Puerto Rico’s changing economic landscape will prompt banks to keep a tight grip on their activites until risks recede, an analysis by H. Calero Consulting firm concluded.

The “retrenching,” as the firm called it, will likely lead banks to remain a “passive sector, one that, in the future, stands to react rather than lead the creation of new economic opportunities.”

The firm identified loan payment delinquency and a shrinking population as ongoing risks for local banks. Also, it questioned whether the recently approved debt restructuring agreement between the government and Sales Tax Financing Corp. creditors will remain sustainable past 2023, and whether it will enable Puerto Rico to return to capital markets.

“Either scenario — or worse, a combination of both — would be directly detrimental to the banking sector’s outlook. Until risk recedes, banks will simply contend themselves to follow the road that others dare first take,” the firm noted.

The firm added that another factor that could prompt banks to remain on the shy side is a lack of opportunities to participate in financing of post-hurricane recovery contracts, which have been granted to foreign companies for the most part.

“In this sense, unless the recovery funds are managed to create the right incentives for them to remain on the island, the banks will simply not leverage capital to jumpstart much needed economic growth, or support development, regardless of continued interest rate hikes,” H. Calero Consulting said. “The stakes at the moment could not be higher. Puerto Rico must get it right this time.”

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