Thursday's announcement that an aviation repair and maintenance facility will bring 400 jobs to Puerto Rico was a bright contrast to years of bleak economic news.
But there is hope that it represents a larger shift of fortunes.
After seven years in which Puerto Rico's economy generally declined, several economists say there are signs that it is stabilizing.
That would be an important development.
Rating agency and municipal bond industry analysts agree that Puerto Rico's economy cannot decline indefinitely without ultimately forcing the government to default on its debt.
From August 2011 to November 2012 the island economy had some growth but after that experienced a new slide until August 2013. Whether the current stabilization is a prelude to a new period of expansion or just a pause in the contraction remains to be seen.
There was a 1.2% increase in the commonwealth's economic activity index to February 2014 (the most recent available date) from August 2013.
Advantage Business Consulting president Vicente Feliciano, Estudios Técnicos chairman Joaquín Villamil, and other economists agreed that Puerto Rico's economy seemed to have stabilized in the last six months. Advantage Business Consulting and Estudios Técnicos are two of the largest economic consulting firms in Puerto Rico.
Feliciano said the parts of the economy most connected to the world economy were showing signs of growth. Among these, he mentioned manufacturing, tourism and aeronautics.
"They are the spearhead of a potential recovery" that should spread to other more domestically oriented sectors, he said.
Economists who focus on Puerto Rico noted that private sector employment is up a bit since the middle of 2013. They also noted there recently has been a decline in initial jobless claims and that these can be a leading economic indicator.
A period of stabilization is needed to set the stage for general economic growth, said Antonio Medina, executive director of the Puerto Rico Industrial Development Company, which is part of the government.
The government of Puerto Rico Gov. Alejandro García Padilla, which came to power in January 2013, has made a range of efforts to promote economic development and "the results are beginning to happen very fast," according to Alberto Bac-, Puerto Rico's secretary of the Department of Economic Development.
Puerto Rico got some good economic news Thursday when the German firm Lufthansa Technik announced that it would create a new aviation maintenance, repair and overhaul facility at the airport in Aguadilla, in northwest Puerto Rico. Servicing short-haul and medium-haul aircraft, the facility will create about 400 direct jobs, many of them skilled, government sources said.
Asked why the firm chose Puerto Rico, Lufthansa Technik director of corporate communications Bernd Habbel said, "Puerto Rico with its skilled people and good geographic position is a very good place to serve airline customers all over the Americas."
JetBlue has agreed to have some of its heavy maintenance done at the new facility. While it does its routine maintenance itself, JetBlue finds it cheaper to have its heavy maintenance done by outside firms, a JetBlue spokeswoman said.
The announcement of Lufthansa's choice of Puerto Rico is the sort of outside investment the government is trying to lure. It is working to attract a variety of different sorts of investment. It is trying to rejuvenate its manufacturing sector while shifting the overall focus to services, government officials told The Bond Buyer.
For manufacturing, Medina said he was focused on promoting "traditional" sectors like rum and textiles; "existing" sectors like life sciences, medical devices, pharmaceuticals, agricultural biotechnology; and "emerging" sectors like aerospace and knowledge services.
Medina noted that a rum producer recently announced that it would increase rum production at its Puerto Rico distillery by 8 million gallons a year. This will increase tax revenues for the Puerto Rico Treasury and creates new jobs, he said.
In the "existing" area, contact lens maker CooperVision in 2013 announced plans to invest $250 million in manufacturing, Medina said.
In the "emerging" area, in January India-based Infosys announced that it was creating an information technology outsourcing center in Puerto Rico expected to employ 300 people.
While manufacturing is strengthening, Puerto Rico's government sees the island's future economy more in services than in manufacturing, Bac- said. The services sector is the largest sector in the economy, employing more than three times the number of people working in manufacturing.
Over the last few years Puerto Rico's government has passed four laws to attract service companies to the island, Bac- said.
It passed an international banking center law that places low taxes on international banks located in Puerto Rico. It adopted an international insurance center law to also offer lower taxes on this industry. It passed Act 20 specifying that companies moving service operations to Puerto Rico would be taxed at a 4% rate. Finally, it introduced Act 22, which exempts investors who move to the island from having to pay taxes on certain forms of investment income.
These laws are attracting certified public accountants, hedge funds, law firms and architectural firms, Bac- said.
Puerto Rico is aggressively marketing itself to companies in Latin America and Spain as a place to set up shops that can be bridges to the rest of the U.S., Bac- said. The island's workforce is bilingual. Offices can be set up with half the costs found in the continental United States and Puerto Rico has lower taxes, Bac- said.
Medina's office is hosting an investment summit on April 23rd and 24th. In the past these summits were arranged by the Government Development Bank of Puerto Rico and geared to those who were interested in buying the government's bonds. This year it will be focused primarily on convincing hedge funds and wealthy investors to move to Puerto Rico.
While Bac- and Medina were optimistic about the effects of the government's program, analysts were more mixed.
The government is doing a good job promoting Puerto Rico for outside investors but needs to do a better job improving the reality, Feliciano said. He particularly said the government must continue its efforts to bring the island's high electrical costs down. A hotel room in San Juan is more expensive than in Miami, partly because of electrical rates, he said.
Municipal Market Advisors managing director Robert Donahue was more pessimistic. The commonwealth's government came up with an economic development plan in October 2013.
However, "Puerto Rico has a long history of writing up exciting and detailed economic development plans but these seem to change with each political transition," he said. "The political leaders have not have not had the decisiveness, wherewithal or luck to convert these plans into results.
"The pressure on the island is intense and it will probably need to cut significant government spending and raise more taxes to balance a large structural deficit in the anticipated fiscal year 2015 budget and bring down its debt levels at the same time," Donahue continued.
Medina's office has "initiated a number of programs in [the direction of economic development] that have been well received and that will be reflected in aggregate economic indicators in the next fiscal year," Villamil said. "However, there still needs to be a more focused effort in terms of designing long term development initiatives."
Villamil said that the private sector and nongovernmental organizations need to join in planning for the island's long-term economic future.
