A change in methodology allowed Puerto Rico ´s position, as a destination to do business, improve five points to reach the 64th position in the latest World Bank´s Ease of Doing Business report.
The improvement happened despite the fact that, at least since 2010, bureaucratic or regulatory conditions have not changed enough on the island for the indicators to show any real improvement. However, that is intended to change with a series of initiatives in the government structure contemplated in the new Fiscal Plan recommended by Governor Ricardo Rosselló Nevares administration.
Puerto Rico is behind in five of the 10 areas measured by the World Bank project. Those poor grades are, specifically, in construction permits, property registration, minority investors protection, contributions payment and contracts execution.
In each of these areas, the island does not appear among the top 100 with the best score. The World Bank project measures business across 190 countries.
However, the goal is that in these areas with deficiencies - except for the minority investors protection - Puerto Rico will improve to be among the top 100 countries. This way, the global rating of the island could get out from stagnation and be among the first 50 economies that facilitate businesses, according to the new recommended Fiscal Plan.
Including measures to improve the ease of doing business in Puerto Rico emerged as a Board´s requirement in a letter sent on February 5, during the draft revision process.
"To generate the growth stated in the Proposed Plan, the Proposed
Plan must commit to improving specific World Bank Ease of Doing Business measures in
the areas in which Puerto Rico most significantly trails the mainland, in particular the
categories of Construction Permits, Registering Property, Paying Taxes, and Getting
Electricity," says the letter signed by José B. Carrión, president of the Board.
The order requests specific measures to improve the investment climate, an implementation schedule and the goals to be included in the plan.
"We believe in this, even before the JSF ... There is an understanding that we must have a solid base in terms of being competitive," said Manuel Laboy, Secretary of Economic Development and Commerce.
To a great extent, the proposed measures are supported by initiatives anticipated by the government. For example, in the construction permits area, they mention the Single Use Permit project, which essentially seeks to simplify the process for the applicant and eliminate bureaucratic procedures. Attempts to standardize permitting processes in the municipalities and the central government are also included. By doing so, they seek to avoid setbacks generated by differences in jurisdictions regulation.
"It is not only changing a process, but also changing an office culture", said Christian Sobrino, governor ´s representative before the Board.
"The permits reform is well advanced. One of the important things about the permits reform is related to the adoption of joint regulations in municipalities. The last time I checked, almost all municipalities allowed offices to adopt the joint regulation that unifies the processes", said Laboy.
They expect to go from position 138 to 87 in the ranking through this changes. This would represent 51 positions or 40 percent improvement.
On the other hand, those improvements outlined for electricity are not different from those already announced by the governor with the sale of power generation plants and the privatization of the energy transmission and distribution system. Sobrino said that these privatizations will address the claims for a reliable service.
On the other hand, regarding Registering Property, multiplicity of government agencies in the process, slowness in officework and limitations in coverage and transparency are raised as problems.
The government's proposal to address this is technology and privatization, according to Sobrino. The official did not specify the functions that may be transfered to private hands. Nor did he mention which additional technology would be implemented after the recent systems digitalization in this office.
To collect or not to collect
According to the plan, problems in the Treasury Department are due to duplicity in tax jurisdictions, the time it takes for the processes to comply with taxation, high rates of property taxes and license fees.
To correct this, the government mentions that it will legislate a tax reform that seeks to simplify Treasury processes. However, the details are not fully reflected in the recommended Fiscal Plan, beyond the idea of lowering tax rates for individuals and corporations.
This taxes reduction has caused differences between the governor and the Board, the entity has warned that any tax change should not reduce government´s revenues.
Precisely, this is what would cause a rates drop. Sobrino indicated that the reform will seek to maintain the same collections level that the government currently has through cuts in the tax incentives offered, among other initiatives.
On the other hand, Sobrino mentioned that a reconfiguration of property taxes, that supply municipal finances, is also anticipated. The recommended Fiscal Plan states that these changes would happen as part of the regionalization plan through the creation of counties, which details are also unknown.
Professions to be deregulated
These initiatives, which seek to influence the World Bank's measurements on the ease of doing business, will be combined with others that also seek that Puerto Rico regain competitiveness and attractiveness for investments, said Sobrino.
For example, one of the initiatives that will be promoted is the deregulation of a series of collegiate professions or examiner panels.
The official did not specify which professions would go through this process. However, he said that the criteria will be that those professions whose results do not compromise or impact society would be deregulated.
"There are some professions and certain activities subject to certain controls, such as lawyers, doctors and architects ... For them, there are valid reasons for regulation because they have functions that affect the community. There are other professions that seem to limit competition and to the extent that there is no public interest to defend, those are the ones that must be eliminated, "said Sobrino.
Sobrino claimed not to know the details about the deregulation that is contemplated for overland haul. According to the Fiscal Plan the intention is to lower the costs of doing business in Puerto Rico.
On the other hand, Sobrino did mention that they will be amending the condominium law to simplify the decision-making processes of condominiums.
The official said that the measure does not necessarily seek to facilitate buildings eviction to construct new buildings, but to promote an agile regulation that makes viable a better structures maintenance.
"There is a lot of construction and maintenance work that can be done and that is not being done because it can be difficult to comply with the law," he said.
Initially, the bills of the tax reform and the Incentive Code were supposed to be filed during the first quarter of fiscal year 2018 and approved in the following quarter. However, the plan was not achieved mainly due to Hurricanes Irma and Maria in September 2017.
In fact, from the 15 structural changes mentioned by the government in the New Fiscal Plan proposal, only the efforts to improve government transparency and mergers of agencies, such as the one proposed for the Energy Commissions, the Telecommunications and Public Service Regulatory Boards are advanced.
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