Transforming Puerto Rico´s business climate in order to leave behind an obstructive bureaucracy and deficient infrastructure that affect entrepreneurs committed to the retention and creation of jobs is an unavoidable and essential project for the island.
Puerto Rico ranked 65th in the last World Bank’s Ease of Doing Business report, among 190 jurisdictions around the world. The World Bank mentions, among other issues, that an entrepreneur has to pay contributions in 16 instances during a regular year and invest about 218 hours in the process.
This dynamic that keeps hampering businesses must be left behind. Re-engineering efficiency-based processes, like experts –who identify investment strengths in other competitive jurisdictions- have recommended, should be a top priority to get Puerto Rico out of economic stagnation. This commitment has to be immediately executed to put an end to the practice of designing models that do not prosper.
Starting a business on the island involves processes that can take up to 156 days. A construction permit entails 22 proceedings. In many cases, these are businesses with proven necessity and convenience. Bureaucratic hindrance prevents job creation and discourages entrepreneurship.
In order to facilitate the permits process, it should be a priority to implement digital electronic systems that also allow the necessary safeguards to regulate the risks of environmental impact and public health.
The Uniform Data System adopted by the Permits and Endorsements Management Office and the Unified Internal Revenue System of the Treasury Department look like steps forward. But, both agencies face the challenge to ensure that the systems remain operational and user-friendly. The Land Registry –which has long delayed the approval of projects in commercial and industrial areas. also needs a similar change.
It is essential to efficiently reduce, simplify and streamline proceedings in order to encourage the operation of small, medium and large businesses.
Any progress in this line by the central government must come along with those of the municipal governments that in many cases follow the traditional way, which requires the delivery of many documents and involves manual review and approval in different offices. These bureaucratic systems are difficult to control and related to undesirable practices such as patronage or nepotism as a condition to advance or obtain a permit.
The Oversight Board recently focused on Puerto Rico’s delay in implementing structural reforms designed to support debt restructuring agreements and the operation of public systems. The Board stressed the need to eliminate obstacles for business development.
Puerto Rico cannot keep postponing essential changes that give, for example, priority to renewing the power grid through diversification of energy sources. It also needs to advance in the implementation of digital mechanisms to facilitate permits to new businesses. Both reforms are essential for new investments on the island.
In Puerto Rico, opportunities for progress also suffer from the growing tax policy that undermines citizens’ and businesses’ resources. Doors to development do not open just by putting the debt burden in taxpayers´ pockets, especially if there are no significant improvements in public infrastructure and satisfactory access to essential services.
The process to start and maintain businesses in Puerto Rico must be swift and have accountability mechanisms. Transparent processes that bring investment will contribute to the diversification of companies, reduce unemployment and make it possible to comply with debt repayment plans.
These transformations must become the basis for stability and development leading to the island's return to capital markets and economic and social flourishing.