Puerto Rico governor signs law to shore up investment

Written by  //  August 1, 2013  //  General Biz News  //  No comments

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Gov. García-Padilla has signed several laws since taking office in January. (Credit: La Fortaleza)

Gov. García-Padilla has signed several laws since taking office in January. (Credit: La Fortaleza)

Gov. Alejandro García-Padilla recently signed the Puerto Rico Investment Companies Law to encourage investment and capital creation through more flexible regulation.

The mandate seeks to open the door to greater local investment and develop a new generation of Puerto Rican entrepreneurs.

“In line with our government’s programmatic platform aimed at sustainable economic development and the creation of more and better jobs, we passed a legislative measure that seeks to facilitate and streamline local investment,” García-Padilla said in a statement issued in his absence from the island.

The governor is in Washington D.C. testifying in Congress before the Senate’s Energy and Natural Resources Committee.

The mandate further seeks to draw participation of foreign capital to invest in Puerto Rico in cooperation with local capital.

“By opening access to Puerto Rican capital for investment, it is easier to make alliances with investors from all countries to multiply the effectiveness of our capital,” according to Senate Bill 232 that became law this week.

The measure establishes: that investment trusts will be exempt from corporate double taxation for the purpose of their investments; a new of 30 percent tax exemption of revenue from activities that are especially important for job creation; a special tax credit to encourage participation by conservative investors in job-generating activities; and increases the tax rate for offshore investments through mutual funds by 50 percent, to offset any expenses related to the newly enacted law.

“In short, this legislation has a dramatic economic potential. Investment in Puerto Rico is 25 percent less than what happens in the U.S., taking into account the proportion of our economy,” the law stated.

Foreign investment in Puerto Rico is approximately $10 billion annually. If Puerto Rico could reduce that difference to 19 percent, it would represent about $700 million in additional annual economic investment, the law stated.

“For every $1 million in investments in Puerto Rico, 33.3 jobs are created; $700 million of additional investment would represent the creation of approximately 23,000 jobs,” the mandate stated.

Ultimately, the law “aims to close the gap between what our economy produces and what is reinvested. By retaining a greater part of local capital, we can support our own businesses,” the governor said.

The new law will go into effect in 30 days, at which point it will be expanded to 120 days to give time to a multisectoral committee appointed by the governor to evaluate and propose the necessary structures to ensure its purpose.

The committee — to be chaired by Chief of Staff Ingrid Vila — will be composed by: Treasury Secretary Melba Acosta, Economic Development and Commerce Secretary Alberto Bacó, Sen. Ángel Rosa, Rep. Luis Raúl Torres, Government Development Bank Chair David Chafey, Financial Institutions Commissioner Rafael Blanco, La Fortaleza legal and legislative Advisor Ángel Colón-Pérez, UBS CEO Carlos Ubiñas, Banco Popular Financial and Insurance Services Vice President Juan Guerrero, Santander Asset Management CEO Frank Serra, and Puerto Rico Manufacturing Association President Waleska Rivera.

“At the PRMA we continue working and presenting alternatives aimed at Puerto Rico’s socioeconomic development and serving as a platform for ideas from the private sector,” Rivera said. “We’re committed to working as part of a multisectoral committee to make this law possible to ensure that it meets the goal of promoting economic development and job creation.”

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