Bacó Bagué Objects to Obama’s plan for Promesa’s Board
SAN JUAN — The Secretary of Economic Development and Commerce, Alberto Bacó Bagué, objected to the possibility that U.S. President Obama may leave three seats vacant in the fiscal control board created by Promesa to manage the island’s finances.
In Thursday remarks, Bacó Bagué contended that the proposed body has already gone a long way in removing the economic uncertainty that scares away investors.
Bacó Bagué said the appointment of an oversight board is a factor that is bringing economic certainty to Puerto Rico’s business environment, helping the effort of attracting investors. Almost immediately after Obama enacted Puerto Rico Oversight Management & Stability Act, firms that were unsure about investing in the island, changed their minds.
Sources told Caribbean Business that President Obama may only appoint four members to the board, rejecting the names recommended by Senate Majority Leader Mitch McConnell as well as abstaining from naming his own appointment to the board in hopes that if the Democrats take control of the Senate and of the White House, the board will be controlled by the Democrats.
“In naming two Republicans and two Democrats, the board would have enough to have quorum to constitute the board, but not enough for one of the two parties to have a majority,” explained the Capitol source tied to the Democrats. “Then you would leave the other three names to be confirmed by what could be a Democratic majority in the Senate with a Clinton White House.” The President has until Sept. 15 to appoint the board.
Bacó Bagué objected to Obama’s strategy. “The board’s ideology should be one of economic development and balanced budgets. As long as we do things right, the board will leave sooner than expected. If we don’t spend more than what we make and regain market access, the board will leave,” he said.
In noting that Promesa is the most important bipartisan bill that Obama has been able to achieve, Bacó Bagué said he hopes the President will do what he needs to do for the board to be in place by December.
He acknowledged that the fiscal control board created under Promesa to oversee Puerto Rico’s spending has removed “a lot of the uncertainty” in the business environment. Immediately after the Act was signed, Bacó Bagué said Aeon Hewitt jumpstarted its plans to create 200 jobs under Acts 20 and 22, which provide economic incentives to investors. Moreover, Santander Consumer Lending immediately pushed its plans to create 500 jobs under the two acts.
“Promesa has removed a lot of uncertainty out of the way,” he said, adding that he has observed an improved business environment in the area of aeronautics, real estate and tourism.
The DDEC Secretary, who was recently appointed to president of the Government Development Bank, made his remarks during an interview with Caribbean Business where he announced EcoSistema 20/22, an event to be held on Aug. 19 at the Sheraton Puerto Rico Hotel & Casino that seeks to educate small and mid-sized businesses and professionals about how they can reap benefits under Acts 20 and 22.
The Export Services Act 20 (Act 20 of 2012) seeks to encourage local service providers to expand their services to persons outside of Puerto Rico, promote the development of new businesses in Puerto Rico and stimulate the inbound transfer of offshore service providers to Puerto Rico.
The Individual Investors Act 22 (Act 22 of 2012) seeks to attract new residents to Puerto Rico by providing a total exemption from Puerto Rico income taxes on all passive income realized or accrued after such individuals become bona fide residents of Puerto Rico.
Despite the fact that several members of Congress criticized Acts 20 and 22 because they view them as laws that promote tax evasion, Bacó Bagué expressed confidence that the Fiscal Control Board will not tamper with the controversial laws, which he said, have created an entire eco-system.
He said Puerto Rico has two types of incentives: tax credits and exemptions to the rising income. He noted that Acts 20 and 22 do not cost money to government coffers and promote jobs because companies and individuals benefitting from the laws must create at least five jobs.
“Once the board understands these incentives, they will see them as a good thing. Promesa lacks economic development and Puerto Rico needs a lot of investment. We need $10 billion in investments per year,” he said.
He said tax credits, on the other hand, do cost money to the government and he believes the board will make evaluate them. “I believe the people in charge of economic development will have to evaluate the cost-benefit of each tax credit but many of them work such as the film incentives whose costs have brought lots of benefits,” he said.
Promesa also creates a Task Force on Economic Growth, which must make recommendations to Congress by December on measures of economic growth. The Task Force recently announced it was accepting suggestions from stakeholders.
Bacó Bagué said that for the past two years, he has been promoting together with the Private Sector Coalition changes to the U.S. Internal Revenue Code that will give the island tax credits similar to the ones enjoyed by U.S. subsidiaries under Section 936 as well as parity in health care funds. Promesa also promotes the expansion of HUB zones for small business to Puerto Rico. “Puerto Rico needs a huge investment that is calculated at $10 billion per year,” he insisted.