By accepting the private sector proposal to exempt, through legislation, local taxes on capital gains, the Puerto Rican opens investment opportunities to inject money and stability to the recovery of Puerto Rico.
Taking advantage of the Opportunity Zones program, contained in the federal tax reform, constitutes a success. But it is one more piece of what should be a clear and comprehensive plan of economic and social development that maximizes these benefits, as well as the federal funds allocated for the island´s reconstruction.
The Opportunity Zones program - provided in the federal tax reform - would help balance the impact of the local tax reform that would be finally approved. The purpose is to significantly reduce the statutory corporate rate while individuals and companies reinvest their profits in areas of economic contraction and poverty. In return, they would be exempted from taxes for, at least, ten years. In the case of Puerto Rico, the definition of the Opportunity Zone program covers practically the entire island.
Measures like this one are urgent now, when International Monetary Fund forecasts anticipate that local economy will fall 2.3 percent this year and 1.1 percent in 2019. The same entity forecasts that unemployment will reach 11 percent in 2018 and 2019.
The commitment expressed by Steven Mnuchin, Secretary of the Treasury of the United States, plays in favor of Puerto Rico. The official has offered to attract investment through the Opportunity Zones program, to the point of coordinating the visit of potential investors. The government also has the support of the diaspora. It still remains necessary to concertedly press in Washington D.C. to facilitate the implementation of the federal legislation on the island.
Taking advantage of the Opportunity Zones program would allow the integration of the island into a system of stable incentives as it is part of the US economic development plan. Local efforts in this direction deserve support and space for evolution.
But it will take more than this valuable piece to frame the vision that shapes Puerto Rico in progress.
Proactivity, organized planning and the island´s credibility as an ideal destination to do business are essential in the search for investors from here and abroad. Destinations such as Washington D.C. and Colorado are competitors, with already defined geographic areas and markets eligible for development. This structure contrasts with the local offer, which leaves opportunities open to investors, at their discretion. Definition can reduce the risks of making mistakes in the types of investments that best suit Puerto Rico.
As part of the preparations and planning, it is up to the government, along with the private sector and other stakeholders, to identify the areas of interest to be developed, as well as the type of resources and support they require. It is also convenient to link potential investors with the chain of local suppliers, with the goal of creating jobs and generating billions in annual sales.
The construction of an island adaptable to accelerated global changes, including those imposed by climate, involves aligning mechanisms such as the Opportunity Zones program with core policies, like energy, urban development, transportation, education and social in a single vision. It also entails diversifying productive activities and generating local mechanisms that depend less and less on the arbitrariness of Congress.
The set of actions, strategically planned and with instruments such as the Opportunity Zones program, has the potential to turn greatest need zones into areas of progress and innovation. This would allow a more equitable distribution of benefits throughout the island.
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