For Investors, Puerto Rico Is a Fantasy Blank Slate

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Or “how tech companies and private capital are poised to reshape the US colony.” In The Nation, Yarimar Bonilla offers an analysis of Puerto Rico’s present state of affairs and the designs that various sectors have on the “fantasy blank slate” after Hurricane Maria.

Puerto Rico is open for business. So declared leaders from the devastated island on February 15 at an investors’ conference convened to explore the opportunities generated by what was described as “the greatest disaster in US modern history.” The event, in New York City, was organized by the Financial Times and Puerto Rico’s Department of Economic Development and Commerce, and it featured Governor Ricardo Rosselló Nevares and several members of his cabinet, who addressed a room of corporate investors eager to learn about the role they could play in Puerto Rico’s economic future. With sleek PowerPoint presentations and relentless optimism, government figures described the post-hurricane context not as a humanitarian crisis but as a chance for a “restart,” declaring almost giddily that they could now accomplish in just a few years what would have otherwise taken a decade.

The governor and his team stressed that their approach to the recovery was not a departure, but merely an acceleration of the austerity policies developed to address the preexisting financial crisis. They pointed to the labor-reform law passed months before Hurricane Maria as a sign of the administration’s commitment to creating a business-friendly environment. The legislation stripped benefits for workers, reduced sick leave, increased probationary periods, facilitated layoffs, and lowered wages. Yet one of the entrepreneurs present at the conference, Cyril Meduña, suggested that the measures had not gone far enough and that more could be done in the wake of the storm, “now that there is more mobility.” In other words, with so many Puerto Ricans leaving because of the slow recovery, lack of aid, and massive unemployment, the time might be right to further erode labor protections.

Rosselló declared that the new economic plan for Puerto Rico focused not just on financial policies but on broader social and demographic transformations. He discussed the recently announced education reform, pending health-care revisions, and reduced allocations to municipalities and the public university system as part of the government’s efforts at “right-sizing” itself to create better conditions for investments. “Even before the storms we saw opportunities,” Rosselló said, “but now we have a blank canvas where we can start thinking anew, where we can take bold steps into investment and innovation and rebuild Puerto Rico much more effectively.”

Key to Rosselló’s imagined demographic shifts, one might assume, is the historic migration of Puerto Ricans to the US mainland, which was well underway long before Hurricanes Irma and Maria struck. Since the storms, not only has the government done little to quell the wave of departures, it has sought to take advantage of the new diaspora in the midterm elections by mobilizing stateside Puerto Ricans against US politicians who voted in favor of the bill that would raise taxes on Puerto Rico–based companies. For the Puerto Rican government the growing diaspora offers political leverage but also an escape valve: The mismanagement of funds and inexplicable delays in restoring public services surely would have been subject to greater scrutiny if not for the fact that so many have left.

While the local population continues to dwindle, Rosselló’s government is courting new “stakeholders” to come to Puerto Rico under Act 20/22, a pivotal piece of legislation that allows wealthy transplants to use the territory as a tax haven. Passed in 2012, Act 20/22 was established to bring capital investment to the island amid fiscal crisis. The law originally carried certain restrictions requiring direct capital investment and job creation. Under the current administration, however, these rules have been lifted. Now, any individual who spends half the year on the island can receive exemptions from federal and local taxes, capital gains tax, and taxes on passive income until the year 2035, regardless of whether they generate employment or invest in the local economy.

Originally designed to attract wealthy financiers, the law has ended up luring tech entrepreneurs, cryptocurrency devoteesdigital nomads, and tax dodgers who choose their countries of residence based on economic incentives, regulatory freedom, and “value opportunities”—rather than on cultural or political ties. Puerto Rico’s status as an unincorporated US territory suits these untethered entrepreneurs. As neither a nation nor a US state, it allows arrivals to retain their US citizenship while benefiting from the legal ambiguities of territorial status. [. . .]

It is not coincidental that one of the first measures passed by the Rosselló administration after Hurricane Maria was to allow unsolicited contracts by private investors. [. . .]

[. . .] The main vehicle for these investments will be Public Private Partnerships, or P3s. As previously reported by The Nation, P3s are the Trump administration’s preferred vehicle for developing public infrastructure. They are promoted through the promise of improved services and greater efficiency, though this is often achieved through cost-cutting measures and layoffs. (Ironically, it was precisely such cost-saving measures which left Puerto Rico’s electric service vulnerable to disaster.)

Long before Hurricane Maria struck, Puerto Rico already had a disproportionate number of P3s. Airports, toll bridges, and convention centers had already been, in the words of the governor, “externalized.” Over the course of the last decade, while the public debt mounted, many public assets and services fell into disrepair. The PROMESA bill, which was enacted by the US Congress to deal with the debt crisis, paved the way for these government assets to be sold, or simply handed over, to private industry to repair, operate, and manage. Since the storms hit in September, the government seems determined to privatize not only what was destroyed by the hurricanes, but also all that had been neglected in the previous decades. This includes streetlight systems, water distribution, public transportation, waste management, and health and education services—to name a few. [. . .]

Continue reading this fascinating article at https://www.thenation.com/article/for-investors-puerto-rico-is-a-fantasy-blank-slate/

One thought on “For Investors, Puerto Rico Is a Fantasy Blank Slate

  1. Reblogged this on It Is What It Is and commented:
    Puerto Rico is opened for business!! … “how tech companies and private capital are poised to reshape the US colony.” … Remember this: P3s …
    ‘The PROMESA bill, which was enacted by the US Congress to deal with the debt crisis, paved the way for these government assets to be sold, or simply handed over, to private industry to repair, operate, and manage.’

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