The Caribbean has more to offer than great vacation destinations - it presents a good opportunity for those looking to start or expand their businesses in the Americas. Our United States Managing Director Jason Gerlis and Eliseo Roques-Arroyo from EDGE Legal look at why it's a good idea to do business in the island of Puerto Rico.
Puerto Rico's administration has implemented several incentives for businesses and individual investors to live, work and profit more freely. It is expected that by 2017 there will be an influx of entrepreneurs and financiers to Puerto Rico, investing around US $10bn in total, taking advantage of big tax savings and creating much-needed new jobs. Through the enactment of several laws to promote the export of services from Puerto Rico and the relocation of investors to Puerto Rico, an attractive framework has been established to attract new capital and foster economic growth by stimulating important new commercial activities in financial consulting, manufacturing, insurance, software development and internet marketing, among many other eligible activities.
Puerto Rico's economic crisis is evident - the public debt is close to US $72 billion, with the potential to become one of the largest debt defaults in its history. However, former IMF expert Anne Krueger say a series of structural reforms, including changes to labour laws and welfare, could help improve the situation. There is also work underway to strengthen the tourism and agriculture sectors, reducing power costs, increasing fiscal measures, encouraging industrial development, offering investment incentives and supporting existing businesses. An aggressive outreach strategy to attract new businesses is also on the local administration's economic recovery plan.
There are many other reasons why investors should consider Puerto Rico as an opportunity. The island is strategically located midway between North and South America - two of the world's fastest-growing economic regions – and is a US Commonwealth or "protected territory", so no passport is required for US citizens. This also means that in Puerto Rico's official currency is the US dollar and that Federal funds for infrastructure, social programs, education, research, and other areas are on offer. US federal laws are fully applicable within Puerto Rico, including but not limited to intellectual property.
Favourable conditions come together in Puerto Rico
On average, doing business in Puerto Rico costs 10% less and manufacturing wages are 65% to 80% lower than the US mainland. With a GDP of US$103.1bn, Puerto Rico offers the benefits of operating within a US jurisdiction while providing the benefits of a foreign tax structure. It also offers several US government incentives aimed at stimulating economic development and attracting Foreign Direct Investment (FDI) in manufacturing, tourism, exports, insurance, financial services, agriculture, hospitality and hotel development and renewable energy.
Puerto Rico has a population of more than 3.5 million from which more than 1.1 million are educated workers and bilingual. There is full presence of international banks and three local airports receiving more than 10 million passengers annually – in addition to another 1.2 million cruise ship passengers.
Entering a new market can present its challenges and make it difficult for businesses to keep track of changes that can affect their operations and remain compliant. It can also be hard to identify the opportunities that exist despite the risks. Having a partner that understands the local nuances and can address them is critical for a business' success.
TMF Group helps corporations keep compliant - understanding local law, regulations, processes and requirements is what we do. If you are investing or looking to invest in a country like Puerto Rico, local knowledge is vital to ensure you control costs, reduce risk and streamline operations.
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