Institute for Economic Liberty urges reforms for Puerto Rico’s private sector
A new report outlines more than 50 laws that limit growth and proposes solutions.
Puerto Rico has experienced state control over productive assets and significant government intervention in the market for decades, which has limited growth by reducing private investment and entrepreneurship. This has contributed to a low labor force participation rate, low wages, high poverty levels and significant emigration.
This is according to the “Economic Freedom Actions for a Fair and Prosperous Puerto Rico” report, published by the Institute for Economic Liberty (ILE). The report highlights more than 50 laws and regulations that limit opportunities in Puerto Rico and provides guidance for the next government administration to establish new public policies aimed at “unlocking the island’s potential.”
ILE’s proposals focus on eliminating barriers to economic freedom, promoting private sector development based on competitiveness and innovation, allowing individuals to make decisions for themselves, and reducing tax burdens that disincentivize wealth creation, with the goal of reducing poverty and dependence.
The report proposes specific actions in areas affecting individuals and businesses, including occupational licensing, tax burdens, property registration, ease of doing business, inventory tax, price controls, container inspections, corporate subsidies and incentives, and municipal business operations.
The recommendations are particularly relevant for micro, small, and medium-sized enterprises (MSMEs), which have fewer resources to manage the costs of excessive regulations. A balanced regulatory environment, the report suggests, is crucial for the creation and development of MSMEs, which are considered the backbone of the economy.
Additionally, the report discusses the size of Puerto Rico’s government and public spending, questioning whether the 132 existing state agencies and entities are necessary. It notes that some U.S. states with similar populations operate with only 37 agencies, raising the issue of why Puerto Rico needs nearly 100 more.
The report’s author, Ángel Carrión-Tavárez, director of Research and Public Policy at ILE, stated: “The laws and regulations studied and included [in the report] are the result of paternalistic and protectionist public policies that failed to achieve their purpose and have ultimately harmed those they intended to help or benefited some at the expense of others.”
“This inequity and injustice have prevailed for far too long and have been detrimental to Puerto Rico,” he added. “Ending unnecessary government intervention in private initiative and creating a favorable environment for investment are fundamental to repairing the socioeconomic damage caused by the regulatory excesses of current policies.”
The report argues that implementing the proposed reforms comprehensively would encourage private investment and entrepreneurship by reducing production burdens and improving the return on private investment. This, in turn, could lead to the creation of new businesses, more jobs, better wages, increased labor force participation and a reduction in the informal economy.
ILE founder and CEO Jorge Rodríguez emphasized, “The government must allow the people, with their talent, creativity and innovation, to be the driving force of Puerto Rico’s prosperity. This report clearly shows the many undue barriers and the government’s centralized economic planning that deprive people of the opportunity to make a living for themselves and their families.”
Rodríguez expressed confidence that the study will serve as a roadmap for the next government, particularly the legislature, with the goal of “unlocking the potential of Puerto Ricans and allowing them to fulfill their dreams and life projects, and contribute to a better Puerto Rico. Only then can a firm and sustainable change be achieved toward prosperity and well-being for everyone on the island.”
