues that deserve attention. of course, many of these issues can only be considered as part of the political process. it is for the people of puerto rico to judge the appropriate trade - offs involved – not me, certainly, or my staff at the new york fed. in a few moments jamie mcandrews, executive vice president and director of research, will summarize the report and its recommendations. before he does so, i would like to share with you my assessment of economic conditions on the mainland and in puerto rico. as always, what i have to say reflects my own views and not necessarily those of the federal open market committee ( fomc ) or the federal reserve system. national economic conditions the mainland u. s. economy has continued to slowly recover from the after - effects of the housing boom and bust and the financial crisis. but the recovery has been disappointing. despite a monetary policy that has been extraordinarily accommodative by historical standards, the economy has grown only about 2 percent over the past year. after a brighter start to the year, economic momentum has slowed in the last few months