1. Puerto Rico’s Fiscal and Economic Turnaround
Luis G. Fortuño, Governor of Puerto Rico
March 2012

2. Fiscal Achievements (2009-2011)
Goals What we faced… What we accomplished…
 There was no money to pay our first payroll  Full payment to suppliers
 $756 million in unpaid checks to suppliers
 Monumental deficit of $ 3,306 billion or 44%  Successful implementation of financing plan
of revenues to reduce inherited deficits.
Implementation of the
Fiscal Stabilization Plan  Lack of credibility and transparency with  Almost 20% reduction in government
the investment community and rating spending. Cut deficit by 81%, to 7% of
agencies revenues.
 Puerto Rico's credit was at its lowest level in Improvement in credit rating:
history, just above junk status
 Moody’s: from Baa3 to Baa1 (two notches)
Improve Puerto Rico’s
Credit Rating  S&P: from BBB- to BBB (First credit rating
upgrade by S&P in the US since 2009)
 Fitch: inaugural rating of BBB+
 Our Retirement System has less than 8.5  We will increased employer contribution
cents per dollar obligation from 9.275% to 20.525% by year 2021
 A system that was going to run out of liquid  Injected $162.5 million on capital
assets by 2014 appreciation bonds with maturity value of
Save our Retirement
over $1.5 billion
 Additional measures have been taken to
increase life of System past 2022 (i.e.
reduction of personal loans to members)
2

3. Improving fiscal and economic landscape by reforming
budget practices
$9,684 $9,684
Projected $8,541
$8,862 $9,077
$8,359 $8,488
Revenues $7,583
vs.
Actual Projected Actual Projected Actual Projected Actual Projected Actual
Revenues
FY 2006 FY 2007 FY 2008 FY 2009
$10,890
FY 2009
$3,306 Deficit
Inherited
Deficit $7,583
(in millions of $)
Revenues Deficit Expenses
Estimate Projection
2.7% 0.7%
2.1% 1.9% 0.5%
Negative
Economic -1.2% -1.0%
-2.9%
Growth -4.0% -3.8%
(GNP Growth)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Government’s Budget Reports, OMB, Treasury Department, and Planning Board.
3

4. Major credit rating agencies have recognized our fiscal
progress with positive ratings
A Negative
Outlook Negative
A- Outlook BBB
BBB BBB Positive Stable
Negative Credit
Outlook Outlook
Outlook Watch
BBB-
2000 2001 2002 2003 2005 2006 2007 2010 2011
Baa1 A3
Negative
Positive Outlook
Stable
Outlook
Outlook Baa2 Baa1
Negative
Outlook Credit
Watch Baa3
2000 2001 2004 2006 2007 2010 2011
Inaugural rating : BBB+ Stable Outlook
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5. We have achieved unparalleled fiscal improvement, reducing
our deficit dramatically
$3,306
billion
43.6%
36.8% 36.7%
22.2% 19.9% 18.8% 15.1%
8.5%
Puerto Rico Arizona California Florida Nevada New Jersey Illinois Michigan
45.2% $610
37.4%
29.3% million
23.6%
18.0% 14.9%
7.1% 5.9%
Nevada New Jersey California Minnesota Conecticut Florida Puerto Rico Michigan
Source: Center on Budget and Policy Priorities & The Bond Buyer 5

6. Economic Development Achievements (2009-2011)
Goals What we faced… What we accomplished…
 Lack of sustainable plan for the  “Schools for the 21st Century: 100 schools (at
development of infrastructure least 1 per municipality)
Implementation of
 PR-22 – Toll Road Concession – DONE (private
Public-Private  Limited lending capacity from the investment of more than $1.5 billion
Partnerships (P3) government to promote infrastructure
 Airport Concession - due in 2012
projects
 Tax code, with effective top rate of  Implemented the largest tax cuts in Puerto Rico
41%, was stifling job creation and history
entrepreneurship  New, simplified tax code provides dramatic
reduction in tax rates across the board, both
Comprehensive Tax individual and corporate. Average rates
reduced 50% for individuals, 30% for corporations.
Reform
 General Fund Net Revenues have increased
during FY2011, due to the “Positive Revenue”
effects of the Tax Reform
 Unprecedented increase in housing  Successfully implemented Housing Initiative from
inventory Sept. 2010-Dec. 2012 that dramatically reduced
housing inventories in both existing and new
housing units
Revamp sluggish
 Initiative cuts property, capital gains taxes for
housing sector buyers, sellers and investors.
 2011 vs. 2010 increase:
 New Homes Sales: 59.8%
 Existing Homes Sales : 26.5% 6

7. Results – Economic Indicators point to positive
growth
The results of Puerto Rico’s fiscal and economic policies are clear.
Puerto Rico is experiencing the first positive growth in six years,
including increased job creation, a sharp rise in home sales, an
increase in consumer confidence reflected in climbing retail and
auto sales, surging tourism numbers, record exports and new
business creation, and tax reform that is generating results.

8. Total employment number in December 2011 increased by 28,000
when compared to the same period in 2010
1,191 2.6%
2%
1,170
1,153 -0.1% -0.3%
0% 1,143
1,139 -0.6%
1,127 1,125 -2.1% -1.8%
-2% 1,117 1,118 1,117 1,113 -2.3% -1.6% 1,118
1,106,105
1 1,103
-2.9% -2.9%
-2.6% -2.2%
1,096
1,094 1,097
1,094
-3.6% 1,089
1,085 -3.4% -3.1% -2.7%
1,090
1,087 1,090
-4% 1,081 1,083 1,084 1,080
1,075 1,077
-5.7% 1,068 1,066
1,061,062 1,062
1,057
1
-6% -6.9% -4.9% -5.4% 1,051
-5.5%
-8% -7.8% -7.0%
-8.8%
-10%
Dec-08
Oct-09
Dec-09
Oct-10
Dec-10
Oct-11
Dec-11
Jan-09
Jun-09
Jan-10
Jun-10
Jan-11
Jun-11
Jul-09
Jul-10
Jul-11
Feb-09
Mar-09
Feb-10
Mar-10
Feb-11
Mar-11
Apr-09
Nov-09
Apr-10
Nov-10
Apr-11
Nov-11
Aug-09
Sep-09
Aug-10
Sep-10
Aug-11
Sep-11
May-09
May-10
May-11
Total Employment
((Household Survey) % Year-Over-Year Change
Source: Department of Labor
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9. The Housing Initiative enacted in 2010 has jumpstarted
Puerto Rico’s residential real estate market
From September 2010 - From September 2010 -
November 2011 Overall Year- November 2011 Overall Year-
over-Year Change 59.8% over-Year Change
26.5%
1.8%
-5.8% US Puerto Rico
US Puerto Rico
Source: Housing Finance Authority
* Gradual incentive reduction subject to approval of “Housing Stimulus Act Transition Program
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10. In 2011, Puerto Rico experienced the highest hotel occupancy
ever on record
Hotel Occupancy Rate Average Daily Rate (ADR)
69.6% Chart Title
$ 190.50
$170.75
68.1% $ 165.05 $ 163.17
67.5%
+4.6%
-13.4%
-1.1%
CY 2009 CY 2010 CY 2011 CY 2008 CY 2009 CY 2010 CY 2011
Source: Puerto Rico Tourism Company
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11. 2011 also showed an increase in cruise ship passenger arrivals
Cruise Ship Passengers (Homeport)
398,023
388,912
319,918
CY 2009 CY 2010 CY 2011
Source: Puerto Rico Ports Authority
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12. Consumer confidence levels are increasing
$35,555*
$34,453 $34,858 1.5% 91,052
17.3% 89,745
2% $28,788
1.54%
76,477
2.7%
CY 2009 CY 2010 CY 2011 (Jan-Oct) CY 2009 CY 2010 CY 2011
Source: Puerto Rico Trade and Export Company
12

13. Recent export data shows a robust improvement since 2009
$66,000 $48,000
$64,876
$64,000 +5.2% $63,954 $46,000 +9.5% $45,266
$44,671
$44,928
$44,000
$62,000
$60,119 $61,657 $42,630
$42,000
$60,000 $60,011 $60,807
$40,000 $40,810
$38,905
$58,000 $40,651
$38,000 $38,898
$56,543
$56,000 $55,175
$36,000
$55,080
$54,000 $33,750
$34,000
$52,000 $32,000
$50,000 $30,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2003 2004 2005 2006 2007 2008 2009 2010 2011
During fiscal year 2011, exports have increased by 5.2% when compared to fiscal year 2010, while
imports have increased by 9.5%
Source: Puerto Rico Planning Board
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14. A total of 14,716 new corporations were created in calendar year
2011, reflecting a 14% increase compared to 2010
14,716
13,731 -0.8%
13,628
(-103) +14.0%
(+1,805)
12,866 +0.3% 12,911
(+45)
+6.6%
-11.4% 12,071
(+795)
(-1,557)
CY 2006 CY 2007 CY 2008 CY 2009 CY 2010 CY 2011
Source: Puerto Rico Department of State
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15. The most comprehensive tax reform in the history of Puerto
Rico is generating the intended results
January – November January – November
Individual Tax Collections General Fund Net Revenues
(in $ millions) (in $ millions)
$7,724
$2,489
$1,789
$6,918
2010 2011 2010 2011
In spite of decreased Individual Tax Collections, General Fund Net Revenues
have increased during the first 11 months of CY 2011, mainly due to the
“Positive Revenue” effects of the Tax Reform
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16. Puerto Rico’s Fiscal and Economic Turnaround
Luis G. Fortuño, Governor of Puerto Rico
March 2012