The second anniversary of Hurricane Maria is a good time to evaluate the rebuilding of Puerto Rico, what still needs to be accomplished and how the recent political crisis has affected these efforts.
The short-term and mid-term federal funding that is scheduled to come to Puerto Rico from HUD, FEMA and other sources should help jump start currently stalled reconstruction efforts and encourage private investment in the island. According to federal data, Congress has allocated approximately $42.7 billion for recovery assistance following Maria, with close to $35 billion of that amount still scheduled to be disbursed.
The construction industry in Puerto Rico was hit especially hard by the recession and it has so far failed to recover. For example, around 12,000 new housing units were built on the island in 2007, versus just less than a thousand the last year. However, with the amount of federal funding designated for the island, and the strong need to continue rebuilding following Maria, the construction industry in Puerto Rico is poised to improve substantially over the near and long term.
While the recent political crisis in Puerto Rico had an adverse short-term effect on the local economy, particularly for the tourism and construction industry, the resignation of Governor Ricardo Rosselló and subsequent constitutional appointment of Governor Wanda Vázquez has allowed people to refocus and move forward.
In addition, Governor Vázquez’s decision not to run for reelection in 2020 will allow her to concentrate on what needs to be done, to fight the perception of public corruption, improve the economy and continue rebuilding the island.
Act 20, also known as the Export Services Act, promotes the exportation of services from Puerto Rico by only charging qualifying companies a 4 percent tax. This has made it a more competitive place for companies to do business, as well as helped local companies be more successful elsewhere. In fact, my firm, Álvarez-Díaz & Villalón, was the first architecture and interior design services company to utilize this law, leading us to open a second office in Miami in 2015.
Furthermore, the recent opportunity zone legislation offers a huge advantage for Puerto Rico. This vehicle was developed to encourage long-term investments in low-income communities throughout the U.S., and promote economic development in distressed areas.
However, what sets Puerto Rico apart is the fact that more than 95 percent of the island qualifies as an opportunity zone, in contrast with a 25 percent cap in all 50 states.
The many benefits of opportunity zones adds to Puerto Rico’s existing value proposition, which includes stability under U.S. laws, attractive tax incentives, a prime geographic location and an educated, skilled work force.
All of this sets the stage for successful and serious investors to develop projects throughout the island, mostly focusing on mixed-use developments, energy revitalization, housing construction and general infrastructure. This will benefit both the long-term investor, the local population and help launch Puerto Rico’s economy into a bright new era of sustained economic development.