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A Celebrity Economy
House bill that would appeal to celebs would make Puerto Ricos economy more appealing too
By GEORGIANNE OCASIO TEISSONNIERE
March 10, 2005
It is fair to say that Puerto Rico has long been considered a haven of hospitality. However, it is also fair to say that the island hasnt exactly rolled out the red carpet for what can be called the celebrity economy. Although the island is undeniably a producer of talent, Puerto Rican celebrities from the world of sports, music, and Hollywood rarely choose the island to establish their residences, much less their businesses.
Ricky Martin, Jennifer López, Marc Anthony, Carlos Arroyo, Carlos Delgado, Iván Rodríguez, and countless others generate millions of dollars through their work and through the merchandising in which most of them are involved. In fact, some estimates suggest the sum of money generated by Puerto Rican celebrities in all the different areas, reaches close to $750 million. Restaurants, clothing lines, perfumes, production companies, music studiosthese are just some of the industries into which celebrities venture, aside from the multimillion-dollar contracts ensured by their principal line of work. Not only do they give rise to millions, but they also spend millions of dollars on real estate, yachts, automobiles, and other luxury items.
All the money Puerto Rican celebrities are generating and spending outside of the island, is a lost opportunity for Puerto Rico according to a proposal of law in the Puerto Rico House of Representatives. The bill proposes offering certain tax incentives for artists so they will consider Puerto Rico an optimum place in which to live and work. Not only would the island benefit from the millions of dollars generated by the artists, but also by the other industries that could simultaneously grow, principally the tourism industry.
Artists Business Managers (ABM), the first Hispanic business management company that caters specifically to Hispanic artists, has been busy promoting the bill in the Department of Economic Development, the Department of Tourism, and of course among several Puerto Rican artists. "If you want to enjoy the benefits of living in the U.S., having the security that your money is in FDIC regulated banks, Puerto Rico has the comparative advantage because it offers the lowest effective tax rate for corporations. We want those benefits to extend to individuals," said ABMs Edwin Miranda, adding that many professionals on the mainland are unaware of the fact that Puerto Rico residents dont have to pay federal income tax.
The bill proposes that the law be called, "The Law for the Development of the Entertainment Industry," and explains the decree would allow artists to gain credit for the amount of jobs they create, offer significant tax exemptions for artists in certain areas of revenue, and make capital readily available for them to use in certain investments.
One of the people involved in the preparation of the bill was Miguel Ferrer, president of UBS Financial Services Inc. Ferrer told CARIBBEAN BUSINESS he came up with the idea from a conversation he had with Puerto Rican actress Roselyn Sánchez, in which she said that Puerto Rico would have to offer certain advantages in order for her, or other artists to consider moving to the island. "It occurred to me that our status as a commonwealth could be key," said Ferrer, explaining that Puerto Ricos fiscal autonomy would allow for certain benefits to be offered to this market.
As an example of the potential development that Puerto Rico could enjoy from this kind of law, Ferrer mentioned the area of South Beach in Miami. "Ten years ago, South Beach was nothing. Today, it is a booming metropolis that attracts celebrities from all around the world," Ferrer pointed out.
It has been two years since the process of preparing the bill began, and since then Ferrer says that everyone who has heard about it has been convinced of the benefits that it could bring to the island. He mentioned that Angelo Medina and other industry experts contributed to the draft by indicating how the island could cater to the needs of celebrity figures. Ferrer explained that Puerto Rico needs to regain the edge in the industry that was lost long ago. "Puerto Rico was a precursor in production of telenovelas [soap operas], in dubbing, and in the production of Hispanic music, but none of these things are being done on the island any longer," he lamented. "This is our second chance to compete once again in this market, and the time to do it is now," he concluded.
Puerto Rico, the Monaco of the Americas?
Monaco has become a common destination for celebrity residents because of certain tax benefits enjoyed in the country. The only direct tax in Monaco is one imposed on profits made in industrial and commercial activities. There is no wealth tax, no real-estate tax, nor lodging tax. In spite of having limited tax revenues, GDP per capita in Monaco is more than 14 times that of Puerto Rico, income per capita is more than twice as much. Unemployment is virtually nonexistent. None of the population lives in poverty, whereas in Puerto Rico nearly half of the population falls in that category.
Tourism has mainly been geared to the individual seeking luxury. It continues to develop along the lines of high-quality services offering cultural activities. However another market has emerged with an influx of business travelers. At the present time the tourist coming to Monaco on business represents 30% in terms of hotel occupancy. To meet this growing need Monaco has built numerous halls and centers. The number of conventions held in Monaco has grown from 212 in 1985 to 768 in 2000.
Proponents of the bill in Puerto Rico point out that Monaco does not have any particular feature that should attract tourists to the principality more than to the island. What they do have is a system and infrastructure that caters to celebrities and high-class individuals, something that Puerto Rico could easily develop. Ferrer points out the José Miguel Agrelot Coliseum as a perfect example of the kind of development Puerto Rico needs more of and the benefits it could bring to the island. Since the coliseum opened in late 2004 international artists of all genres have come to the island at a rate never seen before. The Convention Center now in the process of being built is another attraction that could generate the business traffic that Monaco has continued to capture over the years. Puerto Ricos close proximity to the U.S. mainland, would make it even more attractive for celebrities as a point of departure for their numerous projects and ventures. The idea is not only to become an attractive destination for Hispanic artists or businesspeople, but rather to appeal to the international market in the same way that Monaco has done.
It makes as much sense for them as it does for the islands economy, the ABM representatives point out. The islands current structural deficit and the governments need to generate more revenue, could offer the bill a better chance of approval when it is presented in the House of Representatives in the near future. Puerto Rico already breeds talent; the trick may be in learning how to export that talent and benefit in the process. Entertaining the celebrity market could give Puerto Rico the edge it lacks in the world of entertainment, while also laying out the red carpet for more revenue, businesses, and tourists to boost the islands economy.
This Caribbean Business article appears courtesy of Casiano Communications.