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1:01pm February 13, 2013

Puerto Rico Moves to Privatize Airport, Finds Mixed Reactions

Fernan1

Last week, Governor Garcia Padilla received his first protest, courtesy of his administration’s support for the public-private partnership (APP in its Spanish acronym) concerning the Island’s main airport, the Luis Muñoz Marin International Airport. The partnership, originally pushed by former Governor Luis Fortuño, and opposed, at the time, by Garcia-Padilla’s party in the run up to the elections, has been embraced by the current governor under the premise that the deal was already signed by the time he came into power. Garcia-Padilla doesn’t fully support the partnership, which would lease the main airport to Aerostar, a Mexican company who manages several airports around the world, for a period of 40 years.

In return, Puerto Rico would receive approximately 2.6 billion dollars over 40 years, with an initial payment of $615 million dollars and another $1.4 billion dollars in improvements to the airport. During the 2012 campaign, former Gov. Fortuño defended the partnership, alleging that the state did not have the resources to properly maintain the airport for the needs of the 21st century. Behind the scenes, it was well known that the agency responsible for administering the airport, the Puerto Rico Ports Authority, had a significant deficit that it hoped to plug with the money derived from the partnership. In an interview with El Nuevo Día, the Director of the Ports Authority admitted that his agency needs $500 million dollars immediately in order to pay off its debt.

Unions and student groups have opposed the partnership, alleging that it amounts to a privatization of an “essential cornerstone to our economy”. Opponents claim that the state can properly administer the airport, and that leasing the main airport for a period of 40 years will result in a net economic loss for the Island. Further, they claim that the deal would amount to a net loss of $887 million dollars to the Island. However, this figure was disputed by the Director of the Ports Authority Administration, stating that the figure cited by opponents does not take into consideration the debt owned by the airport, which actually places the airport in the red following debt payments.

Supporters, on the other hand, refer to successful implementations of this model in the United States, arguing that it will increase the airport’s efficiency and bring additional airlines and travelers to the Island. Gov. Garcia Padilla has refused to renegade on the partnership under the premise that it was too late by the time he came into power this past January. Opponents claim that the Governor should rescind the contract, regardless of the consequences. Notwithstanding the pressure, Gov. Garcia Padilla has stayed the course and will go through with the deal so long as the FAA approves it later this month.

As Puerto Rico struggles to recover its finances, Gov. Garcia Padilla is wise to continue a deal made by his predecesor as it would give the Ports Authority new life on its finances, while allowing the main airport to receive much needed improvements. The deal guarantees that the main airport remains in the black while delivering secure income to the Ports Authority. Further, by taking the government out of the equation, the Airport will have greater flexibility in its labor negotiations and contracts, allowing for greater competitiveness. Finally, if the privatization of Puerto Rico’s telephone company in the 90′s is any indication, private administration will result in a more efficient service for tourists and travelers alike.

The airport leasing deal is the latest model of the public-private partnership that former Governor Fortuño implemented, much to the opposition of the now ruling party, to which the latter has embraced now that it is in power. With it, Puerto Rico will continue to move away from a commanding public sector to a more thriving private sector.

 



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8 Comments


  1. [...] Puerto Rico Moves to Privatize Airport, Finds Mixed ReactionsPolitic365, on Wed, 13 Feb 2013 05:03:38 -0800However, this figure was disputed by the Director of the Ports Authority Administration, stating that the figure cited by opponents does not take into consideration the debt owned by the airport, which actually places the airport in the red following … [...]


  2. Edgar

    The aerial picture in this article is from the Satelite Airport in San Juan called Isla Grande (TSIG)


  3. Juan Giusti-Cordero

    This story goes far beyond Puerto Rico, as this would be the first airport privatization to take effect under the US flag. Once again, the colony as Guinea pig. US public airports –i.e. nearly all airports– and defenders of public interest in air transport, watch out. What happens in Puerto Rico in the next few days may impact a debate that will surely grow in the US with coming fiscal cuts on the FAA, as that agency seeks to shift part of its expenditures to the private sector..The Puerto Rico issue merits far more coverage in the US press and social media.


  4. jeanvidal – other media have also reported that the government will receive $2.6 billion. I have not been able to confirm this figure. The upfront $615 million payment is followed by tiny $2.5 million yearly payments and then 5% and 10% of gross income (but excluding PCF changes and govt grants). Only $34 million in improvements are required by contract. There are $167 million in purely optional improvements, nothing close to $1.4 billion that you state. Please explain where you got your figures.


  5. Your info is simply wrong. The only ones that will benefit from this contract are the Mexican millionaires, as is the case of the PR telephone co., also in Mexican hands.


  6. Puerto Rico will be bankrupt soon after the cartel takes over.


  7. That picture is not of the LMM airport. That’s a picture of the Isla Grande airport.



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