Puerto Rico needs to establish closer commercial ties with all countries throughout Latin America and the Caribbean by, among other things, playing up its importance as the gateway to the U.S. mainland, Ricardo Martinelli, president of the Republic of Panama said upon his arrival to the island Thursday.
Speaking to a select group of reporters, Martinelli further said Puerto Rico and his country have many things in common — commercially and culturally — that could set the foundation for a coming together of ideas and opinions.
Martinelli, who took office in July 2009, was on the island Thursday invited by Puerto Rico Chamber of Commerce to deliver a presentation on Puerto Rico’s potential in Central America during the opening night of the trade group’s annual convention.
“It’s very important for Puerto Rico to have a much more significant presence in all Latin American countries. Puerto Rico has everything, and hasn’t taken advantage of it. You’re Latin American and North American,” he said.
“Every country in Latin America wants to be like Puerto Rico, because you’re much closer to North America. This island, not Miami, has to become the gateway for Latin American countries to get into the U.S.,” he said.
Meanwhile, he also said Puerto Rico could take several steps to tackle its high unemployment rate and spark an economic improvement, including providing incentives to the construction industry, which would have a positive multiplier effect.
“The private sector must be stimulated with clear rules and low taxes,” he said. “Providing incentives to the construction industry has a significant multiplier effect, as does supporting tourism.”
Running the government like a business
Martinelli, who prior to taking over the presidency of Panama was a successful businessman, has surrounded himself with other private-sector executives to run the government as if it were a corporation.
Without wasting much time, his administration signed off on a number of laws to improve the economy and create a better business climate in the country, where unemployment dropped to 4 percent this year from 14 percent in 1999.
Among other steps taken, Martinelli’s administration laid down “clear rules” for doing business that make it easier to set up shop there, closed fiscal loopholes and dropped taxes both at the corporate and individual levels, and granted tax exemptions to a broad swath of industries — including agriculture and construction — to jumpstart the economy.
“We dropped import taxes to prevent contraband, dropped taxes to motivate consumption and are now legalizing all foreigners by granting them work permits so they can live and work and contribute to the Panamanian state,” he said, noting that early in his mandate, he revised the tax structure because “you had a bank paying a 7.8 percent tax rate, and an individual executive paying 27.5 percent in taxes. That has now been changed to a maximum rate of 15 percent for individuals and 25 percent for companies.”
“There were many inequalities in Panama’s tax system, but there wasn’t a single politician who would sign off on the necessary changes,” he said. “Businesspeople operate based on objective and performance. Politicians are more laissez-faire and let things run their course. I think that the need for results has helped us move things forward.”
Panama and P.R.’s budding relationship
“Panama and Puerto Rico are economies based on the U.S. dollar that could complement each other because of our geographic locations and connectivity with the rest of the region,” he said. “But our relationship is still in diapers.”
Opportunities abound in certain areas, such as products, services, information technology and pharmaceutical products that local companies could explore to grow.
Chamber of Commerce President Salvador Calaf noted there is a surging interest by local companies wanting to take advantage of the favorable conditions Panama has to offer to establish operations there, as well as export.
“Panama and Puerto Rico don’t compete, they complement each other. That’s the great opportunity Puerto Rico’s business community has. We must insert ourselves through Panama to export products and services,” he said. “That’s the vision that we want to share. Panama has built an incredible value-added zone through its Canal region that will take us to the rest of Latin America.”
So far, several products and services companies have expanded to Panama, including Omega Engineering and Caribbean Management Projects, and there are at least 10 other companies searching for opportunities in that Central American nation, Calaf said.