In the two years since the government passed Laws 20 and 22, some 900 companies have gotten decrees and generated more than $1.4 billion in economic activity in Puerto Rico through new operations and exports, a study revealed Tuesday by the Economic Development and Commerce Department showed.
The “Study of the Impact of Laws 20 and 22 on Puerto Rico’s Economic Transformation” conducted by the Estudios Técnicos consulting firm establishes the effects and the projections of the mandates passed in 2013 designed to attract foreign investors, stimulate local entrepreneurs and promote services exports.
As of November 2015, the government had approved 328 decrees under Law 20 and 574 decrees under Law 22. For the most part, Law 20 companies fall under the categories of consulting, advertising and public relations, financial services, centralized management services, professional services (legal, tax and accountant), development of computer software, engineering and construction designs.
Close to 20 percent of Law 20 grantees are local businesses and close to 80 percent of applicants are foreign, the stud showed. Around 65 percent of exports are destined to the United States market (65 percent), followed by the Dominican Republic and Mexico, respectively.
“Services exports generate high-quality employment opportunities and high value-added investments,” said José Joaquín Villamil, president of Estudios Técnicos.
Annual payroll averages close to $45,000 per job, and businesses had a total payroll of $137.1 million, he said. This payroll estimate includes 7,033 total employment from direct, indirect and induced jobs. Employment in the technical services industry has increased between 2012 and 2014 by 6.4 percent, which could be attributed to Laws 20 and 22 because many of the investors that take advantage of these laws offer these services, he said
The economist added that Law 20 companies have reported total revenues of almost $1.2 billion with aggregate net income of $563 million, which provides fiscal revenues of almost $34 million in corporate income taxes.
The government estimated that by 2024, another 3,500 decrees for Law 20 will be added, which are expected to generate close to 50,000 employment opportunities. The total payroll to be paid by 2024 is estimated in $3.1 billion and the accumulated corporate income tax paid in $800 million.
Meanwhile, data related to Law 22’s economic impact showed that most grantees are consultants, traders within the financial industry, entrepreneurs and investors. About 89 percent reported having their previous residence in the U.S. mainland, and 11 percent in Venezuela, the United Kingdom, Spain and other countries.
The highest economic impact of Law 22 comes from investment in local real estate, which amount to almost $266 million, mainly in Dorado, Humacao, Río Grande and Condado.
“Activity associated to Law 22 companies has generated around 2,483 new jobs on the island. Total potential spending for all decree holders amounts to more than $73 million,” Villamil said.
“It’s estimated that by 2024 there will be approximately 4,000 approved decrees. The value of real estate purchased by Law 22 decree holders could be up to $1.7 billion, and the individual expenditures within the Island could reach over $830 million,” Villamil added.
The study concluded that Laws 20 and 22 could further benefit the local economy if government and service providers capture the secondary effects of the decrees and identify new markets beyond the local demand.
“These measures, combined with other efforts that help guarantee wider secondary effects, have enormous potential to promote economic development based on exportation. Both laws can continue promoting the development of a service oriented economy in Puerto Rico, help in the service export segment growth and increase a specialized industry with well remunerated jobs,” Villamil said.