[Column] Provide Tax Incentives…The Third Wave
When we first moved to Puerto Rico in January 2013, we were one of the first 10 companies to move here for Acts 20 and 22. From a peer point of view, it started as a lonely place. Yet, over time, the others who joined us were, like myself, hedge fund managers, securities traders and other finance types. I felt the program would be considered successful if it had 150 companies or so on the island over the next two to three years. This was equal to the number who were in the U.S. Virgin Islands at the time, and the USVI program had existed for more than 15 years.
Alberto Bacó Bagué, the former secretary of the Puerto Rico Department of Economic Development & Commerce (DDEC), had more ambitious plans.
In March 2013, a Bloomberg article revealed that John Paulson was coming to the island, and that single story fueled a flood of interest. For the most part, it was more of the same—private equity firms, family office managers, more finance types. But around 2015, with DDEC’s relentless push, the base broadened to tech companies and corporate headquarters for a variety of industries, and the finance types were slowly becoming outnumbered, creating more diversity. This was important for the evolution of the 20/22 community.
Last year, the new DDEC secretary, Manuel Laboy, announced even more ambitious plans. He wanted 10,000 companies to set up on the island within five years. While that is a very bold plan (and we currently have about 1,500 grantees), a recent article in the New York Times may help him achieve that goal.
We are now experiencing the third wave of 20/22 transplants into our evolving ecosystem. Some well-recognized names in the blockchain sector have, or are considering making, Puerto Rico their home. This move looms as a very rewarding experience for Puerto Rico and its economy. Nevertheless, some people are not too keen on the newcomers and the noise they have been making. I am not one of them, although, but perhaps a little less noise might be in order to avoid a knee-jerk reaction from local bankers, Financial Institutions (OCIF) and, ultimately, the Treasury Department, none of which seem to quite know what to do with these new folks.
I recently spoke at the CoinAgenda conference, regarding 20/22, as part of Blockchain Week in San Juan, to help inform this group about certain issues and clear up some misinformation being perpetuated regarding capital gains related to cryptocurrency. Hint, you cannot take $10 million in gains in the States, then move here, get your Act 20/22 decree and pay zero taxes. Whoever thinks that is all there is to the process, should consider trying to obtain a private letter ruling from the IRS. There are also some undercurrent and behind-the-scenes issues on this side related to how the exemption applies, which are still unresolved.
Aside from these issues, I can say the vibe emanating from that event’s ecosystem reminds me of the one at the first 20/22 Act Society events we held, where everyone was so excited about the future and all the opportunities ahead that moving here can bring.
Last week, I met a lot of very smart people with ambitious plans for changing the world. Will most of that actually happen? Of course not, but even if just a small fraction of it does, Puerto Rico can become a brand-new hub for a key technology that has the possibility of changing the world.
Since Hurricane Maria, the population leaving the island has been more than 400,000. Consequently, while some locals feel a little apprehensive about the new transplants, let me remind that we also were new transplants at one time, and most people could not have been more welcoming to us. Let’s extend them that same welcome we received as newcomers.
The island needs the jobs, ideas and innovation that these technologies can bring not only to stem the island’s outflow of human capital, but also to bring sorely needed additional human and financial capital to the local economy. Take it from my firsthand experience. I am pretty sure the new investors come in peace, and there is little to fear.
–Robb Rill is the founder of the 20/22 Act Society.
–The views expressed in the Opinion section are the columnists’ own and not necessarily the view of Caribbean Business.