In June, Puerto Rico participated in SelectUSA, the U.S. federal government’s most important investment attraction event. There, we presented the island as a destination full of opportunities for investment and business. However, other regions like Ohio, Texas, and Florida are competing with us by offering very attractive incentives to attract and retain companies in their strategic sectors.

For decades, the Government of Puerto Rico has implemented various tax and economic incentive laws without necessarily measuring or understanding their economic and fiscal impact. Are we truly incentivizing economic development—or merely subsidizing economic activity? Are we creating jobs sustainably? Are we promoting exports and productivity, or are we subsidizing inefficiency or redundant activities? What has been the taxpayer’s return on investment? What level of certainty do local or foreign investors have?

This is why Governor Ricardo Rosselló submitted legislation to establish a new Incentives Code for Puerto Rico.

We must distinguish between an incentive and a subsidy. An incentive contributes to economic growth by yielding more in return than what was originally invested. On the other hand, if less is returned, we are subsidizing that sector or activity. Subsidies aren’t inherently negative—especially if justified for social reasons or because a sector needs a boost to grow. As a result, we conducted cost-benefit analyses of dozens of laws with economic purposes. In general, sectors that promote exports, cost-effective import substitution, innovation, competitiveness, and added value generated a positive return on investment for the government.

A sector with a negative ROI does not necessarily mean its subsidy should be eliminated. On the contrary, with accurate data and sound assumptions, we can make a responsible and objective evaluation:
– Is the sector globally competitive or only locally?
– Should it be subsidized, and for how long?
– Does it promote entrepreneurship and technology?
– Is it linked to social objectives?
– What changes are needed for its return on investment to be positive?

For all these reasons, the Incentives Code is a key tool for economic development. It provides certainty and confidence to investors, consolidates and simplifies processes, and serves as a promotional instrument to attract, retain, and growbusinesses. By placing all incentive laws in a single framework, it facilitates the discovery and analysis of investment opportunities in Puerto Rico, especially in strategic sectors such as manufacturing, life sciences, aerospace, technology, agribusiness, tourism, and film, among others. It also creates a category for individuals (investors, scientists, and young entrepreneurs) and offers additional benefits for small businesses and for eligible activities in the municipalities of Vieques and Culebra.

It is also a tool for fiscal responsibility, as it promotes greater transparency, requires an annual incentive budget, and establishes mechanisms and processes for accountability and compliance.

Puerto Rico needs to create more and better jobs, encourage private investment, and promote exports, innovation, and competitiveness. The Incentives Code helps achieve these goals.