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TOP STORY INSIDE SPECIAL FEATURE Paseo Caribe is Rise in U.S. economy, P.R. auto sales back, but this point to stronger local economy pages 10, 34 time, to sell units Historic summit kicks off energy-saving and complete revolution at government agencies page 35 construction New blockbuster pneumonia vaccine a page 2 big boost for the aged and Pfi zer page 38

Special Feature March 1,2012 Pages 21-29

For up-to-the-minute local, national, internationalernational and economic news in English, go to caribbeanbusiness.pr now on 12 CARIBBEAN BUSINESS THURSDAY, MARCH 1, 2012 Optimism returns as tourism &

looks for growth again En la edición de MARZO, Buenavida te trae el recetario Manjares. Descubre por qué se considera el destino máximo de la gastronomia caribeña. Industry champions push for more hotels, Los más reconocidos chefs se dan a la tarea de enaltecer la cocina boricua mediante las más suculentas recetas. Conoce además lo más novedoso en cruises and , but presses to enact DMO plan productos, bebidas y enseres.

BY JOHN MARINO with hotel earnings, visitor arrivals say new hotel investment of about Secretary José R. Pérez-Riera point- [email protected] and overall investment suffering. $1.5 billion will boost total hotel ed to the government’s “active” air Recently, however, the tourism sec- rooms on the island to the 15,000 and sea access program, the new ith more than a billion dol- tor has begun to shake off the bad mark and revamp the all-important cruise incentives law and the upcom- Wlars of new hotel projects in news with signs of improvement and luxury resort segment. ing concession for Luis Muñoz Marín the pipeline, and an aggressive push a growing confi dence that more posi- “We want to develop the cruise International Airport (LMMIA) as to attract more cruiseships and air tive developments lie ahead. sector, air access and our hotel room signs of that improvement. Búscalas en tu puesto de revistas favorito! routes to Puerto Rico, it’s looking “Puerto Rico’s position as the Puerto Rico government offi cials inventory,” said Puerto Rico Tour- * like government and private industry gateway to the Caribbean is being O suscríbete ahora mismo por solo $15.25 al año (12 ejemplares). fi nally mean business about grow- are trumpeting the fact that Puerto ism Co. Executive Director Mario strengthened,” he said. ing the island’s all-important tourism Rico sold 3.079 million hotel room González Lafuente. “It is an inte- While the Puerto Rico Hotel Llama hoy al: 787.728.7670 (Metro) ● 1.800.981.2185 (Isla, sin cargos) industry. nights last year, and hotel occupancy grated vision that looks to improve & Tourism Association (PRH- Like other sectors of the economy, averaged 69.6%, the highest rate on our tourism product overall.” TA) recognizes and supports the o visítanos en www.casiano.pr local tourism has taken its hits during record, according to the Government Economic Development & Com- *Impuestos incluidos Puerto Rico’s six-year depression, Development Bank (GDB). And they merce (DDEC by its Spanish initials) Continues on next page Fr o n t p a g e 13 CARIBBEAN BUSINESS Thursday, MARCH 1, 2012 Continued from previous page Poesia began making biweekly announcements in the near future, visits to San Juan as part of its East- Paige said, pointing to the passage government’s efforts to attract more ern Caribbean itineraries. of new cruise industry incentives last cruise and air connections, and spur Royal Caribbean has been evalu- summer and Puerto Rico’s hosting hotel development, its top official re- ating Ponce as a port in the Carib- of a major cruise convention later in iterated that the most important need bean, but no confirmation has been the year, which has generated a lot of the industry is a consistent mar- made regarding a set itinerary, while of excitement about the island within keting effort through the creation of the Fortuño administration has been the industry. a destination marketing organization working closely with the company to The October staging of the FCCA (DMO), an idea that was proposed make Pier 3 in Old San Juan compli- Conference was a “huge milestone” by Gov. Luis Fortuño at last year’s ant with its Oasis-class vessel. for the destination, Pérez-Riera said. tourism convention but hasn’t yet Meanwhile, the 4,000-passenger The government promoted cruise been followed up. The DMO would Disney Fantasy is slated to begin market improvements to all attend- be controlled by the private sector visiting San Juan later this year. ing cruiseline chief executives, in- and would avoid the problem of the Last month, Carnival said it would cluding Micky Arison of Carnival tourism industry campaign chang- move its 2,974-passenger Carnival Corp., Adam Goldstein of RCCL, ing every time a new administration Valor from Miami to San Juan next Richard Fein of RCL, Richard Sasso takes office. year, making it the newest and larg- of MSC, Kevin Sheehan of NCL and “We have to get to the root of the est ship ever to sail year-round out of Dan Hanrahan of Celebrity. problem and create demand for the the Puerto Rico capital, the company Paige said the cruise market suf- destination. Only professionally said. The move is part of the cruise fered over the past several years as designed programs by a DMO will accomplish this. Then a lot of these Mario González Lafuente, other things—more airlift, more Puerto Rico Tourism cruises and more hotel rooms—will Co. executive director fall into place,” said Ismael Vega, PRHTA board president. “This isn’t to criticize the Tourism Co., which of these were visitors on homeport has done great campaigns and jobs ships. Homeport visitors typically under different administrations. It is spend more and often combine their just that we need consistency, and cruise with a hotel stay on the is- we need tourism industry executives, land. In the first 11 months of 2011, with many years of worldwide tour- some 972,065 cruiseship visitors ism experience, creating and over- visited Puerto Rico, but 460,510 of seeing these campaigns.” these were on homeport vessels. The However, despite the continuing FCCA had estimated that a total of challenges facing tourism, many 1.17 million cruise passengers vis- in the industry are expressing op- ited Puerto Rico last year. industry leader’s strategy to boost its the local Ports Authority raised fees timism regarding efforts to attract During the current fiscal year end- presence in the Southern Caribbean without improving its facilities or more cruises and airlines and boost ing June 30, total cruiseship passen- in 2013. It will replace the smaller, service, and the private sector also the island’s hotel inventory. gers are expected to increase 9% to 2,758-passenger Carnival Victory, failed to invest in its product in the 1,272,741, according to the DDEC. which will move to Miami. false belief that the cruiselines would Sh i f t i n g i n t o c r u i s e c o n t r o l A 25% increase in in-transit passen- “This is a good indication that the continue to come regardless. Nowhere is the enthusiasm more ger movement stems from increased cruise industry is moving in the right Today, she sees a different palpable than in the cruiseship mar- calls by Norwegian Cruise Lines, direction in Puerto Rico,” Pérez-Ri- attitude. ket, which appears to be on the re- Holland America, MSC and Carnival era said of the announcement. “We have an excellent relation- bound after years in decline. Over- Cruises, according to the DDEC. Puerto Rico’s $245 million cruise ship,” she said. “Puerto Rico has all cruiseship visitors are still down Last year, Puerto Rico welcomed industry brings in nearly 1.2 million set the stage with the new cruise from their peak in 2007, according to a brand new ship whose itinerary passengers per year and promotes incentives. All the executives were official statistics, but there has been included San Juan, the Celebrity more than 4,000 direct and indi- very impressed and enthused. There a big surge in passengers in the all- Silhouette, as well as the inaugural rect jobs on the island, according to are going to be many positive de- important homeport cruiseship seg- berth of the luxury Azamara Journey. the DDEC. A cruiseship carries an velopments from the convention. ment over the past two years. The Celebrity Eclipse also recently average 2,550 passengers and 480 There is now mutual respect and “The proof is in the pudding. made its inaugural call and has now crewmembers, who spend a total of appreciation.” Cruiselines are coming back to regularly scheduled visits to San $285,773 during a port-of-call visit, The incentives (see sidebar) are a Puerto Rico, or they are substitut- Juan. according to the FCCA. Passengers model for other destinations to fol- ing bigger ships for smaller ships,” This year, the luxury line Sea spend about $100 apiece, while low, Paige said. said Michelle Paige, president of the Dream Yacht Club has expanded crewmembers about $150. Puerto Rico has taken other steps to Florida-Caribbean Cruise Associa- its San Juan homeport itineraries The government of Puerto Rico is bolster relations with the industry. tion (FCCA). “There is a lot of en- to include different stops in Puerto also negotiating with a number of These include resolving an eight- thusiasm in the pipeline.” Rico such as Fajardo, Ponce, Caja cruiselines to bring new business or year-old legal case with Carnival In 2007, there were 1.437 million de Muertos and Mayagüez, as well expand their presence here, officials Corp. that limited its growth here. total cruiseship passengers visit- as the offshore islands of Vieques told CARIBBEAN BUSINESS. Transit calls for Carnival Corp. grew ing Puerto Rico, but just 417,137 and Culebra. In addition, the MSC There should be more Continues on page 14 FRONT PAGE 14 CARIBBEAN BUSINESS THURSDAY, MARCH 1, 2012 GOVERNMENT 35 CARIBBEAN BUSINESS THURSDAY, MARCH 1, 2012 Continued from page 13 In 2008, major cutbacks announced by 32% from fi scal 2009 to fi scal St. Regis Bahía Beach, Río Grande by —which at that May the energy-saving revolution begin 2010, mostly due to increases in calls time had close to 50% of all conti- This week’s ESCO-government summit kicks off dealmaking expected to by Holland America and Carnival. nental U.S. departures from Puerto A second major initiative to see Rico—harmed the island’s airlift. save agencies 20% on energy, create 3,000 jobs, lead to $40M investment completion was the removal of the The good news, however, is that other airlines, led by JetBlue, have BY EVA LLORÉNS VÉLEZ speech for its job-creation initiatives in North jobs and obtain an initial investment of $40 mil- canopy at Pier 3, DDEC offi cials [email protected] said, which has paved the way for stepped up with more routes so that Carolina. “Puerto Rico will realize the economic lion, which is expected to be provided by the a visit by the Carnival Dream this the seats eliminated during Ameri- advantages of this,” Samario said. companies. ESCOs are paid with the money that year. can’s cutback have been regained. s far as Ricardo Álvarez, an architect with Luis Bernal Jiménez, EAA executive direc- is saved on energy. The government has also improved Delta and Continental have also in- AAD Energy Group, and Héctor Samario, tor, said the law specifi cally permits agencies to Álvarez knows fi rsthand about the law because the traffi c fl ow of tourism transporta- creased fl ights, and in markets where senior executive with Siemens Industries, are sign ESPCs with ESCOs that have already been the Minillas Government Center in San Juan, the tion at the piers through the construc- American is still serving the island, concerned, a law that facilitates alliances between prequalifi ed by the EAA and the federal Energy Caribbean region’s fl agship structure on energy- tion of a staging area for excursion it too has increased frequency, the government and energy-savings companies Affairs Offi ce. savings performance contracts, is expected to buses and taxis. González noted. (ESCOs) to reduce energy costs in public struc- As part of the ESPC, the ESCOs do energy save the government $2.3 million or 43% of its Total weekly departures increased tures not only will result in millions of dollars in audits of buildings and serve as project manag- energy costs starting in June, and has already IMPROVING THE PRODUCT 5% when comparing February 2012 savings but also create hundreds of green jobs. ers that bring in other contractors and arrange for created 200 jobs. Most importantly, Puerto Rico is fi gures with the same period in 2009, Following the recent enactment of the law, fi nancing of energy-saving improvements. An The ESPC concept isn’t new in Puerto Rico. also improving its offer to cruiseship according to DDEC statistics. Total the Puerto Rico Energy Affairs Administration ESPC may run anywhere from fi ve to 20 years. Besides the ESPC operating for Minillas, which visitors. U.S. departures increased 2%, inter- (EAA) this week hosted the First Energy Savings Bernal said the government expects to save up also includes the Puerto Rico Museum of Art, “Puerto Rico has gone to great national departures increased 86%, Performance Summit for some 10 ESCOs to meet to 20% on energy costs, create about 3,000 new there are ESCOs providing energy monitoring lengths to improve its product. With- and Caribbean departures increased with offi cials from the public and private sectors, services for the Aguadilla and Caguas govern- out the cruise passenger having the 1%. suppliers and contractors to learn about Energy ment centers and the police headquarters in the proper experience and wanting to San Juan’s offering for cruise pas- cruises. Airlift is also a key ingredi- Puerto Rico’s base is now Savings Performance Contracts (ESPC) law. ESCOs get paid on the savings Hato Rey sector of San Juan. It is also part of a come to Puerto Rico, there is noth- sengers, offi cials said. ent for hoteliers. more diversifi ed. JetBlue has be- Samario welcomed the ESPC law because it booming global trend. ing you can do to attract more lines,” The fi rst phase, currently under At one time, Puerto Rico had some come the airline with the largest seat provides a formal process that removes a lot of obtained and arrange for fi nancing Álvarez said an advantage of the law is that Paige said. “Passengers today are construction and slated for comple- 26 international airlines operating capacity, with a 25% share. Next is the guesswork when engaging in partnerships and maintenance during the it helps the government save money because, very astute and want a broad range of tion this year, involves a park and through LMMIA in Isla Verde but, American Airlines, with a 21% with government agencies to help save energy. 5-20 term of an Energy Savings “instead of spending millions building new struc- things to do. They have been to Puer- entertainment complex right on the by the beginning of 2009, the num- share, and American Eagle has the Siemens is one of the largest companies in the tures, you can take the existing inventory and put to Rico before. You have to address bay near the cruise docks, providing ber had been whittled to fi ve airlines, third-largest share with 11%. area of energy savings and was mentioned by Performance Contract. it up to code. You work with what you already their wants, needs and desires.” such amenities as a trapeze school and only one, Spain’s Iberia, was a Airlift has actually improved on President Barack Obama in his state of the union have.” Ⅲ Along with inducements to bring and a balloon lift, as well as other major carrier. Government and in- important routes between the island more cruiseships to Puerto Rico, attractions. dustry offi cials say the post-9/11 and New York, New Jersey, Chicago, incentives were also granted to tour restrictions are a major factor in the Detroit, Washington, D.C. and Or- operators and other businesses that FLYING HIGH FOR NEW ROUTES erosion of international air traffi c. lando, and there are 32 weekly fl ights Federal tax-reform push favors P.R., says PDP’s D.C. candidate provide services to the cruise mar- The number of airlines serving The Fortuño administration has to developing markets, which are ket. Tours for cruiseship passengers Puerto Rico has also suffered dur- been intensively lobbying Obama also important, local offi cials said. Cox Alomar: Congress can be persuaded that tax breaks for local operations were limited to two companies, but ing the long recession. Airlines administration offi cials for a waiver Routes that American abandoned, of stateside fi rms serve national interest; war of words begins over Jones Act the incentives “removed that impedi- have been harmed by events outside to reopen LMMIA’s internation- which include Tampa, Chicago, Bal- ment” and opened the door to robust Puerto Rico’s control as well, such al transit lounge. They have also timore, Hartford and Boston, have BY EVA LLORÉNS VÉLEZ The change, he said, would allow the island competition, Paige said. as big operational changes at the na- reached out to offi cials in the Eastern been fi lled by other airlines. [email protected] to use foreign-fl ag vessels in addition to U.S.- Now cruise companies are making tion’s airports following the terrorist Caribbean’s tiny, tourism-dependent The government is also targeting fl ag vessels for its cargo transportation needs and alliances with other local tour opera- attacks of Sept. 11, 2001. islands that will also see big benefi ts important western U.S. routes such hile Congress is expected to make huge obtain competitive shipping rates. tors to greatly expand the offering In response to the attacks, restric- from an international transit lounge as Los Angeles, Salt Lake City, Den- Wcuts in federal funds to the 50 states and He blasted Resident Commissioner Pedro to cruise passengers, although the tions at airports across the U.S. re- in San Juan, since it would expand ver and Phoenix, as well as under- territories to balance the nation’s budget, Puerto Pierluisi for only requesting a study from the fruits of this effort will be more fully quired all international passengers to the airlift to their countries as well. served airports in regional markets Rico should still seek tax incentives under the Government Accountability Offi ce (GAO) on the felt during the next tourism season, present visas to clear a U.S. Customs However, while local government such as Austin, Ft. Myers, Raleigh/ U.S. Internal Revenue Code for companies oper- impact of the law on Puerto Rico (see related González said. & Border Protection checkpoint, offi cials found some sympathetic Durham, Richmond, Indianapolis, ating here because lawmakers have all agreed on story on page 5), a move Pierluisi later defended “The bottom line is we want to di- even passengers merely changing ears in Congress and at the White Milwaukee, Buffalo and Rochester. the need for tax reform for individuals and cor- arguing the study is needed to show Congress the González pointed to resumed Brit- versify the offer,” the Tourism Co. planes at a U.S. airport to continue to House, security concerns have so porations, said Rafael Cox Alomar, the Popular negative consequences of the law. ish Airways service to London, as “No matter what happens, all U.S. lawmakers chief added. another foreign destination. Prior to far won the day, CARIBBEAN Democratic Party’s (PDP) candidate for resident Jones Act detractors insist the law costs local well as new service to Toronto, via have agreed on tax reform for individuals and Puerto Rico’s cruise law is unique the restrictions, international passen- BUSINESS sources said. U.S. gov- commissioner. consumers $200 million to $1 billion in higher WestJet, and Frankfurt, via Condor, corporations, and Puerto Rico must insert because it provides incentives for gers could catch connecting fl ights ernment offi cials are also concerned Cox Alomar believes Puerto Rico has a good prices, while supporters argue that those numbers as important new routes that will itself into the debate,” said Rafael Cox Alomar, activities beyond the actual cruise- to other international destinations because stateside airports have made chance of getting a new tax incentive to attract are wildly infl ated and the real price difference is help develop new markets. The gov- the Popular Democratic Party’s candidate for lines, and it was written taking into via international air transit lounges similar requests. U.S. companies to Puerto Rico, replacing Section more than made up by big savings and superior ernment is also working to increase resident commissioner. account widespread suggestions by through which they could avoid hav- Increases in landing fees, coupled 936 incentives, which were phased out over more service on other fronts. (See CB Aug. 4, 2011 travel with Spain, another strong the industry. Paige said Puerto Rico’s ing to pass through customs or obtain with the deterioration of neglected than a decade ending in 2006. are only possible under commonwealth status and and Feb. 23, 2012.) previous law was also strong, but last a visa. local airport facilities, also played natural market. The administration is now work- “No matter what happens, all U.S. lawmakers not under statehood. Puerto Rico has a separate The problem, industry executives say, is that year’s update makes it even better. Paige said a reduction in airlift in a hand in driving airlines from the have agreed on tax reform for individuals and tax system from the states. no truly independent study has ever been done The Bahía Urbana project, a long- Puerto Rico has also had an impact market. American Airlines, which ing toward securing a direct fl ight from South America, from either Co- corporations,” Cox Alomar said at a recent event Cox Alomar, a Harvard Law School and that validates one position or the other. The term effort to remake the San Juan on the cruise market as it has placed fi led for bankruptcy in November where he presented his economic platform. “And Oxford University graduate, also vowed to seek transportation industry did commission one study Bay waterfront from the Convention additional burdens on customers 2011, has cut back its operations on lombia or Brazil. It is also targeting Mexico, a robust market producing Puerto Rico must insert itself into the debate.” changes that would exempt Puerto Rico from the in 2003, updated in early 2012, that argues its Center District in Miramar to Old wanting to originate cruises from the island in recent years after once Cox Alomar said the administration of Gov. Cabotage Law or Jones Act to reduce the costs side, which is that the Jones Act should remain San Juan, will also greatly improve the island, especially for homeport dominating the island’s air market. Continues on next page Luis Fortuño isn’t acting because tax incentives of transporting items to the island. in place. Ⅲ LEGISLATURE 34 CARIBBEAN BUSINESS THURSDAY, MARCH 1, 2012 FRONT PAGE 15 CARIBBEAN BUSINESS THURSDAY, MARCH 1, 2012 Continued from previous page while other airports from Miami to Water utility to save $110M in energy with hydroelectric plants Th e W hotel at Vieques Panama have gained ground as Ca- 54,800 annual passengers. Colom- ribbean gateways. Prasa infrastructure director advocates for transfer during hearing bia, meanwhile, puts more than “Puerto Rico should have the evaluating state of plants to be revamped for effort 25,000 passengers in the air annu- preferred airport in the Caribbean, ally, and Brazil produces more than whether for business, pleasure, vis- BY EVA LLORÉNS VÉLEZ decommissioned because it was more cost-effec- the system is no longer considerably contribut- 11,000 passengers. DDEC offi cials iting relatives or simply making [email protected] tive for Prasa to buy energy rather than maintain ing to the Prepa’s energy system, and has been point to the recent announcement by a connection, because passengers the hydroelectric equipment at the dam. neglected. Prasa needs to diversify its energy President Obama to increase nonim- know they will have a pleasant ex- he Puerto Rico Aqueduct & Sewer Authority “Right now, that is not the case,” he said. sources to reduce its overall operational costs migrant visa processing capacity in perience,” PPPA Executive Director T(Prasa) could save up to $110 million in Prasa is currently trying to reduce energy costs because energy costs are around 35% of the pub- Brazil by 40% in 2012 as boosting David Álvarez said recently regard- energy costs if it obtains control of hydroelectric through projects that entail buying energy as lic corporation’s budget and its second-highest the odds of establishing ing the importance of the deal. “That powerplants owned by the Puerto Rico Electric well as saving energy. Regarding projects aimed expenditure after payroll, Lázaro explained. contact with the country. is our vision.” Power Authority (Prepa), Prasa Infrastructure at buying energy, Lázaro said Prasa is evaluating He said the transfer of the hydroelectric system “Our vision is to increase air ser- Inconsistent development and ad- Director Alberto Lázaro said. proposals from private companies to rehabilitate could be done in two stages. The fi rst would allow vice for our primary markets and our ministration of the Carolina facility, Lázaro said Prasa is looking for ways to reduce the Carraízo hydroelectric system. “The contract Prasa to lease with an option to buy the systems. developing markets. Both are im- coupled with the fi nancial incapacity its energy costs, which since 2008 have surpassed under evaluation consists of a private company Afterward, Prasa could take over the system. portant,” González said, adding that of the Ports Authority, have weak- the $130 million annual mark. fi nancing with its own money the rehabilita- Juan Ortiz, a lawyer specialized in legislation the government is looking to bolster ened the airport’s lure and Puerto The offi cial made his remarks during a recent tion of [the Carraízo] system and operating it and contracts at Prepa, said the transfer is “still service to traditional East Coast mar- Rico’s position as a destination as a House Government Committee hearing that while Prasa pays for the energy produced, which under evaluation” because Prepa’s trust agree- kets as it blazes new trails into Latin whole. Government offi cials are con- was evaluating the condition of hydroelectric will be used to operate the pumping system that ment from 1974 establishes that conditions America and Europe. vinced that bringing in private man- powerplants. In the early part of the 20th cen- takes water to the Sergio Cuevas fi ltration plant,” for leasing and selling assets are subject to the It is also working to promote in- agement will be the “game changer” tury, the government built 20 hydroelectric he said. approval of engineers from the bondholders. creased regional service so as to needed for the airport to fi nally take power systems, nurtured by 15 water reser- Under the current conditions, Lázaro said the Prepa’s hydroelectric system comprises 21 plants build on San Juan’s natural position off and realize its potential. voirs providing a hydroelectric capacity of 127 system could be renewed to yield up to 1 MW of and 13 reservoirs, of which only nine can yield as a hub for routes to other Carib- Vega, of the PRHTA, questioned megawatts (MW). energy, which would provide 15% of the power energy, and nine are being repaired. He said the bean destinations, and to have the how a PPP at the airport would trans- Lázaro said that, right now, Prasa only has the needs at Carraízo and 0.6% of Prasa’s total hydroelectric system has been maintained with a U.S. carriers serving San Juan ex- late into more air traffi c. Carraízo reservoir, which had three hydroelec- energy needs. limited budget and reservoirs need to be dredged. pand their services to other Carib- “You need more than a facelift of tric power turbines with a capacity of 3 MW. By In making the case for the transfer of the He estimated that modernizing the hydroelectric bean stops. we need to replace those seats the Investment Board, Camargo Corrêa the airport to increase airlift,” he said, the early 1970s, the hydroelectric turbines were hydroelectric powerplants to Prasa, Lázaro said system will cost more than $100 million. Ⅲ Puerto Rico is served by more than island lost with [the scaling back of] Investimentos em Infra-Estrutura & again underlining the importance of 20 airlines, which include: Air Can- American.” Gestión e Ingeniería IDC; Fraport a sustained marketing effort. ada, Air Tran, , Cape In response to this concern, govern- UTOS AG & Goldman Sachs Infrastructure A Air, United-Continental, Delta, Fly A NEW ERA FOR P.R. AIRPORTS Partners; GMR Infrastructure & In- ment offi cials have pointed to other BVI, Insel, Liat, Vieques Air Link, The government is also immersed cheon International Airport Corp.; airports that have increased traffi c US Airways, Condor, Copa, JetBlue, in fi nding a private partner to operate Grupo Aeroportuario del Sureste & through PPPs. The Dominican Re- Local auto sales surge 1.7% in January Spirit, WestJet, American Airlines, LMMIA. Highstar Capital; Grupo Aeropuer- public, whose Las Américas Airport Volkswagen, Hyundai and Land Rover post triple-digit sales increases as industry moved 6,751 units last month American Eagle, British Airways Six world-class consortia vying to tos Avance (Macquarie and Ferrovial is the region’s second busiest with 2.5 and Iberia, according to the DDEC. run LMMIA under a long-term con- Aeropuertos); and Puerto Rico Gate- million annual outbound boardings, BY JOSÉ L. CARMONA and a 57.2% market share. Korean automakers Of these, 41% are network carriers, cession will submit fi nal bids next way Group (GE Capital Aviation, Al- placed its six airports under private [email protected] Hyundai and Kia together sold 1,068 units last 36% are low-cost carriers and 21% month, and the government hopes to legheny County Airport Authority, management in 2000, while Jamaica month, up 137.1% from the same month last year, regional carriers. pick a winner over the summer. Teachers Insurance & Annuity Asso- and Curaçao leased out their major he island’s auto industry continued last year’s comprising a 15.8% market share. Puerto Rico remains the largest The public-private partnership ciation-College Retirement Equities airports in 2003. During the 1990s, Tupward sales trend in January when 6,751 Combined sales by domestic automakers air service market in the Caribbean, (PPP) arrangement will not only Fund [TIAA-CREF], OpTrust and most South and Central American units were sold, for a 1.7% sales increase ver- (General Motors [GM], Chrysler Group and with the most U.S. fl ights, serving shore up the local Ports Authority’s Airmall USA). nations leased out their airports and, sus the same month last year, according to the Ford) in January reached 1,511 units, up 4% from three times more passengers than the battered fi nances, but also will trans- If completed, the deal will likely more recently, England, Germany, preliminary monthly Automobile Industry Retail the same month in 2011, with a 22.4% overall next largest destination. There are form the airport to realize its full po- be the largest airport PPP in the U.S. India, Australia, China and Singa- Sales Report, compiled and prepared by Plaza market share. more than 60 daily nonstop fl ights to tential as an economic-development under a Federal Aviation Administra- pore have gotten into the game. Motors Corp. For January, sales of GM vehicles were down more than 20 U.S. mainland destina- asset. The deal is expected to gen- tion (FAA) pilot project. Once the In most cases, the results have been Attractive fi nancing terms and offers, manu- 32.7%, while Chrysler Group sales skid 0.7% and tions. Seven regional airlines serve erate a sizeable upfront payment of local Public-Private Partnerships positive. The Cancún airport, for in- facturer’s rebates, dealer incentives and several Ford sales were up 12.3%. we have everything in place to make it happen,” 22 Caribbean destinations with 87 at least $1 billion, with most of the Authority (PPPA) picks a winner, stance, which was leased out in No- auto sales events held during January were sig- During the fi rst quarter of this year, Ford is he said. daily nonstop fl ights. Another seven proceeds used to retire some $800 the deal is still subject to an FAA- vember 1998, saw its passenger base nifi cantly strong enough to lift sales during the slated to open a new dealership in Bayamón, European automakers sold a combined 312 airlines provide close to 70 week- million in outstanding debt held by required 60-day public review, but grow from 7.7 million annually in fi rst month of the year. raising its number of showroom facilities on the vehicles in January, up 43.1% from the same ly fl ights to seven international the cash-strapped authority. offi cials have said they are confi dent 2000 to 12.4 million in 2010, while island to nine. month in 2011, with a 4.6% share of the local destinations. The government said a major fac- the deal will be completed before the the Sydney airport has seen its annual TRIPLE-DIGIT SALES INCREASE Waldo Galán, managing director for Ford’s auto market. However, industry leaders say more tor in picking an operator will be a November election. passenger base surge to 35.6 million The automakers with triple-digit sales increases Central America & Caribbean region, said the With 60 units sold, Fiat became the second needs to be done to increase both the group’s proven ability to develop While LMMIA is still the busi- in 2010 from 23.9 million in 2002, for the month of January were Volkswagen (up additional dealership will give the U.S. auto- best-selling auto brand in the premium luxury quantity and quality of Puerto Ri- new air routes and increase passen- est airport in the Caribbean, it has when it was fi rst leased out. 130%), Hyundai (up 104%) and Land Rover maker an extra boost in terms of sales and market segment in January, surpassed only by Mercedes- co’s airlift, and government offi cials ger traffi c, as offi cials aim to remake stagnated over the past two decades, Meanwhile, Lima’s airport regis- (up 100%). Other brands that experienced sales penetration in Puerto Rico. Benz with 81 units, and ahead of BMW, Mini agree. Puerto Rico’s airport into the gate- with outbound boardings fl uctuating tered 8.8 million passengers in 2009, growth last month include Porsche (up 83.3%), The Ford regional manager indicated the auto- and Audi. “Many of the kinds of tourists we way to the Caribbean, with more between four million and fi ve mil- more than double the 4.1 million it Volvo (up 60%), Nissan (up 53.8%), Mini (up maker’s midterm goal is to eventually achieve a The Italian automaker just launched the Fiat want to attract to higher-end proper- connections with U.S., Europe and lion annually, about half of its po- registered in 2001, the fi rst year of 47.4%), Lexus (up 39.5%) and Scion (up 25.7%). 15% to 17% market share in Puerto Rico. It cur- 500 Gucci Edition on the island, and later this ties require a certain level of service,” Latin America sought. tential market. Meanwhile, offi cials private management. Japanese automakers continue to dominate the rently enjoys a 12.8% share of the local auto mar- year will unveil an all-electric version of the 500, Vega said. “They are used to travel- The fi nalists are: Flughafen added, LMMIA is currently using “This is very important because it ing fi rst class and business class and local market, with 3,860 total units sold in January ket. “We have the products and the dealerships… plus the turbocharged 500 Abarth. Ⅲ Zürich AG, Public Sector Pension a bit more than half of its facilities, Continues on page 16 SPECIAL FEATURE FRONT PAGE 16 CARIBBEAN BUSINESS THURSDAY, MARCH 1, 2012 CARIBBEAN BUSINESS THURSDAY, MARCH 1, 2012 33

Continued from page 15 Pier 4, Old San Juan from the TDF: the $65 million, 120- room Wyndham property in Barce- will put the airport at a whole new loneta and two Hyatt Place proper- level,” González said. “It is impor- tant in terms of better infrastruc- ties, a $50 million, 156-room hotel ture, increased marketing for Puerto in Bayamón and a $38 million, 104- Xtrategit successfully transforms the performance of clients Rico and attracting additional air room hotel in Manatí. routes.” Another project near fruition is a BY MARIO BELAVAL DÍAZ $20 million Best Western renovation A BILLION-DOLLAR of the closed former Diamond Palace “ n today’s demanding global HOTEL PIPELINE Hotel in Condado, which will add I economy, one-dimensional Improving access to Puerto Rico consulting services are no longer another 156 rooms to the local inven- suffi cient to meet the complex is only part of the challenge, how- tory, government offi cials said. ever, and there is also a big effort requirements of public and pri- Meanwhile, industry sources said to expand and improve the island’s vate enterprises,” said Gerardo L. current inventory of hotel rooms. developers are pushing a $25 mil- Martínez, president & founding This year, both the $100 million lion, 156-room Hyatt Place property partner of Xtrategit Corp., an inde- Condado Vanderbilt Hotel, adjacent and a $22 million, 99-room Hyatt pendent full-service transformation to La Concha, and the $342 million Summerfi eld Suites property for the consulting fi rm. Ritz-Carlton Reserve in Dorado, are Convention Center District in the “Peak effi ciency and cost effec- slated to open. Along with the recent Miramar section of San Juan. tiveness are the key drivers of any opening of the $172 million St. Re- Finally, a group of developers is organization that strives to be suc- cessful in the highly competitive and gis Bahía Beach in Río Grande in arranging fi nancing to undertake a rapidly changing business environ- late 2010, the three fi ve-star proper- complete redevelopment of the ill- ties, along with the W in Vieques, ment that challenges every segment are revamping the island’s high-end fated Cayo Largo hotel in Fajardo. of economic activity,” Martínez market. the pipeline, government and indus- The Ritz project is a renovation of Developed early last decade, a ju- observed. “Those challenges require A bigger luxury segment is part of try offi cials said. the former Dorado Beach Hotel, and dicial dispute between project part- an experienced, multidisciplinary the expanded diversity the island’s While the Ritz-Carlton Reserve is the developer also plans to renovate ners kept the 400-room resort from approach to fi nding and implement- tourism product needs, said Vega of expected to be completed by the end its shuttered sister property, the for- opening as it was being completed. ing operating solutions that achieve the PRHTA. of the year, developer Federico C. mer Cerromar Hotel, a $214 million Industry sources said the developers the desired results for clients on time “These openings are extremely Stubbe, president of Prisa Group, is project that will add another 400 ho- are looking to raise the Four Seasons and on budget.” pushing ahead with a second phase important. They add to the high- tel rooms to the island’s inventory. fl ag on the property, but it will re- Over more than 10 years, Xtrategit that will entail the construction of Preconstruction and site prepara- end portfolio of our luxury market, quire a $277 million investment. has painstakingly built a team of Xtrategit top brass (from left): Gerardo L. Martínez, president & managing partner; Camille I. Alejandro, which hasn’t been catered to for a an additional 32 luxury units at an tion work are already underway on experts who apply leading edge vice president of fi nance; Cristina Schoene, senior director; and Alberto J. Cordero, principal A number of small inns have also while,” González said, adding that investment cost of $55 million this the $244 million JW Marriott Coco strategies for clients in four critical the American Express advisory year. The GDB, through its Tour- Beach resort in Río Grande, and opened throughout Puerto Rico. “We areas: strategy and operations trans- for technologies and strategies that clients in the private sector. Studies In addition to advising clients board just wrapped up two trips to ism Development Fund (TDF), is three more properties are expected are putting a lot of emphasis on di- formation; information technology respond to the requirements of our indicate that substantial cost savings in the private and public sector in the island and were very enthused expected to provide guarantees to start construction soon after wrap- versifying our overall hotel product (IT) solutions; cloud-computing clients, regardless of their source,” that improve the bottom-line are Puerto Rico, its primary base of about the new properties. on a FirstBank loan to undertake ping up fi nal details for fi nancing, and fortifying our natural competi- services; and business process out- Cordero explained. realized when effective consulting operations, Xtrategit is now expand- There are plenty more projects in the deal. and are also expected to get a boost tive advantages,” González said. Ⅲ sourcing, Martínez pointed out. He That hands-on approach has services are employed, according ing its highly successful practice to believes, and the fi rm’s track record enabled Xtrategit to successfully to Martínez. “The key word there, assist clients on the U.S. mainland. bears him out, that each of these vital solve some of the most challenging however, is effective,” he warned. The General Services Adminis- functions is an integral contributing problems facing the public and pri- Clients should, therefore, dili- tration (GSA), which is the purchas- Cruise incentives change P.R.’s course factor to the agility and performance vate sector in Puerto Rico. “We are gently test the skills and experience ing arm for the federal government, Reaching beyond cruiselines to encourage new tours, services of any organization that wants to be particularly proud of helping vari- of any consulting fi rm before com- has designated Xtrategit as one of successful for the long term. ous government entities streamline mitting what can be signifi cant bud- only two Puerto Rico consulting “It is important to note that our their systems with online services gets to making their operations more fi rms that are approved as informa- BY JOHN MARINO incorporating into the offer other key segments Cruiselines get a 10% discount on the purchase senior project managers, who have that have reduced offi ce visits by effi cient and, hopefully, profi table. tion technology service providers. [email protected] of the cruise industry such as its supply chain, of local provisions or the contracting of mainte- been responsible for budgets in the 50%. Our positive impact on the “False starts can be very costly to The GSA Schedule 70 designation service providers and tour operators. nance and repair services in Puerto Rico, and a hundreds of millions of dollars for private sector has also been sig- clients,” Martínez said. “At Xtrategit, opens the door for Xtrategit to go he new cruise incentives passed last summer The new incentives, which apply to all ports, 5% discount on the purchase of goods manufac- major global enterprises, each bring nifi cant. Xtrategit has introduced we place tremendous emphasis on after federal government agency IT Tturned Puerto Rico into a welcoming place not just San Juan, grant cruiselines $4.95 for the tured in Puerto Rico. more than 20 years of experience in new processes that are re-engi- partnering with clients to very care- consulting contracts. to do business from a destination that had be- 10,000th passenger to 39,999th passenger, and Incentives are also granted for the sale to non- local, national and international con- neering operations in a variety of fully and precisely identify goals This lucrative area for new busi- come increasingly indifferent to the $245 million $7.45 for the 40,000th passenger and beyond. residents of travel packages that include a cruise sulting,” added Alberto J. Cordero, industries, such as manufacturing, together before implementing cus- ness development can potentially cruise sector in recent years, as fees were raised There is also a homeport incentive of between and a stay in a hotel in Puerto Rico. This is aimed principal of the fi rm. retailing and insurance,” Martínez tomized solutions. After all, you lead to synergies for business growth while the product was allowed to deteriorate, “They are passionate in direct- recalled. “These accomplishments wouldn’t undertake open-heart sur- in partnership with enterprises in industry offi cials said. $1 and $4 per passenger. at spurring local hotel stays and increased tours On top of the cash incentives to the lines, indus- aimed at cruise passengers. ing a staff of more than 40 consul- have brought the latest technolo- gery without knowing that the sur- other sectors of the Puerto Rico The Law for the Promotion & Development of tants, who roll up their sleeves and gies to our clients, making it easier geon knew what he was doing. The economy that seek to develop mar- the Cruiseship Industry of Puerto Rico replaced try and government offi cials wanted a range of The legislation created two funds, one managed incentives to bolster other sector players, such as by the Puerto Rico Tourism Co., the other run work side-by-side within a client’s and less costly to do business on same principal applies in hiring a kets on the U.S. mainland. Looking Law 76 of 2005, which offered cruiselines tra- organization to seek out and imple- the island.” consulting fi rm that will essentially ahead, Martínez and Cordero see no tour operators and cruiseship passenger service by the local Ports Authority, that are supposed to ditional breaks based on passenger quotas and ment solutions that are tailored to Similarly, Martínez points with open the heart of your business to limit to what can be achieved with homeport incentives, among other benefi ts. providers, to improve the product and leverage simplify the cruiseship industry’s dealings with Ⅲ the particular client needs. We are pride to the fact that Xtrategit has a unplug the arteries of operations to Xtrategit at the center of an aggres- However, the new incentives built on this by the industry’s impact on the local economy. the government. completely independent and search 100% positive referral rating from make it perform better.” sive business development plan. Ⅲ