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L Puerto Rico’s concerted efforts to globalize its economy, boost exports, and lure foreign investment is producing tangible results. Right this instant the Island is reemerging as a valuable destination for commercial opportunities.


GREETINGS!

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ritical junctures, if managed with intelligence and responsibility, provide a unique opportunity to implement creative and productive change. Faced with the current situation, our challenge lies in undertaking bold policies that have been postponed for too long. The course is clear: we must regain Puerto Rico’s standing as a dynamic and productive society; promote local goods and services, as well as international investment; increase our competitiveness both regionally and abroad; rethink the way we operate in order to achieve sustainable growth; and last but not least, we must strive for higher quality of life and solidarity. As we aim for a renewed and improved Puerto Rico, these should be the goals that guide our progress. Alejandro J. García Padilla Governor of the Commonwealth of Puerto Rico

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he ability to catch a glimpse of a better future is a powerful tool to overcome difficult situations. It is a way to set higher goals and define a clearer path towards success. That vision of prosperity and growth is the one that guides those of us who currently have the responsibility of transforming Puerto Rico. In our view, we are an Island that has emerged stronger from a complex situation and a people that continues to grow through hard work. It is a place of undoubted potential, but it is up to us to create opportunities. Since 2013, we have been designing a Puerto Rico that serves both Puerto Ricans and international partners. Today, we have a more diversified and dynamic economy that embraces innovation — one that is capable of adapting to global demands. How do I visualize the modern Puerto Rico? Without a doubt, as a multicultural destination of entrepreneurial effervescence, connected to the world, exporting all kinds of services and, at the same time, as a hub for knowledge and entertainment. A Puerto Rico that moves forward with all the potential to become the Singapore of the Caribbean for those with entrepreneurial vision, the Wall Street of the Caribbean for the tenacious investor, and even the Las Vegas of the Caribbean for those people with a free spirit. Welcome to Puerto Rico, a land of opportunities. Alberto Bacó Bagué Secretary of the Department of Economic Development and Commerce of Puerto Rico (DEDC)


TABLE OF CONTENTS PUERTO RICO

30-31 INVESTMENT A land of opportunities for Latin American enterprises

33-37 INFRASTRUCTURE Portek steers the Port of the Americas towards the future New horizons for public-private partnerships

38-41 HEALTHCARE 5-15 COVER STORY Puerto Rico reaches new innovation frontiers: the sky is the limit

16-17 GLOBALIZATION The old world is the new world for a globalized Island

18-25 INTERNATIONAL COMMERCE Strategic, multi-national bases promote bilateral progress

26-29 TESTIMONIALS Investors share powerful stories of Puerto Rico’s transformation

Medical tourism: local growth of a global service industry

42-43 EXPORTS Legal success! Puerto Rico is turning into an international hub of service exports

44 INVESTMENT EB-5 Visas open doors for multiple ventures

45 FINANCE More than just sunny beaches, one-of-a-kind tax incentives

52-57 TOURISM Iberia is back

46-47 BANKING Custom-made services quickly gaining ground

48-49 INVESTMENT How would you like to promote Puerto Rico?

50-51 AEROSPACE A giant industrial sector takes flight

ALTA: a synonym for aerospace development Nonstop arrival of mega cruise ships Ecotourism: a hotel, a maze, and a zip-line

58 COMMERCE A tasty combination of investment and gastronomy

60-61 LIFESTYLE A Gold Trail that leads to fun


COVER STORY Secretary Alberto Bacó Bagué Deputy Secretary Juan Carlos Suárez Executive Assistant & Project Coordinator Patricia De la Torre de Haro www.businessinpuertorico.com Year 2 • Vol 2 • December 2015 Official Publication of the Puerto Rico Department of Economic Development and Commerce (DEDC) International Edition

INVESTinG Puerto Rico is a production of BizNet Media, Inc. www.biznetmedia.net Director / Editor in Chief José Julio Balmaceda jbalmaceda@biznetmedia.net Project Manager / Senior Editor Ivonne Brown Ieromazzo ivonnebrown64@gmail.com Senior Associate Editors Alex Díaz Ángeles Alvarado Stefan Antonmattei Héctor Iván Monclova María Teresa Morón Associate Editors José Javier Balmaceda Ana María Ruiz Goenaga Copy Editing & Proofreading Kristen Hayashi Matías del Valle Translation José Javier Balmaceda Olguita Torrens Photography María Susana Bianchi Getty Images Official Archive of the Government of Puerto Rico Graphic Design Gretel Haeussler Badillo ABA GRUPO CREATIVO Printing House Graphic Printing Distribution All Distribution Servicios Combinados

BizNet Media, Inc. www.biznetmedia.net President José Julio Balmaceda jbalmaceda@biznetmedia.net (787) 607-1013 General Manager Ivonne Brown Ieromazzo ibrown@biznetmedia.net (787) 398-3711 BizNet Media accepts voluntary professional collaborations without the promise of publication or circulation. All contributions submitted to the company, including graphic material, will not be returned. With the purpose of ensuring editorial quality, BizNet Media reserves the right to make stylistic changes to contributions and/or interviews submitted to the company. Neither the DEDC nor BizNet Media are responsible for the expressions or images of collaborators and/or advertisers. Please submit all correspondence, press releases, and collaborations to: jbalmaceda@biznetmedia.net Contacts: (787) 607-1013 • (787) 398-3711 Corporate Address: 472 Calle Cabo Alverio • San Juan, PR 00918-2619 Ext. Roosevelt, La Merced, Hato Rey All rights reserved. Partial reproduction of this work is allowed, provided there is express consent from INVESTinG Puerto Rico and all sources are properly cited.

Puerto Rico in the world, the world in Puerto Rico


COVER STORY

Puert Rico A Worldwide Economic Transformation

A renewed closing of the ranks between the public and private sectors has ignited a thriving process of internationalization in Puerto Rico that promises to break the island’s insularism and usher in a new grand goal for the 21st century: to conquer the world. “I am convinced we have the formula for success,” said Alberto Bacó Bagué, Secretary of the Puerto Rico Economic Development & Commerce Department (DDEC by its Spanish acronym). “Puerto Rico is in the midst of a second economic transformation, and the time to ride the wave is now.” The audacious strategy is not falling on deaf ears, as seasoned investors have taken notice and are moving in. One of the most active is real estate developer Nicholas Prouty, CEO of Putnam Bridge Funding. “When my firm makes the decision to invest in a new market, we conduct a lot of research,” Prouty told INVESTinG. “There is a silent revolution taking place here, and it is a fascinating transition that will allow Puerto Rico to assume its due place among countries like Singapore that are models of economic development in the 21st century.” He describes it as “a profound inflection point. The planets are aligned. Puerto Rico has the singular opportunity to transform itself into a financial power. The country has everything it needs: a rich intellectual tradition propelled by some of the best universities in America, a great number of cultural activities, and a business ecosystem as advanced as any I know. Labor costs in Puerto Rico are higher than in developing

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countries, but 30% to 50% lower than in the States, and the workers are better here. North-bound shipping costs to the States are highly favorable. Office space and real-estate values are generationally low. The time to establish oneself in Puerto Rico is now.” Mohnish Pabrai, CEO of Pabrai Investment Funds and also a business leader of international acclaim, echoes Prouty. “We took a look at Puerto Rico and were immediately convinced. It is difficult to beat. We’re on U.S. soil with the regulatory environment we’re accustomed to, the climate is fabulous, the talent is incredible, and the taxes are very advantageous. So far, we’ve done extremely well here, and we’re considering bringing in other units.”

“We took a look at Puerto Rico and were immediately convinced. It is difficult to beat. We’re on U.S. soil with the regulatory environment we’re accustomed to, the climate is fabulous, the talent is incredible, and the taxes are very advantageous. So far, we’ve done extremely well here, and we’re considering bringing in other units.”Mohnish Pabrai, CEO of Pabrai Investment Funds One local leader agreed. “There are several critical elements in the economic development of Puerto Rico, and one that is particularly important is that we must continue inserting ourselves in the global economy and across the hemisphere. We must leverage our talent and do whatever it takes to move Puerto Rico forward,” said Carlos Rivera, president of the Puerto Rico Manufacturers Association (PRMA), which includes the multinational companies most representative of the global economy on the island.

Rivera, general manager of Edwards Lifescience Puerto Rico -- a plant affiliated with a global leader in the cardiac-valves and hemodynamic-monitoring space -- is a leading private-sector voice who has joined the mission of internationalizing the island. The government, for its part, is now a business facilitator, led by the DDEC, in a historic public-private partnership that meets the highest standards of sustainable socio-economic advancement.

“I am convinced we have the formula for success… Puerto Rico is in the midst of a second economic transformation, and the time to ride the wave is now.” Alberto Bacó Bagué, Secretary of the Puerto Rico Economic Development & Commerce Department

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COVER STORY

A trio that delivers Internationalization. Diversification. Integration. According to Juan Carlos Suárez, DEDC Deputy Secretary, those principles create a framework that delivers tangible results based on teamwork, clear goals and transparency. The message is being transmitted to key markets across the planet and is “clearly” being heard, he said, adding that it consists of an ambitious trilogy of objectives that are also shared by the private sector and are aligned with “the three pillars of the DEDC’s Economic Development Plan: traditional industries, high-impact projects and strategic investments.” Does the south have a role in those objectives? “Of course,” Suárez affirmed. “The economic relationship with Latin America is an important element of the economic policy of our government, and we are currently expanding the island’s international portfolio of investments. In previous decades, Puerto Rico’s model was focused in one direction, the U.S., to attract capital and business relationships. But times have changed. These are times of collaboration, of intense capital mobility, talent, knowledge and technology. Puerto Rico is the natural link between the United States and Latin America, and we are committed to strengthening this positioning.” Agustín Arellano, President and Executive Director of Aerostar Airport Holdings, operators of the Luis Muñoz Marín International Airport (LMM) in San Juan, concurs. “We’ve become part of the economic development and relaunch of Puerto Rico. To those who wonder if it makes sense to invest in Puerto Rico, I can say there is plenty of certainty and transparency, so much so that we’ve invested well over $700 million [since 2012] and plan to invest another $200 million.” The swift response by the private sector to the island’s new incentives, in alignment with corporate objectives, is widely deemed as highly encouraging. Government and business alike are expanding the frontiers of offshore commerce, driven by innovative projects, and are closing ranks behind the inescapable objective of achieving a vibrant economic rebound in Puerto Rico. “We are the principal multi-brand chain of casual dining restaurants in Brazil, and our strategy calls for a presence in captive markets with high pent-up demand, as we have in Puerto Rico. In 2014, we moved ahead with the expansion of our operations at LMM with an investment of $22 million and the creation of 282 direct jobs in the next three years,” explains Juan Comulada Rivera, General Manager of International Meal Co. Puerto Rico.

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“We’ve become part of the economic development and relaunch of Puerto Rico. To those who wonder if it makes sense to invest in Puerto Rico, I can say there is plenty of certainty and transparency, so much so that we’ve invested well over $700 million [since 2012] and plan to invest another $200 million.”Agustín Arellano of Aerostar Airport Holdings “Our investment in the airport will include the opening of new food-service outlets, construction of a General Aviation Terminal (GAFIS), a new hangar for the operations of the company, and the renovation of the existing hangar. The company, in addition, will expand businesses not related to the airport, including opening new food and beverage franchises around the island and food concessions in hospital centers.” At a cost of $600,000, added Comulada, “we will build a new hangar to receive more private jets and chartered flights. Likewise, we will invest another $600,000 to expand air-cargo handling and storage, and we will make improvements to the facilities where we provide maintenance and fueling services. The company has already hired around 500 workers, and we expect our payroll to reach 720 by the end of 2015. With the announced expansions, we anticipate that the number of jobs will reach a total of 1,000 in 2016. Next year, IMC should open three restaurants outside the airport, with an investment of $4.2 million, and several others in Terminal C totaling $1.8 million.”

The primary goal, public and private sector leaders agree, is to make the benefits of internationalization tangible, while engaging in markets that in the past did not feature among priorities for the island. The United States remains the principal target, but Puerto Rico has decided to build upon the solid ground it has established at a global level, and particularly in continental and European destinations. This forms the basis for the island’s focused exploration of opportunities in Ibero-America, a sociocultural bloc with deep roots in Puerto Rican history. Spain, Dominican Republic, Cuba, Costa Rica, Panamá, Guatemala, Ecuador, México, Perú… “Latin America is a global power. With compelling figures such as a Gross Domestic Product of $9 trillion, the world observes us and follows our steps closely. We are in a position to change the course of the future with strategic alliances,” affirms Bacó. Hernán Plazas Rodríguez, Manager of Puerto Rico VA+R Consulting, sees it the same way. “We are a Colombian company focused on growth opportunities in national and international markets. In our client portfolio, we have companies in oil, engineering services, education, software development, call centers and biotechnology. Our projects capitalize on the knowledge provided by academia on the island, as well as the export potential and the possibility of adding value to the community. Projects as varied as the genetic improvement of cattle, a clinic for psychological support, and pollination services induced through bees, are about to begin or are in full feasibility studies.” The opening of new regional offices is a component of this global and regional strategy. Bogotá and Lima opened in 2014, joining the four incumbent offices in cities and countries with long ties to Puerto Rico: Madrid, Spain; Panama City, Panama; Santo Domingo, Dominican Republic; and New York, US (see pages 18-25). “The logical entry point from Latin America to the United States,” stressed Bacó, “is not Miami. It’s Puerto Rico. For years, we have successfully navigated the ways of business in the United States. The uniqueness of the Island as a jurisdiction within the United States but with fiscal autonomy, makes us the natural investment bridge for Latin American companies, an ideal springboard toward a potential market of 450 million people.”

Bacó is spot on. Under the Commonwealth status, Puerto Rico is part of the United States for legal purposes and regulatory protections, but operates as a foreign jurisdiction for tax purposes. It is an advantage no other jurisdiction enjoys and allows for the granting of fiscal incentives that minimize taxation. Puerto Rico offers a 4% tax, compared with 54% for companies that set up in the States, under a range of incentive laws -- Law 20 for service exports; Law 22 for individual investors who establish residence; Law 273 for offshore finance; Law 399 for offshore insurance; Law 27 for film and creative services; Law 73 for manufacturing; Law 74 for tourism; and the denomination of EB5 for investment visas. So attractive and beneficial are these instruments, generally referred to as 20/22, that some analysts have become fond of calling them “the equivalent of a checkmate for the competition.”

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COVER STORY

Crisis as opportunity “The investments we have made showcase the long-term commitment Puma Energy has established in Puerto Rico, and proof that investing in the country facilitates the development and growth of enterprises like ours.” Víctor Domínguez, general manager of Puma Energy for Puerto Rico and the U.S. Virgin Islands

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“We have taken on the task of diversifying the economy. Today, it has become impossible to achieve economic development based only on traditional manufacturing. Not putting all our eggs in one basket has become a form of survival strategy,” said Bacó. As such, and so as not to rest on its laurels, Puerto Rico has opted to open itself to world markets and bet all or nothing on its legendary creativity. The result has been a historic inflection point that has thus far included powerful investments and the arrival of large capital sources. The list is extensive, but some names stand out: Paulson & Co., Putnam Bridge, Pricewaterhouse- Coopers, Aerostar, Neolpharma, Puma Energy, Metropistas, and Taubman Centers. The recent entries (around 1,000 and counting) represent the first to benefit from the attractive scenario of tax incentives that 20/22 represents, formulated as it is to attract producers and exporters of services (information, financial, insurance, creative, and others), as well as the relocation of residents and new local companies. “In the United States, we saw how taxes continued to increase. The business environment was changing. The tendency was, increasingly, toward more regulation and government intervention. In Puerto Rico, we found the contrary, a very open, hospitable jurisdiction that was grateful for our arrival, not to mention the great financial incentives, the magnificent economic development team and the abundance of resources. The combination of all these factors facilitated the decision greatly and accelerated our relocation to Puerto Rico,” said Cris Cannon, President and Founding Partner of Zurixx, a leading global celebrity-brand agency. “The mortgage industry in the U.S. is valued at more than a trillion dollars, and in Puerto Rico, we can operate under the same financial regulations as the States. It is a business environment where we feel very comfortable. Our growth potential is enormous, and Puerto Rico constitutes the perfect springboard. The difference here is the talent. The management and employees are seasoned and dedicated,” added Pavan Agarwal, CEO of Sun West Mortgage.

Víctor Domínguez spoke with the same degree of enthusiasm. The General Manager of Puma Energy for Puerto Rico and the US Virgin Islands, having spearheaded an investment in excess of $450 million, said the company holds “a commitment to the markets in which we operate. We support their growth and development through the generation of direct and indirect jobs. In 2010, we had 24 employees in Puerto Rico, and we now have 227 direct jobs and around 3,000 indirect jobs. We have selected Puerto Rico as our regional hub where we manage the operations of Puma Energy across the Americas, and we will soon be inaugurating a new corporate building.” One could say that the local trajectory of this corporation can be characterized, therefore, as “energetic”. Said Domínguez: “Our immediate expansion plans include the growth of our export and retail operations to other Caribbean islands, including St. Croix, Antigua and St. Maarten. Now that we have consolidated our acquisitions, we want to optimize our asset base and the infrastructure investment we have made in Puerto Rico. We are looking to expand our product portfolio and enter new business sectors. In 2014, we launched in Puerto Rico PUMAGAS, a division that imports and distributes liquefied petroleum gas (LPG). LPG is purchased primarily by commercial, industrial and transport clients. We’re waiting for regulatory approval to be able to distribute LPG cylinders through our gas-station network. With the strategic acquisition of BP’s operations, we have become leaders in the aviation sector in Puerto Rico. We are present, basically, in every

possible line of business: retail, wholesale, LPG, aviation, bunkering and lubricants. Our objective today is to optimize our operations, to be more efficient in terms of operating expenses, and to expand in the Caribbean.” As with so many investors, Domínguez’s expressions become a de facto promotion of Puerto Rico. “The investments we have made showcase the long-term commitment Puma Energy has established in Puerto Rico, and proof that investing in the country facilitates the development and growth of enterprises like ours.” “We believe in Puerto Rico,” he added. “We began in 2008 with an investment of more than $7 million in a Puerto Rico Land Administration property, and we’ve continued growing in an organic and sustained manner since we made our first strategic acquisition in 2011. We have become one of the leading companies in energy and fuel on the island, with 344 service stations and four storage terminals, which allow us to guarantee the sourcing of quality products and the necessary flexibility to respond to demand cycles. Our volume is close to 1.4 million monthly barrels, including the sourcing to PREPA. In recent years, we have invested in the rehabilitation of the Bayamón terminal, with cutting-edge technology and a storage capacity of close to two million barrels of liquid fuel and 96,000 barrels of liquid gas. And recently, we acquired the aviation business of BP, becoming one of the companies in charge of the operations at the [LMM] airport, serving more than four million passengers per year.”

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COVER STORY

Past experience signals future performance Accelerated by annual meetings like the Puerto Rico Investment Summit, these are unequivocal signs of a country that embraces global challenges, maximizes emerging opportunities and carves out its place in an irreversible landscape marked by the Knowledge Economy, from scientific research to film production. The island has no shortage of prior success stories. Of the world’s 20 leading medical-device manufacturers, Puerto Rico is home to 13, and seven of the top 10 highest-selling medicines on the planet are produced here. It is a foundation that has produced high-caliber talent, augmented by 22,000 STEM students (science, technology, engineering and mathematics) each year. The island ranks third in leading competitiveness indexes worldwide in the availability of scientists and engineers. This formidable combination of talent and experience is awakening contagious enthusiasm across many fronts. “For me, this is the new land of opportunity,” said Alex Daley, Investment Strategist at Casey Research. Compared to other centers in Latin America, Puerto Rico has enormous advantages that go beyond tax incentives. That’s the message being widely disseminated outside the country. Law 22 represents a true innovation for the private capital market, including venture capital funds. Almost every day, I am in contact with these firms, including fixed income, raw materials and other marketable securities, considering establishing their operations in Puerto Rico.”

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“For me, this is the new land of opportunity… Compared to other centers in Latin America, Puerto Rico has enormous advantages that go beyond tax incentives.” Alex Daley, Investment Strategist at Casey Research

Small business: a healthy obsession The big players are not the only ones benefiting from this new Puerto Rico. Entrepreneurship, powered by creative vision and export business, is continually strengthened by the Puerto Rico Commerce & Export Co. (CCE by its Spanish acronym) and its highly acclaimed promotional strategies, including more than 20 trade missions per year, the biannual Expo Puerto Rico event, the agency’s alliance with the Economic Development Bank for Puerto Rico (EDB, which may soon be incorporated into the DDEC), and CCE’s accomplished educational entities -- mainly the International Commerce and Entrepreneurial Development Institute. “Our main focus remains the emergence of micro, small and midsize enterprises, which just in 2014 grew 5.9% to 44,848 businesses, the highest level in the last eight years,” said CCE Executive Director, Francisco Chévere. As has been reported, about 10 companies are being promoted as franchise brands looking to export their concepts, and most of the new small businesses (pymes, as they’re commonly referred to in Spanish) have benefited from recent laws (62, 120 and 135) that enhance the creation and retention of jobs, including a special emphasis in financing for young entrepreneurs. “The government of Puerto Rico supports these actions, in line with the alliances we continue reinforcing with the private sector. It is the only way in which we can move this country forward and insert ourselves in the major trend driving foreign trade, starting with our next-door neighbors.

If we do not take this train now, we will miss it,” augurs Chévere. This public-private commitment finds a formidable ally in the tourism industry, as captured by a vigorous Visitor Economy and the record number of tourists who arrive on the island by air or sea (cruise ships). The high tourist traffic partly explains how Puerto Rico, an island 100 x 35 square miles, can boast three international airports, seven regional airports, and 11 commercial transshipment ports, where leading airlines and shipping companies increasingly operate. Only recently, Volaris began work on a direct route between Puerto Rico and México, joining other efforts to connect Puerto Rico with the world. COPA Airlines, Avianca, Air Europa -- all of which have boosted their established operations in Puerto Rico with an extraordinary spike in business -- plus Norwegian (with direct flights to London and Scandinavia), and the notable return of Spain’s Iberia, strengthen the country’s international-travel infrastructure and add to growing number of direct flights to principal mainland cities, mainly by U.S. airlines. Along this line, the island recently created a legal platform that provides a new lease on life to a long-standing aspiration: a structured Medical Tourism offering that has been converted, practically overnight, into a billion-dollar magnet for local and international investment and high-quality services (more information on this edition of INVESTinG Puerto Rico, pages 38-41).

Innovative currents of production As new development segments arrive and grow on the island, traditional manufacturing has found a new groove, riding on such pillar industries as pharmaceuticals, medical devices, life sciences, chemicals, textiles, electronics and food processing, among others. As the base consolidates its positioning, a new industrial wave takes hold on the island, led by the steady entry of leading global players in the aerospace sector concentrated in the western and northwestern regions: Lufthansa Technik, Honeywell, Infosys, Avenger Aerospace and Lockheed Martin, to name a few. Puerto Rico is now positioned as an attractive investment site for aerospace on the strength of specialized services, excellent incentives, lower

operating costs, advanced infrastructure, and top talent (mainly engineers and technical personnel). To that end, Puerto Rico recently hosted a major industry event, America’s Aerospace Summit 2015, featuring a who’s who of the industry. The event facilitated significant contracts, deals and investment opportunities in this new segment of the Puerto Rican economy, and served as a knowledge forum across all aspects related to the future of aviation, aerospace cybersecurity, the benefits of establishing aerospace companies in Puerto Rico, and the future of space commercialization at a regional level. The feather in the cap highlighting the emergence of this new industrial sector on the island will come in May 2016 with the CCMA and Aircraft MRO Conference by ALTA, the Latin American and Caribbean Air Transport Association. ALTA Executive Director, Eduardo Iglesias has recognized publicly that “in Puerto Rico, aviation has been a vital element in the island’s economic, social and cultural development. The recent investments by companies in the aerospace area and the growth of airlines serving the San Juan International Airport, are only a few examples of this successful development plan.”

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COVER STORY

How to be big being small The Puerto Rico Institute of International Competitiveness (ICI) is the source of even more good news. A unit of Interamerican University of Puerto Rico, Bayamón Campus, ICI serves as a forum, portal and center of independent applied research, developing proposals aimed at making the island a prosperous, innovative and highly competitive market. “At the same time as Puerto Rico accepts the challenge of becoming international and to position itself among top rank countries, recent statistics from the World Economic Forum (WEF) provide evidence that we continue enjoying high potential for innovation and human talent at a global level,” added Dr. Francisco Montalvo Fiol, WEF Coordinator on the island and ICI Director. Among the 140-or-so countries that on average WEF evaluates yearly for its well known Competitiveness Index, Puerto Rico remains in one of the most advantageous positions across various key indicators: use of sophisticated marketing techniques (5), governmental priority with the tourism sector at a global level (9), grade of sophistication in the production processes (11), quality of local suppliers (13), and absorption and use of technology in business (9), to mention a the more notable advantages. In addition, the level of protection of intellectual property (7), availability of professional management (19), high quality of air infrastructure (22), and the quality of port infrastructure (24), position the island favorably among other participating countries. “The current macro-economic situation in Puerto Rico influences our competitive placement greatly. However, despite the volatile climate of the global economy, the island is positioned advantageously next to the other Latin American and Caribbean countries,” affirms Dr. Andria Salvá Asencio, President of Puerto Rico 3000, an organization that promotes competitiveness and well-being in Puerto Rico. “While we continue making efforts to reactivate the economy, we must let people know, in an emphatic and sustained way, Puerto Rico’s brand overseas.” Dr. Mario Marazzi Santiago, Executive Director of the Puerto Rico Statistics Institute, could not agree more, emphasizing that “Puerto Rico is the third most competitive country in the hemisphere, according to the WEF 2014 results. Many of the largest multinational companies in the world choose Puerto Rico as a competitive base from which they operate their businesses in the Caribbean and Latin America, and the imminent implementation of the Road Map for the Modernization of Puerto Rico’s National Accounting will facilitate the insertion of the country in the main competitive indexes at a global level.” On another front in the drive to facilitate decision making by investors when it comes to the goal of expanding the analysis and investigation of the competitiveness of Puerto Rico, Montalvo advanced that “the ICI has begun striking agreements with the World Competitiveness Center of the prestigious International Institute for Management Development (IMD) in Lausanne, Switzerland, to participate in their studies and reports of global competitiveness rankings.”

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World Economic Forum’s (WEF) Competitiveness Index Among the 140-or-so countries that WEF evaluates every year for its well known Competitiveness Index, Puerto Rico remains in one of the most advantageous positions across various key indicators:

#5

use of sophisticated marketing techniques

#7

level of protection of intellectual property

#9

governmental priority with the tourism sector at a global level

#9

absorption and use of technology in business

#11

grade of sophistication in production processes

#13

quality of local suppliers

#19

availability of professional management

#22

quality of air infrastructure

#24

quality of port infrastructure

Like the phoenix “We have been working for two and a half years on an orchestrated, competitive and solid plan, but as any project of importance, it needs time and space to mature,” said Bacó. “We are aware of the complexity of the moment and we know that, to turn the page, we need to build new ground, so that a sense of collective responsibility prevails.” In accordance with this time horizon, the DDEC’s top official outlined three measured considerations in response to questions from INVESTinG: Based on your experience, how are markets and/or investors perceiving this new vision of a Puerto Rico open to the world, considering its traditional promotional approach focused on the U.S.? What doubts or certainties do they express regarding this? “The first reaction is one of incredulity, because they had never heard a proposal such as this. For the first time, we are having approaches so serious that investors send their legal teams to conduct deeper research. The result is that, now, several international law firms are considering Puerto Rico to establish multiple service offices under Law 20. Judging from regional cases we’re seeing, this has gone from disbelief to some surprisingly fast moves, because people begin to understand that the gateway to investments in the United States for a Latin American entrepreneur is Puerto Rico, not any other place. The best indicator of their interest is the fact they’re involving their legal teams. It is the same for local enterprises. To use Law 20 to enter Latin America is without a doubt the most effective way.” What value or strategic importance would companies in the U.S. market give to this international opening, being Puerto Rico a unique jurisdiction in the Caribbean? To what extent could the United States use Puerto Rico for hemispheric projection?

“We are facing a new economic development project that increasingly, every day, through an intense process of promotion and investment, provides a glimpse into a new horizon of opportunities, generating investment in all commercial and industrial sectors. So we see, for example, how developers in Miami already understand that the Latin American market is moving toward Puerto Rico. Entrepreneurs in the United States have a great opportunity to use Puerto Rico to develop businesses that they want to expand to Latin America. Our new model allows them to establish themselves in Puerto Rico for their growth in the region. A case in point is Innovatel, which operates under Law 20. This company manages a portfolio of telecommunication towers in Latin America from Puerto Rico. And like this one, there are other players in terms of technology, innovation and communications. The island is an extraordinary place for North American capital to enter the Latin American market.” Considering the international missions that have been held, what is the typical profile of investors with regards to Puerto Rico? What points need to be reinforced so that markets recognize and value the turning point that Puerto Rico’s economic development is experimenting? “Puerto Rico was an enigmatic place, because to Americans, we are Latin Americans, and for Latin Americans, we are Americans. Once people begin to understand the relationship and the opportunity, this perception changes, and it is considered then as a new frontier. We need to reinforce the fact that the island’s fiscal problems have a solution, and at the end of the road, whatever that road turns out to be, Puerto Rico will end up being a country of fiscal discipline. Once this fact is understood, along with the power of the star laws we promote, the impact will be remarkable -- an acceleration of economic growth that will exceed 5%.” “How do I visualize the modern Puerto Rico?” Asks Bacó rhetorically as he wraps up the question-answer: “Without a doubt, as a multicultural destination of entrepreneurial effervescence, connected to the world, exporting all kinds of services and, at the same time, establishing itself as a center of knowledge and entertainment. A Puerto Rico that advances with all the potential to become the Singapore of the Caribbean for those with entrepreneurial vision, the Wall Street of the Caribbean for the tenacious investor, and even the Las Vegas of the Caribbean for people with a free spirit.”

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GLOBALIZATION

The tides have turned...

Is Puerto Rico out to

CONQUER EUROPE? E

urope is an unavoidable destination in Puerto Rico's plans to internationalize and diversify its economy. As a result, despite the Island's historical connection with Spain, the more recent official delegations from Puerto Rico have bypassed the Spanish "Motherland" and have set their sights on Germany, a leading power with an already valuable business base in this Caribbean island. During the "Investing in Puerto "Rico" forum organized by Spanish newspaper El País last November in Madrid and sponsored by companies such as Iberia, Abertis, Mapfre and MC-21 Corp., Governor Alejandro García Padilla indicated that "the economy is beginning to show signs of life," in reference to a long-awaited salvation from a fiscal labyrinth (awaiting the light at the end of the tunnel by the first quarter of 2016) that is counting on the European market as a way out.

Spain: More and Better Business

More business with Spain? Yes, of course! Just months away from the International Congress of the Spanish Language that will take place in Puerto Rico, García Padilla has also highlighted the Commonwealth’s Spanish identity and the obvious logic of strengthening bilateral business connections. "Puerto Ricans," says the Governor, "feel and communicate in Spanish. This allows us to share a business environment familiar to all Spanish speakers, which in turn translates into a competitive advantage." As published in El País, since 1952 this Commonwealth of the U.S. has enjoyed the benefits of the American legal framework--a legal system that is well-known and reliable and one which, in the Governor's opinion, should strengthen commercial ties with Spanish and European companies. Meanwhile, Alberto Bacó Bagué, the Secretary of the Puerto Rico Department of Economic Development and Commerce (DEDC) has encouraged investment in a country that has favorable tax incentives and is geographically posed as a gateway to the United States. “We ask companies to use Puerto Rico as a channel to other, bigger markets," states Bacó, after describing an attractive tax platform to boost sectors such as those of agriculture, services, and industry. Bacó says that foreign businesses value Puerto Rico's stability, as well as the fact that they are on "American soil," where intellectual property is respected.

From left to right: Santiago Miralles, director of Casa de América; Antonio Caño, director of El País; Alberto Bacó Bagué, DEDC secretary; Alejandro García Padilla, Governor of Puerto Rico; Felipe González, former Spanish president; and Juan Luis Cebrián, president of conglomerate PRISA.

Alberto Bacó Bagué, secretario del DDEC, charla con Miguel Jiménez, durante el foro "Invertir en Puerto Rico" en España. "We have been able to get the wheel of economic development turning," says Bacó, who asserts that Puerto Rico is headed towards a solution of the public debt situation and predicts a GDP growth of 5% or 6% once the restructuring process is completed. As for the new stage of relations between the U.S. and Cuba, the head of the DEDC sees it as a "great opportunity for Puerto Rico," given how the two Caribbean islands complement each other and Puerto Rico's vast experience with the U.S. market in areas such as pharmaceuticals and medical devices, among others. Case in point: the press in Spain confirms that—contrary to what happens in any of the states—a Latin American or Spanish company, when repatriating the benefits it has gained, only has to pay 4% in taxes, a far cry from the 50% imposed by states such as Florida. It thus comes as no surprise that the Commonwealth is again at the front line of priorities for Spanish and Latin American companies. Some strong examples? After two years of ceasing its service to the island, Iberia will resume operations in May 2016 beginning with three direct flights a week between Madrid and San Juan; Mapfre is still betting on Puerto Rico, one of its most stable insurance markets; and the Abertis conglomerate is open to leveraging all the new public and private business opportunities proposed by the authorities. “Puerto Rico is a great point of entry for both North and South America, and Madrid is the natural gateway to Europe from America,” says Iberia President Luis Gallego. "When we dropped that route," he explains, "it was more an issue with Iberia than with Puerto Rico—our costs were not a good fit for the market. Not anymore. For us, the island is an opportunity in terms of demand and revenue... and the changes we are promoting will improve this." Along the same lines, Carlos del Río, the General Director of Abertis International Highways and the President of its Puerto Rican affiliate, Metropistas, also stresses his commitment to the island. "We are still betting on Puerto Rico. Our two concessions there are a success, for both the Commonwealth and the company. Why? Mainly because of the volume of vehicles per capita--higher than in France or Spain--and the fact that in Puerto Rico all the highways are toll roads, with no antagonism towards paying tolls." In this environment, the Abertis executive has left the door open to "future operations" on the Island, all of them under the Public-Private Partnerships system. Also relevant is the excitement expressed by a giant of the insurance industry. After a quarter of a century on the Island, the Spanish insurance company Mapfre categorically affirms that Puerto Rico “is a strong market that has offered consistent results through the years,” according to

Fernando Mata Verdejo, the Deputy General Director of Corporate Strategy and Development. "For now," he states, "we have not been greatly impacted by the fiscal crisis—Puerto Ricans are adamant about protecting their property and continue to buy insurance; thus our revenues are growing well."

Strategic German Ties

The Puerto Rican delegation's agenda also featured the German market, with an important visit to the Sartorius facilities in Gottingen, Germany. This company, which has been in Puerto Rico since 1980, has based its successful operations in the municipality of Yauco (in the Southeast region of the island), where pharmaceutical industry equipment is produced at a global level. Sartorius is part of the strong group of mid-sized companies that are the core of Germany's industrial base; yet its presence in Puerto Rico is now strengthened with the arrival of other formidable players such as Lufthansa Technik (see pp. 50-51 of this issue of INVESTinG Puerto Rico). Joachim Kreuzburg, the President and CEO of Sartorius, has reasserted his company's commitment to Puerto Rico, expressing his interest in increasing operations on the Island and his faith in that Sartorius' long-standing presence in the Commonwealth may incentivize Germany's industrial presence even more. "It is a place where well-trained human capital combines with a favorable tax and institutional environment to create great industrial opportunities," stresses Kreuzburg.

In Berlín, the Governor of Puerto Rico (left) held a meeting with the U.S. Ambassador to Germany John Emerson (right) and a group of German executives and organizations, including Fresenius Kabi AG, Lufthansa German Airlines, Biologische Heilmittel Heel BmbH, Siemens AG, the German Marshall Fund, and the German Chamber of Commerce and Industry. Also at the meeting were the ministers and advisors of economic development and commercial affairs of the U.S. Embassy in Berlin.

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INTERNATIONAL COMMERCE Nearly thirty companies have joined Puerto Rico’s commercial ecosystem thanks to the success of three key strategies implemented by the Commonwealth’s commercial offices.

Puerto Rico Propels its Commercial “Consulates” THE COMMONWEALTH HAS RAISED ITS FLAG IN SIX STRATEGIC LOCATIONS

I

n sync with an ever-evolving globalized marketplace, and perhaps like never before, Puerto Rico is pushing to conquer new markets abroad. The goals are as intensive as they are extensive: create new commercial bonds, encourage the export of local goods and services, promote Puerto Rico’s name brand, persuade investors and entrepreneurs to relocate to the Island, boost tourism, foster academic and cultural exchange programs, internationalize local businesses… Slowly but surely, Puerto Rico has been setting foot in an increasing number of regions, bringing its total number of commercial offices to six. The newest delegations were both established in 2014 — one in Bogotá, Colombia, and another in Lima, Perú — as a way to develop closer business ties in Latin America: a powerful region that saw its Gross Domestic Product (GDP) grow at an average rate of 5% between 2003 and 2012 and continues to report consistent economic gains, according to figures from the World Bank. Puerto Rico’s four other delegations are older and have been stationed in cities and countries that share a long history with the Island. These offices are located in Madrid, Spain; Panama City, Panama; Santo Domingo, Dominican Republic (DR); and New York, United States.

Recent updates and modifications made to several regulations have resulted in bilateral benefits for the Commonwealth and those countries that host its commercial offices. These changes have essentially synchronized the vision and mission of each office with that of the master plan set forth by the Puerto Rico Department of Economic Development and Commerce (DEDC), which includes commercial and export initiatives, as well as strategies to advance tourism and strengthen government relations. To this end, commercial offices are now focused on three key elements:

INTERNATIONAL SALE OF PRODUCTS

made by Puerto Rican companies.

EXPORT LA EXPORTACIÓN OF PUERTO RICO DE SERVICIOS SERVICES via Law desde 20. Puerto Rico a través de la Ley 20

PROMOTING PUERTO RICO as the port of entry to the United States.

Several directors of Puerto Rico's commercial offices share a moment with DEDC officials. From left to right: Awilda Mercado (Panama), Juan Carlos Suárez (DEDC Deputy Secretary), Alberto Bacó (DEDC Secretary), Isaura Delgado (Perú), Germán Monroig (Dominican Republic), and Luis Alberto Álvarez (Colombia).

PUERTO RICO

Thanks to these compounded strategies and the tireless work of the people who man these offices, local companies such as Lanco or Indulac and international companies such as True North and VAR Consulting have achieved their commercial goals.

EXPORTING PUERTO RICAN PRODUCTS ABROAD: • Indulac • Inmart Trading • Danosa • Master Paints • Olein • Lanco • Toledo • Air Group Corp. EXPORTING SERVICES FROM PUERTO RICO UNDER LAW 20: • Astra Studios • Rock Solid • True North • Brenda Marrero & Asoc. • Innovatel • GM Security Group • DISS Telemedicina • MC-21 • Alberto Lago – Invid • Darío Ayala – KPG • Fusionworks, Inc. • Ecostalia Consultiva Ambiental • CSA / CPM USING PUERTO RICO AS A PORT OF ENTRY INTO THE US MARKET: • VAR Consulting • Laboratorio Blogen (in process) • Neolpharma • Erazo Valencia (in process) • Equipo de Salud Visual (under a confidentiality agreement) • Grupo Ficosa (in process) • Carlos Alcántara – Trading Co. • Argos

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PUERTO RICO

PANAMA

Who’s who?

Within the list of Puerto Rico’s commercial offices, one could say that Panama is among the countries that are most similar to the Island. Not only does this Central American country have a population of approximately 3.9 million people and the US Dollar as its official currency, it also has an economy that is predominantly focused on services, military bases (now defunct) that at some point hosted hundreds of Puerto Rican soldiers, and even similar cuisines, music genres, and dancing styles. It comes to no surprise then that Puerto Rico decided to open its third commercial office in Panama back in 1994. Thirteen years later, in 2007, Awilda Mercado became the delegation’s director and has been leading Puerto Rico’s operation in Panama ever since. Alongside three other delegates, Mercado and her team have been tasked with promoting Puerto Rico’s economic, cultural, tourism, sports, and academic opportunities in both Central and South America. To that end, Puerto Rico participates in two of the most important commercial summits held in Panama every year: (1) ExpoComer, an event that gathers commercial missions from all over the American continent, Asia, Europe, and the Caribbean with the goal of having participants get in touch with over 2,500 companies; and (2) ExpoCapac, a summit designed to link potential buyers with companies that provide construction materials, machinery, equipment, and technology. If there has ever been a moment in history to invest and have a presence in Panama, it all started in 2001, when the country embarked on one of the largest economic expansions in the world. According to data from the World Bank, Panama recorded an annual GDP growth of 7.2% from 2001 to 2013, a figure that represents more than twice the Central American average. The same source shows that Panama continued to grow at a rate of 6.2% in 2014 and it is poised to post the same number in 2015. As a consequence of this impressive economic acceleration, Panama recently completed a state-of-the-art metro system in Panama City through a $1.2 billion investment, according to Forbes. Moreover, the same publication notes that the country is close to finishing the expansion of its world-famous Panama Canal, a gargantuan project that began in 2007 and will have cost $5.3 billion by the time it is finished. Mercado highlights that Puerto Rico and Panama “have a long history of business collaboration, including the arrival of COPA Airlines in Puerto Rico, and the establishment of a Destilería Serrallés subsidiary and Puerto Rican consulting firm Caribbean Project Management in Panama.” With regard to other exchanges that could benefit both Latin American locations, Mercado averred that Panama could export a higher number of food products to Puerto Rico, given the Commonwealth’s high percentage of food imports, while Puerto Rico could export a wide range of goods to Panama, including electronics, chemical products (petroleum and carbon-based), and miscellaneous manufacturing.

COLOMBIA

The fact that this South American country has averaged an annual GDP growth of 4.31% since 2001 and reduced extreme poverty by nearly 30% might explain why Puerto Rico decided to officially establish a permanent commercial office in Colombia. In merely a year, this delegation—led by Luis Alberto Álvarez and a four-person team—has persuaded three Colombian companies to open offices in Puerto Rico and connected over ten Puerto Rican enterprises with Colombian entrepreneurs and investors. Without a doubt, it is the beginning of a very active relationship between both countries, which also includes countless meetings, trips, and conferences to promote economic, tourism, cultural, and academic exchange opportunities. Among those Colombian businesses that have arrived in Puerto Rico, one of them began operating in early 2015 under Law 20 and is already exporting technical services to a Colombian-based gas company. Álvarez pointed out that this company “hires local engineers from the University of Puerto Rico’s Mayagüez campus to ensure compliance with U.S. federal regulation.” Moreover, a Colombian multinational company specializing in digital advertising (with subsidiaries in six countries) has decided to open a workspace in Puerto Rico and has already added local workers to its payroll. Álvarez also revealed that a “third Colombian enterprise focused on high-polluting waste is looking to buy land in Puerto Rico and is currently assessing properties owned by the Puerto Rico Industrial Development Company and the Island’s Land Authority.” However, despite Colombia’s substantial economic growth, Álvarez notes that there are still great opportunities for the expansion of Puerto Rican goods and services. Colombia, says Álvarez, “has a long way to go in several core areas, especially road infrastructure. Case in point, it is cheaper to send freight from Shanghai to Cartagena by land than sending it from Cartagena to Bogotá. Given these structural deficiencies, the administration of Colombia’s current president, Juan Manuel Santos, has made this sector a top priority – first by investing $22 billion from 2010 to 2013 and more recently by drafting a plan that would attract approximately $50 billion from 2015 to 2020 in order to increase the country’s competitiveness in this sector.” In light of these deficiencies, which represent large windows of opportunity for Puerto Rican exports, Álvarez said he has already met with some of Colombia’s top construction companies to discuss potential business ventures. As opposed to many U.S. and European businesses, Puerto Rico

“Colombia is larger than Spain and France combined, it represents the fourth largest GDP in Latin America, its economy continues to flourish, and it shares a language and numerous cultural traits with us. Needless to say, Puerto Rico should take advantage of all of these opportunities.” Luis Alberto Álvarez, director of Puerto Rico’s commercial office in Colombia

can provide engineering, legal, accounting, and financial services, as well as many other goods and services, for a lower price and the same quality. “Colombia is larger than Spain and France combined, it represents the fourth largest GDP in Latin America, its economy continues to flourish, and it shares a language and numerous cultural traits with us. Needless to say, Puerto Rico should take advantage of all of these opportunities,” explains Álvarez. “Historically speaking, we have only looked at the U.S. to do business and to some extent this has been a mistake. Down south there are great countries that have achieved incredible economic growth. That is precisely why we have opened an office here, in Colombia,” added Álvarez.

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PERU

Founded in November 2014, Puerto Rico’s commercial office in Peru is the youngest of them all. Like Colombia, World Bank economic figures for this Andean country are incredibly positive, as they include a yearly GDP growth of 6.1% over the last decade and a notable reduction of poverty—from 55.6% to 22.7%—during the same time period. With the goal of capitalizing on this South American success story, Puerto Rico has designated Isaura Delgado Brayfield as director and sole member of its commercial office in Peru. Despite working on her own at the moment, Delgado is expecting to add more personnel soon as a result of her operation’s short-term success. In a little less than a year, Delgado has organized more than half a dozen commercial missions from Puerto Rico to Peru and in November 2015 she had Peruvian business executives travel to the Island to participate in Expo Puerto Rico 2015, an event organized by the Puerto Rico Trade and Export Company (PRTEC). Delgado highlighted that in one of PRTEC’s

special missions to Peru (organized in June 2015), sales and commercial agreements totaled $3 million. Moreover, after the visit, two of those Puerto Rico companies—one specializing in environmental consulting and another in educational advisory—returned to the South American country to conduct further business. In addition to Expo Puerto Rico, Delgado pointed out that her office is planning another special mission, this time with the Peruvian Chamber of Construction, in order to have Peru’s construction sector meet with Puerto Rican engineers and academics to discuss construction and infrastructurerelated topics. Like many other Latin American countries, in recent years Peru has made an enormous effort to improve its infrastructure, while its government has made it clear that it will continue to invest heavily in these types of projects. In May 2015, Peru’s current administration announced that it would be joining forces with private-sector enterprises to invest a whopping $113 billion on 2,083 infrastructure projects over the next three years. What’s more, Peru announced that it would dramatically increase its investment in science and technology in the next two years. Presently at 0.12% of the country’s GDP, this figure is expected to grow to 0.7% in order to edge closer to Latin America’s average of 1.75%. Having ample knowledge of Peru’s industrial and commercial world, Delgado asserts that Puerto Rico can offer a wide array of technological and manufacturing goods and services, though the Island still has a long way to go in terms of image. “While it’s true that Puerto Rico has an extensive range of specialized goods and services that are lacking in Peru, we must first make Peruvian entrepreneurs aware that these opportunities are available in the Commonwealth.” In this regard, Delgado agrees with her counterpart in Colombia in that a great number of Latin American businesses first look at cities like Miami for commercial opportunities without taking into account Puerto Rico’s amazing potential as a port of entry into the U.S. market.

“In a little less than a year, Delgado has organized more than half a dozen commercial missions from Puerto Rico to Peru."

PUERTO RICO

SPAIN

For more than three decades, Puerto Rico’s commercial office in Spain has been the only delegation to represent the Island on the other side of the Atlantic Ocean. Directed by Adolfo Rodríguez—who has served as its sole member since 2001—this office is tasked with promoting Puerto Rico’s commercial opportunities in both Spain and other countries in Europe. In this particular case, the office is assigned to PRIDCO (which in turn serves as an instrumentality of the DEDC). Working from the same building that houses Puerto Rico’s Tourism Company in Madrid, Rodríguez explains that Spain and Puerto Rico are especially important to one another because they share the same language. For Spain, Puerto Rico acts as an ideal stepping-stone to access the rest of the US market, while Spain represents the perfect doorway for Puerto Rico to enter the old continent. “Puerto Rico has made great contributions to the Spanish business world. Some of the largest Spanish companies that found success in the US started off in Puerto Rico. These include banks like Santander and BBVA and insurance company MAPFRE,” highlighted Rodríguez. In the four years that followed the financial crisis of 2008-2009, Spanish investment experienced a great decline. However, figures from the Organisation for Economic Co-operation and Development (OECD) show that Spain—which represents the fourth largest economy in the Eurozone and the fifth largest economy in the European Union—has seen a modest and constant rate of economic growth since 2013. The OECD also predicts that the Iberian

country will experience a robust economic expansion over the next two years thanks to several factors, including the depreciation of the euro and the fall in gas prices. These positive figures, says Rodríguez, are already bearing fruit. “In the last year alone, I have been working with a European airplane manufacturer that is interested in investing in Puerto Rico, and two call centers that would like to relocate to the Island to operate under a model known as Business Process Outsourcing (BPO).” The Spanish delegate also mentioned that the DEDC has coordinated two events featuring the world-renowned Spanish newspaper El País. The first event was celebrated last year in Puerto Rico with the goal of promoting business opportunities in Spain, while the second one was held in November 2015 in Spain to advertise Puerto Rico as a prime location for European investment. With respect to Spain’s perspective on Puerto Rico, Rodríguez asserts that while it is true that Spain is investing in Latin American countries such as Peru, Colombia, and Mexico—especially in infrastructure and information technology—the Island has a much more developed and sophisticated market. Therefore, Puerto Rico’s true competitors are cities like Miami and New York, as they have markets that more closely resemble the one in the Commonwealth. “It all depends on the type of industry. Many people aren’t very familiar with Puerto Rico’s economy and culture. However, when you talk to people from the pharmaceutical industry and other specialized manufacturing areas, they know the Commonwealth very well,” notes Rodríguez.

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DOMINICAN REPUBLIC NUEVA YORK

NEW YORK

Located at the heart of the Big Apple, Puerto Rico’s commercial office in New York is the oldest of them all. The office dates back to the 1940’s, when Teodoro Moscoso (known as the key architect of Operation Bootstrap, a government initiative that led to Puerto Rico’s largest-ever economic transformation and boom) became the first director of PRIDCO. What was true back then still stands true today: Puerto Rico’s business efforts in this key U.S. city have always been an essential part of attracting capital and direct investment to the Commonwealth. It is also worth pointing out that New York—for sociopolitical and socioeconomic circumstances—was the top destination for Puerto Rican emigrants during the 20th century. Today, New York is home to over 715,000 Puerto Ricans, making it the Commonwealth’s second largest community living stateside. These historic ties to New York, plus the fact that this metropolis is the largest economic region in the U.S. and one of the largest in the world, make Puerto Rico’s office in the Big Apple a vital component of the Island’s commercial strategy. Since 2013, office director Mara Liz Meinhofer and her nine-member delegation have been working tirelessly to advance the sale of Puerto Rican goods and services in the U.S., including tourism, rum, and specialized manufacturing. Tasked with the same mission Moscoso had seventy years ago, Meinhofer’s other key responsibility is to bring US investment to Puerto Rico. To that end, she has been using two very successful laws—better known as Acts 20 and 22—which seek to persuade US entrepreneurs and business owners to become Puerto Rican residents and relocate their businesses to the Island. Other issues of INVESTinG Puerto Rico have highlighted that this “legal combo” is expected to lure a diverse set of investors to the Island and help propel a robust, multi-sector economic recovery that will position Puerto Rico as a premier hub for service exports. “Every single person I have met has expressed eagerness and a deep PUERTO RICO

interest for these laws. All the feedback has been positive. In fact, many people tell me that these laws are too good to be true,” says Meinhofer. Along with advertising these incentives, a few weeks ago Puerto Rico’s New York office opened the first permanent commercial exhibition space for Puerto Rican goods and services in the Big Apple. This 500 square-foot locale positioned right between Times Square and Radio City Music Hall will allow Puerto Rican businesses and entrepreneurs to display their work to thousands and thousands of New Yorkers walking by every day. Without a doubt, this exhibition space will constitute one of the best spots to promote the Commonwealth’s “Made in Puerto Rico” branding campaign. Meinhofer noted that Puerto Rico’s first exhibition—held November 2015—focused on advertising the Island as a world-class wedding destination. The following month, other companies such as Chocolate Cortés showcased Puerto Rico’s gourmet food products. “Chocolate Cortés took full advantage of December’s weather and served free hot chocolate to many people braving the winter and stopping by our space,” said Meinhofer with a smile.

As a neighboring country located 200 miles west of Puerto Rico (or a one-hour flight), it is easy to understand why the Commonwealth opened shop in the Dominican Republic. That said, one of the key incentives behind Puerto Rico’s commercial office in the Dominican Republic has also to do with a remarkable economic performance. It is no small feat that for the past 22 years this Caribbean nation’s GDP has increased at an average rate of 5.34%, — one of the most consistent and successful economic growth spurts in the region. It is also worth noting that Dominicans represent the largest immigrant population in Puerto Rico, resulting from the exodus that took place in the 1960’s with the death of Dominican dictator Rafael Leonidas Trujillo. Germán R. Monroig Pomales—director of Puerto Rico’s commercial office in the Dominican Republic since 2014—points out that one of his team’s principal objectives is to “make the Dominican business community aware that Puerto Rico, for all intents and purposes, is synonymous with the U.S.,” and therefore “should be seen as a natural entryway for any Dominican entrepreneur seeking to make inroads into the U.S. market.” Moreover, Monroig notes that his delegation is making “a big push to encourage export activity between both Caribbean islands, with a particular emphasis on import substitution.” The benefits of these two neighbors’ healthy, bilateral commercial activity is best illustrated by figures from Puerto Rico’s Planning Board, which show that the Commonwealth’s exports to the Dominican Republic have significantly increased in the past few years. In 2014 alone, Puerto Rico’s export sales jumped to $821 million, from $483 million in 2013, while the Dominican Republic recorded total sales of $565 million in 2014, which represents a $50 million increase from the previous year. Referencing data from the United States International Trade Commission, Monroig highlights that “Puerto Rican exports grew by 70% in fiscal year 2014. These figures should continue to grow as we advance efforts tied to import substitution and the sale of generic drugs. What’s more, based on my day-do-day experiences in the Dominican Republic, I am convinced that the potential exchange of consulting and engineering services could add many more millions to these two Islands’ trade sheet.” Monroig underscored that Puerto Rico’s commercial office in the Dominican Republic has led to several success stories, including that of Lanco Industries: a manufacturer of paint, sealers, and construction materials and one of the top companies in the Dominican market. Other examples include Toledo Fine Locks, a Puerto Rican company that has become the premier seller of high-quality locks in the Dominican Republic.

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TESTIMONIALS

Multi-latin enterprises in Puerto Rico What drives Latin American enterprises to establish operations in Puerto Rico? Below are the accounts of four successful entrepreneurs who participated in a panel about Multi-Latin Companies (read: companies with operations in several Latin American countries) during the Puerto Rico Investment Summit, LATAM EDITION, celebrated this year at the Vanderbilt Hotel in Condado.

Nicolás Kogan

President Americas Leading Finance, LLC

F

or many years I worked in Goldman Sachs, a global investment bank with very talented and intelligent people. There I understood the value of three important elements to succeed in any business: teamwork, the ability to execute, and human capital. We went to many U.S. universities to recruit personnel. More than once I traveled with CEO Lloyd Franklin to Harvard, where he would spend the whole day explaining to students why they should join Goldman Sachs. His mission, as he put it, was to attract "the best and the brightest!" Those experiences taught me that human capital is a vital component of any successful company – even more so than any other asset. Thus, when I started my own company in Puerto Rico back in 2005, I also visited local universities in search of the most talented students. Despite knowing very little about Puerto Rico, I decided to focus my recruiting efforts on the University of Puerto Rico because I have always been a firm believer in public education, especially when it’s completely free and secular. During my visits to the university, I noticed there were many talented, super intelligent, and super motivated individuals who were just missing the right incentives and environment to develop their skills. By the time we sold our company in 2014 to a publicly owned US firm, we had 90 employees on our payroll and their average age was 33 years. All of them had gotten a start with us and grown through the company. Our turnover was minimal. The other key part of this story is that people thought I would be leaving Puerto Rico after I sold the company. However, I decided to stay and develop another company from scratch. This new enterprise will also export services to the U.S. and eventually to the Caribbean. As opposed to the previous firm, now I’m looking to hire grey-haired adults because I believe they’re still young. People in their sixties today are the forty-year olds from the past. I’m bringing many of them on board and mixing them up with a young crowd, which makes for an interesting dynamic. Let’s just say that I’m happy to be back in the game and back in Puerto Rico. The vast majority of the young people I hired at the first company could have worked for Goldman Sachs because they had the capacity to focus and work hard when the incentives were right. To a great extent, I think work ethics depend on the organization and its structure. We paid a great deal of attention to our young workers and gave them ample room to be proactive, to make mistakes, and most importantly, to learn. Sometimes I would leave work at 11:00 p.m. or midnight and still see people around the office. Other times I wouldn’t go to the office at all and they would work on their own. There were no schedules. I never asked them to clock in at 8:00 a.m. and leave at 5:00 p.m. The only requirement was to get things done! In the new company, where we have a mix of gray-haired, experienced workers and young employees, we are achieving the same thing. We’re getting things done! Americas Leading Finance, LLC Founded in 2010, this technology company specializes in the purchase of car contracts sold by dealerships in Puerto Rico.

“I noticed there were many talented, super intelligent, and super motivated individuals who were just missing the right incentives and environment to develop their skills.”

I

began doing business in Venezuela long before the country fell into its current economic depression. Afterwards, I spent ten years in Miami conducting similar ventures and then relocated to Puerto Rico where I have been working for the past 16 years. Thus, I can give you a comparative perspective of these three markets. The first important element in my line of business—aeronautical industry—is logistics. The fact that I can order a replacement, a specific part or a special tool at 5:00 p.m. on any given day of the week and have a vehicle in front of my office at noon the next day delivering my package might sound like science fiction to many of you. However, this is exactly how it works for most of our clients, many of which work in government and air force branches. What’s more, as opposed to most countries, Puerto Rico’s tariff taxation and import procedures are quite simple and straightforward. Another aspect that increases our competitiveness is Puerto Rico’s political neutrality. Even though I’m Venezuelan, residing in the Commonwealth and having a Puerto Rican company opens up many doors in Latin America and the world. For instance, we have done business with the Chilean air force and Argentina’s government. I suspect that if I had been residing in any other part of Latin America it would have been much more difficult to conduct business given the historical rivalries that exist between many of these countries. One more key element I’d like to highlight is that Puerto Rico falls under the rules and regulations of the US Federal Aviation Agency, which guarantees several quality standards that are vital to our industry. As if that wasn’t enough, we also speak the same language and our pricing is quite cost-efficient. I want to share a specific example that illustrates all of the things I mentioned before. Three years ago we won a contest organized by the government of Salta (a province of Argentina) to test helicopters over long-distance flights. Our proposal was chosen from among seven or eight projects, including pitches by international, US, and Latin American companies. As the winners of the contest, we were tasked with flying a two-engine helicopter from Salta all the way to Puerto Rico, a trip that lasted around two weeks and clocked some 80 hours of flying time. After six or seven months the helicopter was then flown back to Salta. Not only were we proud of our achievement, we also took a valuable lesson from the project: even when we are far away, we can still be highly competitive. I worked in Miami for ten years. Many other individuals like me who have worked in similar markets around Latin America know that doing business in Miami can be twice or three times as expensive when compared to Puerto Rico. Not to mention you don’t get the kind of hospitality in Miami that you receive from Puerto Ricans. The Island’s warm welcome to all foreigners, including myself, plus their friendly environment fosters productive and positive business ties. EcoLift Corporation Authorized dealer of parts and services in the Caribbean for the prestigious brands Bell Helicopter, MD Helicopters and Augusta Wetland. After more than 15 years in business, the company has achieved global status as a center for maintenance, repairs, reconstruction, and modernization of helicopters.

Ernesto di Gregorio President EcoLift Corporation

“Puerto Rico falls under the rules and regulations of the US Federal Aviation Agency, which guarantees several quality standards that are vital to our industry.” 27


H

Carlos J. Ramírez

Executive VP Soluciones de Negocios, Evertec

“In addition to so many great benefits, Puerto Rico offers big tax breaks that other U.S. jurisdictions don’t, thereby giving our operation an edge over stateside competitors.”

PUERTO RICO

uman capital is the raw material you need to create the programming behind data processing systems. Like the other panelists, I too can attest to Puerto Rico’s incredibly talented and bilingual human capital. This particular element represents a great advantage for Evertec as it competes with North American rivals that are attempting to penetrate the regional market. Another competitive edge is Puerto Rico’s technology costs. Being in a US territory allows us to purchase computers and software at US prices without having to pay for additional tariffs and taxes that I would have to cover if I were stationed anywhere else in the region. Every year, we invest an average of $25 to $35 million in technology – a figure that would be much higher if we were to buy the same equipment in any other Latin American country. We have actually conducted comparative analyses using the same brands and technology and Puerto Rico always comes out as the most cost-effective location. Yet another important aspect is telecommunications. Here we have the largest and highest-quality industrial sectors in the region, which allow us to process transactions in just fractions of a second. Moreover, we have duplicate networks running through underwater cables that connect Puerto Rico to the 20 countries where we carry out financial transactions. We have established connections with Costa Rica, Guatemala, Mexico, Colombia, the Caribbean Islands, Curacao and Gran Cayman through redundant networks that are much cheaper in Puerto Rico than any other place in Latin America. What distinguishes our business from the large processing companies in the United States that buy the same technology and communication lines? Our advantage over them is Puerto Rico’s bilingualism, which is tantamount to doing business with Spanish-speaking countries. The fact that we share the same language provides us with a better understanding of the most effective system designs and communication strategies. While it is true that our workers can pick up any manual written in English and understand all of it, in Latin America it is easier to communicate in Spanish. In addition to all these great benefits, Puerto Rico offers big tax breaks that other U.S. jurisdictions don’t, thereby giving our operation—for many years now—an edge over stateside competitors. We have been exporting services from Puerto Rico since the 90’s and I must say our ventures keep getting better as the Commonwealth improves its telecommunications, technology, logistics… Sometimes I order a switcher or a router in the morning and it gets here in the afternoon thanks to all the daily, nonstop flights between Puerto Rico and the U.S. The Island’s geographical location is excellent and so are its flight routes, which cover the U.S. and all of Latin America. I often hop on a plane in the morning to go pick up equipment in Santo Domingo or New York and return to Puerto Rico that very same day. The Island has a one-of-a-kind atmosphere that has helped businesses thrive and succeed. Soluciones de Negocios, Evertec This electronic transaction processing company has been growing across Central America and the Caribbean since 2006. In 2010, Apollo Management, LLC acquired 51% of Evertec and a year later the firm entered the Mexican market. In 2013, Evertec became the first technology company in Puerto Rico to participate in the New York Stock Exchange (under the ticker symbol EVTC). The company has since expanded its operations to Colombia.

F

irst off, I want to say that I’m very grateful for the warm welcome we received in Puerto Rico. There is a reason they call this place the “Island of Enchantment.” We’re truly delighted! Ever since we decided to open shop here, people always ask me the same question: Why Puerto Rico? The answer is a bit long but the short version is that the pharmaceutical industry in Puerto Rico is heavily regulated and high-quality standards are ubiquitous across all industrial sectors. We came here because we knew that by virtue of being in Puerto Rico we’d be participating in the big leagues. When we moved in to the new facilities we kept all of Pfizer’s personnel, which allowed us to keep the same level of quality. Bear in mind that these facilities manufactured goods for the entire world. Thus, we have inherited the potential to export to a wide array of countries. Even though our first thought was to do business with North American markets, once we were here we began to look at other possibilities. From a strategic point of view, our goal in moving to Puerto Rico was to access the U.S. market. Nevertheless, from an operational standpoint, there have been other considerations. For example, the way in which Puerto Rico’s government stimulates growth has helped us look beyond the U.S. Our participation in Latin American markets is handled by our subsidiary in Mexico, while the purpose behind our Puerto Rico operation is to insert ourselves in the global market. In fact, we are already exporting goods to several European markets. I always tell my Latin American peers that the purpose of coming to Puerto Rico is to have a global presence. The Commonwealth is not just a platform to enter the U.S. market, though I’ll admit that the U.S. in itself is very important, as it represents 50% of global commerce. What I mean to say is that there is the other 50% that can also be covered from Puerto Rico and that is also very valuable. The fact that the Island has the support of U.S. federal agencies such as the FDA or the DEA represents added value for any pharmaceutical industry interested in coming here. Moreover, the role of the U.S. government in educational institutions is a key part of developing human capital, as federal grants help finance expensive equipment, laboratories, and research projects. These three elements are vital to the development of medication.

In Puerto Rico we have all that is necessary to develop and innovate, and this in turn helps us focus on growth. In our case, we will soon be ready to make an even larger investment in the Commonwealth. We have already expanded twice thanks to the Island’s perfect conditions. A few years down the road our Puerto Rico operation will be the most important piece of our pharmaceutical group. This is not wishful thinking, it’s a fact. It would be selfish of me to keep all of this information to myself. I think the Latin American market should be aware of the amazing opportunities that lie in Puerto Rico, which is why I already consider myself a spokesperson for the Island. Neolpharma International Grupo Neolpharma is a Mexican pharmaceutical conglomerate with a portfolio that includes nearly 200 registered products. For more than 15 years, this company has focused on the research & development, production, commercialization, and distribution of medications and raw materials. Since 2012, Neolpharma has been based in the municipality of Caguas, operating from a facility formerly owned by Pfizer.

Efrén Ocampo

President and CEO Neolpharma International

“We came here because we knew that by virtue of being in Puerto Rico we’d be participating in the big leagues.”

29


INVESTMENT

Revealed opportunities IN TOURISM, SERVICES AND INFRASTRUCTURE

Five-Star Tourism

As opposed to many tourists who confine themselves in an all-inclusive resort while visiting the Caribbean, travelers who visit Puerto Rico are usually wealthier individuals who demand higher standards when it comes to hotels, services, entertainment, and security.

I

t’s a fact. The acclaimed Puerto Rico Investment Summit (LATAM Edition) — held this year at the luxurious Vanderbilt Hotel in San Juan — has become one of the most sought-after business events. Hundreds of investors, entrepreneurs, and thought leaders from all over the Spanish-speaking world came together for the most recent summit to discuss both the challenges and opportunities afforded by Puerto Rico in areas such as tourism, professional services, and infrastructure. What follows are some highlights of the event.

Half a Century of International Services The summit’s service panel was composed of José Arias (UBS Financial), Alfonso Llavero (Eulen), and Rosario Ballesteros (BC Partners), among other executives. One of the key points mentioned during their discussion was tied to Puerto Rico’s experience providing international services. For more than 50 years, local firms have been exporting services from the Island to numerous countries in the world. Of all U.S. states, only New York, California, and perhaps Florida have a similar track record in providing legal and tax services. Puerto Rico’s dominant performance in this sector is no coincidence. Even before the arrival of powerful multi-national companies that relocated to Puerto Rico to reap the tax benefits of Section 936 of the U.S. Internal Revenue Code, the Island was already hosting a plethora of global companies (many of them from the U.S.) and their large-scale manufacturing operations. Today, despite the expiration of Section 936 tax benefits some 20 years ago, Puerto Rico continues to be home to some of largest manufacturing firms in the world — not to mention the Island’s service companies, which have been providing corporate, banking, legal, and accounting services for over half a century at a domestic and international level.

PUERTO RICO

Grade A Infrastructure

Manuel Rodríguez, who works as an attorney for local law firm Pietrantoni, Méndez & Álvarez, points out that the Commonwealth’s consistent and stable socioeconomic climate provides the perfect conditions for businesses to thrive. Such is the case with the recent contract awarded to Mexican conglomerate Grupo Aeroportuario del Sureste (ASUR) to operate the Luis Muñoz International Airport (the largest one on the Island). “The success of this project is a testament to the government’s good will and political commitment. This airport represents our business card to the international community, as well as proof that our government is willing to undertake joint ventures with private-sector investors. This project was the work of two government administrations led by different political parties. Despite their distinct ideologies, both proved their commitment to the betterment of Puerto Rico.”

As Federico Stubbe (a prominent Puerto Rican developer and investor at communications conglomerate Grupo PRISA) points out: “quality is the number one priority.” As way of an example, Stubbe disclosed that he was involved in the recent sale of five luxury properties to foreign investors for a combined value of $22 million. “Puerto Rico attracts wealthy tourists,” says the developer, who also revealed that he is working on a world-class medical tourism project that will be officially announced in a few months. Several sources told INVESTinG Puerto Rico that this endeavor is linked to the prestigious entity Johns Hopkins. Net profit per available hotel rooms is yet another key figure in Puerto Rico’s tourism profile. For instance, the Commonwealth has around 15,000 available rooms while the Dominican Republic has approximately 70,000. Yet, despite the large difference, Puerto Rico’s total profit in terms of US Dollars is nearly the same as its neighboring country. “Beaches are everywhere,” said Adolfo Bodelín, an executive of Spanish investment firm Reig. “However, not every place can offer a beach along with top-notch security, gourmet food, amazing landmarks, and beautiful cultural elements,” added Bodelín, referencing some of the many advantages Puerto Rico holds over other destinations. In addition to the Commonwealth’s stable political and fiscal relationship with the U.S., another great advantage is the Island’s size. There are few places in the world that afford tourists the opportunity to visit — in just a single day — a historic city like Old San Juan (built in the 15th century), walk through the only tropical forest in the U.S., bathe in warm, sunny beaches, and have delicious aged rum in world-famous distilleries such as Bacardí Corporation. “By car, you can reach any point on the Island in two hours or less,” highlights Luis Daniel Muñiz, government official at the Puerto Rico Tourism Company.

One more topic discussed by the panel was the link between foreign investors, government, potential clients, and local partners. What’s special about Puerto Rico’s clients and local partners is their ability to take on global projects from foreign investors. “The Island should take full advantage of its excellent infrastructure and maximize its gains,” advised Francesc Xavier Vives Argilagos, executive at Spanish company Gas Natural Fenosa. “It’s worth noting that a firm such as EcoEléctrica, one of Puerto Rico’s key energy providers, has the capacity to double its output, which currently stands at 15% of the Island’s total energy consumption,” explained Vives, who added that the existing energy infrastructure has great potential to be optimized as well.

31


INFRASTRUCTURE

Port of the Americas: A SOLID BET T

he rapid rate of innovation that occurs in maritime trade has the power to transform whole economies in the blink of an eye, and no more clearly in recent history has this phenomenon manifested itself than in the last 50 years. Since the emergence of freight container technology, the size of shipping vessels has been steadily increasing, limited only by the Panama Canal’s narrow passage linking the Pacific and Atlantic Oceans. Not long ago, a ship carrying 500 containers was a considerable feat; today, vessels can transport up to 20,000 containers, and their freight capacity only continues to grow. Along with these notable technological advances, large-scale projects on the horizon are poised to rock the entire industry. As the Panama Canal expansion nears completion and officials plan for the construction of a similar canal in Nicaragua, many countries have been preparing for the challenges and opportunities that this new maritime landscape will produce. In the Caribbean, countries such as Puerto Rico, the Dominican Republic,

Cuba, Jamaica, and Haiti have already assumed the task of creating ports with the dimensions and technological components necessary to meet the global market’s new demands.

A Brief Account of a Vital Project

Puerto Rico was one of the first to recognize the opportunities inherent in the projected increase in the flow of cargo handling to the region; indeed, the Commonwealth had already begun to implement its vision of a “mega port” on the south side of the Island by the mid-2000s. The monumental project allocated over 400 acres of land around the existing port in the southern municipality of Ponce to the development of new port facilities as well as a value-added zone. Since the start of the project, the Government of the Commonwealth of Puerto Rico has set out to assemble properties, develop new port installations, and prepare the land to facilitate the development of a value-added zone that would both benefit from port activity and simultaneously increase its freight volume.

After a public investment of nearly $300 million in design, permits, infrastructure construction, and acquisition of properties and equipment, Ponce’s port has reemerged as the Port of the Americas (Puerto de las Américas): a modern port capable of handling major imports, exports and trans-shipments. The port benefits from enviable structural and geographic advantages: a naturally protected bay, a canal 50 feet deep (15.24 m.) that can admit sizeable ships, and 1,200 lineal feet (365.76 m.) of new docks designed with the potential to eventually permit the entrance Post-Panamax ships. It also possesses Super Post-Panamax (ZPMC) cranes and other equipment to efficiently manage containers in a new terminal with an annual capacity of 500,000 TEUs (twenty-foot equivalent units). Given these advantages, the port also offers appealing incentives for other industries in addition to commercial trade. Located just five miles away from Ponce’s Mercedita International Airport and with direct access to highways and main avenues, the port has the capacity to receive cruise ships carrying up to 800 passengers — a substantial boon for local tourism. The land adjacent to the port also contains real estate available for storage — with existing facilities as well as terrain prime for new construction projects — and enjoys all the exemptions, incentives, and benefits conferred on the area through its designation as a free trade zone. In 2014, after many years of planning and establishing this vital source of economic development for Puerto Rico, the Island decided to institute a new port authority

From left to right: Tomohiko Oda, Portek’s executive director of port operations and management; Alberto Bacó Bagué, DEDC secretary; Mayita Meléndez, mayor of Ponce; and Carlos Iván Mejía, director of the Ponce Port Authority.

with the goal of championing the Port of the Americas as a competitive player in the current maritime arena. Despite competition from Puerto Rico’s Caribbean neighbors and other factors (such as coastal trade and labor laws that affect operational costs), Carlos Iván Mejía, executive director of the Ponce Port Authority, affirms that the Island is playing a winning hand by investing in this initiative. He explains that, without jeopardizing the completion of important projects, the Authority has given priority to the commercialization of infrastructure in more advanced stages of development and that subsequent development will be based on increases in demand, in accordance with the level of business activity in the port.

Located in a key geographical location, the Port of the Americas has the potential to become a world-class, international transshipment port and a powerful host of value-added activities.

PUERTO RICO

33


A Commercial Rebirth

Within the Caribbean, Puerto Rico possesses other favorable assets that attract cargo owners and shipping companies specializing in distinct products and sectors. “We’re well on our way to offering some of the most efficient port services available in the Caribbean, given that we maintain a highly sophisticated work force; the ability to deliver toplevel security in compliance with our legal and political frameworks; the ease of exchange with United States customs (since cargo in the port is in U.S. territory); and a reasonable price point for different types of supply chains,” says Mejía. “We also have the advantage of a value-added zone, where we can establish distribution and manufacturing centers within a framework of economic incentives that simply cannot be topped, even at the international level. What’s more, we have the free trade zone designation and a proposal on the table for the development of a maritime academy as an additional component of the project, which has already drawn the attention of local universities interested in collaborating,” he adds.

A World Leader Steps In

After a highly competitive process, the Authority has contracted Portek International Limited, a subsidiary of the Japanese conglomerate Mitsui, to facilitate the commercialization and oversee the operation of the Port of the Americas. Based in Singapore, this company not only operates nine ports in Africa, Asia, and Europe, but also develops technologies and systems to optimize cargo handling. The Authority chose Portek for its qualifications as a successful operator at the international level, with the understanding that the new port would seek to corner a niche market in which established ports were already competing. According to Mejía, “Portek has more than 20 offices that are consistently proactive in their promotional efforts and business development in order to foster trade among the ports they run. They have already selected the executives that will work full-time in Puerto Rico to supervise operations and trade in the Port, emphasizing the establishment of competitive fee structures that will place us in particular market sectors to attract cargo.” In doing so, the Authority hopes to launch the Port of the Americas onto the international playing field through direct access to this globally renown network of commercial and professional offices. Portek will oversee port activity, trade, equipment and operational engineering, and will also provide employee evaluations and any necessary training. However, Portek’s most crucial role, explains Mejía, “will be to structure, in conjunction with the Authority, a complete port package, if you will.” In addition to all the tasks mentioned above, Portek will also be in charge of identifying potential clients, implementing marketing strategies, and selling port services to bring new businesses and cargo to the Island. Since this is the first port they have acquired in the hemisphere, they will aim to strategically insert it in routes that they can then market to their clients. As part of a global business network, Portek sees how products move in a given region and uses this information to create routes that offer the highest efficiency and control.”

PUERTO RICO

The agreement reached with Portek signals a fresh start for the Port — a solid platform upon which it can craft a relevant, formidable business model within the context of the present maritime industry. It establishes the means by which the Port of the Americas can acquire Portek’s instrumental skills and capabilities at a time when the industry faces difficulties that exacerbate challenges for all ports in the region. The agreement allows the Authority and Portek to work together to sustain the project during the first three years of stabilization, until business activity and cargo volume reach sufficient levels. Just like the Authority, Portek recognizes the strengths Puerto Rico enjoys as a business destination, and the agreement serves as a tangible manifestation of the enterprise’s long-term interest in the Port. Once the fundamental objectives are accomplished, it lays the groundwork for a long-term agreement after the initial period, assuming the port concession is available. The terms of the agreement are structured to incentivize Portek’s performance, and the Authority retains the control of the Port until the initial goals are achieved. Mejía believes that it will breathe life into an initiative that has long represented a key opportunity for economic growth on the south side of the Island and in Puerto Rico in general. “To a certain degree, the opportunity has always been there. Cargo moves from port to port primarily based on two criteria: the services offered (including how well they meet a company’s needs) and their corresponding prices. That’s why it was crucial to keep moving in the right direction. Ships and cargo don’t arrive simply because we’re here. We have to go out and find them, integrate ourselves into the market, and compete for business. In the next few months, we will finally set out to accomplish these tasks alongside a company with the capability, expertise, and reputation necessary to credibly endorse the Port of the Americas in front of the international maritime community.” He adds that, given the dynamics of the industry, the opportunity for success is always present so long as the contender finds the opening to compete in the market or in particular segments of different markets. This constant search for new business represents a vital component of any port operation.

The pieces have already been put in place to prevent the project from getting bogged down by obstacles that delayed the emergence of the Port in the past. The mitigation and infrastructure works required by the U.S. Corps of Engineers were recently completed, which has freed up land in the value-added zone for the construction of new industrial projects tied

to manufacturing and logistics support for cargo handling and the supply chain. This, along with the Port’s initiation under Portek’s management, has allowed the Authority to offer both essential components of the project to local and foreign enterprises as a tenable business opportunity for the very first time. A new beginning for the Port of the Americas has arrived — one that recaptures the opportunity to serve as the axis of the economic development and growth of the internationalization of Puerto Rico’s industries and services. The Port and its value-added zone are open and ready for business.

A huge increase in Puerto Rico’s freight capacity

Port of the Americas (projected)

Port of the Americas (current)

Port of San Juan (current)

35


COMMERCE

The coming

wave of PPP investments

The government puts everything on the table, both large and small

T

he raving success of public-private partnerships (PPPs) in Puerto Rico, combined with the island’s ongoing fiscal and economic straits, is leading the government’s PPP Authority to go all in with a wave of collaborations that promise to transform how the island does infrastructure in the years ahead. And not just mega infrastructure projects! The Authority has opened the floodgates to a new generation of smaller-scale PPPs —bids under $55 million— covering any government service that can be outsourced for improved outcomes and lower costs. “We are now open to unsolicited proposals from any qualified party who approaches us with an idea of how to run a government service and deliver a better result,” PPP Authority Executive Director Grace Santana told INVESTinG Puerto Rico, adding that the process comes with expedited paperwork and faster turnarounds than the larger projects.

So far, there have been two agreements, given how recent the change was made and the scant promotion. Law 29, the 2009 legislation that led to the ultra successful PPPs of the Luis Muñoz Marín International Airport and highways PR-22 and PR-5, was amended by Law 237 only last year to allow for smaller partnerships. The highway PPP came first in late 2011, when Spain’s Metropistas was awarded the bid in exchange for an upfront investment of $1.1 billion. The company has since pumped $93 million into various improvements. On the other hand, Aerostar, the Mexican-owned airport manager, paid $615 million upon winning its bid roughly a year later and has since invested $140 million in capital improvements. “We’ve become part of the economic development and relaunch of Puerto Rico,” Aerostar President Agustín Arellano recently told a legislative panel. “To those who wonder if it makes sense to invest in Puerto Rico, I can say there is plenty of certainty and transparency, so much so that we’ve invested well over $700 million and plan to invest another $200 million.” That is a message Santana is delivering to companies bidding for the new wave of smaller deals. “We’re in the process of getting the word out more aggressively to provoke greater interest.” The agency makes its pitch at local and international events, but “more is needed so we can stimulate the participation we are projecting.”

“We are now open to unsolicited proposals from any qualified party who approaches us with an idea of how to run a government service and deliver a better result.” Grace Santana, executive director of Puerto Rico’s PPP Authority

One pending deal is a proposal to manage ferry transportation, mainly the Acuaexpreso service connecting Cataño, Old San Juan and Hato Rey, as well as the ferrying of passengers from the eastern town of Fajardo to the island municipalities of Vieques and Culebra. Others include the outsourced management of the Metropolitan Bus Authority (AMA by its Spanish acronym) and operation of the cruise piers in Old San Juan. In fact, most pending PPPs of any size are focused on transportation. The Authority has set the process in motion for the management and operation of nearly every major expressway crisscrossing the island: PR-20 in Guaynabo, PR-52 Caguas-Ponce, PR-53 Fajardo-Guayama, and PR-66 Carolina-Río Grande. By year-end 2015, the agency is due to complete the viability analysis and issue the request for qualifications, followed by the request for proposals in April, selection of the final bidder in July, and the start of construction come September of next year. The process is also on fast track for the PPP construction and management that will turn the existing traffic-light-rich Northeast segment of PR-2 from Hatillo to Aguadilla into a light-free expressway. The timing roughly parallels that for existing expressways, with construction due to begin January 2017. The same applies to construction of the new San Juan-Caguas passenger train. Under a PPP, explained Santana, “the asset remains under the ownership of the government, but if we determine that the people stand to benefit from an improved quality of life, lower costs of operation and greater investments than would otherwise be possible, we move toward a PPP. They stand to become better assets with a longer life, and our job is not just to make the PPP happen, but to oversee it to ensure compliance with the highest standards. Citizens are already feeling the difference in the case of the PPPs that are active. It’s really the way to go.”

M E T R O P I S TA S $1.1 billion upfront investment made in 2011

$93 million

additional investment in the following improvements: ● Rehab of 18 bridges ● Repairs to 170 road kilometers ● Security and safety enhancement (lighting, barriers, signage) ● Toll booth upgrades ● Installation of the Dynamic Toll Lane monitoring system ● New electronic Open Toll Road

A E R O S TA R $615 million

upfront investment made in 2012

$140 million

additional investment in the following improvements: ● Remodeling of Terminals A, B and C ● Centralized the passenger flow for greater efficiency and an improved experience ● Modernized baggage handling on Terminals B and C

PUERTO RICO

37


HEALTHCARE

Medical Tourism in Puerto Rico: Global service provider in the Caribbean

T

he numbers speak for themselves: in less than a year, the effective structure that makes up the Medical Tourism Corporation (in Spanish “Corporación de Turismo Médico” – CTM) has allowed for the establishment of an intensive, dynamic, and successful administration that is continuously providing opportunities to investors, service providers, and, naturally, a wide array of patients. In line with an increasing, global class of travelers who demand top-notch and cost-effective healthcare services, Puerto Rico continues to position itself as one of the greatest hubs of medical services in the Caribbean. With promotional efforts spanning across the entire world, CTM has an exceptional network of professionals specializing in cardiology, odontology, gynecology, ophthalmology, orthopedics, pediatrics, oncology, neurology, and bariatric and cosmetic surgery, among other US Board Certified medical specialties. In such cases, savings can go as high as 40% to 60% when compared to stateside costs for similar procedures. On a corporate level, the diverse set of business opportunities promoted by CTM are now taking shape through the local certification of 19 first-class healthcare providers, including seven hospitals, four hotels, and several radiological, dental, ophtalmological, and outpatient clinics. By the end of 2015, and after a rigurous training and certification process, Puerto Rico’s goal is to have 30 certified providers. To this end, the commonwealth is offering generous tax incentives under laws that seek to propel tourism development, service exports, and individual investment.

PUERTO RICO

Never-ending birth of new businesses CTM’s drive to expand the number of companies that are operating in Puerto Rico continues to transcend overseas. In the last two months alone, at least six healthcare companies have moved their back offices to the Island in order to take full advantage of the benefits provided by Law 20 (low corporate taxes to service companies that export from the Island). As part of the commonwealth’s long-term strategy, all of these companies are expected to develop local offices eventually. In fact, a number of healthcare providers have already expressed a desire to open their own facilities in Puerto Rico, including Lumin Health, which has eight orthopedic outpatient clinics in the US; Miami Medical Solutions, which has six outpatient clinics in Miami and South Florida; and Next Health, which owns nearly a dozen laboratories in Houston, Texas.

A delegation of medical-tourism providers at the 2015 World Medical Tourism Congress in Orlando, Florida.

39


CERTIFIED

PROVIDERS

HOSPITALS

Ashford Presbyterian (El Presby) Auxilio Mutuo Centro Cardiovascular de Puerto Rico y el Caribe Doctors Center Hospital (Carolina) Doctors Center Hospital (Manatí) First Hospital Panamericano, Inc. (Cidra) HIMA Health Metro Pavía (Santurce) Metro Pavía (Ponce) San Jorge Children's Hospital

On-point promotional strategy

“At last, medical tourism in Puerto Rico is gaining great momentum. As a direct consequence of our strategic plan, we are now welcoming patients under our new corporate and operational structure, thereby joining so many other patients who have been coming to Puerto Rico for years,” says Francisco G. Bonet, CTM’s executive director. To a large extent, the influx of patients has grown substantially thanks to the commonwealth’s aerial connections with the top destinations in the world. Hard work rather than chance is what has pushed Puerto Rico to where it stands today. For the past couple of years, CTM has been driving a full-fledged, integrated program encompassing (1) sales, promotions, and marketing, (2) attractive online offers, and (3) an active participation in trade shows and conferences in the US, Canada, Latin America, and the Caribbean. Some of CTM’s most notable appearances include the First Medical Tourism Conference in the Dominican Republic and the World Medical Tourism Conference in Orlando, Florida. As part of the latter event, some of Puerto Rico’s top certified providers traveled stateside to meet with an estimated audience of 3,000 attendees. Moreover, last June the Island hosted the Caribbean Health Summit: an exclusive, annual event focused on attracting multinational healthcare purchasers, especially those from the US. “For the summit, we managed to bring

Advanced

together 32 of the largest enterprises in this field. Today, we’re not just in talks with these companies – some of them are already carrying out patient referrals in Puerto Rico,” pointed out Bonet.

Three names that say it all…

Puerto Rico’s well-aimed promotional launches have led to the development of numerous projects by major hospital players who see the Island’s healthcare sector as a source of wealth and prosperity. Indeed, building upon the rigurosity of processes regulated by local and US federal laws, as well as a top-notch hospital and hotel industry, Puerto Rico’s healthcare industry is attracting some of the biggest names in the corporate and scientific world. Three examples from the US include: the renowned MD Anderson Cancer Center, which is now affiliated to Puerto Rico’s Comprehensive Cancer Center (a $196 million cancer research and treatment center scheduled to open in 2016); the Miami Children’s Hospital—a pediatric authority in the US—is planning to open a 100-bed clinic in the municipality of Manatí, with Doctor’s Center as its lead developer; and Johns Hopkins, one of the top hospital and life sciences providers, is scheduled to build a high-end, 92-bed hospital with private rooms in the municipality of Dorado. Johns Hopkins’ project is specialized in, and aimed at, medical tourism.

A key part of the puzzle comes to life

Good news keep coming CTM’s way. Before the close of this edition, INVESTinG Puerto Rico learnt that the construction of Concierge Center, a key part of CTM’s logistics model, will soon be underway. “This center will allow us to record patient names, their place of origin, and the type of procedure they’re looking for, among other bits of information. Moreover, we are aiming to have the call center open 24/7 and generate five jobs for the project’s first phase, including a sales representative who will be based in the state of Florida. In fact, the CTM is contributing $350,000 of seed capital over the first two years of this initial step,” notes Bonet. “We already have specific phone lines available, 1-844-578-2777 or 1-844-5STARPR, and our website, www.starhealthcarepuertorico.com, is up and running. It’s worth mentioning that both tools have already generated a hefty number of business leads and quote requests. To date, we have obtained over 40 requests,” revealed Bonet.

Outpatient Clinics

CBF Pediatrics Services, CSP Franceschi Method Centro Oncológico Integral de Puerto Rico Instituto de Ojos y Piel José Raúl Montes Eyes & Facial Rejuvenation Metro Pavía Clinics Puerto Rico Integrated Oncology Center Southern Pathology Services, Inc. (Ponce) Southern Pathology Services, Inc. (San Juan) Urostar Vista Ophthalmic Ambulatory Center

DENTAL Clinics

Ashford Dental Dietrich Dental, PSC International Smile Designs Megacentro Dental PRUSA/Health & Wellness

HOTELS

Caribe Hilton Condado Vanderbilt Hotel Doubletree by Hilton San Juan Hampton Inn and Suites Lagoon Villas at Caribe Hilton The Condado Plaza Hilton Turtle Bay Inn

Complementary Services

Centro Sononuclear Río Piedras Med Scan PR Medway Medway Tours San Patrico MEDFLIX TransCita

PUERTO RICO

41


EXPORTS

A World of Opportunities for Service Exports Puerto Rico is at an inflexion point that continues to yield innovation and encourage development. Behind this deep transformation lie global economic trends and the Island’s unique status as a jurisdiction of the United States, which act together to generate state-of-the-art laws that spur Puerto Rico’s economic expansion. The question is how to project the Commonwealth as a top-notch provider of human capital, a premiere manufacturing center, and an international hub of service exports. The most efficient and quick answer has come in the form of a consolidated measure entitled Law 20 (2012). Along with similar regulations, such as Law 273 (2012), Law 20 has led to a constant and increasing stream of entrepreneurs and investors — including powerful exponents from the well-known Fortune 500 list — who have relocated to Puerto Rico in order to reap a unique and diverse set of benefits. Law 20 has been a resounding success. In 2014, more than 200 companies were approved under this measure. In 2015, the same figure nearly doubled. Of all the Law 20 businesses that are emerging on the Island, nearly 10% specialize in professional services, 19% offer consolidated services, and 17% provide services related to information technology. According to Caroline López, special aid at Puerto Rico’s Department of Economic Development and Commerce (DEDC), “all cases are distinct but the underlying message is the same: all these companies see Puerto Rico as a world-class location to export services around the globe. Businesses continue to move to the Commonwealth because we offer amazing opportunities and the ideal venue to optimize operations. Thanks to Puerto Rico’s lower operational costs and fiscal incentives such as the 4% corporate tax, we have welcomed many companies that used to export services from the continental United States, Latin America, and even Asia. What’s more, these businesses are hiring local talent and adding jobs to the local economy. These laws are bearing fruit at a crucial time, as well as attesting to our amazing human capital, strategic geographical location, and innumerable resources.” “One of the greatest results of this entire operation is its contribution to intellectual property, which greatly benefits from this melting pot of knowledge, culture, and ideas. It will lead to an unprecedented multiplier effect,” adds López.

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Doing Business in Puerto Rico: A Wonderful Experience Not too long ago, accounting firm PricewaterhouseCoopers (PwC) provided further evidence of Law 20’s success by moving one of their service centers in New York to Puerto Rico. PwC is by no means a new player in the Commonwealth, as it has provided tax-consulting and quality-control services for many years. However, their decision to expand the firm in Puerto Rico shows that even the largest multinationals are willing to bet on the Island. “PwC is growing in Puerto Rico because they are aware of the Island’s local talent, its deep commitment to economic development and innovation, and its positive, long-term economic prospects. We have been doing business in Puerto Rico for more than 60 years and we expect to continue growing,” noted Darycel Collazo-Ruiz, director of PwC’s tax division. For the moment, PwC’s new division in Puerto Rico will offer tax-compliance services to U.S. clients, including orientations on how to properly fill out federal and state tax forms. Though the company has hired a preliminary group of 45 employees to conduct this operation, multiple sources have informed INVESTinG Puerto Rico that PwC “is looking to hire an additional 150 people to provide asset management services, while other partners are considering similar moves.” In light of the announced expansion, the DEDC is working alongside PwC and several universities in Puerto Rico to improve and renew their accounting and asset management courses.

The Perfect Location and Business Environment Other successful Law 20 examples include Live Career, one of many lines of business owned by conglomerate BOLD that is dedicated to providing international human resource services. Well known for its long list of online products, Live Career recently decided to move its headquarters to Puerto Rico to enjoy the benefits of Laws 20, 22, and 273. Heather Williams, the company’s CEO and CIO, said: “BOLD was founded in 2015 in the municipality of Guaynabo. As a reliable online service, Live Career’s mission is to transform people’s work environment. In May 2015 we opened our international base in Puerto Rico, and since then we have created numerous jobs and moved our call center to the municipality of Caguas, where we partnered up with Atento. At the moment, we are planning an ambitious expansion and actively seeking to hire more employees to service our growing demand.” “We chose to station our headquarters in Puerto Rico because the Island has an enviable geographic location and a wonderful business environment. We are committed to building strong ties with local communities, participating in charity events, funding career development opportunities, and creating awareness about this Island’s amazing business potential,” said Williams.

Law 273 Lures a Powerful Bank Perhaps one of the greatest news in 2016 comes from the subsidiary of a powerful bank and its decision to move several of its operations to Puerto Rico. Indeed, Santander Consumer USA Holding, Inc. (NYSE:SC) — a subsidiary of Spanish bank Banco Santander — has decided to relocate a number of its operations to Puerto Rico in order to access the incredible benefits afforded by Law 273 regarding the export of financial services. Based in Dallas, Texas, SC is a leading loan provider with an estimated 2.5 million clients. As part of its move to the Island, which SC describes as the “perfect location,” the company is expected to create around 500 jobs over the next three years. “This investment represents Santander’s faith in the future of Puerto Rico and its people. Despite the Commonwealth’s tough situation, Santander has decided to invest here and create jobs,” remarks Fredy Molfino, president and CEO of Santander Puerto Rico. “Our decision to establish this new center in Puerto Rico was prompted by specific benefits,” says Jason Kulas, CEO of SC. According to him, these benefits include Puerto Rico’s “highly-qualified work force, geographic location and time-zone, sophisticated technology infrastructure, tax combos, and Santander’s strong presence on the Island.”

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FINANCE

INVESTMENT

INTERNATIONAL BUSINESS

New frontiers for local production

EB-5: Passport to Progress

The opening of more commercial offices overseas has coincided with the approval of legislation to create in Puerto Rico a Regional Center under the program of EB-5 Visas (granted by the United States), also known as “Immigrant Investor Program” or “Employment-Based Immigration: Fifth Preference”. Created by Congress in 1990, this program was designed to stimulate the U.S. economy through job creation and capital investment by foreign investors. EB-5 visas are granted to foreign citizens who invest a minimum of $500,000 in the U.S. and create no less than 10 direct jobs (through pre-approved enterprises). Among many benefits, Puerto Rico’s EB-5 Regional Center offers a number of financing methods as an alternative to traditional banking. Furthermore, investments from the EB-5 Visas program provide an additional mechanism to attract foreign capital to the Island, which in turn allows for the financing of projects and the creation of local jobs. It comes to no surprise then that EB-5 Visas have become a preferred and effective tool to facilitate projects that are a priority to public interest. Both initiatives (offices and visas) are part of a comprehensive interagency program that also includes efforts to establish liaisons with public and private institutions from Latin American countries, as well as with academic and research entities.

I R S E A S E S TA X R E S I D E N C Y R E Q U I R E M E N T S

U.S. citizens living in Puerto Rico will enjoy more flexibility

Time to reconquer…

“Getting closer to Latin America again is an essential feature in our plan to drive a grand economic transformation on the Island. Most markets in that region are expanding quickly and many of them have already signed Free Trade Agreements with fellow South American countries, the U.S., and some Caribbean nations. These conditions allow and call for higher regional integration,” stated Alberto Bacó Bagué, Secretary of Puerto Rico’s Department of Economic Development and Commerce. For his part, Colombian Vice President Angelino Garzón pointed out: “this is good for Colombia, good for Puerto Rico and good for the entire Caribbean region.” In general terms, Puerto Rico’s push to build new trade offices represents a push to boost its competitiveness via strategic points that can be summarized as follows: • Establishing the Island as an entry point for Latin American companies looking to move to the U.S. • Promoting direct investment from Latin America in order to strengthen key economic sectors such as life sciences, services (including finance and insurance), agriculture, and film. • Attracting regional capital through the EB-5 visa program to finance high-priority projects, including infrastructure. • Raising the number of products and services exported by Puerto Rico. • Increasing the number of flights to Puerto Rico, maintaining all direct flights to Latin America’s principal cities, and reclaiming the title of Caribbean Aerial Center.

Competitiveness: A Global Obsession

“We can be a bridge to the U.S. but we can also be an important final market,” pointed out Bacó. Becoming the latter is undoubtedly Puerto Rico’s highest goal and also its biggest challenge. As with any country, securing healthy and prolonged economic development first requires discovering, maintaining, and sometimes recovering global competitive factors. Michael Porter –famed Harvard Business School professor and expert on competitive strategies– notes: “competitiveness is already a main concern for developed and developing nations participating in an open and integrated global economy.”

T

he warm welcome offered by the beautiful Caribbean island of Puerto Rico to U.S. citizens residing on its beaches has gotten even better. At the end of August 2015, the U.S. Internal Revenue Service (IRS) proposed certain modifications to the rules and regulations that determine whether an individual is a bona fide resident of the U.S. territory. Since 2012, more than 500 U.S. investors have made Puerto Rico their home base. In addition to the Island’s charm and easy-access location, the local government—through Acts 20 and 22—has guaranteed tax and investment shelters, among other benefits, to individuals and corporations that make Puerto Rico their main place of residence. In income-rich states like California and New York, combined federal, state, and city taxes can go as high as 50% to 60% of personal income. This is not the case in Puerto Rico. Act 22 provides individual investors with a 100% tax exemption on all dividends, interest income, and capital gains, while Act 20 offers a 100% tax exemption on distributions from earnings and profits, plus a corporate income tax rate of 4% for export services.

What makes an investor a bona fide resident of Puerto Rico? In general, a bona fide Puerto Rico resident is defined as a person who spends at least 183 days of the taxable year in Puerto Rico (or 549 days during a period comprised of three consecutive taxable years, just as long as the person is present for at least 60 days of each taxable period). The acts provide several definitions for what constitutes “days of presence,” which count towards an individual’s overall proof of residency. Even when the person is outside of Puerto Rico, some days may be considered days of presence under a concept defined as “constructive presence.” The amendment proposed by the IRS would provide higher flexibility to individuals by allowing up to 30 days to count as days of presence even when the person is outside the U.S. or Puerto Rico. These days would be accounted for under constructive presence in order to provide individuals with more time to conduct personal or commercial trips outside of the Commonwealth. Investors should be aware that the amendment excludes trips within the U.S.; only international travel would count towards the aforementioned 30 days. Furthermore, U.S. residents are required to spend more time in Puerto Rico than any other part of the U.S. These new regulations will be become effective during the 2016 taxable year. Changes also stipulate that the 30 days of constructive presence will not apply to the 60-day minimum period that individuals must spend in Puerto Rico to account for the three-year residency period of 549 days. For more information, investors can access the proposed rulemaking (REG-109813-11) on the Federal Register or access the following link: http://www.taxnews.com/news/IRS_Adds_To_US_Territory_Residency_Rules____69014.html#sthash.1bc09iMc.dpuf

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BANKING

“We have specialized personnel with deep knowledge in these incentive laws to help guide clients as they establish their residence in Puerto Rico, to ensure an effective transition.”

The land of private banking

María Awilda Quintana, senior vice president of the wealth management division at Banco Popular

Local financial institutions provide personalized services for

20/22 clients

PUERTO RICO

I

f you’re considering a move to Puerto Rico under Act 22 personal incentives, most likely in combination with one of the many business incentive laws promoted by the Island’s Department of Economic Development and Commerce, this is a must read. Of the long list of professional services you place on your to-do list, personal or private banking ranks high, given the importance of having an expert banker handle your finances and guide you through the maze of local tax and financial laws and opportunities. Thankfully, you will find a robust offering among Puerto Rico’s financial institutions. In the case of FirstBank, for example, the Platinum Banking unit “offers a full suite of products and services to high-net worth individuals,” said Mari Evelyn Rodríguez, senior vice president in charge of the division. As is common in such services, “we serve our customers privately, in person or remotely, as they prefer. And the Platinum Banking division provides customers with a single point of contact for all their banking needs, personal or commercial. Our relationship officers help a customer with the full range of services, from opening their personal and commercial accounts, to obtaining a mortgage, securing a credit card, and even reviewing the bank’s property portfolio for potential acquisitions.” It is a pattern followed by such other local institutions as Scotiabank, UBS, and Oriental Bank. Most recently, Banco Popular has taken it one step further with the launching of Investor’s Services Hub in the bank’s Hato Rey headquarters, at the heart of San Juan’s financial center.

400+

Number of 20/22 clients served by Banco Popular

This integrated service center not only extends the private-banker model already offered by Puerto Rico’s largest bank, but also “connects the client with a network of other professionals on the Island, as well as facilitate trade with a complementary network in the region,” according to María Awilda Quintana, senior vice president in charge of the bank’s wealth management division. Just as clients find expert advice on the island’s incentive statutes in local legal and accounting firms, so too across Puerto Rico’s private-banking units. “We work with clients from a very early stage, when they are just beginning to consider moving to Puerto Rico to take advantage of Act 20 and Act 22,” explained FirstBank’s Rodríguez. Ditto at Popular. “We have specialized personnel with deep knowledge in these incentive laws to help guide clients as they establish their residence in Puerto Rico, to ensure an effective transition,” added Quintana. Sure enough, these and other banks have experienced a surge in 20/22 clients of late -- “an important growth,” said Rodríguez, prompting a move to “continue investing in our service offering to ensure we maximize this opportunity.” Popular, for its part, has served more than 400 individuals who have relocated to Puerto Rico under 20/22. In the case of clients who move to Puerto Rico from Latin America, the bank also helps with “support related to immigration, and we refer to other experts in cases requiring greater structure,” said Quintana, adding that the bank participates actively in trade missions to promote Puerto Rico throughout Latin America. “Promoting these types of incentives is important because they offer effective mechanisms to advance the economy,” said Popular CEO Richard L. Carrión. “This is one of several innovative ideas we are developing and that stimulate economic growth on the Island.”

20/22

47


INVESTMENT

REWARDING PUERTO RICO’S PROMOTERS

New law provides up to 15 years of incentives

“It’s a program like no other in the history of Puerto Rico. We are giving private-sector individuals a great incentive to go out there and promote the Island. Imagine if your job was for act as commercial ambassador for your country!”

Caroline López-Beauchamp, special aide at the DEDC

“Our diaspora is a very valuable asset. This program has been designed to capitalize on these individuals and their global connections. Our government is always seeking new ways to be more efficient, especially in time like these. Given these limitations, the purpose of incentivizing independent promoters is to guarantee the continuity of our campaign to boost growth in Puerto Rico. The truth is these promoters can reach people and places that the government cannot,” explained Caroline López-Beauchamp, an experienced lawyer and accountant currently working as special aid for the DEDC. Around 10% of revenue generated by companies under Acts 20, 273, and 399 is placed in a special fund for the Development of Export Services and Promotion.

As the name clearly states, this DEDC-administered fund is meant to incentivize research, insurance, and financial services companies—to mention a few—to settle their operations in Puerto Rico and use the Island as an international export hub. “What better way to promote these types of strategic partnerships than through this incentives program!” exclaimed López-Beauchamp. There are several requirements to qualify as an official promoter, including a certification from the DEDC, at least five years of professional experience, vast knowledge of Puerto Rico, and a tax exemption from the commonwealth’s treasury department. Want to know more about what it takes to become a promoter? Visit www.ddec.pr.gov.

I

n times of need one must think outside the box. And that is exactly what the Department of Economic Development and Commerce (DEDC) is doing. In an unprecedented move, the DEDC has created an incentives program to reward companies that actively persuade companies to relocate to Puerto Rico and export services from the Island. Through the program, promoters get a 7.5% cut of all taxes paid by their clients to the Puerto Rico Treasury Department for a maximum of 15 years. For those companies operating under Act 273, promoters will receive a slightly smaller cut of 5.625%. To illustrate how the program works, take a look at the following example. Promoter Y convinces Company X to move its operations to Puerto Rico. One year later, Company X reports $10 million in net revenues and pays $400,000 in taxes to the Treasury. Of the total tax amount paid by Company X, Promoter Y would pocket 7.5% or $30,000. Let’s suppose now that the following year Company X’s net revenues increase to $100 million. In this case, Promoter Y would be rewarded with $300,000. As long as Company X pays any amount of taxes, Promoter Y would be rewarded accordingly for up to 15 years.

PUERTO RICO

49


AEROSPACE

Diversification and Specialization of the Aerospace Industry

These facilities, along with other high-profile aerospace projects, are the result of tireless efforts by many government officials to advance Puerto Rico’s economic development and promote the Island and its countless business incentives around the globe. As the current administration continues to work closely with other aerospace giants to replicate the success of Lufthansa Technik Puerto Rico, this relatively new industrial sector is slowly expanding and promises to generate thousands of jobs over the next decade.

Lufthansa Technik:

Economic Diversity in Puerto Rico Takes Flight

F

rom blueprint to reality. Lufthansa Technik’s first-ever maintenance, repair, and operations (MRO) center in America is now fully functional and operating from Puerto Rico’s western municipality of Aguadilla. Among those in attendance at the grand opening of Lufthansa Technik Puerto Rico (LPR) were Dr. Johannes Bussman, chair of Lufthansa’s executive board, Dr. Peter Wittig, German Ambassador to the U.S., and Vinai Thummalapally, executive director of Select USA. These facilities, along with other high-profile aerospace projects, are the result of tireless efforts by many government officials to advance Puerto Rico’s economic development and promote the Island and its countless business incentives around the globe. As the current administration continues to work closely with other aerospace giants to replicate the success of LPR, this relatively new industrial sector is slowly expanding and promises to generate thousands of jobs over the next decade. During the opening ceremony of the MRO center, LPR CEO Elmar Lutter expressed his deep gratitude to the central government of Puerto Rico, as well as the entire municipality of Aguadilla and its mayor. He also offered a special recognition to Lufthansa’s first two clients in Puerto Rico, remarking: “without them we wouldn’t be here.” Then, while pointing at two airplanes parked in the back, Lutter added: “please take a look at this beautiful yellow bird brought here by Joe Resnik, vice president of

PUERTO RICO

operations at Spirit Airlines, and this gorgeous blue bird brought to us by Jeff Martin, executive vice president at JetBlue Airways.” LPR’s CEO also highlighted the participation of the University of Puerto Rico (UPR) and its vital contribution to the project. “Without the help of UPR, which created a world-class school in Aguadilla to train our employees, we would have never been able to establish this operation. Our collaboration with the University is an essential component that guarantees the success of our long-term plans.” For his part, the German ambassador pointed out that one of the “hardest challenges for German companies that open subsidiaries outside of Germany is finding well-trained and qualified personnel. All the more reason to commend the collaboration between Lufthansa and the University of Puerto Rico, as this partnership has fostered a vocational education system much like the one we have in Germany. What makes this system so great is that it combines education and real-life training in the same companies where young people later develop their careers.” Wittig, who met with the Governor of Puerto Rico before the event, added: “Lufthansa’s new facilities will serve as a point of reference for foreign investors and companies looking to establish their operations in Puerto Rico. This MRO center sends a clear message to the rest of the world about the amazing economic opportunities that lie in the Commonwealth.”

Left with the final remarks, Governor Alejandro García Padilla mentioned that after many decades of hosting the largest and most successful pharmaceuticals in the world (which continue to contribute a great deal to the Island’s manufacturing base), it was time for Puerto Rico’s economy to diversify. In light of a changing world and the rapid growth of the aerospace industry, García Padilla stated that his administration has made a concerted effort to foster this new industry in Puerto Rico. LPR, said the governor, “is proof of our strategy’s short-term success and our push to more closely connect with German manufacturing companies.” “The pharmaceutical industry found fertile ground in Puerto Rico. Our incredibly talented human capital set the stage for the development of one of the most impressive concentrations of pharmaceutical manufacturing in the world. Thirteen of the top 25 patented products sold around the world are made here, and 12 of the top 20 biopharmaceutical companies on the planet are part of this Island’s incredible industrial ecosystem. Nevertheless, our economy today must branch out and we must venture into new industrial sectors. This is why we have entered the aerospace industry, which promises a bright future and an amazing potential for economic growth,” said the governor. “While in the process of developing LPR we discovered terrific opportunities. For example, we learned that German companies obtain huge tax benefits by virtue of participating in our fiscal system, and this in turn opens new industrial possibilities for Puerto Rico and consolidates our relationship with German manufacturing.”

ECONOMIC IMPACT GLOBAL 26,000 employees 30 subsidiaries PUERTO RICO 200 jobs in 2015 400 jobs in 2017 $2,200 millon over the next 30 years

Before the inauguration of Lufthansa Technik’s maintenance, repair, and operations (MRO) center in Puerto Rico, Governor Alejandro García Padilla (left) held a meeting with German Ambassador to the U.S. Peter Wittig (right). Lufthansa’s MRO center is the result of concerted efforts by the Island’s public and private sector to develop an aerospace industry and diversify Puerto Rico’s economic development.

51


TOURISM

Iberia is back! BIG TIME! O

n May 15th, 2016, Spanish airline Iberia will once again start offering non-stop flights between San Juan and Madrid three days a week: Monday, Wednesday, and Sunday. In the airline’s first season alone, the Island is expecting to welcome around 7,500 visitors with an economic impact of $21.2 million. Iberia’s return to Puerto Rico was announced during the Forum for Leaders of ALTA (Spanish acronym for Latin American and Caribbean Air Transport Association), which saw the participation of Iberia President Luis Gallego. The Spanish airline had canceled all direct flights to Puerto Rico three years ago after 66 years of continuous service. In addition to reinstating its flights, Iberia has reached a deal with the Puerto Rico Tourism Company (PRTC) to promote the Commonwealth in Europe for several years. The advertisement campaign will focus on creating awareness about the Island’s ability to cater to all types of people—from those looking for tourist attractions to individuals seeking business ventures—in order to boost the number of European visitors and ensure the sustainability of the route. To this end, Puerto Rico will be using all sorts of media outlets, including print, radio, social media, and company websites. “Iberia’s initial flights are scheduled to bring approximately 7,500 visitors to Puerto Rico,” highlighted PRTC Executive Director Ingrid Rivera. “Flights will depart at 4:35 p.m. from San Juan and arrive in Madrid at 6:25 a.m. Returning flights will depart from Madrid at 12:25 p.m. and land in San Juan at 2:55 p.m.”

From 2015 to 2018, Iberia is scheduled to acquire several brand-new models of Airbus A330-200, some of which will be used to cover the transatlantic route. These aircrafts are equipped with a total of 288 seats: 19 fully-reclining chairs with direct access to the aisles for business-class travelers and 269 seats with extra legroom for those traveling coach. The Airbus A330-200 also includes Wi-Fi hotspots, GSM connectivity, and plugs for all types of personal devices. The San Juan / Madrid route will allow travelers to access Iberia’s connecting flights to over 90 destinations in Spain and the rest of Europe via Terminal T4 of Barajas, Madrid’s largest airport. It’s expected that these connections will increase tourist flow and incentivize commercial missions between Puerto Rico and the Old Continent. “Iberia is back, big time. This airline will certainly open doors for Puerto Ricans and in-transit passengers at Puerto Rico’s Luis Muñoz Marín Airport who are looking to access all kinds of tourism and economic opportunities in Europe. What’s more, Iberia’s return to Puerto Rico along with all the other flights offered by European airlines servicing the Island will increase the weekly number of European passengers to record highs,” said Governor Alejandro García Padilla. For his part, Gallego explained: “when Iberia suspended flights to Puerto Rico, the company made a commitment to return once the route was sustainable again. That moment has arrived. Thanks to all the adjustments we’ve made within the company in the past few months, we have been able to restart our service to Puerto Rico and establish flights to five new destinations in Latin America: Havana (Cuba), Cali (Colombia), Medellín, (Colombia), Montevideo (Uruguay), and Santo Domingo (Dominican Republic). We’re confident that these new routes will further consolidate our position as the leading carrier between Latin American and Europe.” Iberia flies to over 117 locations in 44 countries across Europe, America, Africa, and the Middle East. It leads all other airlines in transatlantic flights between Latin American and Europe. Along with its subsidiary Iberia Express and its franchise Iberia Regional Air Nostrum, Iberia operates around 600 flights every day using an air fleet of 130 planes. Moreover, the airline is a member of the Oneworld Alliance, which offers upwards of 14,000 flights to more than 150 countries and approximately 1,000 airports.

Sky-high aerospace expectations at P

uerto Rico’s growing reputation in the aerospace sector just received another tip of the hat at the twelfth annual ALTA (Latin American Association of Air Transportation) Forum, a conference that gathers leaders of major global airlines — approximately 500 participants this year alone — to discuss major industry challenges, opportunities, and innovations. The Forum’s overarching objective is to drive the exchange of ideas around the development of safer and more efficient aviation strategies, with a regional focus on Latin America and the Caribbean this year. “We have put forth great effort to diversify the economy, exploring new opportunities and bolstering our established economic sectors. This type of meeting allows us to continue strengthening the tourism sector, where we are witnessing very substantial achievements,” indicated Alberto Bacó Bagué, secretary of the Puerto Rico Department of Economic Development and Commerce (DEDC). Likewise, Eduardo Iglesias, executive director of ALTA, confirmed that “the aviation industry has been a vital element in Puerto Rico’s economic, social, and cultural development. Recent private investments in the aerospace field and the proliferation of airlines serving the Luis Muñoz Marín International Airport (SJU) are just a few examples of this successful development plan.” “The forum not only gave us the chance to cover far-reaching topics for the management of the aviation industry, but it has also placed us in the global spotlight once again,” commented Ingrid Rivera Rocafort, head of the Puerto Rico Tourism Company (PRTC). She describes the conference as a key opportunity to solidify the Island’s position as a favorable destination for conventions and business trips, while conveying the advantages, incentives, and competitiveness of Puerto Rico to those interested in investing in touristic development. The delegates and participants at ALTA — considered one of the industry’s most important conferences — primarily consist of top airline executives, aircraft and engine manufacturers, providers, civil aviation and tourism officials from the region, and members of the local and international press specializing in the aerospace industry. This year, ALTA convened representatives of the airlines that handle close to 90% of Latin American and Caribbean traffic — estimated this year at 210 million passengers. The participants included top executives

ALTA

of companies rendering services in The Arrival of a Royal Caribbean Mega Cruise Ship Puerto Rico, such as Air Europa, Avianca, COPA Airlines, Delta Air Lines, Insel Air, JetBlue, LIAT, American Airlines, Lufthansa Technik, Volaris, and World Fuel Services.

Iberia’s forthcoming arrival is expected to bring

7,500 visitors in the first season alone.

PUERTO RICO

53


The Arrival of a Royal Caribbean

MEGA CRUISE SHIP

is proof that Puerto Rico’s visitor economy continues to grow

M

arking a historic moment in Puerto Rico’s tourism industry, Governor Alejandro García Padilla eagerly welcomed earlier this year the world’s third largest mega cruise ship—Royal Caribbean’s Anthem of the Seas—a few moments after the vessel docked in the Island for the first time ever. In his message, García Padilla was quick to underscore the key role of the tourism industry in the Island’s economy, labeling it as one of the most important engines behind the Commonwealth’s economic recovery. “It is no small feat that in 2016 alone, Puerto Rico is expecting to host a whopping 240 passenger ships, and eight of them will be doing so for the first time,” said the governor. García Padilla added: “For a long time our tourism industry remained stagnant at 6% of our Gross Domestic Product (GDP). However, thanks to the success of many strategies that we’ve been implementing for the past three years, today we can proudly say that our tourism sector comprises 7.1% of our GDP, making it one of our top economic drivers.”

PUERTO RICO

RECORD FIGURES FOR PUERTO RICO’S TOURISM INDUSTRY IN 2014-2015

1.5 million

CRUISE-SHIP PASSENGERS

The rise of tourism in Puerto Rico isn’t just a mere coincidence; rather, it is the result of thoughtful planning, as well as the collaboration of several government agencies, which together helped execute large-scale projects. These include the construction of Pier 3 in the Port of San Juan to endow the port with the capacity of anchoring mega cruise ships. “None of this would have been possible if we hadn’t invested more than $8 million in the reconstruction of Pier 3 to allow these floating mega hotels to come here. I’d like to point out that some of these ships have a length of 1,141 feet, can weigh 168,000 tons, and host up to 5,000 passengers and 1,300 crew members. Many people questioned our decision to invest $8 million in the pier, but I think that with the arrival a few months ago of mega cruise ship Quantum of the Seas, we essentially laid to rest any doubts as to the value of our investment,” stated the governor. For his part, Federico González-Denton, Royal Caribbean’s associate vice president of government affairs in Latin American and the Caribbean, noted: “In

$200 million ECONOMIC IMPACT

7.1% SHARE OF GDP

the past few years, Puerto Rico has made significant progress in tourism infrastructure. Not only have these changes helped increase the overall satisfaction of our passengers (when compared to other destinations in the Caribbean), they have also further consolidated our trust in Puerto Rico as a premier cruise ship destination. I would say the proof of our increased faith in the Island lies with our mega cruise ships Quantum of the Seas and Anthem of the Seas, both of which recently visited Puerto Rico for the first time.” It is expected that in 2016, between January 1st and April 30th, the Island will see the arrival of more than 240 passenger ships and approximately 600,000 visitors. In March 2016, Puerto Rico will host one of the two largest cruise ships in the world, Oasis of the Seas, rivaled only by its sister ship Allure of the Seas. Both vessels belong to Royal Caribbean as well. In 2014, promotional efforts and other endeavors by the Puerto Rico Tourism Company attracted a record 1.5 million visitors to the Commonwealth, for an economic impact of $200 million.

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Nayara Toro Verde

Luxury Ecotourism in the Heart of Puerto Rico’s Mountains

T

he successful ecotourism park Toro Verde (Spanish for Green Bull), located in the municipality of Orocovis and within Puerto Rico’s mountainous region, is getting ready to add two brand new projects to its long list of attractions. One of them is to be developed by the prestigious Costa Rican hotel chain Nayara, which has decided to expand abroad for the first time ever to build a unique luxury hotel in Puerto Rico. The first development phase of this ecotourism-focused hotel — Nayara Toro Verde — began back in August 2015 and includes the construction of 20 luxury cabins along with a main lobby, multiple common spaces, and a pool. According to Toro Verde’s CEO Jorge Jorge, “the construction phase of the Nayara Toro Verde Hotel, valued at $2.5 million, will create between 50 and 60 jobs. Once it’s completed, the hotel is expected to hire between 30 and 40 people, which means that the whole project will create somewhere between 80 and 100 direct jobs in just one year.” “In the long run, the entire hotel complex is scheduled to invest a combined $6 million and feature a total of 50 cabins,” added Jorge. “For the first time ever, Hotel Nayara will be expanding outside of Costa Rica and we’re very happy that our first international destination will be located on this beautiful Island, within the successful Toro Verde Ecotourism Park. I’m certain that our partnership will be beneficial to Puerto Rico and its tourism industry,” said Nayara’s Freddy Obando. For her part, Ingrid Rivera Rocafort, director of the Puerto Rico Tourism Company (PRTC), stated: “In addition to the great value that our tourism industry will gain from the construction of the Nayara Toro Verde Hotel, which is slated to receive its ecotourism certification soon, the project also represents a great boost to the economy of our mountainous region and yet another large investment by a foreign company in Puerto Rico.” “Toro Verde is a dream come true. In our effort to be on the cutting edge, we have joined forces with Nayara: a famed, five-star hotel chain that provides guests with unforgettable experiences. There is no doubt in my mind that this will be another successful venture and a unique addition to Puerto Rico’s luxury ecotourism industry. This project, like so many others, provides further evidence of our Island’s incredible potential.”

PUERTO RICO

From left to right: Toro Verde CEO Jorge Jorge, PRTC Executive Director Ingrid I. Rivera Rocafort, and Orocovis Mayor Jesús E. Colón, seen here at the groundbreaking ceremony of Nayara Toro Verde in the municipality of Orocovis, Puerto Rico.

THE ADVENTURE CONTINUES… On the same day of the event to celebrate the beginning of the Nayara Toro Verde Hotel, the ecotourism park also inaugurated a rope course dubbed “El Laberinto del Toro” (Bull Maze). Valued at $200,000, this impressive and innovative attraction consists of a 60 x 60 ft. rope course with 36 different adventures, including canopies, all types of challenging obstacles, and rappelling (or abseiling). This maze, which can hold up to 50 people at once, represents the largest of its kind in the Americas, and will be used primarily for team-building activities and birthdays. “We would like to thank the hotel chain Nayara for

choosing Puerto Rico as the site of their first international venture. We would also like to thank the creators of Toro Verde for their vision and commitment in creating this unique adventure park. People from all the over the world come to the Island to experience Toro Verde’s signature zip line, “La Bestia” (The Beast) and now they can also enjoy the Bull Maze. What’s more, soon visitors will have the amazing opportunity to stay in the luxurious Nayara Toro Verde Hotel,” pointed out Rivera. “We feel very fortunate to have Toro Verde in Puerto Rico. Their enterprise is a sterling example of the Island’s top-notch tourism industry,” added Rivera.

57


COMMERCE

RENOWNED INTERNATIONAL FRANCHISE,

Serafina

ARRIVES IN CONDADO Vittorio Assaf and Fabio Granato, co-owners of the successful international chain Serafina Restaurant Group.

I

n mid-August, the Serafina San Juan restaurant opened its doors at the La Concha Renaissance Resort in the vibrant community of Condado, offering a delightful menu inspired by the cuisine of northern Italy. The San Juan locale is the most recent expansion of the prestigious Serafina Restaurant Group, an international franchise with dozens of locations in New York and other U.S. cities, as well as in several countries around the world: India (Mumbai, Calcutta, Bangalore), Japan (Tokyo, Saitama), Korea (Seoul), Arab Emirates (Dubai), Brazil (Rio de Janeiro, São Paulo) and Turkey (Istanbul). The group also owns the Brasserie Cognac (NYC, Istanbul) and Oriente restaurants. “The San Juan location was developed with an investment of close to $3 million dollars. We created over 70 direct jobs in the construction phase and another 80 jobs to run the establishment. Moreover, we have incorporated fresh, locally-sourced products into our menu, promoting local agriculture Puerto Rico,” commented Ricky Díaz, general manager of Serafina San Juan. The restaurant chain was born of near disaster: the initial idea arose from a promise that the owners, Vittorio Assaf and Fabio Granato, made to each other when they found themselves lost at sea and unsure of their chances of survival. However, the particular interest in Puerto Rico emerged after they both participated in the Puerto Rico Investment Summit 2014. It was there that they became aware of the incentives available to establish their company or render services on the

PUERTO RICO

Island, including the numerous benefits stemming from Laws 20 and 22 For Assaf and Granato, the opening of Serafina San Juan represents “a significant milestone, as this is without a doubt the best-equipped and fun Serafina restaurant that we have ever established. It’s a place where diners can enjoy simple recipes inspired by the rich gastronomy of northern Italy, all of which are prepared with fresh, authentic ingredients of the highest quality.” Aside from mouthwatering dishes, the successful entrepreneurial duo also guarantees the most comfortable and pleasurable dining experience in each one of their restaurants. “This goes far beyond opening a restaurant with international presence in the local market. This is about bringing the administration of a business conglomerate to the Island, where it will oversee operations and render services to different localities. It’s a perfect example of the kind of business activity we seek to encourage in diversifying the economy and promoting Puerto Rico’s next great economic transformation,” explained the secretary of Economic Development and Commerce, Alberto Bacó Bagué. In addition to the inauguration of Serafina, the Condado area can look forward to the opening of the Hard Rock Café as well as a whole series of private investments in tourism projects. These projects include the construction of a hotel on 880 Condado Avenue, the development of condominiums where the Regency Hotel is presently located, the remodeling of the San Juan Beach Hotel, the expansion of the Marriott Hotel, and the reopening of the Ambassador Hotel. “The opening of Serafina forms part of the rebirth of Condado and exemplifies our progress in promoting economic development on various fronts,” added Bacó.

Investing in Puerto Rico (Jan. 2016)  
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