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Puerto Rico's Progress Benefits The Region, Too


December 7, 2001
Copyright © 2001
THE MIAMI HERALD. All Rights Reserved.

These are excerpts from the remarks of Puerto Rican Gov. Sila M. Calderón before the 25th Caribbean/Latin American Action annual convention in Miami on Wednesday:

For many years, Caribbean/Latin American Action has worked to link our business communities. As our interests increasingly converge in the global economy, these meetings become useful tools in bringing us together.

Let me share with you my policies to strengthen Puerto Rico's role in the Caribbean.

First of all, I have an agenda for clean government. Puerto Rico had been a model of honest government, and my administration is determined to rescue that legacy.

Shortly after I was sworn-in in January, I appointed an independent Blue Ribbon Committee of highly respected citizens to evaluate major government transactions. We have enacted legislation to allow the government to recover illegally appropriated property and funds, imposing severe penalties on those found guilty. We also have passed other laws protecting whistle-blowers and prohibiting those convicted of corruption from bidding for public contracts.

I also have made economic development the top priority. Debating the status issue over the last decade diverted the government's attention from the crucial task of laying strong foundations for economic development and job creation.

Unfortunately, the previous administration successfully lobbied Congress to repeal federal tax incentives under Sections 936 and 30-A, which were crucial to our manufacturing sector. As a result, we have lost 27,000 jobs since 1996.

I am thus implementing four short-term strategies to boost our economy:

  • Employ our fiscal autonomy to the fullest. I have signed into law 18 new economic development measures, among them, additional local tax incentives for investment on the Island. We have reduced our capital-gains tax rate and enacted special tax credits for large retailers that purchase locally manufactured goods for distribution outside Puerto Rico. We provide full tax exemption to pioneer industries in advanced technologies, as well as additional benefits to local manufacturing operations.

  • Simplify and accelerate our government-permitting process. We are eliminating unnecessary steps and reviewing regulations to expedite public and private construction projects and facilitate investment.

  • Reduce the costs of doing business on the island, particularly energy costs. We adopted a ``hedging'' program to stabilize and lower fuel costs.

  • Seek a new federal tax incentive to promote economic development and investment. It will help offset the high costs of compliance with federal environmental and minimum-wage laws in Puerto Rico. This way, we will become highly competitive vis-a-vis other investment destinations such as Singapore, Malaysia and Ireland.

We propose to amend section 956 of the Internal Revenue Code, which will be good for the United States and for Puerto Rico. It will allow U.S. subsidiaries doing business as ``controlled foreign corporations'' the unique opportunity to reinvest their Puerto Rico profits in the United States at reduced tax rates. Helping Puerto Rico to remain competitive makes economic sense for the United States.

Despite its limited geography, Puerto Rico has a sizable economy. We have substantial resources to be a strong collaborator for development in the region. We are the second largest U.S. trading partner in Latin America and the Caribbean.

We are also a major transportation hub in our region. San Juan has the fourth largest container port in the Western Hemisphere and the 17th busiest in the world. About 40 shipping lines provide transport services to nearly 80 U.S. and foreign ports.

Also, more than 30 airlines connect Puerto Rico with the rest of the world. San Juan's airport ranks 29th out of 250 U.S. airports in cargo movement, and 37th in passenger movements.

All major multinationals have operations in the commonwealth. For example, nine out of the 10 top prescription drugs in the United States, are manufactured in Puerto Rico. Moreover, 70 percent of all prescription drugs sold in the United States are made in Puerto Rico.

Tourism is also an important industry, and we are promoting its growth. More than 2,000 new hotel rooms are under construction or development.

I came into office to bring sensitivity back into government. I have a personal commitment to pay close attention to the needs of our poor families. They are the human face of economic development.

Under our Special Communities Program, more than $100 million will be invested next year to finance infrastructure, community facilities, parks and other priority projects selected by residents.

We are redefining our role in the Caribbean. We want to engage our neighbors and draw strength from our diversity. Our Hispanic heritage and culture, tied to our special relationship to the United States, makes us a bridge for the Greater Caribbean and the entire hemisphere.

We will work with governments of the region to achieve the dreams of justice, peace and prosperity that we have always carried in our hearts.

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