For nearly a decade now, Puerto Rico has been stuck in an economic slowdown, with negative growth for six-straight years, high double-digit unemployment, labor participation languishing at a low of 40% and no end to the debacle in sight.

Puerto Rico, once the Shining Star of the Caribbean and a model for industrialization across the world, lost its luster. A manufacturing industry, that had long lost its competitive edge to other countries that were already starting to offer lower wages and excellent incentives in the mid-1970s, was no longer the only game in town. Decade by decade, a permit bureaucracy grew to intolerable levels and labor laws became prohibitive to the point that Puerto Rico became a very unattractive place to do business.

Today, thankfully, we are seeing the prospects of renewed economic activity—with two-straight quarters of positive growth—giving many investors the confidence to bet on Puerto Rico once again. The Gov. Luis Fortuño administration’s new model, offering bold incentives for both local and foreign companies to establish operations in Puerto Rico, is largely responsible for the island’s renewed attractiveness.

Armed with a comprehensive empowerment strategy, the Puerto Rico Industrial Development Co. (Pridco) is spearheading the crusade to put Puerto Rico back on the world map. Pridco’s Economic Development Model (MENE by its Spanish acronym) is driven by a host of incentives for the establishment of new business across industries.

The Economic Incentives for the Development of Puerto Rico Act—the economic-development plan’s backbone—provides a whole host of attractive incentives, including tax credits for businesses established to render services on a commercial scale for foreign markets or for other eligible businesses in Puerto Rico.

The broad array of benefits to businesses under this law’s umbrella includes tax incentives (as low as 4%), credits for research and development, tax credits as high as 50% of costs of investment in machinery and as much as a 90% exemption from property taxes.

The incentives list goes on and on: for job creation; for the manufacturing of furniture; for Pridco-promoted companies that improve properties belonging to Pridco; for the film industry; for scientific research and development; for banking and finance; for developers who invest in eligible tourism-related projects.

One recent addition to the incentives roster, the Export Services Act, aims to help grow the export of services through «100% tax exemption on dividends for 10 years or profit distribution from export service businesses; 100% exemption on property taxes for certain export services; a decree of 20 years, renewable for 10 more, guaranteeing these.»

Pridco is hell-bent on helping local companies promote beyond Puerto Rico’s shores. To be sure, the marketing incentives available have helped some companies make a giant leap to showcase their wares around the world. Pridco reports that the promotions program has helped more than 200 companies, created more than 14,000 jobs and attracted a commitment of more than $1 billion in investment over the past three years. That is a start to Puerto Rico becoming an important location for business investment.

Also very important, the whole of these incentives, say experts interviewed by CARIBBEAN BUSINESS, significantly offset onerous labor laws and permit procedures that we are glad are in the process of being fixed to add to Puerto Rico’s competitiveness. Puerto Rico is definitely in the process of becoming lean and mean again.

Pridco’s wide-ranging incentives are a leading step in the right direction to keep the momentum of positive growth. Hopefully, lawmakers pushing labor reform will follow this up to labor and the private sector’s acceptance for the good of job creation.

— con Maria Matta