Puerto Rico is rapidly becoming the most competitive jurisdiction within the United States.
The island is undergoing a steady transformation that involves government right-sizing, reductions in public spending, a trimming of the number of political appointees, and a reformation of permitting processes. The government, led by new Governor Ricardo Rosselló, is also working on tax and energy reforms.
Rosselló's future vision also focuses on the use of public-private partnerships, a largely-overlooked model on the mainland but nonetheless a powerful tool to spur Puerto Rico's growth and create long-lasting, well-paying jobs. Instead of merely selling off government assets, these partnerships allow the government to capitalize on its resources and services by working with with the private sector.
Partnerships are not new to Puerto Rico. After a four-year process, Puerto Rico's main air hub, San Juan Airport, became the U.S. Federal Aviation Administration Airport Privatization Pilot Program's first success story in 2013. This partnership paved the way for liquidity to meet debt obligations. It also created a revenue source for the duration of the lease, and more importantly allowed for long-overdue modernization and renovations of airport facilities, as well as job creation.
Today, San Juan Airport serves as a regional hub for JetBlue. It is also one of the few airports in the U.S. that operates an automated baggage-scanning system. In addition, new retail stores in the renovated terminals have created 3,000 jobs.
Such partnerships provide a way for Puerto Rico to jump-start its economy by injecting private cash into the economy, consequently improving the services provided. The Rosselló administration intends to replicate this story throughout Puerto Rico's infrastructure.
One project in the pipeline is the concession of maritime ports to improve maintenance and passenger experience. Another is a concession of parking garages to improve service, generate investment, and remove government from a service that is obviously not essential to its functioning.
And the renewed focus on partnerships is already yielding positive economic results. In March, S&P Global Ratings removed the toll operator for Puerto Rico Highway 22 and Puerto Rico Highway 5 from CreditWatch negative placement, citing "clear indications that the new government is supportive towards [public-private partnership] projects." The Rosselló administration is also taking swift action and moving into the implementation phase, focusing on seven to 10 projects to restore investment and credibility.
Additionally, Puerto Rico will host investors and entrepreneurs from all over the world on September 20 and 21 for the first Invest Puerto Rico Forum. At the forum, we will unveil an incentives program that includes a 4 percent tax rate on net income for corporations in sectors such as manufacturing, biotechnology, bio-agriculture, tourism, exports, insurance, and pharmaceutical, financial, and professional services, among others.
In a very short period, Governor Rosselló has undertaken numerous reforms and enacted initiatives to revitalize Puerto Rico, thereby signaling that the island is open for business. It is an exciting, new chapter in Puerto Rico's history. By investing in these various projects, investors have a real opportunity to participate in this transformation and play a role in the island's future.
This is the new path forward for Puerto Rico.
Carlos R. Mercader is executive director of the Puerto Rico Federal Affairs Administration.
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