Puerto Rico is on the road to economic recovery

Whether it’s the government of Puerto Rico’s recent bond offering or new investment by major multinational companies on our Island, the Commonwealth of Puerto Rico has been in the news quite a bit in recent months -- and members of Congress and the Obama administration are paying close attention.

In fact, this week the Congressional Hispanic Leadership Institute is hosting a forum on Capitol Hill focused on the economic situation in Puerto Rico. While there is still more that needs to be done to get our economy back on track, Puerto Rico has come a long way in the last year and a half, thanks to a combination of both innovative ideas and tough choices by Gov. García Padilla to create sustainable economic growth.  

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Yet, in order to sustain the economic turnaround, Congress needs to meet its responsibility by restoring its partnership through tax incentives for U.S. manufacturing in the Island. It is no coincidence that Puerto Rico’s recession began in 2006, the final year of the congressionally mandated phase-out of Section 936 of the IRS Code that incentivized U.S. manufacturing in Puerto Rico. The consequences of that ill-fated decision are still being felt today with tens of thousands of U.S. jobs lost and the expected tax revenues going abroad, and not to the U.S. Treasury as was hoped. The current discussions on federal tax reform provide the perfect opportunity to renew the historic partnership between Congress and Puerto Rico that for decades proved to be enormously beneficial to both economies.

Meanwhile, Puerto Rico is doing its part to foster growth and create jobs. Recent decisions by multinational companies to set up operations in Puerto Rico shows that our economic development strategy is working. In the past year alone, industry leaders like Lufthansa, Honeywell, Infosys, Actavis, Infotech Aerospace Services, and Seaborne Airlines have expanded operations on the Island. These companies are utilizing the talent on the Island and creating well-paying jobs. Better yet, they are attracting small businesses to the region, creating new opportunities for entrepreneurs and workers in Puerto Rico and helping strengthen the economy for the long-term. The growing manufacturing sector combined with agriculture, tourism and education development initiatives will guide Puerto Rico towards a knowledge economy.

Another key component of the recovery plan is getting the Island’s fiscal house in order. Puerto Rico has taken significant steps to cut government spending, including streamlining professional-service contracts and reforming the public pension system. Most recently, Padilla presented the first balanced budget in more than two decades. With the new balanced budget the administration is working towards a more modern, effective and efficient government that operates within its means.

During his State of the Commonwealth address in April, Padilla outlined his strategic plan to get the economy back on track with job creation and economic growth that diversifies our industrial base by utilizing Puerto Rico’s established manufacturing industry, and targeting life sciences and knowledge based industries for growth, like companies in the aerospace and defense sectors. The governor has also signaled his intention to move forward with a tax reform initiative that promotes economic development and supports the necessary infrastructure to compete in today’s global economy. To help us achieve this, we are investing in our people – our most important asset.

We are thankful for the partnership we have enjoyed with the White House, several federal agencies such as the U.S. Departments of Commerce, Transportation and Homeland Security, and Congress. Now is the time to take that momentum to the next level and enact policies to boost Puerto Rico’s economy with a new federal tax incentive. U.S. jobs are at stake both stateside and in the Island, and our manufacturing base will continue to grow as a result.

We have a strong vision for modernizing Puerto Rico’s economy and look forward to continuing to work closely with officials in Washington, D.C. to continue to build on the progress we’ve made in recent years to ensure the people of Puerto Rico have the quality of life they deserve.  

Hernández is the director of the Puerto Rico Federal Affairs Administration, which is the Office of the Governor in Washington, D.C.