From an investment promoter’s perspective, Puerto Rico has been in the news for all the wrong reasons in recent years.
On the heels of a massive debt crisis came Hurricane Maria, which happened a year ago in September, laying bear problems with the island’s infrastructure as well as its disaster preparedness plans. Beyond the power outages, the biggest tragedy from the storm was the loss of nearly 3,000 lives, according to the results of an outside investigation.
But the island’s commerce secretary, Manuel Laboy, told Global Atlanta that the skies are clearing and a new day is dawning for the island’s economy.
“The hurricanes were really a disaster, extremely painful and something that we don’t want to go through again. There are a lot of lessons learned from that,” Mr. Laboy said. “On the other hand there is a silver lining opportunity that we have a chance to transform Puerto Rico, especially our infrastructure.”
Mr. Laboy spoke to Global Atlanta the week after he visited Atlanta for the German-American Chamber of Commerce of the Southern U.S. Inc.’s 40th-anniversary gala. Many German investors, including the aviation maintenance arm of Lufthansa and biopharma company Sartorius, have operations on the island, he said.
“We now have a lot of focus on retaining and promoting the expansion of existing partners that are doing business in the island,” he said.
Mr. Laboy’s optimism comes from a few sources. In 2017, Congress under President Obama passed a bill that created a fiscal oversight board for Puerto Rico to help restructure its $72 billion in public debt.
This year, the island filed for bankruptcy under Title III, a provision of that law, known by the acronym PROMESA. The bright side is that investors are no longer in limbo about what’s going to happen with the debt, Mr. Laboy said.
“Before, there was nothing on the horizon as to how to address this issue, but now there is an orderly process that is ongoing,” he said.
On top of $6 billion earmarked for recovery, Puerto Rico is also now expected to receive tens of billions of dollars in federal funds for rebuilding infrastructure, including roads and its battered power grid. (Electricity-generation projects will be subject to a public-private partnership law.)
And that’s building on what Mr. Laboy calls the island’s inherent business advantages, like its workforce and its tax structures. As a territory, Puerto Rico has a U.S. legal and regulatory framework, but it’s not subject to the same tax regime.
Act 20, passed in 2012, allows companies that export services like software, research and development, public relations and investment banking to be eligible for a reduced corporate tax rate of 4 percent. Any dividends repatriated sent from the island to the mainland are completely exempt from taxation.
A related law, Act 22, provides income-tax exemptions for residents moving into Puerto Rico, a benefit meant to encourage relocation of innovators and investors.
“When you combine that, I think it really becomes a true compelling argument to convince businesses and companies to invest in Puerto Rico,” Mr. Laboy said.
Puerto Rico had long been a hub for pharmaceuticals but suffered when many firms that had come in for tax advantages left after the expiration of credits in search of lower-wage jurisdictions. While that created problems for the economy, the companies that remain have moved up the value chain, Mr. Laboy said. Now the island seeks “high-tech, highly regulated and research-based” activities and products.
The island territory is also diversifying its economy, focusing on aerospace, engineering, agriculture and looking to become a hub for emerging tech sectors like blockchain, the Internet of Things, the sharing economy and smart cities technology.
He cited existing collaborations between Georgia Tech and the University of Puerto Rico as an example of projects between Georgia and the island that could be expanded.
While hit hard by the storm, the tourism engine is still humming along, with an estimated 50 hotel projects in the pipeline valued at around $1.5 billion, Mr. Laboy said.
Mr. Laboy often asked by fellow Americans on the mainland what they can do to support the island’s recovery. It doesn’t have to be a matter of charity alone, he said.
“The best way to help Puerto Rico is to come and visit, or come to Puerto Rico and invest.”