Caribbean Business - February 11, 2016

W E E K O F F E B R U A R Y 1 1 - 1 7 , 2 0 1 6 | V O L . 2 E D I T I O N 5 | W E E K LY $ 2 . 0 0 | © 2 0 1 6 L A T I N M E D I A H O U S E , L L C | C A R I B B E A N B U S I N E S S . P R

State Elections Commission Trimming More Fat

Bond Exchange Plan Hitss Investors Hard

Panama Canal Operation to Diversify With its Expansion

Friends of Court Defend P.R. Bankruptcy Law

Seeking New Cuts to Absorb Shortfall PAGE 6

Trades Big Cuts for Value PAGE 7

New Transshipment Hub in the Works PAGE 22

Stress ‘Fragile’ State of Prepa Deal PAGE 26

COVER STORY

TOP STORY

Lawmakers Mull Bill to Help Prasa Achieve External Financing GDB Says not so Fast With Puerto Rico lawmakers on the verge of approving the “largest securitization in U.S. history” for the P.R. Electric Power Authority (Prepa), another bill seeking the same structure for the P.R. Aqueduct & Sewer Authority (Prasa) is being trumpeted as the utility’s last shot at avoiding a waterrate hike this summer.

aims to jumpstart capital improvement projects now on life support, while avoiding a rate hike to maintain financial stability.

After all, Prasa’s board had decided in 2013 to finance a fouryear capital improvement plan (CIP) mostly by issuing debt, but not precisely with the utility’s revenues. With no access to

The Investment Summit

T

Scaling the Acts 20/22 Mountain

he 2016 Puerto Rico Investment Summit kicked off at the Convention Center today, Feb. 11, bringing together executives, attorneys, CPAs, institutional investors, investment bankers and private equity professionals for two days of informative panels on investment opportunities, public officials pitching the latest tax incentives and networking among the attendees.

In a way, the yearly forum that began in 2014 has become

a sort of tradition: crowds of wealthy investors, most of them recent arrivals to Puerto Rico, make their way to the conference rooms of a five-star hotel to learn about the latest and greatest tax lures that the Caribbean island has in store for anyone willing to establish a business in Puerto Rico and a place of residence for at least 183 days of the year.

It is part of a concerted effort by public officials—particularly the island’s Economic

Development & Commerce Department (DDEC by its Spanish acronym) and its secretary, Alberto Bacó Bagué—to inject much-needed cash and jobs into Puerto Rico’s embattled economy. What began as a trickle of offshore investors coming to the island after Acts 20 and 22 were signed into law in 2012, has now turned into a stream, if not an outright flood, of investment activity.

BY DENNIS COSTA PAGES 14-17

Alberto Lázaro, Prasa president House Bill 2786 would establish the Prasa Revitalization Act, whereby a new corporation would be created with the sole purpose of issuing new debt for the utility, backed by a new charge on water bills that would be pledged to cover its debt service.

In essence, the bill attempts to help Prasa regain access to capital markets as it desperately

external financing at reasonable terms and not enough revenues to cover for all costs, there is simply no money to fund these projects under the existing rate structure and revenues.

At first glance, it would seem that the lifeline measure could be soon on its way.

BY LUIS J. VALENTÍN CONTINUES ON PAGE 4

THURSDAY, FEBRUARY 11, 2016

2

Publisher’s Letter

Contents PICTURE OF THE WEEK PAGE 26 Criollo Bankruptcy to be Heard

By Miguel A. Ferrer Publsiher

Dear Readers:

Advertising ...........................................................................................................42 Advertising Calendar............................................................................................42 Autos ....................................................................................................................30 Banking.......................................................................................................... 10-11 Cars 101 ..............................................................................................................29 Column.................................................................................................................18 Economy ......................................................................................................... 12-13 Editorial ...............................................................................................................18 Front Page ...................................................................................................... 14-17 General Business .................................................................................................43 Healthcare............................................................................................................21 Latin American Affairs .........................................................................................20 Lead Stories ....................................................................................................... 6-8 Legislature ...........................................................................................................23 Politics ........................................................................................................... 24-25 Poll .......................................................................................................................19 Shipping...............................................................................................................22 Top Story............................................................................................................ 1, 4

FINANCIAL DATA: Stock Comment ....................................................................................................12 Winners & Losers..................................................................................................12

Much to my dismay, the process of restructuring Puerto Rico’s debt is moving toward what I believe is a disastrous path for local bondholders and for the economy as a whole. This issue, which I submit needs to be understood by all Puerto Ricans, causes me to address you as Publisher of Caribbean Business, something that I had hoped to significantly limit or avoid altogether. The situation, as I see it, is that local bondholders have been placed at the bottom of the structuring pyramid so that the offer they will receive consists of a near wipeout of their investments.

The restructuring, apart from the disastrous effect on their individual financial well-being, is also devastating to the Puerto Rican economy, at a time when we have been suffering from a 10-year recession. Assuming local bondholders still hold $15 billion in local bonds (from an estimate of $22 billion held until 2014-2015) and they received but 40% of their principal, this loss of principal equates to $9 billion in real losses, as distinct from the present paper losses, which by themselves are caused by the ongoing bad publicity on Puerto Rico’s fiscal woes.

The loss of current interest payments is also a crucial matter not being given appropriate weight. At 5% average coupon, the foregone income proposed erases $750 million of income from the bondholders’ pockets with the concomitant effects on the economy itself.

There are other ways to restructure Puerto Rico’s fiscal black hole so bondholders do not assume the main burden of getting Puerto Rico back on its feet and, thus, not suffer their investments going by the wayside.

All constituents involved need to shoulder this Puerto Rico problem, that is the taxpayers, the pension plans, the government and the bondholders, plus those individual government entities that are being rescued.

Overall, the proposal being promoted is disastrous to the Puerto Rico investors, who believed in their country and put their money where their hearts were.

Miguel A. Ferrer* Publisher Caribbean Business * Holds a portfolio of Puerto Rico bonds

SPECIAL REPORT:

2016 P.R. Investment Summit ...................................................................... S1-S36

SPECIAL FEATURES: Companies in Motion...................................................................................... 31-41 North America International Auto Show ................................................................28 Special Coverage: Prepa................................................................................. 26-27 caribbeanbusiness.pr Volume 2, No. 5 • Thursday, February 11, 2016 PO Box 12130, San Juan PR 00914-0130 CARIBBEAN BUSINESS ® (USPS 313150) is published weekly, except the first two weeks of January, by Latin Media House, LLC, 1700 Ave. Fernández Juncos, San Juan, P.R. 00909-2938. Subscription rates: $45 a year + $4.73 state tax +.45 municipality tax = $50.18; $58 for two years + $6.09 state tax +.87 municipality tax = $64.96; $108 a year for foreign + applicable tax and shipping & handling. Customer Service/Subscription telephone: (787)728-8280, toll free 1-844-723-2351. Fax: (787)728-0195.

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GDB President & Chairwoman Melba Acosta and Millstein & Co. Chairman & CEO Jim Millstein

Reality Realty: A Strong Voice Adding Confidence to P.R.’s Recovery through Real-Estate Advisory THURSDAY, FEBRUARY 4, 2016

As a result of Law 20 and 22, Puerto Rico continues to experience a growing presence from global businesses and investors.

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market, an annual “Puerto Rico Real Estate Synopsis” is published by our Consulting Department.

UNITS SOLD The residential market had shown an increase in number of units sold, with a total of 19,166 at the end of September 2015, compare with 2014.

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UNITS SOLD

COMMERCIAL SALES Commercial sales increased by 27% just in the first nine months of 2015, compared to 2014. More than 50% of the transactions were CASH. AVAILABLE INVENTORY Absorption improved in 2015 compared to the previous two years. The Real estate market in Puerto Rico remains an effective instrument of investment.

Nowadays, sellers realize that we operate in a historic buyers’ market. Liquidity, used strategically, allows investors to benefit from significant discounts. We

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10

4

THURSDAY, FEBRUARY 11, 2016 Push for securitization at Prasa continues, while GDB calls for changes to the bill, says strategic plan should come first

Top Story Prasa

Continued from cover

Popular Democratic Party Rep. Rafael Hernández, co-author of the bill and chair of the House Treasury Committee, has placed high priority on the matter, aiming to move the measure as quickly as possible. During a public hearing held last week, Prasa Executive President Alberto Lázaro strongly supported the measure and Hernández said he had yet to field any concerns at the time of the hearing.

However, the island’s fiscal agent, the Government Development Bank (GDB), submitted a laundry list of concerns in its written testimony on the measure. Although the bank supports establishing a securitization mechanism at Prasa, it stresses that changes must be introduced to the legislation to ensure that at the end of the day, the utility’s customers are not the only ones footing the bill.

In a recent interview with Prasa’s chief, Lázaro explained to Caribbean

Business what clients would see on their water bills if the securitization mechanism were to be implemented: “a line on the bill with a description...that it is a financing charge.”

He said that although he can’t be categorical, depending on the financing achieved, the goal would be to use the utility’s revenues to cover this charge inside Prasa’s current rate structure, which was last revised in 2013.

GDB: PRASA CLIENTS TO CARRY MOST OF THE BURDEN But the GDB points in its testimony to Prasa’s deficits during the past few years, and paired with the inability to access financing to pay old debt, “it was evident that the rate and operational structure didn’t generate enough cash to cover all its operational, financing and CIP costs.”

What’s more, the bank warns about how these costs aren’t being shared among all Prasa stakeholders, with clients drawing the short end of the stick and bearing the

burden almost exclusively. It notes how in Prepa’s case, this burden was shared among all players, particularly bondholders, as part of its yearlong debt-restructuring talks.

For his part, Lázaro acknowledged that several stakeholders have already taken their fair share of the pain, including clients, employees and even federal agencies. Yet, “the stakeholder we are still missing would be investors, or not necessarily them, but rather debt service itself and everything related to it,” he said.

When asked whether Prasa will seek a restructuring of its debt through the securitization mechanism—such as in Prepa’s case—he said that although a possibility, it may be too early to discuss. So far, the water utility has been out of the commonwealth government’s debt-restructuring plans.

Still, the GDB believes this is a good opportunity for Prasa to restructure its “operations and finances.” The island’s fiscal agent states that a long-term strategic plan

The GDB is warning about how costs aren’t being shared among all Prasa stakeholders, with clients drawing the short end of the stick. should be first agreed to with stakeholders to develop infrastructure projects, implement operational improvements and elevate service standards.

This plan should serve as the starting point toward Prasa’s securitization.

FEELING THE PINCH Residents of Moca—a small town in the island’s northwest—recently spent four days with no water service. A waterfiltering plant had a malfunctioning valve worth $15,000 causing service disruptions in the area.

When Prasa called its supplier to fix the problem, the company had 5 million reasons to refuse to do so.

A partial payment was

made to the supplier and the problem was solved, and while Prasa’s chief told this newspaper there are no similar cases as of this writing, unexpected fixes are often required.

With more than $140 million in payments owed to suppliers, timely addressing unforeseen problems could be particularly tough for Prasa.

Meanwhile, the utility’s CIP has come to a complete halt, including about 55 projects that were already under construction and worth more than $350 million.

This program is key, not only for the system’s upkeep, but also for compliance efforts with several agreements in place with federal authorities.

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Prasa has been on the hunt for external financing since 2013, when its board decided it would pay for the CIP by issuing debt, on the heels of a water-rate hike that pumped in $390 million in additional revenues.

It has been a rocky road ever since to get that financing.

To pay roughly $90 million in short-term debt maturing on Feb. 29, Prasa would most likely siphon its Rate Stabilization Fund—money that was supposed to be used to cover operational deficits during fiscal years 2016 and 2017 in a bid to avoid further rate hikes.

Since 2014, Prasa has sought to issue as much as $750 million in new debt, but to no avail, saying that “noise” generated by the island’s fiscal crisis has faded the utility’s prospects of achieving the transaction under reasonable terms. Yet, the GDB believes that like most Puerto Rico residents and businesses, Prasa cannot be alienated from the fiscal woes the island is facing. 䡲

6

THURSDAY, FEBRUARY 11, 2016 The SEC must avoid spending money on political issues where parties and candidates benefit from the agency’s funding

Lead Electoral Expert Says There is Room to Reduce Electoral Process Expenses

BY ISMAEL TORRES i.torres@cb.pr

Expenses incurred by the Puerto Rico State Elections Commission (SEC) for this year’s electoral cycle—which includes primaries and the general election—estimated at $90 million, can be reduced but changes cannot be left to the electoral body itself due to its partisan nature.

One of the first changes that could be implemented is to reduce the Permanent Registration Boards (PRB), which have many employees who could be reassigned to work in other areas, in addition to closing positions as workers retire.

As for a reduction of funds for the primaries and general elections, former Popular Democratic Party (PDP) Electoral Commissioner Eudaldo Báez Galib said it would be possible to reduce the

number of voting centers for primaries, which in turn would inconvenience voters.

“Adjustments would have to take into consideration not only the voting mode, but rather the way we vote, as in reducing the number of [voting] centers and making a more intensive use of technology,” he said.

He said we should also look into cutting costs in matters that have nothing to do with the election itself, such as by not employing more people, “but this would be very difficult because political parties depend on such appointments.”

However, Báez Galib thinks the essential money has to materialize since the electoral process has already begun. “The State Elections Commission is an economic giant whose expenses are not justified today, based on the technological advances that

have taken place,” said the former PDP senator.

He pointed out that the SEC must avoid, at all costs, spending money on political issues where parties and candidates benefit from the agency’s funding—which in his experience is a considerable amount.

“I am sure, due to my experience, that there is room for cuts. What happens is that internally they won’t do it because there is a political dependency on that budget,” said the former legislator.

In this regard, he said that the only way to identify these cuts in funding is through an external intervention, “a team of outsiders who understand electoral matters and can identify cuts and implement them.”

He said, however, that there is room to reduce costs without affecting the electoral process itself.

Nevertheless, he warned that in the SEC’s delicate fiscal scenario, no consideration is being given about the effect such a decision would have of reducing the number of required endorsements for an applicant to be certified as a candidate.

He said such a decision would allow the many people who didn’t file nominations, due to the high number of endorsements they had to obtain, to now file an appeal to revive their candidacies and others to become certified.

He said it is a mistake to require an equal number of endorsements from independent candidates as well as from party candidates, who after presenting their endorsements go to an internal primary in their party. “They are two totally different things,” he said.

In an interview with Caribbean Business, the electoral expert warned that this new scenario represents an additional cost to the SEC, which is already facing a critical fiscal situation.

Due to lack of funds, as of Dec. 1, 2015, the SEC

was unable to provide all the materials needed by the people who submitted their nominations for the upcoming June 5 primary.

The Puerto Rico Republican Party has reported through its chairwoman, Jenniffer González Colón, that due to the reduction in the allocation of funds to pay for the political party’s primary, they decided to incorporate an alternative method with 110 open voting centers instead of the 3,528 that were open in the 2012 primaries. Of the $809,000 that the Republican Party had requested for these purposes, they were assigned just $300,000.

The SEC has called for a global allocation of $90.6 million for this election year, of which $29.7 million is intended for the general election, $10

million for the primaries, $18 million for the general vote-counting process (including special ballots and other materials) and $33 million for the agency’s regular operations.

Of the $10 million promised to the SEC for the primaries, the agency has received just $1.2 million and the Office of Management & Budget has promised to deliver another $6 million by March.

John Poulus, CEO & president of Dominion, the company that will operate electronic votecounting machines, is confident the SEC will have the money to fund the process, as approved, including some 6,009 machines to read the ballots, in addition to training the personnel who will handle the equipment. 䡲

THURSDAY, FEBRUARY 11, 2016

7

Lead

Haircut for affected creditors could be 45%

Bond Exchange Seeks to Trade Value for Shared Pain

BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

The bond exchange the Puerto Rico government is proposing to holders of $49.2 billion of debt will have an impact on local bondholders who have a nominal value of around $15 billion in bonds.

Economist Vicente Feliciano said a restructuring will not alter the portfolio value of the bonds, but it will change the amount the bondholders receive in interest. He said that in a restructuring process, the nominal value, or face value, of the bonds is changed.

For example, if an investor buys $10,000 in Government Development Bank (GDB) bonds, the nominal price is $10,000, but if these same bonds were later trading at 28 cents to the dollar, then the market value of the bonds is $2,800 and the investor has lost $7,200, he indicated.

As long as a particular

bond issuer does not default or a bond is not restructured, the interest paid by the issuer (as in the example of the GDB) is on the nominal value of the bonds and not on the market price.

“Investors will be paid less in interest, but there will not be a significant reduction in the value of the portfolio compared with present market value,” said Feliciano, who is the president of Advantage Business Consulting.

To facilitate an orderly restructuring of its debt, the commonwealth government has designed an exchange offer to holders of its $49.2 billion of taxsupported debt. The restructuring contemplates that creditors will agree to exchange their existing securities for two new securities: a “base bond,” with a fixed rate of interest and amortization schedule, and a “growth bond,” which is payable if the commonwealth’s revenues exceed certain

levels. Under this proposal, the $49.2 billion of tax-supported debt would be exchanged for $26.5 billion of new mandatorily payable “base bonds” and $22.7 billion of growth bonds.

The “haircut” for affected creditors could be in the vicinity of 45%, according to estimates.

According to government documents, the proposed structure contemplates no interest payments until fiscal year 2018 and no principal payments until fiscal 2021, which would provide the commonwealth with the necessary debt-service relief to be able to continue providing essential services to residents, pay stretched suppliers and taxpayers, rebuild depleted cash resources and properly fund the retirement systems.

Additionally, the new securities are projected to provide the commonwealth with a sustainable level of debt service over

the long term, as total debt service will only increase to the extent that the commonwealth’s revenues grow, the document reads.

To ensure Puerto Rico’s compliance with an agreed upon and approved exchange plan, as well as the government’s Fiscal & Economic Growth Plan (FEGP), the commonwealth has passed legislation establishing a local fiscal-control board that would ensure implementation of its commitments embedded in the restructuring plan and the FEGP. However, to the extent a broad federal restructuring regime is made available, then oversight may be enhanced through a federal fiscal-control board. This issue is now under discussion in the U.S. Congress.

The new securities in the Puerto Rico government’s exchange offer are slated to provide creditors with improved credit protections such as statutory liens and pledges on certain revenues and a commonwealth guarantee. Further, the structure provides creditors with the

Vicente Feliciano, president of Advantage Business Consulting

opportunity to recover the full face amount of their bonds if the commonwealth’s revenues grow as a result of real growth in the Puerto Rico economy.

Creditor recoveries on the

growth bond will be dependent on the growth rate of Puerto Rico’s revenue collections—if the commonwealth economy achieves long-term economic growth rates. 䡲

8

THURSDAY, FEBRUARY 11, 2016

Lead

CNE says fiscal board will be ineffective, proposes fiscal rule

CNE Proposes Fiscal Responsibility Law

BY EVA LLORÉNS VÉLEZ

Arguing that the imposition of a federal fiscal-control board reeks of colonialism and would enforce the kind of strict, inflexible and static budget-control measures that have already failed in Puerto Rico, the Center for a New Economy is calling for a fiscal responsibility law that would limit expenditures to revenues and overhaul public financial-management systems.

The proposal was presented earlier this week

by Miguel Soto-Class, CNE president; Sergio Marxuach, CNE public policy director and Deepak Lamba-Nieves, CNE research director.

According to a CNE report, fiscal responsibility laws have been successfully adopted throughout the world. It is a hybrid option that could transform Puerto Rico’s fiscal position, introduce much-needed governance reforms, overhaul key institutions and ensure the commonwealth’s long-term fiscal solvency while addressing legitimate federal concerns and

recognizing valid political qualms on the island.

Soto said Puerto Rico’s $70 billion debt is unsustainable and the only alternative available to the island is restructuring and putting fiscal policy on a sustainable path.

The fiscal responsibility law for Puerto Rico proposed by the CNE has two components. First, it has a simple, intuitive and objective fiscal rule. The second component consists of procedural guidelines that support a largescale overhaul of Puerto Rico’s public financial-

management systems, institutions and practices.

Marxuach said a law is an alternative to a federal fiscal-control board, which will be resisted by the general populace and will do nothing to improve fiscal management and government capabilities.

The fiscal responsibility law would keep expenditures below what the government can raise in taxes in the long run, thereby ensuring sustainability, while allowing deficits whenever the economy is operating below potential and tax revenue is abnormally low, thereby guaranteeing flexibility.

“We propose a rule for Puerto Rico requiring that annual General Fund spending shall not exceed:

cyclically adjusted revenues, as determined and certified by an independent panel of professional economists and other fiscal policy experts, minus a small structural surplus,” Marxuach said.

Within that limitation, the Legislature would assign funds among and between the commonwealth’s government agencies and departments according to its own spending priorities, he said.

The implementation of this type of fiscal rule has several advantages because government spending would be independent of short-term fluctuations in revenues caused by cyclical swings in economic activity and other financial vagaries

that affect government revenues. This type of fiscal rule, by limiting spending to permanent fiscal income, smoothes out government spending over the economic cycle.

In essence, the government saves during upswings and dissaves during downturns.

“Therefore, the fiscal rule precludes both sizeable spending upswings when the economy is booming and drastic fiscal tightening when there is a substantial slowdown,” Marxuach said.

The fiscal rule requires the commonwealth to run a small surplus over the economic cycle. 䡲

For the rest of this column, please access cb.pr

10

THURSDAY, FEBRUARY 11, 2016 Fiscal uncertainty set back island’s auto loans portfolio last year

Banking/Finance Puerto Rico’s Auto Loans Portfolio Fell 2.6% to $6.5B Through Last September

BY JOSÉ L. CARMONA j.carmona@cb.pr

While Puerto Rico’s new-vehicle market fell 7.8% to 81,353 new units sold last year, the island’s auto loans portfolio dipped only 2.6% to $6.5 billion through September, the latest figures available, thanks to the financing of used vehicles. Last year, auto leases in the Puerto Rico market totaled $836.9 million.

Local consumers prefer to have more economical, fuel efficient entry-level vehicles.

Néstor Vale, executive vice president of Reliable Financial Services, the local subsidiary of West Fargo, said the auto industry as a whole—distributors, dealers, banks and auto insurance companies— has been affected by the ongoing uncertainty over Puerto Rico’s fiscal and budget woes.

“The news you read and see in the local and national media about Puerto Rico is not good—local firms are closing, multinational companies are in [legal] disputes with the central government... Obviously,

all this creates more uncertainty. As more people lose their jobs or if there’s a possibility they might lose them; this lessens the chances of consumers acquiring homes or new vehicles,” Vale told Caribbean Business. “This in turn dissuades those who want to invest in Puerto Rico or acquire homes or new vehicles.”

In his opinion, as long as there is no clear direction and a uniting message from the government and the private sector, people will keep losing trust about investing in Puerto Rico.

“This [scenario] had a direct effect on the decline experienced by local newauto sales last year,” the Reliable executive said.

While there are no official statistics on usedcar sales on the island, in terms of Reliable’s position, Vale said 58% to 60% of monthly loan applications received last year were for used vehicles.

“This indicates a strong interest among local consumers for more economical vehicles. In Reliable’s case, our approved customers ended up buying slightly more new vehicles than used ones. I attribute that to the excellent work done by auto distributors and their dealers to offer the best deals possible in terms of offering bonuses and lower interest rates, jointly with the banks, to incentivize the sale of new vehicles,” Vale indicated.

Pricewise, local consumers prefer to have more economical, fuel efficient entry-level vehicles, and in the case of domestic brands, sport utility vehicles, or SUVs, are selling the most, he said.

“Puerto Rico banks and auto finance companies continue to strongly support local dealers. There’s appetite on our part to lend, and we try hard to fulfill the needs of each particular client, which is inherently different from each other. In Reliable’s case, this is very important as we maintain our

leadership in the local market with a 25% market share in retail auto lending, with commercial lending even higher,” Vale said. “Over the past 12 months, we haven’t lost a significant dealership, and we even added one significant big client to our list, Bella Group.”

Among local banks, he said Reliable commands 40% of the floor-plan financing on the island. The number would be much higher if real estate and term loans are included,” he added. “We have a very strong retail and commercial loan portfolio, which combined is in excess of $2 billion in outstanding loans. That says a lot about our market participation and the support we give to the island’s auto industry.” 䡲

caribbeanbusiness.pr Volume 2, No. 5 Thursday, February 11, 2016 Publisher Miguel A. Ferrer

Editor in Chief Heiko Faass

Executive Editor & Deputy Editor in Chief Philipe Schoene Roura EDITORIAL Editor Rosario Fajardo Online Editor Eduardo San Miguel Tió Politics Editor Ismael Torres Regional Editor Juan A. Hérnandez Senior Reporters Online Reporter Reporter Special Projects Editor Researcher

José L. Carmona, Dennis Costa Luis J. Valentín Mario Belaval Francis E. López Blane McLane

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THURSDAY, FEBRUARY 11, 2016

11

Banking/Finance

67% of Popular’s Mi Banco Móvil clients use the app for banking transactions

Popular to Compete Against Samsung Pay With its Own Android Application Mobile Wallets is One of Three Payment Projects Bank Will Launch in 2016

BY JOSÉ L. CARMONA j.carmona@cb.pr

Popular—which in 1983 became a pioneer in banking technology when it launched the first debit card and ATM network in Puerto Rico (known as ATH)—plans to maintain its leadership position as a bank innovator with the introduction of three new

technological projects this year, which it says will revolutionize Puerto Rico’s financial industry.

The three projects are: Mobile Wallets, a digital payments system similar to Apple Pay and Samsung Pay that allows users to pay at the cash register electronically with their smartphones; a new cardless cash-access

service that does not require the use of a debit or credit card when using an ATM; and the integration of Popular’s ATH Móvil app into Mi Banco Móvil.

“In 2016, we will be bringing services and technological advances that will change the way we make payments between individuals and businesses.

We are

committed to continue developing innovative, safe products of the highest quality with local talent to place us on par with global institutions,” Camille Burckhart, Popular chief information & digital strategy officer, told Caribbean Business.

“This vision and work in development is a product of that commitment.”

MOBILE WALLETS Mobile Wallets will allow Banco Popular credit card clients with Android smartphones to make their payments by simply scanning their mobile devices on payment terminals with the Near Field Communication (NFC) system.

“Mobile Wallets is currently in its final testing phase and will be available soon,” the Popular executive noted.

CARDLESS CASH ACCESS With the cardless cashaccess service, Popular will expand the prototype announced jointly with Diebold last November at the Money 2020 conference—one of the top events in the U.S. financial industry.

“This service will allow bank clients to connect to Mi Banco Móvil and indicate their need to withdraw cash. Once clients reach the nearest ATM, they can withdraw the money in seconds without

having to insert their ATH debit or credit cards into the machine,” Burckhart explained.

ATH MÓVIL Recognizing the success the ATH Móvil app has had, and in an effort to provide greater convenience to bank clients, Popular is integrating this service to the Mi Banco Móvil app.

“This will allow clients to pay other individuals instantly through ATH Móvil directly from the Mi Banco Móvil app,” Burckhart said.

Mi Banco Móvil has 600,000 clients and 67% of them make their banking transactions through the app, she noted.

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12

THURSDAY, FEBRUARY 11, 2016

WINNERS & LOSERS WEEKLY PERFORMANCE OF PUERTO RICO STOCKS

Sin Comillas is a Spanish-language digital media website that specializes in business news in such areas as economics, banking, planning and tourism. Sin Comillas was founded in 2010 by economist and journalist Luisa García Pelatti.

WINNERS FOR THE WEEK STOCK -

SYMBOL -

52-wk LOW -

52-wk HIGH -

PRICE 1/22 -

PRICE 1/29 -

CHANGE -

PRICE 1/29 22.29 13.74 5.62 2.60 25.14

PRICE 2/5 20.95 12.58 5.46 2.45 25.08

CHANGE -1.34 -1.16 -0.16 -0.15 -0.06

LOSERS FOR THE WEEK STOCK Triple-S Management Corp.

Evertec Inc. OFG Bancorp First BanCorp Popular Inc.

SYMBOL GTS EVTC OFG FBP BPOP

52-wk LOW 17.34 12.57 4.56 2.06 22.40

52-wk HIGH 27.07 23.12 17.61 6.76 35.83

Moody’s Weighs in on Commonwealth Debt Exchange Plan

Weekly Comment on Puerto Rico Stocks Wall Street tumbled last Friday, spearheaded by falling technology shares and oil prices, in addition to a mixed U.S. jobs report that cast doubts on additional interest rate hikes by the Federal Reserve this year. Poor results from data company Tableu Software and networking platform LinkedIn sent the Standard & Poor’s (S&P) 500 information technology sector falling 3.4%. Meanwhile, the Nasdaq Composite Index dropped to its lowest level since October 2014. While U.S. nonfarm payrolls increased by just 151,000 jobs last month—well below forecasts of 190,000—the U.S. unemployment rate fell to 4.9%, the lowest since February 2008. Despite the weak jobs figure, the markets received the rest of the payrolls report in a hawkish way. A sharp rise in wages suggested the U.S. labor market’s recovery remains on track. After the news, investors boosted their view of the chances of a Fed rate hike in December to about 40%. Before the report, they had expected the Fed to wait until well into next year before raising rates again. The Fed’s own forecasts, however, still suggest four increases by yearend, a pace many consider unrealistic. For the week, the Dow Jones Industrial Average lost 1.58% to 16,204.83. The S&P 500 fell 3.09% to 1,880.02, while the Nasdaq Composite Index dropped 5.42% to 4,363.14.

After the previous week’s weekly gain, all the components of the government Development Bank’s Puerto Rico Stock Index (PRSI) tumbled last week, bogged down by Wall Street’s selloff. For the week, the PRSI lost 50.57, or 3.36%, to close at 1,454.24. Leading last week’s list of nongainers was Evertec Inc., which erased $1.16, or 8.44%, to close at $12.58. It was followed by Triple-S Management Corp., which tumbled $1.34, or 6.01%, to close at $20.95. Shares of First BanCorp inched down 15 cents, or 5.77%, to close at $2.45. OFG Bancorp skidded 16 cents, or 2.85%, to close at $5.46. Popular Inc. fell 6 cents, or 0.24%, to close at $25.08.

BY JOSÉ L. CARMONA SENIOR REPORTER, BANKING & FINANCE CARIBBEAN BUSINESS

BY LUISA GARCÍA PELATTI SIN COMILLAS

It will be hard for creditors to accept Puerto Rico’s debtexchange proposal to restructure some $49 billion in debt, credit-rating agency Moody’s Investors Service said in a report published last Friday.

Some of the difficulties mentioned include the complexity of the debt and the limited time left for negotiations—only three months. The Moody’s report also highlighted that the debt reduction proposed by the government, which totals $23 billion, exceeds what bondholders lost when the city of Detroit filed for bankruptcy, some $1.6 billion.

However, Moody’s also acknowledged that the proposal to cut back the debt by $23 billion is consistent with the credit rating agency’s estimates on the government’s long-term repayment capacity, and that the implementation of Chapter 9 or a federal fiscal control board would improve forward-

looking perspectives regarding debt recovery.

The commonwealth government has threatened to impose a moratorium on their debt if creditors do not reach an agreement with them before the debt payment deadline on May 11. The Government Development Bank has to pay $422 million by May and $1.3 billion by July.

Last week, the Alejandro García Padilla administration unveiled its revised voluntary restructuring offer, whereby creditors would exchange their existing bonds for two new types of security: a “base bond,” with a 5% interest rate and a 35-year maturity; and a “growth bond,” payable only if government revenues exceed expectations as a result of economic growth.

Of note is that while the proposal includes a $23 billion reduction to principal, investors would have the opportunity to recover losses with growth bonds. In all, $49.2 billion worth of tax-supported debt

would be exchanged into $26.5 billion of commonwealthguaranteed base bonds and $22.7 billion of growth bonds.

Moody’s pointed out that general-obligation (GO) bondholders are the most reluctant to the debt-exchange proposal in the absence of either Chapter 9 of the U.S. Bankruptcy Code or another federally supported restructuring regime for Puerto Rico. On the contrary, if Chapter 9 or a fiscal control board is allowed, it would facilitate the restructuring process and prevent minority investment groups from being left out of negotiations to obtain more favorable conditions.

The commonwealth’s proposal says it would “reflect, and seek to respect, constitutional priorities” of each type of debt, with GOs on top of that list, followed by the Sales Tax Financing Corp. and then the rest of the debt. 䡲

—CB Online Reporter Luis Valentín contributed to this story.

13

THURSDAY, FEBRUARY 11, 2016

Economist: Many Mistakes Have Been Made

BY LUISA GARCÍA PELATTI SIN COMILLAS

Six years ago, Estudios Técnicos made projections indicating that, growing at a rate of 1.8% a year, the economy of Puerto Rico would not return to 2006 levels until 2016. Now, after revising these projections, the firm estimates that achieving this goal will not be possible until 2023. “The economy has lost 16 or 17 years of its evolution and that means major structural changes,” said José J. Villamil, chairman of Estudios Técnicos, during his lecture last week before the Financial Professionals Association.

Villamil believes that many mistakes have been made in recent years that have brought the economy to the situation where it now stands. The Special Communities program

decapitalized the Government Development Bank (GDB) and projects such as the Urban Train, which costs $150 million a year, were funded. But the “biggest mistake was not taking action by early 2013” because as early as January 2013, it was known that there were liquidity problems and the government did nothing until mid-year, when 15 taxes were approved.

“One of the most serious mistakes was not to approve the crudita bill in November 2014,” he said, referring to the hike in the petroleum-products tax.

The bill was submitted by the Executive branch in November 2014 to provide liquidity to the GDB, to whom the Highways & Transportation Authority (ACT by its Spanish acronym) owes more than $2 billion. The goal was

to issue $2.950 billion [in bonds] that would have solved the GDB’s liquidity problem. After several amendments, the Legislature finally approved the bill on March 15, 2015.

But the bond issue guaranteed by that tax never came to fruition. Amendments filed by the Legislature constituted a rejection of the legislation and to this day, Puerto Rico is still paying the cost of not approving that bill. There have been other mistakes, such as lack of government transparency and how the information has been provided, he indicated.

On Dec. 30, the government activated the clawback clause, which aims to redirect funds backing some [bond] issues’ financial obligations like those of ACT, the Infrastructure Financing Authority and the Convention Center

Economic Index Inches Up in December After Long Drop

BY LUISA GARCÍA PELATTI SIN COMILLAS

Economic activity in Puerto Rico showed a slight improvement in December 2015 after dropping for six straight months, according to indexes that economist Angel Rivera Montañez prepared and published in a recent monthly report. In December, commercial activity improved as a result of the holiday shopping season and an increase in construction activity after three months of steady drops.

The Coincident Indicator Index (CII)—a metric that shows the

current state of economic activity in a given area—increased by 0.1% in December versus the previous month, the first increase in six months. Increases in the production of electric energy, construction and retail sales contributed to the uptick.

Compared with December 2014, the index decreased by 2.9%. In quarterly terms, economic activity fell 1.3%, the biggest drop since the second quarter of 2013.

The Leading Indicator Index (LII), which forecasts economic activity, registered an increase of 0.6% in December, but it also showed a deceleration in its rate of growth during the past

José J. Villamil, chairman of Estudios Técnicos District Authority, among others.

“What the government did was deplete those agencies’ reserves to pay debts,” and that’s technically a default, Villamil said. The clawback allowed Puerto Rico to pay a debt of about $1 billion, but $37 million went unpaid. He explained that after saying it had no money, the government had to show evidence of the fact, and that’s why the default took place, even if only for a small amount. “The reality is that the clawback contributed very little to

12 months. When compared to December 2014, the LII grew by 6.9%.

In general terms, the indexes show a negative trend in economic activity. “In a certain period during the past six months, the average monthly decrease in economic activity has been -0.3%, while in the previous sixmonth period, the average drop was -0.1%,” Rivera Montañez noted, adding that segments such as manufacturing and construction continue to show signs of weakness. In particular, perspectives on construction are negative in light of an absence in public works and scant investment on the private side.

“The duration, scope and depth of the current downturn in economic activity have been the most severe in Puerto Rico since World War II,” the economist

the $1 billion,” he said.

But does the government have money to pay off the debt or not? Villamil believes that there is no more flexibility to continue cutting government spending. He said it is very difficult to make budget cuts and doing so would mean layoffs. Reducing payroll by $200 million would mean some 7,000 people would lose their jobs.

“The other option is to increase taxes and that has its complications. We have raised taxes, which should not have been raised,” Villamil said, referring to the 4% tax that companies have been paying since October for services between companies (business-to-business tax). “It’s a terrible tax. It’s a tax on economic activity and it has harmful implications for small and midsize businesses.

“The government’s tax team has forgotten something fundamental. Tax systems have to be simple, easy to implement and

explained. “Economic activity, as measured by the CII since the start of the recession in April 2006 until the present, has dropped 27.1%, a trend that was only interrupted in 2012 during several consecutive quarters of growth. This technically meant an end to the recession, but it nevertheless continued, structurally speaking,” he said.

manage, and shouldn’t involve costs,” he said.

Villamil also opposes the introduction of the value-added tax (VAT) in April. He said it is a good system, but it has certain implementation costs “and this suggests this isn’t the right time” due to the island’s economic situation. In the past 10 years, Puerto Rico has lost more than $100 billion in wealth, which includes bank assets and home values.

The government does not have many options and the critical date of July 1 is approaching fast— this is the day when the government must make a payment of $1.3 billion, money that it doesn’t have.

Villamil would not welcome the implementation of a federal fiscal-control board either. “I think it is a serious mistake,” he said. “Not knowing who is going to be part of it, not knowing what its responsibilities will be. It is a very dangerous measure.” 䡲

Rivera Montañez noted that “fiscal uncertainty continues to grow as the short term probability of a fiscal rescue by the White House or U.S. Congress is looking less probable. Without a doubt, carrying out the necessary fiscal adjustments through local fiscal policies beyond the federal level will be inevitable.” 䡲

14

THURSDAY, FEBRUARY 11, 2016 FRONT PAGE

Investment Summit: A Lifeline for Puerto Rico’s Economy?

Puerto Rico’s Tax Incentives, Spearheaded by Acts 20/22, are Ready to Go Full Throttle

BY DENNIS COSTA d.costa@latinmediahouse.com

T

he 2016 Puerto Rico Investment Summit kicked off at the Condado Vanderbilt Hotel today, Feb. 11, bringing

together executives, attorneys, CPAs, institutional investors, investment bankers and private equity professionals for two days of informative panels on investment opportunities, public officials pitching

the latest tax incentives and networking among the attendees.

In a way, the yearly forum that began in 2014 has become a sort of tradition: crowds of wealthy investors, most of them

recent arrivals to Puerto Rico, make their way to the conference rooms of a five-star hotel to learn about the latest and greatest tax lures that the Caribbean island has in store for anyone willing

to establish a business in Puerto Rico and a place of residence for at least 183 days of the year.

It is all part of a concerted effort by public officials—particularly the island’s Economic

Development & Commerce Department (DDEC by its Spanish acronym) and its secretary, Alberto Bacó Bagué—to inject much-needed cash and Continues on next page

15

FRONT PAGE THURSDAY, FEBRUARY 11, 2016

Continues from previous page

Efforts to lure foreign capital into the commonwealth are being looked at with more optimism, partly due to a study by Estudios Técnicos that was commissioned by DDEC and its secretary, Alberto Bacó (pictured).

Continues from previous page

jobs into Puerto Rico’s embattled economy. What began as a trickle of offshore investors coming to the island after Acts 20 and 22 were signed

into law in 2012, has now turned into a stream, if not an outright flood, of investment activity.

For the uninitiated, a brief rundown: Act 20 encourages the establishment of companies that export

services from Puerto Rico.

The law provides a corporate income-tax rate of 4%, no tax on dividends paid to local residents and no withholding tax on outbound dividends to nonresident owners. Act 22, meanwhile, seeks to attract new residents to Puerto Rico and exempts those residents from commonwealth taxes on investments and passive income, namely, interest, dividends and capital gains.

Oddly enough, some of the biggest investments in Puerto Rico have been carried out by individuals who haven’t necessarily benefited from Acts 20/22 incentives, according to their own words.

These include billionaire John Paulson, who has bought a bevy of properties in Puerto Rico, among them the aforementioned Vanderbilt and the nearby La Concha Hotel, the St. Regis Bahia Beach in Río Grande; and fellow billionaire Nicholas Prouty, who purchased La Ciudadela, a commercial residential complex in San Juan’s Santurce area, and Marina Puerto del Rey in Fajardo. All of these properties have undergone significant

redevelopment following their buyouts.

Nevertheless, other cases abound of investors who have set up shop on the island as a direct result of perks granted

by Acts 20/22, as well as other incentive laws such as Act 273 of 2012, which provides tax exemptions to international financial entities, and Act 185 of 2014, which establishes similar tax decrees for private equity funds (see Front-Page sidebar, page 17). Other lesser known incentive laws include Act 73 of 2008, which provides a wide range of incentives related to manufacturing; Act 399 of 2004, aimed at insurance companies; and Act 27 of 2011, which seeks to spur the local film industry.

This year’s Investment Summit comes at a key juncture in the island’s ongoing economic and fiscal crisis, with the local government quickly running out of options to fulfill future bond obligations—and in fact already defaulting on some of them—and congressional discussions in Washington, D.C., rife with talk of establishing a federal fiscal-control board to manage the commonwealth’s

finances, which include a $70 billion debt load.

Coupled with all the above is a rapidly downsizing labor market and nearly record numbers of people leaving the island; in fact, Puerto Rico’s net migration reached more than 200,000 people in 2014. Further underlining the need for foreign capital is that overall investment on the island has declined in the past two years and is now 29% below 2006 figures, representing a loss of $559.4 million, according to a recent study by Estudios Técnicos. As public spending continues to decline, gross domestic investment is projected to drop further in the coming years.

Moreover, for perhaps the first time since the tax incentives have been established, the efforts to lure investors and foreign capital into the commonwealth are being looked at with more optimism and a better idea of the benefits they could yield for the local economy. This is in great part due to the Estudios Técnicos study— commissioned by DDEC— that provides the first clear picture of the economic activity resulting

from the tax lures.

Caribbean Business obtained an exclusive glimpse at preliminary results in late January, but now that the whole report has been released, several facts jump out regarding the growing role that Acts 20/22 applicants and other investors are having on the local economy, particularly when it comes to Act 20.

MORE THAN 5,800 DIRECT JOBS CREATED First, as of Nov. 2, 2015, the government had approved 360 Act 20 decrees, with another 574 Act 22 decrees also approved. In terms of direct employment, both programs generated 5,800 jobs in the first four years of their enactment, with Acts 20/22 generating about 3,349 and 2,483 jobs, respectively.

Under Act 20, a total of 7,033 direct, indirect and induced jobs have been generated by Act 20 companies in the four years since the program was enacted. These translate to 3,349 direct jobs that were generated, which in turn helped to generate 2,163 indirect jobs and Continues on page 16

16

THURSDAY, FEBRUARY 11, 2016 FRONT PAGE

John Paulson, president at Paulson & Co. Continues from page 15

1,520 induced jobs.

Act 20 companies reported a total payroll of $137.1 million and an average salary of $42,301 a year, the study reported.

“With these salaries, employees would have paid an estimated individual income tax of $17.6 million annually, under the current tax system,” the report states. “This totals $3.6 million in sales tax paid by the employment created under Act 20 beneficiaries.”

Total investment for Act 20 firms was calculated at nearly $143 million. “This means Puerto Rico’s economy has benefited from an injection of productive capital of almost $70 million when real estate and machinery & equipment are added up,” the study says. Notably, most of the investment

Alejandro García Padilla, governor of Puerto Rico

José María Aznar, former prime minister of Spain

Miguel Ferrer, chairman Ferrer Faass & Co.

is concentrated in real estate, machinery and equipment. “This validates the fact that most businesses are new foreign companies establishing their operations in Puerto Rico.”

When it comes to tax revenue, Act 20 alone has generated close to $60 million, stemming from total revenues of almost $1.2 billion for Act 20 companies. Out of this total revenue, Act 20 firms reported aggregate net income of $387 million, which provides fiscal revenues of almost $34.3 million in the form of corporate income taxes. Moreover, since salaries from Act 20 businesses are relatively high, individual income taxes represent close to 30% of all tax revenues, to the tune of $17.6 million.

Further broken down, the study estimates that the

program has also generated some $17.6 million annually in individual income taxes, $3.6 million in sales tax and $2.3 million in municipal taxes.

Data compiled by Estudios Técnicos shows that annual payroll for Act 20 companies averages close to $43,000 per job, and businesses had a total payroll of $137.2 million. When compared to Puerto Rico’s average salary for all privates and public-sector jobs, which is $27,510 a year, Act 20 companies represent almost double that figure.

Regarding the types of jobs being generated, the services with the highest share of new employment opportunities are concentrated in consulting services. Nonetheless, advertising and public relations, call centers, architectural and engineering services, as well as accounting

and management services, also account for a substantial share of employment.

Of note is that the average number of jobs per decree is close to 9.3 jobs, and most of the contracting is done locally, since 87% of total employment is local residents.

Perhaps more impressive with regard to Act 20, in terms of the effects on gross national product (GNP), the economic impact in the form of revenues could represent close to 1% of Puerto Rico’s GNP for 2014.

50,000 DIRECT JOBS COULD BE CREATED BY 2024

Forecasts regarding Act 20 activity several years down the line also look promising, with the study estimating that by 2024, nearly 50,000 direct employment opportunities could be created. By the

same token, Act 20 companies would have accumulated more than $38.5 billion in gross revenue and paid over $800 million in corporate income taxes by 2024.

Over the 10-year period from 2015 to 2024, a total of 2,351 additional decrees are expected to be added under Act 20, according to the report. These are expected to generate an average of 4,237 employees per year, or a total of 44,656 new jobs in Puerto Rico. The gross income generated by these decree holders would amount to an additional $3.8 billion a year, or a total $38.510 billion over the 10-year period. The accumulated corporate income tax paid throughout the period would amount to $808.9 million.

While such figures could be interpreted as quite optimistic, they offer a more pared-down prediction from numbers supplied by DDEC, which estimated that Act 20 decrees will essentially double year-by-year, with similarly notable increases in tax revenue and employment.

Statistical data concerning Act 22—which has been singled out by critics and was even the target of a KPMG tax-reform report in early 2015 calling for its repeal—paints a slightly less significant yet nevertheless positive picture, especially when it comes

to Puerto Rico’s stagnant real-estate sector and widening the island’s tax base.

Currently, Act 22 has added more than $266 million in acquired real estate, and by 2020, grantees could make nearly $1 billion in real-estate investments.

“These investments will provide an injection of capital to the local construction industry,” the report adds. “Moreover, the total value of individual expenditures of Act 22 grantees will reach over $830 million by 2024.”

In residential real estate alone, total investment under Act 22 has exceeded $150 million, with average property values hovering around $1.5 million.

According to the report, Act 22 investors were initially more interested in renting properties rather than buying. This trend changed in mid-2014 when there was a noticeable increase in property sales, with real-estate firms in Puerto Rico moving about $40 million to $50 million a year in transactions related to Acts 20/22 investors.

Most Act 22 grantees who are buying homes in Puerto Rico are acquiring real-estate properties in San Juan’s Condado sector, as well as the municipalities of Dorado, Humacao and Río Grande. Moreover, the process of purchasing, remodeling and Continues on next page

17

FRONT PAGE THURSDAY, FEBRUARY 11, 2016

Continued from previous page

improving hotels, office buildings and marinas, as well as establishing partnerships with local businesses, have generated an additional investment of $125 million for the local economy.

Of note is that 52% of Act 22 grantees have established new businesses in Puerto Rico, generating 2,483 new jobs. These direct jobs helped to generate 1,604 indirect jobs and 1,127 induced jobs. The direct, indirect and induced employment account for a total of 5,214 jobs.

MOST ACT 22

GRANTEES HAVE A NET WORTH OF LESS THAN $10 MILLION The report also provides a glimpse into the profile of individuals who apply for Act 22 tax lures. Out of 573 approved decrees generated so far, a total of 344 grantees had a residence in Puerto Rico at the time of the application and 232 had a business established on the island.

Based on the information the program participants provided, nearly 66% had a net worth of less than $10 million; only 10% had a net worth between $10 million and $50 million.

Out of all the decrees, 510 (89%) reported having their previous residence in the mainland U.S. The other 11% had previous residence in countries such as Venezuela, the United Kingdom and Spain. As with Act 20, the participants’ main business (52.5%) is consulting and financial services.

Acts 20/22 decree holders also have more than 730 bank accounts in local banking institutions, with some institutions having nearly $100 million in deposits from these clients.

Individual investors have generated over $85 million in residential mortgage closings and utilized local banking services for investments of more than $5 million.

Looking ahead, Act 22 decrees are expected to produce an average of 1,195 jobs a year, for a total of 11,945 jobs added over the 2015-2024 period. The value of real estate purchased by Act 22 decree holders could reach $1.7 billion, depending on the available local inventory.

The study recommends DDEC establish thresholds related to jobs created and investment requirements for Acts 20/22. “The objective of Act 22 should be to incentivize the arrival of foreign entrepreneurs toward Act 20 eligible activities or some other type of investment,” the document states.

In a similar vein, the report stresses that efforts should also focus on incentivizing local firms to obtain these types of decrees, a goal made possible through complementary tax decrees under Act 185.

“Due to all of the structural inefficiencies on the island, the benefits of tax alleviation to local firms are bound to be greater in comparison to foreign firms.”

Lastly, the study concludes that in the long run, maintaining both policy tools could render strong yields for the local economy, particularly if the central government and service providers are able to capture the spillover effects of Acts 20/22 grantees. “Incentivizing the service sector, even through the injection of foreign capital, will bring about stronger economic growth.” 䡲

Private Equity Funds Act Provides Level Playing Field for P.R. Investors P.R. Investment Summit Panel to Discuss Combining Incentives Under Acts 185 and 20

BY DENNIS COSTA d.costa@cb.pr

A

mid the hoopla surrounding the tax benefits that the likes of Acts 20 and 22 are providing to investors in Puerto Rico, other incentive laws that could be just as significant have slipped under the radar.

A case in point is Act 185 of 2014, also known as the Private Equity Funds Act. As the name implies, the law “lays [out] a framework for partnerships of limited liability companies investing in private securities,” according to a January 2015 report by accounting firm BDO Puerto Rico. Such investment vehicles can be domestic or foreign private equity funds (PEFs).

Businessman Miguel A. Ferrer, chairman of Latin Media House and publisher of Caribbean Business, said that perhaps more importantly, Act 185 opens the door for investors who are also fulltime residents in Puerto Rico to hop onto the tax incentive bandwagon.

“Act 185 allows for a more level playing field among the investment community in Puerto Rico,” Ferrer said. In short, investors who are Puerto Rico residents stand to benefit from deductions for net capital losses as well as additional deductions with their investments in an eligible fund, he noted.

The act also gives

Puerto Rico companies, which do not have access to public capital markets, the opportunity to be financed by a group of investors. “It broadens the scope of investments that can be incentivized on the island to create additional economic activity and job creation,” Ferrer added.

Incentives under Act 185 can also be combined with tax perks provided

by Act 20, which promotes the export of services. This distinction will be discussed in a P.R. Investment Summit morning panel on Feb. 12 titled, “Pairing up the Laws: Act 20 Meets Act 185,” which will feature Ferrer as a panelist alongside Gaby Hernández, of BDO Puerto Rico; Ismael Vincenty, of law firm O’Neill & Borges; and Frank Holder of Berkeley Research Group.

“Through the panel, we want more people to know about Act 185 and the opportunities they represent, both for investment purposes and as an instrument to spur the Puerto Rican economy,” Ferrer noted, adding that while Act 185 has had a relatively low profile, at least five investment firms have signed up since the law was signed.

THE BENEFITS OF ACT 185 Through Act 185, PEFs gain full tax exemption on interest and dividends income as well as

capital gains. Accredited investors only have to pay a 10% rate on interest and dividends income and 0% on capital gains.

In the event an investor sells an ownership interest in the fund, the investor is subject to a fixed tax rate of 5%; that is, unless the proceeds are reinvested within 90 days into a domestic PEF. Lastly, general partners and registered investment advisers with the fund are subject to a 5% tax rate on interest and dividend income, and a 2.5% tax rate on capital gains.

As for the requirements for PEFs to apply for the tax perks offered by Act 185, they differ slightly, depending on whether the PEF is domestic or foreign. As for common requirements, both types of PEFs need to have an office in Puerto Rico and a minimum of 80% of their capital invested in nonpublicly traded (i.e., private) securities. The remaining 20% has to be invested in either shortterm securities or other instruments such as certificates of deposit. Similarly, they must have a

minimum of $10 million in minimum capital and restrict investment in any one business to 20% of the fund’s capital.

An important requirement is that they need to have a minimum of their capital in private securities that derive at least 80% of their gross income from sources within Puerto Rico or connected directly to the island, a requirement known as the 80% P.R. Gross Income Rule. In the case of domestic PEFs, at least 60% of their capital needs to comply with this rule, while for foreign PEFs, the requirements go up to 80%.

Finally, Act 185 explicitly states that any tax treatments under Act 20—or Act 22 for that matter—are not limited by the PEF incentives. When it comes to Act 20, its incentives include a 100% tax exemption on earnings and profit distributions on income generated from export services; a 4% flat income-tax rate on income generated from export services; and a 100% property-tax exemption. 䡲

18

THURSDAY, FEBRUARY 11, 2016

18

Column Editorial

Column

By Philipe Schoene Roura

What This Politically (In)correct Campaign Tells us

BY CLARENCE PAGE

EXECUTIVE EDITOR

A Summit to Restore Confidence Puerto Rico is hosting another Investment Summit, a yearly conclave of wealthy investors designed to showcase attractive incentives contained in Acts 20 and 22 of 2012, to lure them to establish local businesses and/or make the island their home.

The benefits of Acts 20 and 22 include a 4% corporate tax for businesses in Puerto Rico exporting services and 100% tax exemption on capital gains from eligible services, respectively.

All told, more than 200 investors are expected to descend on the Pedro Rosselló Convention Center in San Juan during the two-day event. The Alejandro García Padilla administration is hoping they will join the more than 700 adopters of Acts 20/22 who have already made Puerto Rico their home, as the island desperately needs to offset a sad pattern of jobs being lost at an apocalyptic rate.

To date, Acts 20/22 have helped create more than 3,000 direct jobs. This is but a drop in an empty bucket, as Puerto Rico has lost more than 290,000 jobs dating back to the beginning of a 10-year depression that started in 2006. The lack of job creation was singled out by all the credit-rating agencies when Puerto Rico’s credit was downgraded to noninvestment grade, or junk status, early in Garcia Padilla’s first term. So, too, was joblessness a core concern in the report “Puerto Rico: A Way Forward,” written by former International Monetary Fund Managing Director Anne Krueger, along with colleagues Ranjit Teja and Andrew Wolfe.

The most recent admission of the poor prospects for job growth on the island came during last week’s briefing of congressional staffers given by Puerto Rico’s restructuring brigades.

During the briefing, former Chief Restructuring Officer for the U.S. Treasury Jim Millstein, who is the point man for the commonwealth government in debt negotiations; Government Development

Bank (GDB) Chairwoman & President Melba Acosta and Puerto Rico’s legal counsel, Richard Cooper, who is a partner at Cleary Gottlieb Steen & Hamilton, explained that there is no way the commonwealth can meet upcoming debt payments. The GDB has some $422 million due in May and the central government owes another $805 million on generalobligation bonds in July.

The commonwealth’s Restructuring Brigades are proposing a debt exchange plan that intends to prompt holders of some $49 billion in Puerto Rico government debt to exchange their notes for tradable instruments called “base bonds” worth $27 billion. The remainder of what they are owed—some $22.7 billion—would be put in instruments called “growth bonds,” which are paid back in full across 30 years, but only if Puerto Rico’s economy grows beyond the rate of inflation (around 2% a year). Given Puerto Rico’s depressed economy, they should have called these “Cinderella bonds.”

In their dog and pony show, Millstein and Company stated in no uncertain terms that even with the austerity and fiscal measures the commonwealth has implemented, they do not expect Puerto Rico’s economy to grow significantly over the next decade. The caveat is a damning admission because it means that the holders of $49 billion in debt across some 11 entities, not including the Puerto Rico Electric Power Authority and the Puerto Rico Aqueduct & Sewer Authority, will be taking a 40 % haircut.

Such frank talk before congressional staffers would seemingly imply that Puerto Rico’s advisers are counting on an orderly restructuring regime passing in the U.S. Congress. They know better. The only certainty is that market confidence in Puerto Rico continues to dwindle. This is a dangerous game with too much at stake—Puerto Rico can ill afford to scare away capital for another 20 years. 䡲

“Political correctness” may be the most intriguing issue to emerge in the presidential election cycle, especially for Republicans. Yet it also may be the most underdiscussed, perhaps out of fear it would not be politically correct to do so.

What is PC? A mostly pejorative term to describe language, rules and policies intended to avoid offending particular groups in society.

That also is a pretty good definition of what we used to call simply “good manners” and “common decency” before the smart-sounding label “PC” caught on in the early 1990s.

Popularized initially by left-progressives to poke fun at the excesses of their fellow lefties, it soon was embraced and broadcast by the right to express their outrage at the left’s excesses too.

I agree that PC is a menace when it infringes on free speech; but neither left nor right has a monopoly on it.

For example, New York magazine writer Jonathan Chait sounded alarms recently in January under the headline, “Not a Very PC Thing to Say: How the Language Police Are Perverting Liberalism.”

He raised some legitimate points, such as the excesses of leftist students who protest commencement speakers whose views they do not like.

But as John K. Wilson, author of the 1995 book “The Myth of Political Correctness: The Conservative Attack on Higher Education,” blogged, Chait said nothing about right-wing calls to censor commencement speakers such as President Barack Obama.

Yet, we hear the PC debate attacked most often in this presidential cycle by conservatives, particularly Donald Trump, who seems to find boundless joy in violating it.

That is ironic, since Trump’s supporters also happen to be the least likely among all of the GOP’s top-tier candidates to have graduated college.

An NBC News/Wall Street Journal poll in December, for example, found only 38% of Trump supporters graduated college, compared to 46% of “social conservatives,” who tended to back Texas Sen. Ted Cruz or Dr.

Ben Carson, and 55% of “establishment” Republicans, who support Sen. Marco Rubio or former Florida Gov. Jeb Bush.

Yet when asked about what motivates them, the Trump supporters tend to lash out most of all against illegal immigrants and political correctness.

Of course, they also hate the media— partly, I am sure, because journalists often have served as arbiters of manners long before the term “PC” became popular.

A focus group of Trump supporters convened in December by Republican pollster Frank Luntz in Virginia praised their man’s “political incorrectness” along with his business experiences and selffunded campaign.

Why does PC strike such a sensitive nerve?

Certainly, there are some who resent PC because it muzzles their own opportunities to express bigoted opinions.

But you can find some racists and other bigots in every racial, religious, political or ethnic group.

More important, I think, is the invasion Trump supporters see PC “thought police” making into their lives with a new, foreign and often bewildering etiquette that they have neither the time nor ability to learn and practice.

Remember why Trump disdains PC? “It takes too much time,” he says.

I understand what he means. I still receive emails from people asking whether they should use “black” or “AfricanAmerican”—and what was so bad about “colored” and “Negro” anyway?

Good questions. Talking about the nation’s growing diversity across racial, ethnic and gender lines is how we from the U.S. learn to get along, regardless of our tribes.

Today’s anti-PC rebellion appears to be a response to growing anxiety over our nation’s growing diversity. Political campaigns can be a terrible place to solve such anxieties, but it is a good time to start talking honestly about them—if that is not too politically incorrect.䡲

©2016 Distributed by Tribune Content Agency LLC

THURSDAY, FEBRUARY 11, 2016

19

Poll

Respondents say experience more important than charisma

Female Professionals Speak Out: Puerto Rico’s Economic Development Should Be Top Priority for Gubernatorial Candidates

BY ROSARIO FAJARDO r.fajardo@cb.pr

Puerto Rico’s gubernatorial candidates need to focus first on the island’s economic development, followed by dealing with the central government’s debt problems and improving education, according to a survey of female professionals and businessowners in Puerto Rico, conducted by Gaither International.

What’s more, these female professionals said when they are evaluating candidates, what matters most to them is experience.

For politics, respondents were asked about the primary issues that gubernatorial candidates should elaborate on in their campaigns. By far the mostmentioned issue was

Puerto Rico’s economic development with 62%.

Other top issues included the island’s $70 billion public debt (14%), education (12%), social issues (8%) and political status (3%), Gaither reported.

When asked which they valued most, experience or charisma in a political candidate, 96% chose experience.

The political status choices among the female professionals surveyed?

Statehood was the overwhelming winner with 68%, followed by independence with 19% and commonwealth 13%.

With Puerto Rico facing massive outmigration to the mainland U.S., primarily due to the island’s economic and fiscal crisis, the female professionals were asked to rate the likelihood that they would

still be living in Puerto Rico three years from now.

Two-thirds of them said yes, it was very likely they would stay on the island (65%), while 13% said it was somewhat unlikely or very unlikely, indicating their propensity to move from Puerto Rico.

Finally, for general spending, respondents were asked to identify which activities or items they were spending more money on now compared with a year ago. The mostmentioned activity was eating out more by 42% of respondents. Almost a quarter (23%) mentioned they were spending more on travel now versus a year ago. Purchasing clothing and shoes was mentioned by 15% of those surveyed, while spending money on beauty salons and spas was mentioned by 10%.

Gaither International conducted the survey during this year’s Women Who Lead Summit, which was held Feb. 3 at the Puerto Rico Convention Center. An estimated 400 female professionals, executives and entrepreneurs attended, which was led by business communications expert Frances Ríos, who organized the event.

There is no question that women are lagging, compared with their male counterparts, in serving as general managers, presidents or CEOs in top companies in Puerto Rico, she indicated. “We as leaders have to make sure to promote the inclusion of women which, as has been proven, is synonymous with better economic results,â€? RĂ­os said

Frances RĂ­os

during the activity.

According to a 2012 McKinsey Quarterly report, EBIT [earnings before interest & taxes] margins at the most diverse companies were 14% higher, on average, than those of the least diverse companies,� according to the website

Puerto Rico’s gubernatorial candidates should focus most on economic development, according to 62% of respondents in a Gaither International survey of female professionals at the recent Women Who Lead Summit.

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womenomicstoday.com. “In the same year, Credit Suisse made a link to stock performance, stating that stocks of large-cap companies with at least one female board member outperformed those with all-male boards by 26% worldwide,� the website adds.

The Women Who Lead event is aimed at helping Hispanic female professionals and entrepreneurs acquire the tools and strategies they need to climb the corporate ladder and grow their businesses.

Gaither’s participation in the event consisted of conducting a live poll on a variety of issues among all attendees. The questions posted ranged from political issues and emigration to general spending. 䥲

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THURSDAY, FEBRUARY 11, 2016

Latin American Affairs Economic Growth a Struggle for Latin America in 2016

BY JUAN A. HERNÁNDEZ j.hernandez@cb.pr

Economic growth for Latin America in 2016 will be marginal, at best, according to most economic forecasters, including the World Bank, which further characterizes growth in the region as “anemic.”

“The macroeconomic outlook across Latin America in 2016 is expected to be complex and still beset with significant uncertainties and risks.

We expect the economy to experience a very shallow, feeble, flat recovery, basically coming from a contraction of about 0.5% in GDP [gross domestic product], to a very weak expansion of less than 0.5% in GDP,” said Alberto Ramos, head of Latin America Research for the investment and banking firm Goldman Sachs.

The culprits for such a weak outlook for the Latin American economy are the persisting effects of the

declining prices for commodities, such as crude oil and other raw materials, and what many economists have euphemistically called the “domestic challenges” affecting the largest economies of the region, referring specifically to the political power struggles in countries such as Venezuela, Brazil, Argentina and Peru. It is because of the latter that analysts believe there will be very little advances, if any, in terms of fiscal and/

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or monetary policies that may push forward significant economic growth in the region.

In Argentina, recently elected President Mauricio Macri has initiated a series of macroeconomic adjustments that are expected to take all of 2016 to implement. But while Macri’s administration has assured it will stay the course, some of its early measures have proven to be very unpopular, such as the dismissal of several thousand government employees, to the point of rioting in the streets.

In contrast, Venezuela seems to be at a standstill waiting for the administration of President Nicolás Maduro and the opposition-controlled National Assembly to come to some sort of agreement that can reactivate the country’s ailing economy. During the recent election campaign, the opposing Mesa de Unidad Democrática emphasized the need to rehabilitate the economy, but it seems to have concentrated its efforts on political measures such as freeing alleged political prisoners and removing government officials from

office and appointing new ones.

For World Bank analysts, there seems to be some differences among the subregions, with stronger growth in both Central and North America, as well as the Caribbean that could compensate the weakness of the economic outlook for South America. This could be the case of Mexico, whose GDP is expected to increase “a little less than 3%.” The reasons for such a difference, when compared to the region’s forecast, could be a better managed economy, no significant macroeconomic imbalances, no exposure to China, limited exposure to commodities and increasing demand from the U.S. market, accompanied by significant integration with the U.S. business cycle.

But as “feeble” as the economic outlook for Latin America may be, it is not exclusive to the region as both advanced economies and emerging markets have similar outlooks.

Global economic growth for 2015 fell short of expectations after the drastic fall of oil prices, while flagging trade and capital flows and episodes of financial volatility stifled many economies. The possibility for a stronger outlook now seems to depend on the continued economic health of highincome countries, the stabilization of oil prices (as well as the price of other commodities) and China’s (the largest emerging market) transition to a consumption-based economy, according to the World Bank. 䡲

21

THURSDAY, FEBRUARY 11, 2016 Against this backdrop, the demand for homes for elderly people, or extended care centers, is increasing.

Healthcare

Services for Elderly People: An Industry Developing as the Problem Grows Casa Feliz Answering the Need

BY JUAN A. HERNÁNDEZ j.hernandez@cb.pr

Like many other countries and jurisdictions, Puerto Rico’s population is growing old. Within the next 10 years, the number of people 60 years and older living on the island will be greater than the number of children 15 years and younger, according to the United Nations’ World Population Prospects.

To the myriad of problems the commonwealth government must face during the 21st century, the consequences of major demographic changes have just dumped another one, the social, housing and healthcare needs of elderly people.

During the past five years, the only group that has increased in size in Puerto Rico is adults 65 years old and older. They have gone from 546,000 in 2010 to 617,000 in 2014, according to Gaither International, citing U.S. Census data.

Against this backdrop, the demand for homes for elderly people, or extended care centers, is increasing. However, the number of these centers now operating in Puerto Rico is still significantly below the growing demand needed to attend to this growing population. Entrepreneurs Erick Declet and Montier Betancourt identified the need and the business opportunity in this industry;

they have developed what they call a holistic alternative to what they also believe is soon to become a very competitive industry.

Hogar Casa Feliz is a residential institution for elderly people, located in Bayamón, with an environment that replicates life in regular homes, with all the comforts and security.

“We don’t want to be the place where you just leave a loved one. This is his or her home…this is where he or she lives and you go visit them, with everything that a family home entails,” explained Betancourt, who emphasized that Casa Feliz has an open-door policy for residents and their families.

“Sometimes things get a little complicated and people may not be able to visit a parent or aunt over the weekend, so they can drop by any time they want during the week and spend some time with their loved ones. We don’t restrict visiting hours…people can even come and have lunch or dinner with them,” said Declet, who explained visitors coming around meal times can sit with residents and have the same menu as the rest, like anyone would do when visiting a relative or friend.

The economic stress of Puerto Rico’s ongoing depression and the central government’s fiscal crisis, as well as scientific and health-related advances, have forced many people to

Hogar Casa Feliz

postpone their retirement plans. So, it is expected that many elderly people will still be agile and active individuals when they do decide to retire.

Anticipating the needs of their future residents, Declet and Betancourt have planned to develop various facilities within the grounds of Casa Feliz to keep elderly people active, such as a garden, hydroponic vegetable patches, a gym and library, as well as animal therapy programs, among other activities.

Operating since June 2015 with 25 beds, Casa Feliz is now developing its second phase, which will include increasing the number of beds and developing a skilled nursing facility to offer rehabilitation services to residents who may need them.

Total investment for this second phase is estimated to be $2 million, creating 100 direct and indirect jobs. Construction is slated to begin later this year. 䡲

22

THURSDAY, FEBRUARY 11, 2016

Shipping

RFP to be issued for new container terminal

Panama Canal to Diversify its Operations with Expansion

BY JUAN A. HERNÁNDEZ j.hernandez@cb.pr

The Panama Canal Authority is anticipating the needs of transshipping companies once the third set of the massive new locks start giving way through the expanded canal to the post-Panamax vessels in May. The authority is planning to put out a request for proposals within the next 30 to 60 days to build and/or operate a new container terminal that will serve as a transshipment hub for North and South America.

“Our main business is transit in the canal, and

that will be there. What we are adding is additional magnetism by having more capacity, specifically more transshipment capacity,” said Panama Canal Administrator Jorge Quijano.

The proposed terminal will serve as storage and transfer facility mostly for the transshipment containers from the postPanamax vessels. The containers will be unloaded from the bigger ships to be stored and/or transferred unto smaller vessels that will deliver the cargo to smaller ports that cannot handle the postPanamax ships.

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But some people have already expressed their doubts about Panama’s ability to attract more transshipment activity.

According to Asaf Ashar, a research professor at the Ports & Waterways Institute at the University of New Orleans, global trade alliances are becoming more dominant in the transportation business and they could impact how much of the transshipment business Panama may be able to attract.

Quijano said he is ready to argue against that assessment.

“A big ship like that [the post-Panamax] wants to unload a lot of cargo and wants to load a lot of cargo, and then go on to the next stop. What makes sense is, you drop it off in Panama, which is in a central location, and then you use the smaller vessel and take that [the cargo] to smaller ports,” Quijano argued.

While the increased efficiency and lower cost

of the big ships make the Panama route more competitive and attractive for shipments from Asia to ports on the east coast of the U.S., there are several other considerations that affect cargo routing such as transit times, vessel operations costs, fuel costs and canal tolls, among others. So, to incentivize shipping companies to use the canal as much as possible, the Panama Canal Authority announced a loyalty program that will charge lower tolls when shipping companies continue to use smaller vessels through the older locks. 䡲

“What we are adding is additional magnetism by having more capacity, specifically more transshipment capacity.”

— Jorge Quijano, Panama Canal administrator

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Message from Heiko Faass Editor in Chief Latin Media House

Puerto Rico: It Doesn’t Get Much Better Than This

A

summit, by its primary definition, means a place where it simply can’t get any better, where you can’t reach any higher. A quick look at the list of guest speakers sharing their wisdom with you during this 2016 Puerto Rico Investment Summit will make you understand that it can’t get any better than this and being here, if you are interested in investing in or moving to Puerto Rico.

I didn’t always think it was such a great idea to have moved to Puerto Rico from Germany. I came to the island in December 2005 as a direct import due to personal reasons. A direct import from what could be described as the exact opposite of Puerto Rico in many ways.

And yet, 10 years later, I’m still here when I could live or work wherever in the world I’d like.

Why? Because, like this summit, it doesn’t get much better anywhere else in the world than in Puerto Rico. Especially, once you have gotten used to having great weather and warm temperatures all year round, which for me set in after about a year.

Thereafter, it becomes burdensome to leave the island during the period from October to April.

But it’s actually not the weather that will make you want to stay. It’s the people. And that’s going to require an additional investment besides any money you may want to bring here.

Investment of your time! Make an effort to get to know “the locals,” speak their language, eat the excellent local food, make some friends and find business partners.

As I mentioned, I wasn’t always such a big fan of staying here. But that was during a time in my early days in Puerto Rico when I got lost in sort of a permanent comparison between here and there, trying to figure out why certain things were done differently from the way they were done in Germany or elsewhere. The moment I was able to stop and see that and immersed myself into the local culture, things started to change.

The major breakthrough in this was definitely learning to understand and speak Spanish.

People will open up to you in whole different ways—because, hey, I bet their German is a lot worse than my Spanish—if you make an effort to do as the Romans, when in Rome… Every little investment from your end will be honored here, rest assured!

Connecting with local professionals also got a lot easier once I started attending a local Rotary Club. I quickly got to know and appreciate a lot of “good people” and even ended up presiding the Rotary Club of Santurce, where I have forged some friendships for life.

Seeing my son today attending elementary school here (entirely taught in English), I can personally attest to the high level of education provided by local schools. This is more than competitive on an international level and will prepare him well for high school or university anywhere in the world.

So, this leads me to a last topic: security.

In more than 10 years here, I have never had even one critical incident. Knock on wood.

However, I want to say that I do feel safe in Puerto Rico.

I hope you’ll enjoy this special edition of Caribbean Business. The English-language weekly business newspaper we hope will become your preferred source of information. Our staff working with Executive Editor Philipe Schoene is doing a tremendous job and we don’t have enough opportunities to say so. But the Caribbean Business you are holding in your hands has something in common with this P.R. Investment Summit and the island: It doesn’t get much better than this!

Enjoy your stay, come back with your family, make this the center of your lives and create with all of us here, the new Puerto Rico of tomorrow!

Cordially, HEIKO FAASS CEO & EDITOR IN CHIEF LATIN MEDIA HOUSE

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CONTENTS S6

Puerto Ricco Profile

caribbeanbusiness.pr

Publisher Miguel A. Ferrer

Editor in Chief Heiko Faass

Executive Editor & Deputy Editor in Chief Philipe Schoene Roura EDITORIAL Editor Rosario Fajardo Online Editor Eduardo San Miguel Tió Politics Editor Ismael Torres Regional Editor Juan A. Hérnandez

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Incentivves

Tourist Atttracctiions

Senior Reporters Online Reporter Reporter Special Projects Editor Researcher Project Manager

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Atlantic Ocean

Official Name: Commonwealth of Puerto Rico July 25, 1952) Became a U.S. territory in 1898 Total Area: 5,324.5 sq. miles

Economics (FY 2014)

Capital: San Juan Currency: U.S. Dollar Nationality: U.S. Citizens Government: Democratic system of elections every four years Ruling Party: (PDP) Time Zone: Atlantic Standard Time; Greenwich Mean Time -4 Area Codes: 787, 939

Gross Domestic Product (in current dollars): Gross National Product (in current dollars): GNP per Capita: GNP Growth (constant): Inflation: Unemployment: Bankruptcies:

The People:

Main Trading Partners (FY 2014) Country

Average High Temperature (ºF) Average Low Temperature (ºF) Average Precipitation (in.)

84

88

89

86

72

76

78

75

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5.0

5.5

5.6

Jan.-Mar. Apr.-Jun. Jul.-Sept. Oct.-Dec.

Transportation: Passenger Movement (FY 2014) LMM Int’l Airport: 8.47 million passengers (inbound/outbound) San Juan Port: 1.21 million cruiseship passengers Cargo Movement (FY 2014) LMM Int’l Airport: 815.07 million magtow lbs.* Regional Airports: 192.17 million lbs.

San Juan Port: 7.71 million short tons** * Magtow = maximum gross takeoff weight ** Short ton = 2,000 pounds

Island Transportation Network Commonwealth System Roads: 7,450.93 km.

Highways: 301.8 km. Expressways: 224.7 km.

Municipal System Roads: 20,602.24 km.

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$69,201.6 million $19,373 -0.9% 0.9% 13% (FY 2015) 10,321 (FY 2015)

Preliminary figures

Ethnicity: Hispanic/Puerto Rican Official Languages: Spanish/English Population: 3,474,182 (2015 Estimate) People per sq. mile: 1,014.7 (2015 Estimate) People per sq. mile: 1,088.2 (2010 Census)

Climate:

$103,675.7 million

Australia Austria Belgium Brazil China Dominican Republic France Germany Ireland Italy Japan Mexico Netherlands Singapore Spain United Kingdom United States Other Countries TOTAL

SPECIAL MARKET FACT REPORT

Exports

Imports

(In Thousands $)

(In Thousands $)

142,272.0 1,375,045.3 3,932,060.6

1,750.8 9,350.1 685,295.9

240,688.3 837,561.5

1,465,142.0 730,581.9

732,613.3 752,342.8 328,790.5 119,762.9 573,019.5 1,153,004.9 359,286.4 2,578,231.5 432,954.9 1,446,661.3 1,108,937.4 51,433,100.9 1,844,590.1 69,390,924.0

605,499.6 273,325.1 317,079.3 5,170,753.8 214,623.4 1,421,749.0 437,221.6 537,725.6 3,424,620.3 231,285.7 502,740.8 22,333,839.1 4,870,442.1 43,233,026.1

Source: Puerto Rico Planning Board

Caribbean Sea

Tourism (FY 2015) Total Registrations Hotels & Inns

2,588,487

Nonresidents United States & Canada International Markets Caribbean Latin America Europe Other Countries Others* Residents

1,737,260 1,601,682 119,339 35,084 36,909 38,205 9,141 16,239 851,227

*Includes crew members

Occupancy Total Room Nights Occupied Total Room Nights Available

70.8% 3,476,529 4,908,498

Preliminary figures Source: Puerto Rico Tourism Co.

Politics Next Elections: November 2016 Head of Government: Gov. Alejandro García Padilla Percentage of votes cast elections 2012 PDP Popular Democratic Party 47.73% NPP New Progressive Party 47.13% PIP Puerto Rican Independence Party 2.52% WPP Working People’s Party 0.98% SUP Sovereign Union Party 0.56% PPR Puerto Ricans for P.R. Party 0.36% Others 0.72% Senate: 27 members PDP Popular Democratic Party 18 NPP New Progressive Party 8 PIP Puerto Rican Independence Party 1 House of Representatives: 51 members PDP Popular Democratic Party 28 NPP New Progressive Party 23

Puerto Rico Profile Population

Puerto Rico’s population is estimated by the U.S. Census Bureau to be at 3.474 million. A Decennial Statistical Studies Division census coveragemeasurement estimation report, published by the Census Bureau, indicated that the loss of population in the 2000-2010 decade was not 82,821, as reported by the 2010 Census figures, but about 243,000. Therefore, the island’s population estimate was revised down, from 3.725 million to 3.528 million. For reference, the census in 2000 had reported a population of 3.8 million. The population change is the product of a reduction in birth and death rates and an increase in emigration to the U.S. mainland.

Furthermore, the fertility decline has raised the average age of Puerto Rico’s residents. From 2000 to 2010, the population of those up to age 19 reflected a reduction of 16.6%, while those 65 and older increased by 28%.

In short, islanders are having fewer children, a significant number of those born decide to leave and a higher fraction of those who remain are surpassing retirement age.

The new demographic reality of Puerto Rico hasn’t been linked to the economic prospects for the island. Yet, it is abundantly clear that a shrinking and rapidly aging population will have a huge impact on the economic future of Puerto Rico, as well as major social implications.

Government

As a territory of the U.S., Puerto Rico falls within the U.S. federal system and is subject to both federal and local law. Specifically, U.S. constitutional law and, in fact, most federal laws and regulations apply in Puerto Rico, and the island also has its own constitution, laws and regulations that apply to the extent that they are not contrary to federal law. Puerto Rico’s local government, like the federal government and those of the states, includes an executive, legislative and judicial branch.

Puerto Rico has a republican system of government, elected every four years. The executive branch comprises the governor, elected by the people, and cabinet members who are in turn appointed by the governor. The legislative branch is

composed of two chambers: the Senate and House of Representatives. In both legislative bodies, the members are elected by the people. The judicial branch comprises four main bodies: the Supreme Court, the Court of Appeals, the Court of First Instance and a lower-level system of municipal courts throughout the island.

Municipalities

There are 78 municipalities, with various degrees of autonomy from the central government.

A recent development has been the creation of regional entities in different parts of the island, which are beginning to assume greater prominence, particularly with respect to economic-development initiatives. Four of these already exist. Their names are Inteco (Iniciativa Tecnológica Centro-Oriental), Intene (Iniciativa Tecnológica del Noreste), Intenor (Iniciativa Tecnológica del Norte) and Disur (Desarrollo Integral del Sur). A fifth regional initiative is PRTEC (Corredor Tecnoeconómico de Puerto Rico), which brings together 15 municipalities in the west.

The governor signed an executive order recognizing these regional initiatives as the model to be followed in decentralizing government. Each initiative operates as a nonprofit corporation with a board of directors comprised of mayors, representatives from academia and the private sector.

PRTEC has a different makeup in that it was created originally by the Puerto Rico Industrial Development Co. (Pridco).

An interesting development is that each region has put in place a plan for assuming control over the permitting process, an area of concern for many years. A reflection of the importance of these regional initiatives is that the new Economic Incentives for the Development of Puerto Rico Act (Act 73 of May 2008) includes these initiatives as eligible for support from a special development fund.

Politics

The governor and legislators are elected by popular vote every four years. Members of the judicial branch are appointed by the governor with the advice and consent of the Senate.

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Legal Relations with the U.S.

Puerto Rico has three main political parties that stand for three distinct future political scenarios. The Popular Democratic Party (PDP) seeks to maintain the island’s “association” status as a commonwealth, enhanced commonwealth and/or a true, free sovereign state, or free associated republic, and has won a plurality vote in referenda on the island’s status held over the past four decades. The New Progressive Party (NPP) seeks statehood, and the Puerto Rican Independence Party (PIP) seeks independence.

Puerto Rico was a Spanish colony for 400 years and became an unincorporated territory of the U.S. after the Spanish-American War of 1898. After a number of years in political limbo, Puerto Ricans were granted U.S. citizenship in 1917.

In 1952, a constitution was approved providing Puerto Rico with the current commonwealth status with the U.S., or Estado Libre Asociado in Spanish. Although there has been a great deal of effort expended on introducing changes to the political relationship with the United States, it has remained essentially unchanged since 1952.

There is free movement of people and goods between the U.S. and Puerto Rico.

Limited Congressional Representation

Puerto Rico has limited representation in the U.S. Congress in the form of a nonvoting delegate, formally called a resident commissioner. The election of this delegate in Puerto Rico is governed by the Federal Election Commission. All other elected officials are governed by the local elections commission (Comisión Estatal de Elecciones).

Under the Puerto Rico Constitution, Puerto Rico is described as a “Commonwealth” and Puerto Ricans enjoy a degree of administrative autonomy similar to that of a U.S. state, with the major difference being that it falls outside the federal tax system. In fact, Puerto Rico is considered a foreign tax jurisdiction by the U.S. Internal Revenue Service (IRS).

Puerto Rico residents cannot vote in U.S. presidential elections, but they do participate in primaries to select candidates from both major U.S. parties, the Republican and Democratic parties. When residing stateside, Puerto Ricans enjoy the same privileges as U.S. citizens and can vote in presidential elections.

There is free movement of people and goods between the U.S. and Puerto Rico, although shipping is regulated under the Jones Act, which prohibits transport of cargo between Puerto Rico and U.S. ports by foreign-built or -flagged vessels.

The local currency, banking and postal systems are within the U.S. system. Besides having a local judiciary

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SPECIAL MARKET FACT REPORT

branch of government, Puerto Rico constitutes a district of the federal judiciary and has its own U.S. District Court. Additionally, most federal agencies are represented.

Most Puerto Rico residents do not pay federal income tax, but do pay federal payroll taxes (Social Security and Medicare), and Puerto Rico income taxes. Federal employees, or those who do business with the federal government and Puerto Rico-based U.S. corporations that intend to repatriate profits to the U.S., pay federal income taxes.

Residents are eligible for Social Security benefits upon retirement. Yet Puerto Rico is excluded from Supplemental Security Income (SSI) and receives a lower share of Medicaid funding than it would as a state, and Medicare providers receive only partial reimbursements for services rendered to beneficiaries in Puerto Rico, even though Puerto Rico residents pay fully into the system.

Puerto Rico residents may enlist in the U.S. military.

Since becoming U.S. citizens in 1917, Puerto Ricans have been included in the compulsory draft whenever it has been in effect, have participated in all U.S. wars since the beginning of the 20th century, most notably World War II, the Korean and Vietnam wars, and conflicts in Iraq and Afghanistan.

Because Puerto Rico isn’t an independent country, it hosts no embassies. However, it does host consulates from some 42 countries, mainly from the Americas and Europe.

Puerto Rico does have sovereignty with regard to sports, and participates as an independent country bearing the Puerto Rican flag in international sports tournaments, including the Pan American Games and the Olympics, and in other regional competitions and events.

Skilled Workforce for the 21st Century

It is precisely the island’s top-notch labor force— hardworking, dedicated and intelligent—that has become the No. 1 asset of Puerto Rico’s diverse manufacturing sector and remains one of the main reasons established companies continue to operate locally and new ones are drawn to the island.

More than 90 public and private university and college campuses award some 30,000 degrees each year, including nearly 10,000 degrees in science, engineering and technology. The University of Puerto RicoMayagüez campus and Universidad Politécnica de Puerto Rico rank 13th and 16th, respectively, in the mainland U.S. in undergraduate engineering enrollment. 䡲

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1 Popular One services are available to clients who maintain a combined balance of $250,000 or more in personal deposits with Banco Popular and/or investments with Popular Securities. Popular Securities LLC is a registered broker/dealer, member of FINRA and SIPC. Investment and insurance products are not insured by the FDIC or by any other government agency, are not deposits or obligations of, nor are they guaranteed by Banco Popular de Puerto Rico, its subsidiaries and/or affiliates, and may lose value. The suggestions and recommendations included in a financial plan are offered only as advice, with no guarantee of the yields of any product that may have been acquired pursuant to such recommendations. For more information, please contact one of our service centers.

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Summary of P.R., U.S. Income-Tax Benefits Under Acts 20 & 22 and U.S. Internal Revenue Code

BY FERNANDO GOYCO-COVAS

“It’s too good to be true.” This is the typical reaction when individuals first hear about the income-tax benefits available to them if they become bona fide residents of Puerto Rico. However, the fact is that the tax benefits are both as good as they seem and legally available, pursuant to the interplay between certain

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provisions of the U.S. Internal Revenue Code (IRC), as amended, and Puerto Rico’s Act to Promote the Transfer of Investors to Puerto Rico (Act 22-2012), as amended, and Act to Promote the Exportation of Services, as amended (Act 20-2012).

As a result this interplay, individuals who move to the island enjoy U.S. and P.R. income-tax exemption on interest and dividends from sources within the

SPECIAL MARKET FACT REPORT

island and on certain short- and longterm capital gains from the sale of securities and, if such individuals use certain legal entities to render certain services from Puerto Rico to nonresidents of the island, the fees derived from such services are exempt from U.S. income tax and subject only to a 4% Puerto Rico income tax.

Moreover, individuals who continue to

reside in the U.S. may also enjoy tax savings ranging from 16.4% to 12.75% by organizing a Puerto Rico corporation that provides the eligible services from the island to nonresidents of Puerto Rico.

A wide array of individuals may benefit from these tax-savings opportunities.

U.S. citizens and residents, who derive a Continues on next page

Continues from previous page

significant portion of their income from capital gains from the sale of securities (e.g., high-net-worth individuals, traders in securities and hedge-fund managers ), are among the individuals for whom moving to Puerto Rico may result in exemption from the island’s income tax and from the maximum federal income-tax rate of 43.4% (39.6% maximum ordinary income-tax rate + 3.8% Medicare tax on “net investment income”) and the 23.8% (20% maximum capital gains tax + 3.8% Medicare tax ) on short- and long-term capital gains from the sale of securities, respectively, plus exemption from the applicable state income tax.

Individuals who organize certain legal entities or are equity holders of certain existing legal entities that engage in business activities, such as providing financial or business consulting services, development and sale of software, internet marketing, call centers and other services, may also enjoy significant incometax benefits, so long as the services have no nexus with Puerto Rico and are rendered from the island to non-Puerto Rico clients.

In these cases, the benefits to the individuals who move to the island to provide such services consist of a reduced 4% Puerto Rico income tax plus a 0.2% municipal gross-receipts tax and exemption from federal income tax. Individuals who are also providers of the services must receive a fully taxable, arm’s length salary for their services, but the remaining income will only be subject to the 4% Puerto Rico income tax and a 0.2 % gross receipts tax.

Owners of other types of businesses with operations in the U.S. may also enjoy these benefits by providing eligible services to the stateside entity from Puerto Rico. In these cases, the tax savings hinge on the amount of fees that may be charged for the services rendered in Puerto Rico under IRC section 482 (i.e., the fees that would be paid to an unrelated third party for the same services).

Notably, the shareholders of the Puerto Rico service operations that continue residing in the U.S. may also enjoy the aforementioned tax savings, ranging from 16.4% to 12.75%, by organizing a

Puerto Rico corporation that provides the eligible services from the island to nonresidents of Puerto Rico.

We will now summarize the requirements that must be met to enjoy the foregoing Puerto Rico and United States tax benefits.

PUERTO RICO INCOME-TAX BENEFITS Act 22-2012 A. In General. The Puerto Rico incometax exemption on interest, dividends and capital gains is granted by Act 22. The exemption is applicable to interest and dividend income and certain short- and long-term capital gains from the sale of securities of nonresidents of Puerto Rico (United States citizens or aliens) that (i) become residents of Puerto Rico after Jan. 17, 2012; (ii) had not been domiciled in Puerto Rico at any time during the sixyear period ending Jan. 17, 2012; (iii) acquire a residence in Puerto Rico; and (iv) obtain a grant of tax exemption from the Secretary of Economic Development & Commerce of Puerto Rico (Act 22 Grant).

B. The Act 22 Grant. The Act 22 Grant is a contract between the individual and the Government of Puerto Rico. The treatment of the Act 22 Grant as a contract is aimed at making applicable section 7 of article II of the Constitution of Puerto Rico, which bars the impairment of contractual rights, so as to protect the tax benefits of Act 22 from revocation or amendment by future Puerto Rico laws.

C. Resident of Puerto Rico. The Act expressly provides that the exemption on interest, dividends and capital gains is granted to resident individuals, as defined in section 1010.01(30) of the Puerto Rico Internal Revenue Code of 2011, as amended (P.R.-IRC). Section 1010.01(30) defines such term as an individual who is domiciled in Puerto Rico, and provides that an individual shall be presumed to be domiciled in Puerto Rico if the individual has been present in Puerto Rico for a period of 183 days during the calendar year. It further provides that the Secretary of the Treasury of Puerto Rico will promulgate regulations setting forth the factors that must be taken into account in determining whether the individual is domiciled

in Puerto Rico. Because of the absence of such regulations, there was uncertainty as to the requirements that had to be met to qualify as a resident of Puerto Rico for purposes of Act 22. To eliminate such uncertainty, the Act 22 Grant provides that if the individual meets the IRC requirements for bona fide Puerto Rico residency, the individual will also qualify as a Puerto Rico resident under the P.R.-IRC. D. Capital Gains. The Puerto Rico income-tax exemption on short- and long-term capital gains is applicable to gains from the sale or exchange of securities, attributable to the increase in value of the securities after the date that the individual establishes domicile in Puerto Rico. Thus, gains realized from securities acquired after establishing domicile in Puerto Rico are exempt from Puerto Rico income tax, whereas gains derived from securities acquired prior to establishing

income-tax rate, in lieu of any other Puerto Rico income tax, and grants other tax benefits to any entity that renders certain eligible services from the island to markets outside of Puerto Rico.

B. Eligible Services. The following types of services are among those that qualify for the tax benefits of Act 20, provided that, the services are rendered to nonresidents and the “no nexus” with Puerto Rico requirement is met: (i) research and development; (ii) advertising and public relations; (iii) economic, environmental, technological, scientific, management, marketing, human resources, information and audit consulting; (iv) advisory services on matters relating to any trade or business; (v) commercial arts and graphic services; (vi) the production of construction drawings, architectural and engineering services, and project management; (vii)

The dividends paid to bona fide residents of Puerto Rico that are exempt under Act 20, are not subject to federal income tax. domicile in Puerto Rico are exempt only to the extent that the gain is attributable to the increase in value of the securities after the individual is domiciled in Puerto Rico. The portion of the gain attributable to the increase in value of the securities prior to establishing domicile in Puerto Rico is subject to the applicable Puerto Rico capital-gains tax rate, but, if such gain is recognized after 10 years from the date that the individual becomes domiciled in Puerto Rico, a reduced 5% tax rate is applicable.

E. Exemption Period. The income-tax exemption commences on the date of the individual’s domicile in Puerto Rico and ends on the earlier of Dec. 31, 2035, or the date the individual(s) cease(s) to be domiciled in Puerto Rico.

professional services, such as legal, tax and accounting services; (viii) corporate headquarters; (ix) electronic data processing centers; (x) the development of computer programs; (xi) voice and data telecommunications between persons located outside of Puerto Rico; (xii) call centers; (xiii) services provided by shared services centers, including but not limited to, accounting, finance, taxes, auditing, marketing, engineering, quality control, human resources, communications, electronic data processing and other centralized management services; (xiv) storage and distribution centers; (xv) educational and training services; (xvi) hospital and laboratory services; (xvii) certain creative industries (xviii) trading centers; (xix) investment banking and other financial services; and (xx) any other service that the government of

Act 20-2012 A. In General. Act 20 imposes a 4%

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Continues on page S14

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Continues from page S13

Puerto Rico determines should be treated as an eligible service.

C. The Act 20 Grant. To enjoy the tax benefits of Act 20 a grant of tax exemption must be requested and issued by the

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Secretary of Economic Development & Commerce of Puerto Rico. This grant of tax exemption is also a contract with the Government of Puerto Rico that should be protected from revocation or amendment by subsequent legislation by the constitutional prohibition against the impairment of contracts by legislative action.

SPECIAL MARKET FACT REPORT

D. Employment Requirement. To obtain the Act 20 tax grant, the company must enjoy a minimum of five (5) full-time employees who are residents of Puerto Rico. Three of such employees must be employed within six months from the date of commencement of operations, and the remaining two employees must

be employed within two years from the date of commencement of operations.

E. Tax Benefits. Pursuant to the Act 20 tax-exemption grant, the Puerto Rico corporation or limited liability company Continues on next page

Continues from previous page

created by the individual who moves to Puerto Rico will enjoy the reduced 4% Puerto Rico income-tax rate and 60% exemption from municipal-license taxes during a 20-year period. The 20-year period may be extended for 10 additional years if certain requirements are met.

F. Compensation vs. Dividend Income. Individuals who organize a Puerto Rico corporation to generate dividend income exempt from the island’s and the U.S.’ income tax, and also render services to the company must receive a salary that will be subject to Puerto Rico income tax at a maximum income-tax rate of 33%. Otherwise, the Treasury Department could characterize a portion of the exempt dividends as taxable compensation for services rendered, pursuant to P.R.-IRC section 1040.09 (equivalent to IRC section 482). The salary must be a market salary (i.e., the salary that a similar company in Puerto Rico would pay for equivalent services to an individual who

is not a shareholder) up to a maximum of $350,000.

U.S. Income-Tax Benefits Interest, Dividends & Capital Gains from the Sale of Securities. Pursuant to IRC section 933, bona fide residents of Puerto Rico during the “entire” calendar year are not subject to federal income tax on their income from sources within the island.

Thus, interest, dividends and capital gains from the sale of certain securities that are exempt from Puerto Rico income tax under Act 22 are also exempt from federal income tax if (i) the individual meets the requirements of IRC section 937 to become a bona fide resident of Puerto Rico during the entire taxable year, and (ii) the interest, dividend and capital gains are from sources within Puerto Rico pursuant to the IRC source of income rules.

Service Fees. Under the IRC, corporations organized outside of Puerto Rico are not subject to federal income tax, unless they are engaged in trade or business

in the U.S. or derive certain income from sources within the U.S. In addition, dividends from a Puerto Rico corporation that derives substantially all of its income from services rendered on the island constitute income from sources within Puerto Rico.

Consequently, a corporation organized under the laws of Puerto Rico that is subject to Act 20’s Puerto Rico 4% income-tax rate is not subject to federal income tax, if substantially all of its income is derived from services rendered from Puerto Rico.

Additionally, the dividends paid to bona fide residents of Puerto Rico that are exempt under Act 20, are not subject to federal income tax pursuant to IRC section 933.

Moreover, if the entity that enjoys the Act 20 tax benefits is a pass-through or disregarded entity under the IRC, the individual bona fide resident of Puerto Rico who is subject to Act 20’s 4% Puerto Rico income tax on the entity’s income is not subject to federal income tax on such income.

Dividends from Act 20 Companies to

Residents of the U.S. The shareholders of a Puerto Rico corporation that enjoy the Act 20 tax benefits and continue to reside in the U.S. may also enjoy the tax savings, provided that the Puerto Rico corporation has a labor force that renders the eligible services from the island. Such tax savings may be achieved because the dividends from the Puerto Rico corporation generally are subject to the U.S. capital-gains rate of up to a maximum of 20% or, if the 3.8% Medicare tax is applicable, a maximum of 23.8%. Consequently, the U.S. resident shareholders are subject indirectly to the Act 20 Puerto Rico incometax rate and to either 20% or 23.8% on the remaining 96%. As a result, the combined Puerto Rico and U.S. income-tax rate is a maximum of 23.2% or 26.8%, respectively, instead of the U.S. income-tax rate of a maximum of 39.6% that would otherwise be payable if the operations are conducted in the U.S. through a pass-through entity. Thus, the tax savings range from 16.4% (39.6% - [20% x 96%] to 12.75% (39.6% - [23.8% x 96%]). 䡲

Property Management and Leasing Tenant Representation

SPECIAL MARKET FACT REPORT

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BUSINESS, MANUFACTURING & SERVICES

Puerto Rico has long been an investment destination for industry, although the focus has shifted from heavy and labor-intensive manufacturing to hightechnology, high-value-added and services-oriented enterprises.

The Puerto Rico Industrial Development Co. (Pridco) is the primary government agency charged with promoting industry and foreign direct investment, and is especially focused on attracting and developing high-technology sectors such as the biosciences, information technology and professional services.

ECONOMIC INCENTIVES FOR THE DEVELOPMENT OF PUERTO RICO ACT (ACT 73 OF 2008)

The Economic Incentives for the Development of Puerto Rico Act provides attractive tax rates and other incentives to foster investment in key sectors of Puerto Rico’s economy.

Eligible Businesses

In general terms, eligible businesses include: those established to manufacture products on a commercial scale; businesses established to render services on a commercial scale for foreign markets or other eligible businesses in Puerto Rico; and businesses established to engage in a wide range of specific economic activities, such as scientific research & development, recycling, hydroponics, intangible-property licensing, software development and manufacturing of renewable-energy equipment, among others. Furthermore, businesses with operations of specific strategic projects, as defined by Pridco, may be also eligible for the incentives.

Application for a Tax Decree

Act 73 operates through a tax decree issued for a period of 15 years. The decree identifies and ensures the incentives to which the eligible businesses are entitled. To obtain a decree, an eligible business must submit an

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application, with all required supporting materials and fees, to the Office of Industrial Tax Exemption. Once the application is duly filed, the decree should be granted or denied within 70 days.

Tax Incentives

Approved eligible businesses qualify for the following benefits:

• Income Tax Rates Typically, eligible businesses are subject to a 4% income tax rate and a 12% withholding tax rate on royalties.

An eligible business engaged in “novel or pioneer” activities or operations in Puerto Rico—as determined by the government agency—will be subject to a 0% to 1% income tax rate.

An additional reduction of 0.5% from the fixed income tax rate will be available to eligible businesses that are established in industrial areas of low or intermediate development, as determined by the Office of Industrial Tax Exemption.

• Withholding Tax Rates on Royalties or License Fees Eligible businesses will be subject to a

SPECIAL MARKET FACT REPORT

12% fixed income tax rate, withheld at source, on royalties or license-fee payments for the use of intangible property.

• Investment Income Eligible businesses are not required to pay taxes on income derived from “eligible investments,” which are specified in the incentives act and typically involve debt and/or equity investments in certain local real estate, business activities and securities.

• Distributions The stockholders or partners of a corporation or partnership with a decree shall be exempt from taxes on the distribution of dividends.

Gains realized from the sale or exchange of equity shares of an eligible business or of a substantial portion of the business’ assets, if such sale is executed while the business’ decree is still in force, shall be subject to a 4% tax. After the decree has expired, the tax treatment will be adjusted to limit the benefits to gains generated while the decree was in force.

• Tax Credits • Eligible businesses that purchase

products manufactured in Puerto Rico will be permitted to claim a credit of 25% of the purchase cost, up to a maximum of 50% of its tax liability; for products made from recycled materials, the credit shall be equal to 35% of total purchases up to the 50% limit.

• Eligible businesses can receive a tax credit for each job created during the first year of operations. The size of the credit will depend on where the exempted businesses are located.

In Vieques and Culebra, the credit is $5,000 per job; in a low industrialdevelopment zone, it is $2,500 per job; and in an intermediate industrial-development zone, it is $1,000 per job.

• Eligible businesses can receive a credit of 50% of the investment, for investments in research & development, clinical trials, toxicology tests, infrastructure, renewable energy or intangible property.

• Eligible businesses can receive a tax credit of 50% of the investment, for investments in machinery and equipment for the generation and efficient Continues on next page

Continues from previous page

use of energy. For eligible businesses that invest to generate energy for their own consumption, the credit will be capped at 25% of the business’ income tax. For eligible businesses dedicated to the production and sale of energy in Puerto Rico, the credit will be capped at $8 million for each eligible business, up to an aggregate maximum of $20 million for such investments by all eligible businesses per year.

• All eligible businesses that are industrial clients of the Puerto Rico Electric Power Authority can receive a tax credit of 3% of their electricity payments. A higher credit (7%) is available for eligible businesses that retain 25 employees or an average payroll of $500,000 or more during the taxable year.

• Eligible businesses can receive a credit for 12% of all payments made for the use or right to use intangible property in their exempt operations in Puerto Rico.

• Eligible businesses can receive a credit of 50% of the amount of any investment in a “strategic project,” as defined in the incentives act.

• Eligible businesses can receive a credit of 50% of (1) the cash amount used to purchase the majority (50% or more) of the equity interest or operational assets of an exempted business that is in the process of closing operations in Puerto Rico or (2) the cash amount contributed to a small or midsize business in exchange for corporate stock or partnership interest used for construction or improvements of physical facilities and purchase of machinery and equipment.

• Real & Personal Property Taxes • Eligible businesses shall receive a 90% exemption from municipal and commonwealth property taxes on personal property used in the businesses’ development, organization, construction, establishment or operation.

• For the first five years of operations,

eligible businesses shall receive a total exemption from the payment of property taxes on real property used for its central or regional corporate headquarters rendering centralized management services to affiliated entities.

• Eligible businesses shall receive a complete exemption from real property taxes during the period authorized under the grant to carry out the construction, expansion or establishment of the tax-exempt business, and during the first government fiscal year during which the business would have been subject to property taxes.

• Eligible businesses can also take advantage of the benefit afforded by the Optional Self-Assessment, as described in the incentives act, for real property taxes. This method may be used exclusively for that property, which should be considered real property because of its use and the location to which it is destined and used in the development, organization, construction, establishment or operation of the exempt business, and if that property has not been assessed by the Municipal Revenue Collections Center (CRIM by its Spanish acronym).

• Municipal License & Other Municipal Taxes • Eligible businesses shall enjoy a 60% tax exemption on municipal license taxes, with the first three semesters being 100% exempt. Any taxable portion will be subject to the regular tax rate, that currently can be up to 0.5%; therefore, after considering the 60% exemption, the effective tax rate would be up to 0.02%.

• Eligible businesses shall be fully exempt from any tax, levy, fee, license, excise, rate or tariff imposed by any municipal ordinance on the construction of works to be used by the exempt business within a municipality (such taxes do not include the municipal license tax levied on the volume of business of contractors or subcontractors of the exempt business).

• Income obtained from investments that qualify shall be exempt from municipal licenses, municipal excises and other municipal taxes.

• Eligible businesses enjoy the following exemptions from municipal licenses, municipal excises and other municipal taxes imposed by any municipal ordinance: —Exempt businesses in Vieques and Culebra shall enjoy 90% exemption.

—Small or midsize businesses shall enjoy 75% exemption.

—Central or regional corporate headquarters engaged in rendering centralized management services to affiliated entities shall enjoy 100% exemption during five years from the date the exemption begins.

—Other businesses shall enjoy a 60% exemption.

• Commonwealth Excise Tax and Sales & Use Tax (IVU) The following items directly or indirectly introduced or acquired by an exempt business will be totally exempted from commonwealth excise and sales & use (IVU by its Spanish acronym) taxes during the life of the decree: —Raw material (except hydraulic concrete, crude oil, partially manufactured products, finished oil products and finished products from any other hydrocarbon mixture) to be used in Puerto Rico to manufacture finished products.

—Machinery and equipment (and accessories thereof) used in the manufacturing process or in the construction or repair of ships inside or outside the premises of a manufacturing plant.

—Machinery, trucks or forklifts used exclusively and permanently to transport the raw material within the circuit of the tax-exempt business.

—Machinery, equipment and accessories used to carry out the manufacturing process, or which the taxexempt business is under the obligation to acquire as required under federal or commonwealth laws or regulations for the operation of an industrial unit. The exemption

shall not cover machinery, devices, equipment or vehicles used in whole or in part in the administrative or commercial operations of the exempt business.

—Machinery and equipment that must be used by an exempt business to comply with environmental, safety and health requirements.

—Machinery, equipment, parts and accessories used in experimental or reference laboratories.

—Machinery, equipment, parts and accessories used in the preliminary phase of regional exploration geared to the mineralogical development of Puerto Rico, and in dry docks and shipyards for the construction or repair of vessels.

—Fuel used by the exempt business covered by the incentives act in the cogeneration of electric power for its own use or for use by its affiliates.

—Chemicals used by the exempt business in sewage treatment.

—Energy-efficient equipment, properly certified by the local Energy Affairs Administration.

SPECIAL INCENTIVES

The following special incentives have been created to encourage the establishment and retention of local and foreign investment in Puerto Rico.

Basic Incentive for Job Creation

Companies that are promoted by Pridco, including both local and nonlocal businesses that meet their commitments related to job creation and retention, receive a basic incentive payment for each employee hired. The incentive is $400 per employee for new businesses and $250 per employee for expansions of existing businesses.

Incentive for Job Creation & Location

In addition to the basic incentives, companies can receive a location-based incentive for job creation outside of the San Juan metropolitan area. This incentive will be available for local and

SPECIAL MARKET FACT REPORT

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nonlocal businesses, and depends on the geographical location of the company and the number of employees. Companies will receive an orientation from Pridco, and must submit, within a year from the promotion date, certain information for evaluation.

Special Aid for the Rescue of a Project

When a Pridco-promoted business intends to cease operations or reduce its workforce by 50% or more, a new owner committed to keeping at least 25% of the employees who are working at the moment of the rescue may be entitled to assistance.

Incentive for Strategic Projects

Companies promoted by Pridco that execute projects deemed to have extraordinary importance for the economy of Puerto Rico—i.e., because they create and maintain a large number of jobs or a lesser number of high-quality jobs, promote new technology, transfer technology business knowledge or are otherwise considered highly meritorious by the executive director and the board of Pridco—may be eligible for incentives.

The company will receive an orientation from Pridco and must submit certain information for evaluation by and approval from Pridco’s board.

Incentive for Infrastructure Development & Industrial Building Improvements

Companies promoted by Pridco may be eligible for an incentive to improve buildings belonging to Pridco that are necessary for the companies’ operations. As a general rule, the infrastructure incentive isn’t available for improvements to private buildings unless they can help create and retain jobs, in which case Pridco’s board approval is required. The company will receive an orientation from Pridco and must submit certain information for evaluation, including project drawings, specifications, cost estimates, agency approvals and any other document required for

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the installation or construction of the improvements. The application for this incentive must be prepared and certified by a licensed engineer or architect.

Incentive for the Manufacturing of Furniture & Related Products and the Apparel Industry & Similar Products

This incentive is available for Puerto Rico businesses that have been operating for at least one year in the manufacture of furniture or related products, or in the manufacture of apparel or similar products that qualify for the economic incentives provided by Law 8 of 1986. Moreover, this incentive can be granted in addition to other special incentives. Businesses that qualify will receive a cash incentive of 3% of eligible sales, up to a maximum amount of $150,000 per year.

The incentive can be used to acquire raw materials, machinery or equipment; acquire and/or improve the company’s manufacturing facilities; pay production payroll (when the company isn’t already participating in another reimbursement program); subsidize the lease of buildings housing the manufacturing process; acquire technical assistance, training in new production techniques, administration, promotion and/or marketing; improve services through computerized equipment; promote the business’ services and/or products outside Puerto Rico; make interest payments on loans related to operations; and other purposes established under Law 8.

To qualify, a company must apply during July or August and submit all required documentation to Pridco. The application will be received and evaluated by the Office of Strategic Planning & Economic Analysis. Once it is determined that the company is eligible, it can request the incentive at the end of each trimester.

Incentive for Industries Located in Vieques & Culebra

Companies that are promoted by Pridco may be eligible for a cash incentive of up to $100,000 for establishing

SPECIAL MARKET FACT REPORT

and operating a business in Vieques or Culebra. The incentive can be used for maritime, land and air transportation of raw materials and finished products, including labor costs, tolls and other expenses related to transportation, based on an evaluation by Pridco. The eligible company may request the incentive at the end of each trimester, after the commencement of operations has been certified, or at the end of the fiscal year, whichever is more convenient. The application must include detailed costs.

The commitments will be formalized through a contract.

Marketing Incentives Program

This matching fund is available to qualified, local, Pridco-promoted companies whose sales are greater than $100,000 per year and whose commencement of operations has been certified. Through this incentive, Pridco will reimburse 50% of the cost incurred, up to $50,000, for publicity, publications, promotional material, market research and special promotional activities. The company must submit the application to Pridco for evaluation at least 60 days before the promotional campaign or marketing activity will be carried out.

Special Fund for Economic Development

Puerto Rico is focused on attracting research & development to the island. Act 73 established a Special Fund for Economic Development (FEDE by its Spanish acronym). This fund can be utilized for the following programs or uses: • Scientific research, development of new industrial products or processes, improvement of existing products or processes in nonprofit private-education institutions.

• Special incentives for scientific and technical research and the development of new industrial product processes, improvement of existing products and processes, research and development directed toward bioscience, information technology, agricultural biotechnology, aeronautical engineering and renewable energy, among others.

• An industrial incentives program administered by Pridco in furtherance of its industrial-promotion efforts, including the improvement and development of industrial property.

• The development and establishment of special programs for self-employment or micro-enterprises to bring gainful employment to the economically marginalized.

• Special incentives for the establishment in Puerto Rico of industries of strategic importance to the government, including the investment in venture capital funds that promote this type of industry, upon authorization by the Economic Development Bank.

• Special incentives for the acquisition of exempted businesses by their management.

• Special incentives for establishing programs to further and promote investment, technology and training of small and midsize businesses.

• Financial support to community businesses.

• Special incentives for the establishment and development of the strategic projects in the incentives act.

• Support for entities or programs dedicated to: —Furthering the establishment of networks for public Internet access and reducing the digital divide in Puerto Rico.

—Rendering consulting services in information systems for small or midsize businesses.

—Establishing incubation centers that provide a support structure and proper framework for the establishment and development of new companies through specialized resources.

—Establishing centers and training programs in information and communication systems for unemployed people throughout the island.

—Establishing educational programs at all levels with emphasis on languages, sciences and mathematics.

• Support regional initiatives for the development of companies, Continues on page S20

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research & development, establishment of incubators and other related objectives.

Similarly, the Puerto Rico Science, Technology & Research Trust (the Trust)—an autonomous entity that receives funding from the FEDE and the Scientific Research Fund of the UPR, among other sources—provides a financing option for research, development and infrastructure projects in the fields of science and technology.

About 30% to 40% of the Trust’s annual budget is used to finance corporate activities and projects that have an impact on science and technology research & development in Puerto Rico. Another 30% to 40% is invested in academic projects (to match academic research initiatives), recruiting and retaining scientists, and creating an effective structure to commercialize products. From 20% to 30% is earmarked for the development of research infrastructure, such as institutes, programs, incubators and more.

Applications to the FEDE should be submitted to the executive director of Pridco. The application must be approved by the Pridco board.

• Research & Development Incentives • Eligible researchers/scientists residing in Puerto Rico can receive a tax exemption of up to $195,000 on income generated from qualified federal research grants or up to $250,000 if the research is conducted within the Science District.

• Firms can receive a 50% tax credit for eligible investments in research and development, clinical trials, toxicology tests and any other qualified intangible property.

• Scientific or industrial R&D laboratories pay a fixed 4% income tax rate, and 0% to 1% income tax rate for “pioneer” activities.

• Puerto Rico-based firms providing export services, such as environmental, technological, scientific,

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information technology or engineering consulting services, pay a 4% income tax rate, or a 3% tax rate if 90% or more of its gross income comes from the export of services.

AGRICULTURE

Puerto Rico now provides new incentives to modernize and bring investment to the agriculture industry of the island, promoting the sustainable growth of this important sector of Puerto Rico’s economy.

With the recent approval of the Agriculture Biotechnology Promotion Act, Puerto Rico has now one of the most attractive tax credits for agriculture in the region and is focused on developing an entrepreneurial and hardworking culture based on quality and competitiveness, and to maximize the yield of high potential agricultural soils.

The Bona Fide Farmers Act includes: 100% exemption on taxes for agricultural equipment; 100% exemption on property taxes;100% exemption on municipal taxes; 100% exemption on stamp payments to the Treasury Department and fees to register a property; 90% exemption on earning contribution from agricultural activity; and a 50% tax credit for investment in eligible agricultural business.

Furthermore, Puerto Rico offers an annual bonus for agricultural workers, as well as operates a wage subsidy program for eligible farmers.

INTERNATIONAL BANKING ENTITIES (IBEs)

Puerto Rico’s International Banking Center law (Act 52 of 1989) permits the creation of international banking entities (IBEs), which are essentially banks located on the island that provide financial services to clients outside of Puerto Rico.

Puerto Rico is considered a foreign jurisdiction under the U.S. International Banking Act of 1978; therefore, all IBEs in Puerto Rico are exempt from

SPECIAL MARKET FACT REPORT

International Banking Association requirements for domestic financial institutions.

Puerto Rico IBEs are generally exempt from the U.S. Bank Holding Company Act (BHCA) and thus may be affiliated with commercial institutions (if the IBE accepts demand deposits and issues commercial loans, however, it will be considered a bank under the BHCA).

Businesses that establish themselves as IBEs in Puerto Rico enjoy a 0% tax rate on income, branch profit, dividends/ profits distribution, liquidation, municipal license and property taxes. In addition they are not required to file tax returns, and the revenues to non-residents are also tax-exempt.

Applicants for new IBEs would have to file the application under Act 273 of 2012, and may receive additional information from the Commissioner of Financial Institutions.

INTERNATIONAL FINANCIAL ENTITIES (IFEs)

must be completely paid-in. The Commissioner of Financial Institutions may lower the capital requirements to as low as $500,000 for IFEs performing limited activities. IFEs must maintain at least 4 full-time employees working at its offices located in Puerto Rico.

IFEs are authorized to engage in traditional banking and financial transactions with clients outside of Puerto Rico, including transactions related to accepting deposits, borrowing money, lending, refinancing, trade financing, securities brokerage and asset management, among many others.

IFEs are generally not permitted to do transactions with local Puerto Rico counterparties, except in certain cases.

Any entity may apply for a permit with the Office of the Commissioner of Financial Institutions to organize an IFE. To enjoy the tax benefits under Act 273, IFEs must request and obtain a tax exemption decree at DDEC. The decree will have term of 15 years, renewable for two additional 15-year periods, subject to certain conditions.

The Puerto Rico International Financial Center Act (Act 273-2012) provides incentives to Puerto Rico entities engaged in traditional banking or financial services for non-Puerto Rico clients.

INTERNATIONAL INSURANCE CENTER

IFEs are also exempt from the IBA’s requirements for domestic financial institutions and the BHCA, allowing IFEs be affiliated with commercial institutions. However, if the IFE accepts demand deposits and issues commercial loans, it will be considered a bank under the BHCA. In addition, all IFEs must ensure that they comply with any applicable U.S. federal laws and regulations.

IFEs incentives include: 4% income tax rate; 6% (Puerto Rico shareholders) or 0% (non-Puerto Rico shareholders) tax rates on dividends or other distributions of profits; 0% tax rate on municipal licenses; and 0% property taxes.

It has a sophisticated and experienced financial-services industry, which includes a highly developed insurance sector, as well as trustworthy legal and regulatory frameworks.

IFEs must have at least $5 million in capital, of which at least $250,000

Puerto Rico, both by its geographical location, as well as its financial, administrative and professional-services infrastructure, has the necessary attributes to attract this type of economic activity.

Act 399 of 2004, known as the International Insurers & Reinsurers Act of Puerto Rico, provided the principal legal grounds to develop the island as an international insurance center focused Continues on next page

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on the exportation of insurance and reinsurance services to international markets.

Generally, an international insurer is one that provides direct insurance only for risks outside of Puerto Rico, although it can provide surplus lines coverage and reinsurance for risks located in Puerto Rico.

An international insurer holding company is a Puerto Rico legal entity that holds shares or other securities of an international insurer or another international insurer holding company.

A branch is a business unit through which a foreign insurer not organized under Puerto Rico law carries out

business transactions along the lines of an international insurer.

International insurers, branches and international insurer holding companies are given attractive tax treatment.

In addition, they are not required to file tax returns, and revenue to nonresidents is exempt from taxation.

Act 98 of 2011 facilitates the establishment of entities that export insurance and reinsurance services, allowing Puerto Rico to compete with jurisdictions such as Bermuda, Cayman Islands and Vermont, which for years have successfully engaged in promoting this type of activity.

Due to its many advantages, including direct access to the U.S. and other international markets, Puerto Rico is a sound gateway for insurers and reinsurers wishing to enter the Latin America insurance & financial market.

Acts 399 and 400 in Chapter 61 of the Puerto Rico Insurance Code were adopted to establish the basis for the International Insurance Center (IIC), which provides a competitive environment for insurers and reinsurers to cover risks outside of Puerto Rico, under a secure and flexible regulatory system, with attractive tax benefits. Act 98 provides a long-term tax status that will guarantee the tax treatment of international insurers and reinsurers for an initial period of 15 years, renewable for two additional

15-year periods.

International insurance entities have various alternative ways to organize and operate within the IIC. These options include operating as an international insurance holding company, as an international insurer or a branch of an international insurer and protected cell arrangements.

TAX TREATMENT

Tax exemptions conferred under the International Insurers & Reinsurers Act of Puerto Rico include: • Exemption from premium taxes; • Exemption on dividends and other profit distributions made by the international insurer and international

SPECIAL MARKET FACT REPORT

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insurer holding company; • Exemption on municipal franchise and real and personal property taxes; • Exemption from withholding taxes on payments of dividends and other profit distributions made to third parties, and from filing tax returns with the Puerto Rico Internal Revenue Service; • Isolation of the proceeds and benefits paid by international insurers because of liquidation procedures from income taxes; and • $1.2 million tax exemption on net income. Exemption applicable at the individual cell level for Protected Cell Company arrangements and at the company level. Preferred 4% tax rate on net income, guaranteed by a decree effective over a renewable period of 15 years.

PUBLIC-PRIVATE PARTNERSHIPS

Puerto Rico has embraced public-private partnerships (P3s) as a way to leverage the capital and expertise of the private sector with the management and oversight of the government to provide the public with needed assets and services. Puerto Rico’s Public-Private Partnerships Authority (PPPA) is the public entity responsible for implementing P3s.

The Puerto Rico government plans to utilize P3s for strategic public infrastructure projects in areas such as roadways, airports, schools, powerplants and water & sewage systems.

FILM & CREATIVE SERVICES

The Puerto Rico Film Commission (PRFC) was created in 1999 to develop the film industry on the island, in part by offering incentives to outside producers looking to develop their projects in Puerto Rico.

The PRFC’s primary incentives are a 40% tax credit on local production expenditures, and a 20% tax credit on

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production expenditures on nonresident talent, provided they are subject to income taxation in Puerto Rico. In addition, the PRFC also provides incentives for film industry-related infrastructure projects. The 40% tax credit is calculated on expenditures and is issued in the form of a transferable tax credit.

To be eligible, the payments to Puerto Rico residents have to be made by a licensed film entity. The film entity doesn’t need to be organized in Puerto Rico, and it can be a single-purpose company established in Puerto Rico or a subsidiary registered to do business on the island.

A $100,000 minimum spending requirement per project ($50,000 for short films) is necessary to apply for these incentives. However, there are no perproject or individual wage caps, nor caps on credits for payments to nonresident talent. The annual cap on credits for payments to Puerto Rico residents is $50 million (and may be expanded up to $350 million).

With the signing of the Puerto Rico Film Industry Incentives Act of 2011 (Law 27 of 2011), the PRFC expanded many of its incentives to stimulate the local film infrastructure.

INFRASTRUCTURE INCENTIVES

• 25% tax credit on costs for development or expansion of infrastructure projects.

• Minimum hard costs of $5 million.

• Maximum aggregate annual cap of $10 million and lifetime cap of $150 million for all infrastructure credits.

FILM DEVELOPMENT ZONE—P3S OPERATIONAL STRUCTURE

People engaged in qualifying media and infrastructure projects, as well as the operation of a large-scale studio within the film-development zone, shall be eligible for favorable tax treatment: 4% fixed income-tax rate; 100% exemption on dividends; 90% exemption from municipal and commonwealth

SPECIAL MARKET FACT REPORT

taxes on property; and 100% exemption from municipal license, excise and other municipal taxes.

HOTEL/ HOSPITALITY DEVELOPMENT

The Puerto Rico tax-incentive package offers hotel developers a competitive advantage over developing in other destinations.

Act 74 of 2010, known as the Tourism Development Act of Puerto Rico, intends to facilitate the establishment of tourism-development projects throughout Puerto Rico. Act 118 of 2010, known as the Municipal Economic & Tourism Development Act, aims to facilitate the establishment of world-class tourism-development projects throughout Puerto Rico.

TOURISM INCENTIVES FOR THE ECONOMIC DEVELOPMENT OF MUNICIPALITIES OF 2010

The main criteria for eligibility are being a world-class hotel with a four-star rating; planning for diverse commercial and recreational establishments, other tourist attractions or facilities typical of four-star hotels, including casinos; and developing exclusively with private capital.

TOURISM DEVELOPMENT ACT OF PUERTO RICO OF 2010

The main criteria for eligibility are new facilities, existing facilities that haven’t been in use for three or more years, and existing facilities where substantial renovations or expansion will take place.

The following business activities qualify as tourism-related activities: • Ownership or administration of: (1) hotels, condo hotels, timeshares/vacation clubs, hostels or guesthouses, excluding the operations of casinos; (2) theme parks, golf courses, marinas for tourism purposes or port facilities in areas that promote tourism activities; (3) natural resources as a

source of entertainment value; and (4) other entertainment or recreational tourism-related facilities.

• A business operation dedicated to renting or leasing to an exempt business dedicated to tourism-related activities.

Tax exemptions under this law will remain valid for a period of 10 years from the starting date of the eligible tourism-related project, and the business operation will be entitled to a 10-year extension.

CRUISESHIP INDUSTRY

Act 113 of 2011, known as the Law for the Promotion & Development of the Cruiseship Industry in Puerto Rico, further strengthens Puerto Rico’s competitiveness in the cruise industry, including such key segments within the industry as supply chain, service providers and cruiselines.

Act 80 of 2013 amended certain sections of Act113 to further expand the incentives provided by the Puerto Rico Ports Authority to promote transit and homeport cruise visits to the island, as well as to extend other incentives for the cruise industry up to fiscal 2018.

Incentives for Local Suppliers

The Puerto Rico Tourism Co. reimburses cruiseship owners at a rate of 10% for food and beverage purchases made from certified local suppliers while the cruiseship is docked at any Puerto Rico port.

EDUCATION & TRAINING—THE WORKFORCE INVESTMENT ACT

The Puerto Rico Human Resources & Occupational Development Council (HRODC) administers funds received by Puerto Rico under the federal Workforce Investment Act (WIA).

The program offers workforce-training incentives to businesses through Continues on page S24

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on-the-job training, customized training, combined programs and retraining: • On-the-job training: WIA reimburses up to 50% of the salary of the participant for the duration of the training, which will vary according to the occupation and the participant’s professional and educational experience level.

• Customized training: WIA reimburses up to 50% of the salary of the participant as compensation for extraordinary costs and additional supervision that comes with the training.

• Combined program: WIA grants 100% of training costs and up to 50% of the participant’s salary for the duration of the training.

• Retraining: WIA grants 100% of the costs of retraining employees to handle new tasks and up to 50% of the salary of the participant during the retraining period.

FREE-TRADE ZONES

Puerto Rico has the largest noncontiguous free-trade zone (FTZ) system in the U.S. The system allows companies to obtain significant financial savings because raw material, components and packaging can be transported taxfree throughout these zones, and items shipped abroad after processing are exempt from U.S. taxes.

With FTZ 61, businesses can reduce their storage and operational costs when they establish operations in FTZ 61 or create a subzone within their place of operation. This can eliminate or postpone merchandise taxes and duties.

SMALL & MIDSIZE ENTERPRISES

Small and midsize enterprises (SMEs) play a significant role in the economy of Puerto Rico, and the government is focused on facilitating their growth. Two governmental agencies are particularly focused on SMEs: the Economic Development Bank (EDB) and the Puerto Rico Commerce & Export Co. (CCE by its Spanish initials), or Puerto Rico Trade Co.

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ECONOMIC DEVELOPMENT BANK

The EDB offers financial support to SMEs through asset-based loans, participation loans with private financial institutions or under the SBA 504 loan guarantee program, mezzanine financing or capitalization loans, tourism project loans, management buyout loans, and credit lines for operational capital.

The EDB financial support includes loans of: • Up to $500,000 for women entrepreneurs.

• Up to $5 million for agricultural projects.

• Up to $500,000 for new-business owners.

• Up to $300,000 for environmentally friendly projects.

• Up to $5 million for businesses that help their industry.

The EDB provides lines of credit of: • Up to $750,000 for federal contractors.

• Up to $750,000 for companies looking to export.

The Puerto Rico Commerce & Export Co.

The CCE is a public corporation under the DDEC umbrella. Its mission is to foster the development of trade, with special emphasis on small and midsize businesses, and the export of Puerto Rican products and services to other countries or regions.

Among the programs, incentives and laws with which it operates are:

Jobs Now Act

A law that provides incentives such as: use permits processed in only 24 hours; energy credits; tax exceptions on personal and real-estate property; and $1 rental of spaces from the government, among others.

Community Economic Development Program

Stimulates business incubators and community microenterprises with resources, services and funding with up

SPECIAL MARKET FACT REPORT

to $50,000 for new and existing community incubators, and up to $5,000 for community microenterprises.

Foreign Trade & Business Development Institute (ICEDE)

Offers business education, providing courses in management, innovation and competitiveness.

Urban Center Direct Employment Program & Commercial Impact to the Urban Center Program

The CCE offers incentives for revitalization and job creation through these programs:

—Set Aside Program Fifteen percent (15%) of the purchases and contracts of the Puerto Rico government is set aside for local SMEs.

—Promoexport (Puerto Rico Exports, Expopartners) A program that offers the basic tools to enter international markets. It seeks to stimulate and promote Puerto Rico exporting activity by providing analyses of a business’ export potential, support in identifying potential international markets, technical assistance in the exportation process, workshops and seminars on international trade, and participation in international business fairs and missions, among other benefits.

The Financial Incentive to Develop Women in the Export Business provides up to $5,000 to each participant. Project MARCA P. ERE promotes the design and fashion segment as an important component of the island’s financial development.

Financing & Consulting Services

The CCE offers consulting services on matters such as how to establish a new business or how to expand an existing business, available options for financial help in state and federal agencies, and commercial projections and financial statements, among others.

Voluntary Chain Program

The Voluntary Chain Program permits groups of independent businesses to unite under one name to create a common market and strengthen their competitiveness. Voluntary chains must be endorsed by the CCE. Voluntary chains are exempt from municipal license taxes for the volume of their generated sales and inventory tax payments. They tend to benefit from reduced operational expenditures, more bargaining power to obtain better terms and prices on group purchases, and stronger brands. Each owner can have up to five establishments within the chain.

Commercial Facilities

The CCE’s real-estate division can provide storage facilities for product distribution. The CCE manages strategically located warehouses and commercial facilities in San Juan, Ponce and Mayagüez.

From these warehouses, clients distribute consumer goods such as food, pharmaceuticals, chemical products and others to local and international markets. The CCE also maintains the facilities known as the Centro Mercantil Internacional, Distribution Center and Free Trade Zone 61 in Guaynabo.

PUERTO RICO WORLD TRADE CENTER (PRWTC)

The PRWTC provides access to the best ideas in international business, as well as new international marketing channels, and extends the benefits of the World Trade Center Association to its members.

The PRWTC offers a wide range of services for businesses interested in internationalizing their products and services: business training, meeting rooms, local and international business missions and fairs, international business services and counseling, and the international business library.

CREDIT FOR ELECTRIC POWER The

Puerto

Rico

Electric

Power

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Authority (Prepa) is authorized to grant a 10% credit, up to a maximum of $40 per month or $480 per year, to small retailers or nonprofessional personal logistics facilities with seven or fewer employees that are located in urban centers.

RENEWABLE ENERGY

Puerto Rico is entering a new age in terms of its diversification of energy sources with the implementation of a new public energy policy and programs to diversify energy sources, ensuring that the generation of electricity on the island is affordable, viable and sustainable.

ENERGY DIVERSIFICATION

BY MEANS OF SUSTAINABLE & ALTERNATIVE RENEWABLE ENERGY ACT (ACT 82 OF 2010)

• Recognizes many sources of renewable energy utilizing various technologies.

• Sets a hard target of 12% renewableenergy production by 2015, and 15% by 2020, with a requirement for retail-energy providers to establish a plan to reach 20% renewable-energy production by 2035.

• Establishes Renewable Energy Certificates (RECs) as legally recognized assets that can be purchased, sold, traded and transferred separately from electric power.

• Creates a permanent Renewable Energy Commission as an oversight entity focused solely on the implementation of renewable portfolio standards.

GREEN ENERGY INCENTIVES ACT (ACT 83 OF 2010)

• Creates a Green Energy Fund (GEF) through which the government of Puerto Rico will co-invest $290 million in renewable-energy projects during the next 10 years; initial funding of $20 million began July 1, 2011 (steps up to $40 million by fiscal 2016).

• Offers cash rebates of up to 60% on the cost of installing Tier 1 or small projects (0 kW-100 kW) for residences and small businesses, and up to 50% on the cost of Tier 2 projects (100 kW-1 MW) for commercial or industrial use.

EXPORT SERVICES ACT (ACT 20 OF 2012)

The main objectives of the Export Services Act (Act 20) are to turn Puerto Rico into an international hub of export services, retain local talent, attract foreign talent and capital, and promote the establishment of new businesses to export services from the island. It also looks to stimulate the inbound transfer of foreign service providers.

Coupled with Puerto Rico’s highly educated and skilled labor force, Puerto Rico is fast becoming a hub for international export services.

Act 20 applies with respect to any business with an office located in Puerto Rico that is engaged in the export of services to nonresident individuals and/or foreign entities.

BUSINESSES ELIGIBLE TO BENEFIT FROM ACT 20:

Almost all services provided for export are eligible including research & development; advertisement & public relations; consulting; investment banking, asset management and other financial services; and professional services such as legal, accounting, architectural and engineering services, among many others.

TAX BENEFITS UNDER ACT 20:

• 4% corporate tax rate, which may be reduced to 3% • 100% tax exemption on dividends or profit distributions from export services businesses • 100% tax exemption on property taxes for certain export service businesses for the first 5 years, then 90% • 20-year tax decree, renewable for

an additional 10 years, guaranteeing these rates

INDIVIDUAL INVESTORS ACT (ACT 22 OF 2012)

On Jan. 17, 2012, Puerto Rico also enacted Act 22, the Individual Investors Incentives Act. The law provides tax exemptions to eligible individuals residing in Puerto Rico, and may have profound implications for the continued economic recovery of the island. To avail themselves of such benefits, individual investors need to become residents of Puerto Rico and apply for a tax-exemption decree.

Act 22 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 the island. This relocation should result in new local investments in real estate, services and other consumption products, and in capital injections to the Puerto Rico banking sector, all of which will contribute to the economy of the island.

Tax exemptions under Act 22 are valid through December 31, 2035. There are several requirements for new residents who have not lived in Puerto Rico for the past 15 years, including physical presence in Puerto Rico for at least 183 days a year.

TAX BENEFITS UNDER ACT 22:

• 100% tax exemption from local income taxes on all dividends • 100% tax exemption from local income taxes on all interest • 100% tax exemption from local income taxes on all short- and longterm capital gains accrued after the individual becomes a bona fide resident of Puerto Rico • New resident investors may be able to reduce the tax rate applied on interest and dividend income coming from sources outside of Puerto Rico (including the source country taxation) to 0% or 10%, respectively, by

investing through certain Puerto Rico investment vehicles.

EB-5 IMMIGRANT INVESTOR PROGRAM

The U.S. Congress created the fifthemployment based (EB-5) immigrant visa category in 1990 for the qualified foreigner willing to invest in a business that will benefit the U.S. economy and create or save at least 10 full-time jobs. While the required investment is typically $1 million per foreign investor, a minimum investment of $500,000 is accepted if the investment is made in a designated Target Employment Area, such as Puerto Rico.

Once the job-creation requirement is met, the foreign investor becomes the holder of a permanent residency, with no conditions attached.

Upon making the investment, the foreign investor gains the opportunity to become a conditional resident of the U.S. for a period of two years.

After five years of holding a conditional residency/Green Card, the foreign investor can apply for U.S. citizenship.

There is no obligation to remain in the U.S. on a continuous basis as a conditional or permanent resident to be able to apply to become a citizen. Thus, travel is possible, but residence in the U.S. must be maintained during that time.

Immigrant investors may include their spouses and unmarried children under the age of 21 in their EB-5 application under the same $500,000 investment. 䡲

Editor’s note: The Puerto Rico Legislative Assembly is currently debating a law that would introduce a valueadded tax (VAT, or IVA by its Spanish acronym) system in Puerto Rico. Please check with DDEC and Pridco for further information on the incentives provided for eligible businesses.

—Associate Project Researcher Luis J. Valentín contributed to this report.

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Culebra Island

Some of Puerto Rico’s Best Features

Wonders Organization) 3. Bahía Beach, Río Grande- Audubon International Gold Sanctuary certification (first in the Caribbean)

Nature & Adventure 1. Bahía Sucia, Cabo Rojo- Top 10 most beautiful beaches in the U.S. (Coastal Living Magazine) 2. El Yunque National Rainforest, Río Grande- Nominated to new 7 Natural Wonders of the World (Seven

4. Toro Verde Eco-Park, OrocovisFirst ecotourist park in P.R. and second longest zipline in the world (“La Bestia”) 5. Culebra Island- Ranked among Top 30 Best Secret Islands in the World; home of Flamenco Beach, one of the world’s best beaches (Travel +

Leisure) 6. Pelícano Beach, Caja de MuertosNatural reserve; Blue Flag certificate 7. Vieques Island- Ranked among top islands in the Caribbean

Surfing & Kiteboarding West- Middles, Jobos, Surfer’s, Gas Chambers, Córcega, Crash Boat, Colón and Rincón East- Brava, Azul and Culebrita North- Aviones, Chatarra and La Pared

Puerto Rico’s Convention Center

.

El Yunque National Rainforest, Río Grande

Culture, Sightseeing, Gastronomy & Entertainment Island of Puerto Rico • Ranks fourth in the world among culinary destinations (The Huffington Post) • Third best Christmas destination in the world (CNN Travel) • Most Complete Caribbean Destination Readers’ Choice (Caribbean Travel + Life) Casinos About 20 casinos around the island open until the wee hours of the morning Mesones Mesones is a special Puerto Rico Tourism Co. (PRTC) program that endorses exceptional restaurants outside of San Juan for their high level of quality and commitment to local specialties. Only restaurants with the PRTC endorsement can call themselves a Mesón Gastronómico.

Coffee Puerto Rico has a long-standing coffee tradition. The nutrient-rich volcanic soil and cool climate of Puerto Rico’s mountainous region make it the ideal place to harvest coffee. The municipality of Yauco is known as the City of Coffee and it is where the super premium Alto Grande brand, preferred by the Pope for generations, is produced. continues on page S28

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Puerto Rico Coliseum

T.787-706-0102 F.787-706-0117 info@olympic-agency.com www.olympic-agency.com PMB 370, 1353 Carretera 19, Guaynabo, P.R. 00966-2700

Crash Boat, Aguadilla

Corporate Benefits Administrator: Affordable Care Compliance & Consulting ACA-Education for HR Administrators COBRA Management 5500 and SPD’s Compliance Benefits Contact Center Medical and Pharmacy Discount Network Among others...

Credit Insurance / Special Products: Administration of Products Administration of Claims Sales Coaching Actuary Services Allocation Risk Re-Insurance Consulting Extended Warranties Among others...

SPECIAL MARKET FACT REPORT

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Cabo Rojo Lighthouse

Puerto Rico Coliseum Ranked among the top-20 best arenas in the world, the Coliseum is the premier Caribbean venue for some of the world’s top entertainment performers including Usher, Andrea Bocelli, Marc Anthony, Billy Joel, Jennifer López, Rolling Stones, Ozzie Osbourne, Maroon 5 and many more.

singers, musicians and composers of all times, chief among them, El Gran Combo de Puerto Rico, known as the Rolling Stones of salsa.

PGA Puerto Rico Open Largest PGA-certified golf event in the Caribbean

La Fortaleza Oldest governor’s mansion in the New World still in use

Film productions On location filmmaking of Hollywood blockbusters such as Pirates of the Caribbean, Die Hard 5, The Rum Diaries and Fast Five

Puerto Rico Convention Center 2010 Inner Circle Award (Association Meetings)

Salsa Salsa music is one of Puerto Rico’s hottest exports. The island is the home of some of the world’s greatest salsa

Salsa World Congress World’s largest salsa competition Old San Juan UNESCO World Heritage Site

Antigua Cárcel de La Princesa Originally a Spanish provincial prison, the Antigua Cárcel de La Princesa, now serves as Puerto Rico Tourism Co.’s headquarters. It also houses Puerto Rican art.

Fuerte San Cristóbal (fortress)

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National historic site built in 1643 Fuerte San Felipe del Morro (fortress) Old San Juan’s most famous fort hides within its 18-foot-thick walls the city’s incredible past. It features dungeons, covert tunnels and its iconic garitas, or sentry boxes.

Galería Nacional Colonial building dating back to the 16th century that houses one of the most important 18th to 20th century Puerto Rican art collections from renowned painters such as Francisco Oller and José Campeche.

Castillo Serrallés Museum Overlooking the city of Ponce on El Vigía Hill, this Spanish-revival mansion that once belonged to the wealthy Serrallés family, is now a museum dedicated to the impact of the sugar cane industry on Puerto Rico’s economy. 䡲

Quintessentially Lifestyle Sets Up Shop in Puerto Rico London-Based Concierge/Personal Assistance Service Offers Special Packages Catered to Puerto Rican Market

BY DENNIS COSTA Quintessentially Lifestyle, a concierge service firm based in London and with offices in more than 60 cities around the world, recently established its latest office in San Juan, just in time for the latest Puerto Rico Investment Summit on Feb. 11-12.

Founded in 2000 by Aaron Simpson, Paul Drummond and Ben Elliot—the nephew of Camilla, Duchess of Cornwall—Quintessentially has rapidly become one of the most noteworthy companies in its class worldwide, earning accolades from publications such as Condé Nast Traveler and The New York Times. Overall, the firm boasts more than 68 offices, including a presence in markets from Brazil to Mongolia, and most recently expanding in China. Together with Puerto Rico, the company recently opened offices in Oman, Hungary and Turks & Caicos.

Paulette Prats, head of private member services for Quintessentially Lifestyle, told Caribbean Business conversations to establish a Quintessentially office in Puerto Rico began about two years ago in London, partly due to the influx of

wealthy investors to the island. Once they were given the go-ahead, four San Juan-based investors set things in motion by investing about $500,000 to set up the local office.

The company styles itself as a “lifestyle management” firm, combining aspects of a concierge service and a personal assistant for private and corporate members, 24 hours a day, 365 days a year. “We bring together specialist advice and knowledge, insider access and exclusive privileges, enabling everything from everyday needs to life’s defining moments,” Prats said. “We do this by facilitating every member’s requests, solving pressing practical problems and helping in all-important lifestyle decisions.”

When asked what have been some of the most extravagant client requests, Prats said, “We have arranged dinner for two on an iceberg and even closed down the pyramids for a private party in Egypt. We’ve sourced everything from tigers, swans, flamingos and inflatable giraffes for pets, parties and weddings. We’ve recovered BlackBerry mobile phones from airport expresses and iPhones from the Swiss Alps. One year

we arranged five proposals, one of which involved closing down the Sydney Opera House on New Year’s Eve so a member could climb to the top and propose while the fireworks were going off.

When you pull off something like that, you know you’ve got a member with you for life.”

For private clients, the company offers three membership levels. The Elite package, geared toward frequent travelers, puts at the members’ beck and call a team of so-called “lifestyle managers” in different areas of the globe, who are experts in their respective markets. The company has about 2,000 lifestyle managers worldwide, each with a specific number of clients they serve.

“The number of clients that a lifestyle manager has is kept at a strict cap to ensure quality of service,” Prats noted.

The Dedicated level assigns a lifestyle manager who takes a proactive role and gets to know the client’s preferences and catering needs. “For instance, if a Dedicated member is passionate about the arts, a lifestyle manager not only would take care of the day-today, but he or she would also keep the client informed about the latest

art-related events and find out how to get access to those events,” Prats explained.

Lastly, the General package is the least expensive offering and thus takes a more reactive instead of proactive role.

For example, clients in the General tier can call for exclusive dinner reservations and have flowers sent to the respective restaurants at specific times.

SPECIAL PACKAGE FOR PUERTO RICO Together with Quintin Puerto Rico, the firm is offering an exclusive package for the local market. Dubbed Q Puerto Rico VIP Pass, the package provides services that are specially catered for those who are considering moving to the island.

The services include coordinating air travel, hotel and transportation arrangements, as well as scheduling meetings with local real-estate, tax, financial and legal experts.

For those who already have decided to move to Puerto Rico, the firm also offers relocation and

Paulette Prats, head of private member services for Quintessentially Lifestyle Puerto Rico expeditor services as part of the VIP package. These range from providing information on procedures required for obtaining residence status, facilitating the necessary documents, helping to initiate contacts with local banks, insurance brokers, lawyers and health providers, as well as expediting utilities, cable and other essential services.

Recommendations on lifestyle and unique luxury experiences in Puerto

SPECIAL MARKET FACT REPORT

Rico are also offered.

“We are not only providing important services to clients here on the island, but we are also providing plenty of work to local companies that we subcontract,” Prats added. “We already have members who have decided to invest on the island in great part due to the experience we provided in Puerto Rico. It’s a great way to put our best face forward.” 䡲

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SOPHISTICATED SURGERY

COMMONPLACE One of the best examples of the growing level of medical sophistication in Puerto Rico over the past decade is that surgical procedures such as cardiovascular and transplant operations have become commonplace. Various institutions in Puerto Rico carry out bypass surgery and cardiac catheterization and angioplasties. Some of these are Auxilio Mutuo Hospital in San Juan; the Advanced Cardiology Center in Mayagüez; the Cardiovascular Center of Puerto Rico and the Caribbean Hospital in Río Piedras, San Juan; the Pavía Heart and Lung Center in San Juan; HIMA-San Pablo Hospital’s pioneering Cardiovascular Institute in Bayamón; the Cardiovascular Institute of San Lucas Episcopal Hospital in Ponce; and the Veterans Affairs Medical Center in San Juan.

In Bayamón, there is Hospital Hermanos Meléndez, with a tremendously successful cardiovascular and thoracic surgery record, and its modern Puerto Rico Children’s Hospital.

Hospital San Jorge in San Juan is also renowned for its pediatric services. San Jorge’s interiors featuring colorful murals designed to put children at ease and video games in waiting rooms remind one of the Miami Children’s Hospital—a top-notch facility in its own right.

Auxilio Mutuo Hospital

Excellent Facilities, World-Class Physicians Make P.R. Attractive for Healthcare

BY CB STAFF Medical services in Puerto Rico have done away with the notion that you have to travel to the mainland U.S. to receive quality healthcare.

health resources run by some of the world’s best doctors, who are overseeing the development of top-notch medical teams performing highly complex procedures with a tremendous success rate.

Excellent physicians, facilities and technology have transformed Puerto Rico during the past 20 years into a place that possesses high-quality

Liver, kidney and heart transplants are being routinely performed with high precision, and oncology treatment is on the cutting edge, with new equipment to

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help more effectively diagnose and treat cancer.

The excellent education received in local medical schools, such as the University of Puerto Rico School of Medicine in San Juan and the Ponce School of Medicine, located in the southern city of the same name, is thorough and relevant, turning out top-notch medical doctors.

Ashford Presbyterian Community Hospital, also known as El Presby, in San Juan’s Condado area, is widely recognized for its neonatal services, women’s healthrelated services and wound center.

HIMA-San Pablo, a network of islandwide hospitals, is a local trendsetter in cardiovascular care and has been setting the pace as one of the first hospitals to actively promote Puerto Rico in the medical tourism industry. Adding to the list of excellent cardiovascular facilities is the Cardiovascular Center of Puerto Rico and the Caribbean, where the first heart transplant in Puerto Rico was successfully performed

by Dr. Iván González Cancel in 1999. continues on next page

Continues from previous page

CHILDREN AND ADOLESCENTS Puerto Rico’s hospitals have also established top-quality services when it comes to children, from birth to the first years of life. Auxilio Pediátrico at Auxilio Mutuo Hospital sports the largest pediatric emergency room in Puerto Rico and two floors dedicated to pediatrics care and services.

The hospital also has El Niño Jesús Intensive Neonatal Care Unit and a Pediatric Care unit to tend to the special medical needs of babies.

Meanwhile, Hermanos Meléndez’s Puerto Rico Children’s Hospital is solely dedicated to the needs of children and is the first hospital designed exclusively for children and adolescents.

And while El Presby is the first institution in Puerto Rico that has been certified as a “Child-Friendly Hospital,” its fame as the “hospital of births” is what truly showcases this institution’s commitment to children from their first years of life. The hospital, which averages 300 births a year, has a team of neonatologists that are available 24 hours a day—and if necessary, may assist in deliveries—as well as advanced telemetry technology that allows the staff to keep tabs on the mothers’ health status.

ADVANCED TECHNOLOGY Among HIMA-San Pablo’s successes is the implementation of the Da Vinci Surgical System, a highly advanced robotic device that carries out delicate and complex head and neck surgeries. Among the benefits of the highly touted unit are shorter hospital stays, minimal invasive procedures, less pain and blood loss and, in some cases, better clinical results.

The team at Auxilio Mutuo Hospital’s transplant center carried out the first liver transplant in Puerto Rico. The operation represented the culmination of a multimillion-dollar liver transplant program. The program required putting together highly skilled medical personnel in specialties including anesthesia, gastroenterology and intensive care; acquiring cutting-edge equipment; and securing licenses.

Auxilio Mutuo’s strategy has been to launch services that were not available before on the island by blending the best human resources in the field with the most advanced technology. Such is the case with its cancer center.

STAYING COMPETITIVE IN

IMPORTANT AREAS When Auxilio Mutuo’s center was inaugurated, the top priority was to fulfill continues on page S32

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Juan to offer its services in alliance with El Presby.

To stay competitive, hospitals have to build their reputation through the quality of their services and their human and technical resources. In addition, most top doctors with private practices also practice at Puerto Rico’s main hospitals.

Although a vast majority of the island’s hospitals and medical clinics are concentrated in San Juan, the southern municipality of Ponce and its surrounding region has seen tremendous healthcare advances and now has many outstanding facilities where advanced medical procedures are carried out and major medical teaching facilities have been established. Top-ranking hospitals in the southern region include Damas Hospital, San Cristóbal Hospital and Dr. Pila Metropolitan Hospital in Ponce, Mennonite Hospital in Aibonito and Metro Pavía Yauco Hospital in Yauco.

continued from page S31 unmet needs on the island for excellent oncology care in multiple disciplines.

Because profit was never the primary goal of the center, the first challenge was to carry out the mission with a modest budget.

In 2011, the Auxilio Mutuo Cancer Center’s Breast Cancer Program also received the accreditation of the National Accreditation Program for Breast Cancer Centers (NAPBC), becoming the only center in the Caribbean, and the first outside the mainland U.S., to receive such accreditation.

Another example of the quality of local talent and the general ability of healthcare professionals to adapt to patients’

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needs is the Cardiovascular Center at HIMA-San Pablo Hospital in Bayamón, which has a cardiology department and an invasive-cardiology division that includes a cardiac catheterization department.

The wound center at the Ashford hospital in Condado tends to wounds caused by conditions such as diabetes, and pressure ulcers caused by patients spending extended time bedridden as they face certain health situations or recover from them. Renowned for its excellence in the area of obstetrics, El Presby has also moved into offering other services.

Recently, the Caribbean Spine and Research Institute, the first private institution specializing in spine surgery in Puerto Rico, inaugurated its new facilities in San

SPECIAL MARKET FACT REPORT

Medical care in Puerto Rico in the past two decades has made it unnecessary to travel to the mainland U.S. for healthcare and has even created a large medical tourism industry.

The impressive success rate achieved by the superior personnel overseeing the local resources is a testimony of how far the island has come in the field of medicine, while much more is underway.

The Knowledge Corridor sponsored by the Puerto Rico Research, Science & Technology Trust, for example, which is in the final planning stages, will interconnect existing and future academic and research facilities that will help increase knowledge in the biotechnology and medical fields, among others, thus accelerating the scope and size of the local healthcare industry. 䡲

Top Bilingual Private Schools There are many top private schools in Puerto Rico, many of which teach in English or are bilingual Spanish-English. Many of these private schools also have a college prep program, along with many extracurricular and athletics offerings. The following is an alphabetical list of top private schools in the San Juan-metro area and the municipalities of Dorado and Humacao.

Academia Perpetuo Socorro

American Military Academy

The American School

Academia del Perpetuo Socorro, in the historic Miramar neighborhood of San Juan, offers a strong Kindergarten-12 academic program. The school’s focus is traditional and courses are offered in Spanish and English interchangeably. The school is oriented toward a Catholic education but this is not a requirement. A strong athletics department, extracurricular activities, theater and travel programs are also available.

The American Military Academy is a bilingual school, which uses the new platforms (iPads and tablets) in lieu of books. There are university-level courses for students in grades 10-12. Located in Bayamón, the school has a strong athletics department. Community service is compulsory before graduation.

Located in Bayamón, for over 30 years the American School has aimed to provide an academic experience in tune with today’s cutting edge of discoveries in science technology, communications and exploration in English. With an enrollment of about 800 students, its dedicated staff and administration nurture the school’s demanding intellectual culture.

Baldwin School

Colegio Marista

Colegio San Ignacio de Loyola

Baldwin School is an independent, nonprofit, nonsectarian, college-preparatory, English-language school in Guaynabo. The curriculum is demanding since its mission is to challenge students to become creative thinkers. Baldwin has up-to-date technology resources, an exceptional green campus and facilities, and a community that fosters character building as well as accomplishments in the arts, service, athletics and global understanding.

Colegio Marista in Guaynabo is a private school run

by Marist Brothers. Its mission is to forge students who are independent and capable of continuously striving to better themselves. The school has a very strong athletics department and is up-to-date with technological advances. The alumni association as well as parents of students play a strong role in participating at activities.

Founded in Guaynabo in 1952, CSI has formed generations of young men through the five pillars of Jesuit education: intellectual competency, openness to growth, lovingness, religiosity and commitment to social justice. Anchored in these values, CSI aims to provide a well-rounded education, diverse extracurricular activities and community service opportunities.

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Colegio San José

Commonwealth-Parkville School, CPS

Cupeyville School

Colegio San José is a Marianist Catholic school that educates boys from grades seven to 12, preparing them for admission to the top universities and colleges in Puerto Rico and the continental U.S. Located in San Juan’s Río Piedras district, Colegio San José’s mission is to develop capable, responsible and sensitive Christian leaders who are committed to the service of God and their neighbors. Although it is highly devoted to its academic program, the school has an excellent athletic department within a very comfortable campus. Students are encouraged to participate in clubs and teams to join in the school spirit.

A college-preparatory co-educational day school with instruction in English and a strong program in Spanish, CPS has nearly 700 students on two safe and nurturing campuses: Parkville (pre-prekindergarten to sixth grade) in Guaynabo and Commonwealth (seventh to 12th grades) in San Juan’s Hato Rey district. Small classes allow teachers to identify each child’s unique interests, strengths, goals and learning styles. Many changes have been made to its structure to acommodate new technology and green spaces clearly designed for students. Parkville is very much a progressive school offering many opportunities for intellectual growth.

The school’s philosophy of education is based on the cognitive/humanistic theories of learning. Cupeyville has a strong Bridges program—an instructional program for students with mild learning disabilities—designed to meet the unique educational needs of students who have difficulty working independently and require additional academic support in the basic areas of English, Spanish and math. Students go to a resource room daily for the duration of the school year. Trained and/or licensed teachers provide small-group instruction. Sports include volleyball, basketball, track & field, swimming, soccer, baseball, softball, tennis, golf and bowling. The school is in San Juan’s Cupey Bajo district.

Dorado Academy

Palmas Academy

Robinson School

Dorado Academy is located within the beautiful and secure Dorado del Mar community. It is an independent, nonprofit, nonsectarian school, which states its mission is to provide the highest academic standards, in English and a bicultural environment, from Pre-K through 12th grade.

Palmas Academy’s institutional commitment is to guide students from early childhood to a full collegepreparatory education oriented toward community service and lifelong learning. Located within Humacao’s Palmas del Mar community, the school’s stateof-the-art facilities provide a uniquely stimulating learning environment that encourages curiosity and discovery.

Located in the heart of San Juan’s exclusive Condado neighborhood, Robinson School has been a center of knowledge and learning for generations of families since 1902. From preschool through 12th grade, the school includes a college-preparatory program with a Regular, Honors and Advanced Placement curriculum.

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St. John’s School

TASIS

Wesleyan Academy

For a century, Saint John’s School has prided itself on creating a unique learning environment that actively encourages the potential for individual excellence in every student. Characterized by small class sizes (about 15 students per class) from pre-prekindergarten through 12th grades. Located in San Juan’s Condado neighborhood, the school prides itself in graduating the most Ivy League candidates from the island.

The TASIS School in Dorado is a private, nonsectarian, co-educational day school that has English as its language of instruction. The school is affiliated with The American School in Switzerland (TASIS) in Europe, and has about 800 students in pre-prekindergarten through 12th grade. Designed within a vast land space, the school’s campus is very accomodating and offers itself for future growth.

Wesleyan Academy seeks to encourage and enable students to pursue a redeemed life of personal faith in Christianity, marked by a lifestyle of service and leadership that is developed in the context of a college-preparatory school. The English-language instructional experience is offered from pre-kindergarten through 12th grade. The school is located in Guaynabo. 䡲

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THURSDAY, FEBRUARY 11, 2016

23

Legislature

Summary of Senate hearings on so-called Oil Cartel

P.R. Senators Believe Prepa May Have ‘Overpaid’ $300M a Year in Fuel for at Least two Decades Purchases

BY EVA LLORÉNS VÉLEZ e.llorens@cb.pr

With nearly two years of research, the Senate’s Special Commission to Investigate the Norms & Processes of Fuel Purchases at the Puerto Rico Electric Power Authority (Prepa) began hearings on irregularities in oil purchases and the so-called Oil Cartel.

The Senate decided to investigate the matter amid concerns irregularities in past fuel purchases contributed to Prepa’s huge $9 billion debt and curtailed efforts to move the utility from the use of fossil fuels to renewable sources of energy.

Senate officials estimate Prepa may have “overpaid” for fuel by $200 million to $300 million a year for more than 10 years. The hearings are still ongoing.

If anything, the testimony so far from former Prepa directors has proven that the Fuel Purchasing Office, headed by engineer William Clark for over at least two decades, operated as an autonomous entity and Clark “was being protected” despite reports of irregularities at the office during his tenure.

Clark began to work at Prepa in 1987 but headed the Oil Purchasing Office from 1996 until his retirement nearly two years

ago. Popular Democratic Party (PDP) Sen. Aníbal José Torres, who chairs the Senate panel, said the testimonies this week serve as a basis to back up future testimony.

“There are things that have already passed, but there are others that are still happening, and we will be going into that,” he said.

Already, PDP Sen. Ramón Luis Nieves, chairman of the Energy Affairs & Water Resources Committee, said he is evaluating the inclusion of language in the Prepa Revitalization Plan to help regulate fuel purchases by the utility. The legislation was still in the works.

“Oil Cartel” is the term used to refer to the union of oil companies and the Puerto Rico Electric Power Authority officials who work in conjunction to stop Prepa from moving from fossil fuel to renewable sources of energy.

FIRST INVESTIGATION 15 YEARS The investigation into the so-called Oil Cartel first surfaced some 15 years ago through a Commonwealth Comptroller report, which found a laboratory hired by Prepa to test the quality of the fuel purchased by the public corporation adulterated up to 600 tests form the late 1980s to the

1990s to make it appear as if the fuel complied with environmental standards.

Even though the allegations were brought to Prepa’s attention, the public corporation continued to pay the laboratory for tests and spent more than $2 million. After the audit, Prepa sued the laboratory but later settled the matter in court.

The Office of the Comptroller found that contrary to the rules of public policy and internal control, Clark engaged in conflicting functions since he would select potential fuel suppliers and directly send them invitations to bid. He received all offers submitted by bidders. He also advised the Board of Bids on which suppliers to choose. He approved purchase orders issued to suppliers and received, examined and approved invoices for payment submitted by suppliers.

According to the audit, the situation prevented Prepa from exercising proper control of fuel purchases and created an atmosphere conducive to irregularities. For instance, Prepa purchased fuel from two companies without having contracts and the Fuel Purchase Office did not maintain adequate records of the purchases.

On the day Clark retired, his name came to light when a news crew went to his retirement party at

a restaurant in San Juan’s Condado neighborhood, which was attended by executives from Puma Energy, Petrobras América, Peerless Oil and PetroWest, which supplied fuel to Prepa. The executives allegedly had helped pay for the going away party.

During Clark’s tenure, former Prepa executive directors Josué Colón, Miguel Cordero and Héctor Rosario as well as former board President José Izquierdo Encarnación acknowledged they did not intervene with Clark because he had ample knowledge about crude-oil purchases.

Cordero, however, said he tried to separate the Office of Oil Purchases from Prepa, and that was the reason it was placed under the Government Development Bank more than five years ago. The decision was later reverted.

EXISTENCE OF OIL CARTEL VALIDATED Former Prepa board President Luis Aníbal Avilés, who held the position from 2006 to 2009, validated the existence of the so-called Oil Cartel. Avilés said that during the time he was there, Prepa held bids on fuel purchases but only one or two suppliers complied with the requirements.

One of those requirements was for the supplier to have a blending facility that ensures the mixing of hydrocarbons does not produce a fuel with more than 0.5% of the level of sulfur, as required by the Environmental Protection Agency. He said that resulted in Luke Oil winning bids four years in a row.

Luis Aníbal Avilés, former Prepa board president

Luis Manuel García Passalacqua, former Prepa board president

Eduardo Bhatia, Senate president and Aníbal José Torres, president of the Special Commission to Investigate the Norms & Processes of Fuel Purchases at Prepa

He recalled that on one occasion Luke Oil charged $27 a barrel for transportation and management and Prepa decided to repeat the bid but the bidders once again requested payments of $22 to $27 a barrel.

“These are companies that dominate the market and spoke to each other.

That is what a cartel was.

It is the combination of one or two suppliers that manipulate the price of a product,” he said.

Former Prepa board President Luis Manuel García Passalacqua, who headed the board from 1993 to 2000 and from 2008 to 2011, said he requested an

extensive audit of the Fuel Purchase Office but Clark objected to it. Caribbean Business received two memos from Clark from 2010 in which he complained that the auditors were intervening with his office’s operations.

“He thought this office was his private domain and continually challenged the auditors,”García Passalacqua said.

However, none of the officials could take needed action against Clark because labor processes at Prepa were slow. Officials also said investigations concluded he did no wrong. Hearings are slated to continue. 䡲

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THURSDAY, FEBRUARY 11, 2016

Politics

NPP strengthens party structure through primaries

Bittersweet Primaries for the New Progressive Party

BY ISMAEL TORRES i.torres@cb.pr

From its foundation in 1968, the leadership of the New Progressive Party has prided itself as a party where internal primaries strengthen its structure and have yielded much electoral political benefit.

But that political maxim has not always favored the party and, due to wounds suffered in the process and the internal strife it generated, it has

cost the party the general elections, such as in 1984, 1988, 2004 and, most recently, in 2012.

For the 2016 general elections, the NPP has a number of primaries, beginning with the candidacy for governor, followed by resident commissioner, legislators by district and many for city hall, such as San Juan.

Vying for the candidacy for governor are Ricardo Rosselló and the current resident commissioner,

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Pedro Pierluisi, who is also NPP president.

In Rosselló’s camp, the former NPP speaker of the House of Representatives, Jenniffer González, is seeking the candidacy for resident commissioner. In Pierluisi’s camp is engineer Carlos Ignacio Pesquera, who is a former NPP president and unsuccessfully ran for governor in the 2000 general elections against Sila María Calderón.

Matters appear to be

about the same on the legislative level. There is intense struggle for the presidency of the Senate between Thomas Rivera Schatz and Abel Nazario, mayor of Yauco. In subtler ways, others are also making their moves for the position, including Sens. Larry Seilhamer, current speaker of the NPP in the Senate; Carmelo Ríos; and Margarita Nolasco.

Campaign directors Elías Sánchez (for Rosselló), and Néstor Aponte Hernández (for Pierluisi), who is a former judge and legislator, have expressed that confrontations will be avoided at all costs, but Sánchez warned that if attacked there will be retribution.

This past weekend, former Gov. Pedro Rosselló called attention to the need for internal unity to move the NPP forward.

“We have to be more united than ever,” said the former NPP president.

Meanwhile, Leo Díaz, recently elected president of the NPP in San Juan, and Jorge Hernández Vivoni, a former secretary of Housing with deep ties to San Juan’s communities,

are both aspiring for San Juan mayor.

The race for Senate president looks quite even because Nazario has a great ability to move among the candidates in the Senate district and is part of the top leadership in Ricardo Rosselló’s campaign. For Rivera Schatz, he bases his campaign on his performance as president of the Senate (2009-2013) and his work in NPP leadership positions, such as secretary general and a electoral commissioner, as well as occupying one of the vice presidencies of his party.

“He is a party colleague.

I am going to be president of a different Senate,” Rivera Schatz has said about Nazario’s aspiration.

Meanwhile, the Yauco mayor is sure of his victory and that he will be the next president of the Senate. “We are going to win,” Nazario has said.

Sen. Seilhamer had postponed his announcement regarding his decision to seek re-election and opt for the Senate presidency, awaiting Rivera Schatz’s decision on whether he would run for governor. However, given

the former Senate president’s reluctance, Seilhamer opted to seek reelection to the Senate and maneuver to receive support for his bid to preside the Senate. Seilhamer had also been mentioned— and did not dispel the rumors—as aspiring for the NPP candidacy for resident commissioner.

The situation will not be that much different in the House of Representatives, if the NPP were to win the legislative majority in the November general elections. More than one person is already actively campaigning to shore up support to lead that body, among them Rep. Johnny Méndez, who is the current alternate speaker for the NPP minority in the House; Rep. Gabriel Rodríguez Aguiló; and very much on the low, former president of the House and current NPP secretary general, José Aponte Hernández.

Rep. Méndez is very active in Ricardo Rosselló’s primary campaign, facing the group that supports the candidacy of NPP President and Resident Commissioner Pedro Pierluisi. 䡲

“Guiding Clients’ Paths for more than 25 years” Taxes–Audit–Consulting www.landaumpierre.com P.O.Box 363642 San Juan, Puerto Rico 00936 Tel. 787-765-4644 Email: info@landaumpierre.com

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THURSDAY, FEBRUARY 11, 2016

25

Politics

Trump and Sanders expected to win

Candidates Sprint to New Hampshire Finish, but Brace for Long Campaign

BY THE ASSOCIATED PRESS & CB STAFF

SALEM, N.H. (AP)—Eyeing their first wins in a capricious campaign, Republican Donald Trump lashed out at his opponents Monday while Democrat Bernie Sanders sought to play it safe on the eve of the nation’s initial primary. GOP contenders vying for second and third saw fresh hopes for survival after New Hampshire as both parties settled in for a drawn-out slog for the nomination.

As snowfall brought yet more uncertainty to the race’s final hours, Hillary Clinton tried to move past talk of a shake-up in her campaign and controversy over comments by supporters that women should feel obliged to vote for her. Barnstorming New Hampshire with her family, she worked to flip Sanders’ favored critique against her by claiming that he, too, had taken big bucks from Wall Street— if only indirectly.

Trump was running ahead in pre-primary polls, as was Sanders on the Democratic side.

Not so long ago, Republicans saw New Hampshire as the proving ground that would winnow their chockablock field of candidates.

Rubio’s surge into third place in Iowa one week ago raised the prospect that voters here would anoint him over the rest.

Yet Rubio faced fresh questions about his

readiness—and his ability to defeat the Democratic nominee—after Saturday’s debate, when he was mocked for reciting a rote talking point over about President Barack Obama.

Growing doubts about Rubio seemed to portend a fight for delegates, which could extend for weeks or months—to the dismay of Republican Party leaders hoping for a quick consolidation behind anyone but Cruz or Trump. Democrats are already resigned to the likelihood of a protracted primary following Sanders’ strong performance in Iowa.

“Even though Trump comes out as a favorite in the polls with 31% to 32%, we will have to wait for the people’s poll, which is the one that really counts,” said Rep. Jenniffer González, chairwoman of the Republican Party in Puerto Rico.

“It will be interesting to see who will occupy the second and third positions, which would help

Democrats are already resigned to the likelihood of a protracted primary following Sanders’ strong performance in Iowa.

determine who will oppose Trump and Cruz from the party’s establishment.

There’s the real possibility that for the first time in history, five Republican candidates will get 10% or more in New Hampshire,” she added.

“More importantly for Puerto Rico, the primary may produce numbers that suggest there’s still a lot of time left to define who will be our presidential candidate. This will magnify the importance of the primary in Puerto Rico on March 6, in which, with money or without money, Republicans in Puerto Rico will have a proportionally greater influence than the 22 delegates we will elect,” González said.

In the 18 polls carried out after the Iowa caucuses, Sanders is in front, in all of them, indicated Kenneth McClintock, committeeman of the Democratic Party in Puerto Rico.

“In 16 polls, Sanders is ahead by double-digit margins, so he should win comfortably by a 15% or 30% margin in New Hampshire, which is the geographic and media extension of his state, Vermont, and which is even more liberal,” he said.

Political analysts are already focusing on larger states that are less liberal and more racially and ethnically diverse, such as South Carolina and Nevada, to take the real pulse of the Clinton-Sanders race, McClintock noted. 䡲

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THURSDAY, FEBRUARY 11, 2016

Special Coverage

RSA subject to high execution risks

Prepa: We Need Puerto Rico Bankruptcy Law Because RSA ‘Fragile’ and ‘Uncertain’

Electric Power Authority, Prepa headquarters

Nonprofits say Inability to Restructure Debt Will Hurt Essential Services

BY EVA LLORÉNS VÉLEZ

The Puerto Rico Electric Power Authority (Prepa) has urged the U.S. Supreme Court to validate a local bankruptcy law because the current restructuring support agreement (RSA) with creditors to restructure its finances is fragile, subject to numerous termination events and holdout risks, and still requires agreements with additional bondholders holding $2 billion of the utility’s $9 billion debt.

In addition, more than 10 nonprofit organizations also urged the top court to rule in favor of Puerto Rico because these groups, which provide services directly to the people and communities, could be forced to shut down or cut services because they will not get government funding.

Meanwhile, the Puerto Rico Manufacturers Association says a hike in rates by utilities that are not allowed to restructure debts will be detrimental to that sector and the economy in general.

These arguments were part of a reply brief and several amicus curiae, or friend of the court, briefs filed in the case of Puerto Rico vs. Franklin California Tax Free Trust, in which the top court of the land will decide if the local bankruptcy law is

preempted by the federal bankruptcy law. The local law, the Debt Enforcement & Recovery Act, was declared unconstitutional by lower federal courts, leaving Puerto Rico without any legal recourse to restructure the debt of some of its public corporations. According to the respondents, however, the Recovery Act is a “‘state law prescribing a method of composition of indebtedness’” and is thus pre-empted insofar as it purports to “‘bind any creditor that does not consent to such composition.”

Prepa said that from its establishment, it has relied heavily on debt financing for the performance of its public functions. Prepa first issued bonds in 1945 (when it was named the Puerto Rico Water Resources Authority) and has periodically raised debt since that time to advance its mission.

Prepa currently has 25 series of bonds outstanding, totaling more than $8.1 billion. In addition, Prepa has entered into revolving lines of credit in the amount of $700 million to purchase fuel and pay for other operating expenses.

Increasing this debt load has been facilitated by certain laws, and has occurred against a backdrop of explicit agreements and a common understanding

that if Prepa were unable to pay its debt as that debt came due, there would be a mechanism for the orderly and equitable treatment of all its creditors without the proverbial “race to the courthouse.”

The relevant laws in place at the time were the U.S. Constitution and the U.S. Bankruptcy Code, the utility said in its brief to the court.

“Nothing in the Bankruptcy Clause of the Constitution prevents Puerto Rico from adopting a law allowing its public corporations to adjust their debts, nor had the Bankruptcy Code been interpreted to prevent Puerto Rico from treating its public corporations in the same way that the 50 States can treat their similarly situated entities. Likewise, the Trust Agreement governing the bonds recognizes that the Commonwealth could enact a restructuring law,” the entity states.

The significance of that background understanding has become manifest now, both in terms of Prepa’s current ability to provide services and its future ability to raise additional debt financing so that it may continue to provide services in the future. Prepa cannot now repay its current debts in full. The utility currently owes $700 million under

its fuel lines of credit and will owe about $428 million in principal and interest under bonds that mature in July. Nor can Prepa obtain additional financing to repay amounts now coming due because of recent credit downgrades and Prepa’s severe financial condition have deprived the utility of access to new capital.

“In short, Prepa has neither the funds nor the means to obtain the funds sufficient to repay its debts in full. And, without those means or the ability to compel 100% of its creditors to agree to an equitable plan of reorganization, Prepa lacks the ability to reorganize its debt in a manner that would protect the interests of all creditors and the Commonwealth’s citizens, businesses and government agencies [that] need electricity. The Debt Enforcement & Recovery Act…that is the subject of this lawsuit provided such a legislative solution. In its absence, Prepa may literally be unable

to provide the electricity that is the lifeblood of the Commonwealth,” the entity states.

‘UNCERTAINTIES’ IN THE RSA Prepa’s negotiations with its creditors to date have demonstrated the wisdom of and necessity for a law such as the Recovery Act. While Prepa has reached an RSA with an ad hoc group of bondholders, some of the monoline insurers of certain Prepa bonds and its fuel-line lenders, the agreement is fragile and subject to a number of uncertainties including— most notably—numerous termination events and holdout risks.

“To demonstrate the fragility of the RSA, one needs to look no further than a few days ago, when the RSA terminated because required legislation was not enacted into law.

Prepa is in discussions with creditors to revive the RSA, but even if those discussions are successful, any restructuring

presents holdout and other risks: it will require agreement from additional bondholders holding approximately $2 billion in Prepa bonds who were never parties to the RSA,” Prepa states.

Other highly uncertain “conditions precedent” would remain. The Puerto Rico Energy Commission (PREC) would need to approve a new rate structure; the contemplated new securitization notes would need to receive an investment-grade rating, a significant challenge in light of the commonwealth’s financial crisis; the commonwealth would need to enact supporting legislation, including a transition surcharge to refinance Prepa’s debt, in a form acceptable to creditors; and a Puerto Rico court would need to validate the new securitization bonds.

“If any of these conditions fails, or if they are not all satisfied by June

Continues on next page

THURSDAY, FEBRUARY 11, 2016

27

Special Coverage 30, 2016, the RSA would fail. More specifically, $700 million would immediately become due under the matured fuel lines of credit, and Prepa will owe on July 1, 2016 an additional $428 million,” the utility adds.

SOCIAL SERVICES COULD BE HURT On the other hand, Puerto Rico’s inability to restructure the debt of its public corporations as a result of the decision invalidating the Recovery Act will hurt social services for the island’s most vulnerable individuals, according to several nonprofit organizations.

Prepa is, for all practical purposes, the sole electric-power provider on the island. The cost of electricity in Puerto Rico in kilowatt-hours is the second-most expensive in the U.S., they said, adding that its infrastructure is both outdated and inefficient.

Other public corporations, namely Puerto Rico’s Transportation and Aqueduct & Sewer Authorities, place a similar burden on the local economy.

“Both operate as publicly sanctioned state monopolies, have deficient and costly infrastructure and force a heavy burden on taxpayers. Their respective fiscal situations are already impacting the economy,” the organizations’ brief states.

“For example, Puerto Rico’s Legislature has been forced to significantly raise taxes on petroleum-based products twice during the past year in an attempt to save the Transportation Authority’s finances. To make

matters worse, Puerto Rico’s population is extremely dependent on automobiles and [the Transportation Authority] has been unable to develop a comprehensive and reliable public transportation system,” they add.

Nonprofits have already been severely affected by the economic and fiscal crisis. “Private donations have dried up and the fundraising capability of these entities has diminished as a result of the economic downturn.

Nonprofits have been forced to invest time and effort defending their public funding before a government that is desperately trying to raise the resources necessary to meet the demands of its creditors,” the organizations state. “It is therefore unquestionable that the fiscal state of Puerto Rico’s public corporations has and will continue to have, a direct impact on the economy of the island and on its overall fiscal health.”

The austerity measures taken by the government of Puerto Rico have already started to affect the nonprofit sector. Due to reduced revenue projection, as recently as Jan. 13, the government’s Office of Management & Budget issued a decision reducing the amount of “special legislative grants” to various governmental entities and important nonprofit institutions. The total reduction was $254 million.

The effect of this reduction has already affected the services provided by these organizations and some have indicated they will completely shut down

their operations. An example of an organization contemplating such drastic action is the Boys & Girls Club of Puerto Rico.

Other nonprofit organizations affected by the $254 million reduction in special legislative grants

social change in disadvantaged communities).

The United Nations has said countries that cannot properly restructure their substantial debts have difficulties guaranteeing the human rights of their citizens, the nonprofits

U.S. Supreme Court

Prepa’s negotiations with its creditors to date have demonstrated the wisdom of and necessity for a law such as the Recovery Act. include: Iniciativa Comunitaria de Investigación (serving the homeless and those with drug-related problems); La Fondita de Jesús (helping the homeless to reintegrate in their communities and providing basic necessities); the island’s three main museums (Puerto Rico Museum of Art, Ponce Art Museum and Contemporary Art Museum); and Instituto Nueva Escuela (promoting academic excellence and

argued. On the other hand, countries that have been able to restructure their debts have experienced significant socioeconomic benefits such as increased school enrollments and healthcare subsidies.

PRMA: MANUFACTURING WILL ALSO BE HURT The Puerto Rico Manufacturers’ Association (PRMA), which represents 1,200 companies, argued

in its brief that, like the rest of Puerto Ricans, its members depend on public utilities to operate.

“If a viable and reasonable solution is not promptly offered or implemented, the Commonwealth would be forced to suspend immediately all basic services to its constituents,” the PRMA said in its brief written by former Justice Secretary Luis Sánchez Betances.

If utilities are forced to increase rates, it would seriously affect manufacturing, as utility costs have a high impact on the sector’s decisions regarding cutting jobs and making improvements or capital investments.

“We have repeatedly stressed that operating costs on the island are high, and if they continue to rise due to the inability to pay or restructure their debts, the competitiveness of Puerto Rico will be undermined, thus affecting millions of American citizens,” the brief states.

Meanwhile, two scholars and experts in municipal bankruptcy and bankruptcy law, Clayton P. Gillette and David A. Skeel Jr., argued that while Congress adopted a new definition of “State” in 1984 that excluded Puerto Rico from the bankruptcy law, there is no evidence that Congress intended for the new definition of “State” to leave the island without any restructuring options.

Gillette is a law professor at New York University and Skeel is a law professor at the University of Pennsylvania.

“By striking down the Recovery Act, the District

Court took the extraordinary step of overriding Puerto Rico’s exercise of its territorial police powers. If Congress clearly intended to pre-empt a Puerto Rican restructuring law, it had the power to do so. But there is no evidence supporting the conclusion that it did. When the predecessor of section 903(1) was enacted, Puerto Rico was deemed to be a state for municipal bankruptcy purposes and thus permitted to allow its municipalities to make use of the federal bankruptcy laws,” the professors said.

Gillette and Skeel argue that a literal reading of the Bankruptcy Code indicates that the preemptive effects of Section 903(1) cannot apply to Puerto Rico. A finding that Congress intended Puerto Rico to have no ability—either from the Bankruptcy Code or from domestic legislation—to adjust municipal debts would jeopardize the delivery of public services, the very function that Puerto Rico municipalities were created to fulfill, they state.

“The history of municipal insolvency law demonstrates attention to the need for debt adjustment in order to ensure the continued provision of municipal services without generating substantial increases in the cost of service or [an] exit by residents. It is, therefore, implausible that Congress, by denying Puerto Rico’s municipalities access to Chapter 9, intended that they have no avenue by which to adjust their debts,” the professors argued. 䡲

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THURSDAY, FEBRUARY 11, 2016

2017 Honda Ridgeline breaks with conventional thinking for pickup trucks

2017 Honda Ridgeline: Shaking up the Midsize Pickup Truck Segment Second-Generation has Versatility of Original Ridgeline, but Adds Exclusive Features, Design and Technology

BY JOSÉ L. CARMONA j.carmona@cb.pr

Unveiled at the North American International Auto Show (NAIAS) last month, the all-new 2017 Honda Ridgeline truck intends to once again challenge conventional thinking in the pickup truck market.

Honda says the second-generation Ridgeline sets new benchmarks for versatility, capability and comfort in the midsize pickup segment.

“We are bringing our unique technology and original thinking to the market in a new and challenging concept for a Honda pickup,” said John Mendel, executive vice president of American Honda Motor Co. Inc., at the Ridgeline presentation. “We think we have a better idea, a truck that uses its unibody construction and Honda packaging magic to deliver more of the things that many of today’s truck customers want and need, with none of the things they don’t.”

Designed, developed and manufactured in the U.S.—just like the firstgeneration—the new Ridgeline will launch in the first half of this year.

NOW WITH ALL-WHEEL DRIVE The 2017 Ridgeline is based on Honda’s Global Light Truck platform with rigid yet lightweight unibody construction, next-generation Advanced Compatibility Engineering, or ACE, body structure and fully independent suspension—designed to deliver a higher level of ride and handling refinement than conventional body-onframe truck designs, Honda said.

The Ridgeline will be powered by Honda’s 3.5-liter, direct-injected iVTEC V-6 engine and mated to a sixspeed automatic transmission. For the first time, Honda’s pickup truck will be available in both front-wheel and all-

wheel-drive (AWD) configurations.

All-wheel-drive models will utilize Honda’s i-VTM4 torque vectoring AWD technology, featuring Intelligent Terrain Management with Normal, Sand, Snow and Mud modes.

SPACIOUS CABIN Inside, the Ridgeline features highgrade materials and finishes, available leather trim and all the latest technologies that Honda has to offer.

These include trizone climate control, push-button start, a full-color Thick Film Transistor center meter and available 8-inch Display Audio touchscreen with Apple Car Play and Android Auto compatibility.

With the rear 60/40-split seats folded down, the Ridgeline will comfortably carry up to five people while still accommodating long items. Folding up one or both sides of the 60/40-split seat bottom opens up the back to carry tall and bulky items.

VERSATILE BED Being 5.4 inches wider and 40 inches longer than the previous generation, Honda said the bed in the 2017 Ridgeline has the only four-foot-wide flatbed space (with 48 inches between the rear wheel arches) in the midsize pickup class, allowing for flat hauling of items such as plywood sheeting or drywall.

The Ridgeline, Honda added, also offers payload capacity rivaling that of top competitors, approaching 1,600 pounds, with final specifications to be released closer to launch.

The composite, ultraviolet, or UV, stabilized and scratch-resistant bed also boasts a number of available Honda-exclusive features, including an In-Bed Trunk, dual-action tailgate, available 400-watt alternating current, or AC, power inverter and the industry’s first in-bed audio system. 䡲

Unlike the first generation, the 2017 Honda Ridgeline pickup features a separate cabin and bed, but retains the versatile In-Bed Trunk and dual-action tailgate of the original Ridgeline.

THURSDAY, FEBRUARY 11, 2016

29

You don’t want to find yourself braking hard like Fred Flintstone, with the soles of your feet!

Cars 101

When to Retire Your Car’s Brakes

BY JUAN A. HERNÁNDEZ j.hernandez@cb.pr

Welcome to class!

Like many other parts of your car, the brakes wear off slowly, over time. So, if you don’t pay the minimum attention to the tell-tale signs, you may find yourself braking hard like Fred Flintstone, with the soles of your feet!

Granted, in most cars

to the little signs your car gives you to avoid costly repairs and the possibility of rear-ending another vehicle on the road.

If you aren’t hard of hearing, as your brakes start to reach the end of their useful life, they start to squeal—a very annoying squeal, as a matter of fact—every time you brake. For this, you have to thank brake manu-

an inch left in its asbestos-carbon block, the “indicator” touches the rotor (disk) and squeals.

Depending on how often you drive and the miles logged, you have about a month left before the screws start to do most of the braking and making some not-so-neat grooves on your rotors. By then, you should already be considering cashing in

As your brakes start to reach the end of their useful life, they start to squeal—a very annoying squeal, as a matter of fact—every time you brake. it’s not easy to check how your brake pads are doing. But you don’t have to crawl under your car to check for yourself. You just have to pay attention

facturers that have included a little metal strip on the brake pads so you can know when to change them. Generally, when the pad has about 1/4 of

your Christmas Club fund to pay for repairs.

On the other hand, under normal circumstances, your rotors should last you through two or three

pairs of brake pads before they need to be replaced.

You can choose from quite a few alternatives when replacing your pads.

Of course, there’s always the possibility of buying aftermarket pads. These are less expensive and they do the job, but many don’t have the squealing indicator that warns you when they need to be replaced.

In addition, if you feel sophisticated, you could buy pads made out of such exotic materials as ceramic, aramid fibers (a class of heat-resistant and strong synthetic fibers used in aerospace and military applications and as an asbestos substitute) or some other plastics. If you prefer, you can even go green and buy the so-called organic pads, which are made of recycled glass, rubber and/or resins.

In terms of safety and cost, the important thing here is not to wait too long to change your brakes or for your insurance agent to tell you so. 䡲

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THURSDAY, FEBRUARY 11, 2016

Autos

Brand provided Toyota valuable insight for attracting new, younger customers

Scion Brand Killed, Models to be Sold as Rebadged Toyotas Warranty and Service to be Provided by 22 P.R. Toyota Dealers

BY JOSÉ L. CARMONA j.carmona@cb.pr

Scion, the entry-level standalone brand launched worldwide by Toyota in 2003 to attract new and younger autobuyers, will be transitioned into the Toyota brand, the Japanese automaker’s U.S. division announced Feb. 3.

According to Toyota Motor Sales USA (TMS), the corporate decision was made after realizing younger Scion autobuyers, for whom the brand was created, have evolved in their car-buying decisions, moving them closer to the Toyota brand.

While the profile of Puerto Rico consumers is different from that of their stateside counterparts in terms of age and preferences, the brand transition applies here in Puerto Rico as well, local distributor Toyota de Puerto Rico (TDPR) confirmed in a prepared statement.

According to the TDPR, the move does not affect Toyota’s local operations, current Scion owners or

the service provided by dealers, which will continue as usual under the Toyota brand.

“Scion was conceived as a laboratory to explore new products and processes— it was never intended to be a sales-volume proposal. It was a niche that allowed us to learn. This decision is a step forward for the Toyota brand, because it allows us to reach new types of customers,” George Christoff, TDPR president, explained to Caribbean Business.

Last year, the Scion brand sold 907 units in Puerto Rico, down 5.9% from 2014, when it sold 964 vehicles on the island.

Stateside, the brand has sold more than 1 million units, with 70% of Scions purchased by customers who were new to Toyota, and 50% were less than 35 years of age.

As part of the brand transition, which begins in August, Scion vehicles of model-year 2017 will be rebadged as Toyotas.

The sporty FR-S and iM hatchback will become

models of the Toyota family.

The Scion tC sport coupe will come in a special final edition version, ending production in August 2016. The C-HR, whose concept was first unveiled at the Los Angeles Auto Show last November, and slated to arrive soon to the local market, will also become part of the Toyota model lineup.

Warranty, service and repairs for Scion clients will not be affected because they can visit the service departments of any of the island’s 22 Toyota dealerships.

“We thank the 10 Scion dealerships for the support they have provided to the brand in Puerto Rico,” Christoff said. “During this transition, we will work closely with the dealers to support them during the process and assist them in communicating the changes to our customers.”

Toyota’s decision, the local TDPR executive commented, responds to customers’ needs.

“These customers ap-

Warranty, service and repairs for Scion clients will not be affected because they can visit the service departments of any of the island’s 22 Toyota dealerships.

preciate the quality, durability and trustworthiness that Toyota offers. At the

same time, the new Toyota vehicles have evolved to meet the style and dynam-

ic handling that customers are looking for,” Christoff added. 䡲

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THURSDAY, FEBRUARY 11, 2016

Paseo Caribe: An Investment in Luxury Living

BY CB STAFF

Paseo Caribe, San Juan’s newest and most exciting neighborhood, is a vibrant community created for the world’s most discriminating buyer. Paseo Caribe combines luxury residential living with a stunning setting and an unprecedented mix of shopping, dining and entertainment.

Residences are now for sale in Bahía Plaza, the final and most stylistically modern of the three Paseo Caribe towers.

Bahía Plaza offers urban-inspired loft and flat-style residences, each of which features a terrace with sweeping views of the ocean, lagoon or marina. Bahía Plaza is an excellent choice for residents seeking a new luxury residence or pied-àterre ( a second residence), global buyers looking to relocate to Puerto Rico or savvy investors wishing to establish residency on the island. Now, Act 22-2012 makes it the best time ever to purchase a home in Puerto Rico, and Bahía Plaza presents the perfect opportunity to take advantage of this law.

Life at Bahía Plaza offers an ideal combination of stunning residential designs, resort-level concierge services and luxury amenities. The Bahía residences are imaginatively designed and perfectly suited for entertaining: all have spacious living and dining areas and oversized kitchens fully appointed with topof-the-line appliances. Resort-caliber

concierges, all with deep experience in San Juan, are on hand to maximize residents’ experience of the neighborhood and the island overall.

And residents will enjoy unmatched

amenities, including a top-of-the-line fitness center; state-of-the-art security and life-safety systems; owners’ library; private elevator to ensure security and privacy; elegant reception area; valet and visitor parking; full power generator and

water cistern; and an oceanview terrace and pool.

Bahía Plaza’s model apartments, conceptualized and furnished by lifestyle designer Aaron Stewart, are also now available for purchase. As new residents settle in to their sophisticated, urban-style residences, they will also get acquainted with the exciting Paseo Caribe neighborhood—its beauty, vitality and proximity to all sorts of attractions.

Located in the heart of the Paseo Caribe neighborhood, Bahía Plaza is steps from the waterfront, Condado Lagoon and the Atlantic Ocean, and close to excellent schools, restaurants, supermarkets, museums, the Symphonic Theater and the Luis A. Ferré Performing Arts Center. Residents will enjoy strolls along the paseo promenade and over the pedestrian-friendly Dos Hermanos Bridge, and can explore the many nearby green spaces, including Parque Central.

Paseo Caribe’s 110,000-square-foot retail center is also rapidly coming into focus. The center already features exciting tenants such as Fogo de Chão and Rosa Mexicano, with many more to open in the coming months, including a gourmet mercado featuring artisanal products, established culinary brands and up-andcoming chefs.

Bahía Plaza is truly a one-of-a-kind urban retreat, offering a unique blend of stylish living, breathtaking views and unparalleled experiences.

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F&R Construction Group Builds on More Than 40 Years of Experience and Excellence

BY MARIO BELAVAL DÍAZ

One can read into F&R Construction Group’s 44 years of success as a leading construction, development and project management company with just a glimpse of Puerto Rico’s skylines. From schools to museums, residential highrises, hotels and industrial facilities, F&R has been involved in the creation process of many significant projects that surpass the expectations of its clients and positively affects the quality of life of those who work, study, visit and live in Puerto Rico, as well as the local economy.

“The company has been driven by the simple and solid desire to work hard

with honest and total commitment to our clients and their projects,” said Jaime Fullana Lefranc, PE, VP & partner at F&R, and a member of his family’s second generation in the company. “From zero to 100, we will provide everything for our clients, from plans and designs to delivering the projects on time and within budget.”

While the firm started as a general contracting company in 1972, F&R has expanded its services throughout the years to include areas such as design and build, project management, consulting, business development and sustainability. The firm has the flexibility and expert talent that can provide each service by itself or provide the full complement

of services, according to clients’ needs.

There is no doubt that the construction industry has felt the pressure of the island’s difficult economic climate, but Fullana Lefranc said there is still work out there, all it takes is to identify the opportunities and provide the right service or mix of services that tend to clients’ needs regarding their projects.

“No project is too big or too small for us; they all have the same value and importance for the company,” said Fullana Lefranc, who has been with F&R for some 30 years and is a field specialist and one of the senior project managers at the firm. “Technology surely has had its benefits for the industry, but construction is still about putting one block Prepa building

Marina Bahía

Sheraton Hotel at Convention Center

Puerto Rico Museum of Art

on top of the other, about the quality and dedication of the workforce at all levels, offering the best service possible, and making each client’s project your own.”

Another source opportunity for the industry is investors who are coming to Puerto Rico under Acts 20 and 22 of 2012, many of whom, attracted by the slew of benefits that the laws represent, are either investing in new properties or revamping existing ones on the island.

“With more than 40 years in the industry, we thoroughly know the business and offer in one place all the services clients may need to make the projects of their dreams come true,” Fullana Lefranc said. 䡲

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THURSDAY, FEBRUARY 11, 2016

Unique Properties at the Vanguard of Real-Estate Service in Puerto Rico

BY MARIO BELAVAL DÍAZ

Unique Properties was already a company in motion with more that 20 years of experience in the local real-estate market when recent developments in the Puerto Rican economy made it one of the most sought after firms in the field.

“The arrival of investors to Puerto Rico attracted by Acts 20 and 22 of 2012, as well as EB-5 [Immigrant In-

vestor Program], has brought us a lot of good work,” said Aida I. Colón, president & CEO of Unique Properties. “Now we work seven days a week and in two shifts, dedicated and committed to finding exactly the right properties that fit the needs of our clients.”

Besides offering orientation and assistance to people who move to Puerto Rico attracted by Acts 20/22 and the EB-5 program, Unique Properties provides a wide roster of services that includes short- and long-term rentals for

vacation or business, sale of repossessed properties and investment properties, property management services and legal and notary services.

Unique Properties also provides services geared to clients who are looking to sell a property, such as an analysis of their best options, whether it is sale, rental or short sale.

Colón explained that to thrive as a business in the real-estate field, it is necessary to be highly sensible to the

With more than 15 years of experience in sales and rentals of Real Estate properties, Unique Properties is known by the excellence, commitment and personalized service of their dedicated team.

needs of clients and guide all effort toward achieving those needs. This requires maintaining a network of topnotch providers, and in the case of Unique Properties, complementing the experience the company has in the realestate business with knowledge in areas such as accounting and basic law, and a strong sense of teamwork with other related professionals such as appraisers, surveyors, bankers, contractors and architects.

An essential part of providing services to investors who are planning to move to Puerto Rico as a result of Acts 20 and 22, and the EB-5 program is to always have the most relevant and complete information.

“We are always more than well informed and at the forefront in all aspects of our industry, which allows us to develop unique services for our clients, services of the best quality, at the best cost and within a sensible timeframe,” Colón noted. 䡲

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Popular Continues to Expand Services for Act 20/22 Segment

BY CB STAFF

Puerto Rico has become a destination that attracts investors’ attention because of the benefits offered by the Tax Incentive Program promoted by Acts 20 and 22 of 2012. Thus, Popular Inc. continues to expand services that are specially geared to this segment.

With this in mind, last year saw the inauguration of the Investor Services Hub, an office located at Popular Center in San Juan’s Hato Rey district, where investors who benefit from these laws can obtain a wide range of commercial and personal banking services at the hands of a team of dedicated experts. María Awilda Quintana, first vice president of Wealth Management at Popular, added in the past year, enterprises such as financial consulting, hedge funds, brokers, mutual funds and online marketing companies.

“The competitive advantage that Popular offers these clients is very wide, because we have a network of branches throughout the island and an extensive range of services in the areas of trusts, banking, investment and insurance, among many others,” Quintana said. “At the same time, we facilitate the connection between our clients and other local entrepreneurs.”

Since 2013, Popular has served more than 500 investors who have taken advantage of the benefits of Acts 20 and 22.

Popular Center in San Juan’s Hato Rey district

The institution has destined specialized resources to attend to these clients, providing access to highly experienced associates with ample knowledge of these laws, and providing orientation and assistance in the process of establishing themselves in Puerto Rico, guaranteeing an effective transition.

Popular, with the support of the P.R.

Economic Development & Commerce Department (DDEC by its Spanish acronym), has participated in events aimed at entrepreneurs to promote the island in Latin America. During 2015, joint missions were completed to Mexico, Venezuela, Costa Rica and Spain, which were attended by more than 300 entrepreneurs.

Popular & DDEC also had a prominent role in the Private Wealth Latin America & the Caribbean Forum in Miami.

The bank also took an active part last year in two of the most important forums originating from Puerto Rico: the Investment Summit 2015 and the Investment Summit 2015 Latam Edition, as well as the Expanded Board of the Latin American Business Council (CEAL by its Spanish acronym) in Puerto Rico.

Puerto Rico enjoys more than its privileged position in the Caribbean. The strong ties that bind the island to the U.S. and the vast opportunities in the business sector make it easier for investors to expand or establish their business on the island.

Since 2013, Popular has served more than 500 investors who have taken advantage of the benefits of Acts 20 and 22. The institution has destined specialized resources to attend to these clients, providing access to highly experienced associates with ample knowledge of these laws, and providing orientation and assistance in the process of establishing themselves in Puerto Rico, guaranteeing an effective transition.

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THURSDAY, FEBRUARY 11, 2016

TASIS Dorado: Strong Focus on Thinking Skills

BY CB STAFF

Over 15 years ago, with the backing of Friedel and Pricilla Stubbe and Hacienda San Martin, TASIS Dorado was born, bringing a unique educational system to Puerto Rico. Fast forward to the present and TASIS Dorado has achieved its original goals—and more.

TASIS Dorado continues to excel in a number of areas. Its programs and students receive top honors and its graduates move on to prestigious universities and stellar careers. “From the beginning, the depth and breadth of our programs have catered to excellence in a number of areas, and our approach is different from other schools on the island,” said Maritere Matosantos, the school principal. “We place an emphasis on critical thinking, with kids in Pre-K already writing their own books.”

She explained that this is just one example of how students are encouraged to think for themselves, while learning to polish and validate their opinions. “Traditionally, there has been an emphasis on memorization,” she said. “But here we take a completely different approach, whereby students are provided a fundamental base on each subject, then encouraged to build on previous knowledge, establish connections and learn how to apply that knowledge to our changing world.”

For example, students are encouraged to express their views, while respecting the diverse opinions of fellow classmates.

Students are also taught to think innovatively and establish connections among the various subjects they are taking, and train to document their arguments with facts and supporting evidence to develop a “voice” and build on their strengths.

TASIS Dorado is also an active promoter of foreign exchange programs, which serve to elevate students’ global vision through the TASIS Leadership Academy at TASIS England, the Art & Architecture summer program in the South of France, and student exchanges with TASIS’ sister schools. TASIS Dorado students are

involved in international student competitions, including the Math Olympiad in Thailand, where a TASIS Dorado student recently garnered the Bronze medal.

“Our goal is to develop our students’ research and leadership skills so they can understand how everything is interrelated at the global level,” Matosantos said. “If we can teach them how to

and the PRISA Group, the school’s new Performing Arts Center was recently completed—an ultramodern facility with a sitting capacity of 528. At the center’s inauguration, more than $250,000 was raised to provide a state-of-theart studio, visual and lighting features.

Designed for a wide range of activities, including concerts, musicals, lectures and other stage performances, the center is equipped with a retractable seating system to provide 4,200 square feet of floor space, as well as two fully equipped

educator and one of the school’s founding members. “As a nonprofit with a solid financial footing and balanced budget, we can now raise money for enhancements, with people in the community knowing their donations are going directly to improve the school and not pay outstanding debts.” The school is now managed by the board of the TASIS Dorado Educational Foundation, led by headmaster Dr. Timothy Howard.

“I am continually impressed by the high quality of independent school edu-

be articulate and connect what they learn to the ever-changing world, we will have succeeded in our mission.”

Desiring to make major contributions to the local community, TASIS Dorado continues to evolve and create new opportunities. Under the guidance of recently-retired director Louis Christiansen, and led by engineer Eduardo Cortés

dressing rooms, a scenery workspace, orchestra pit, loading dock and full-featured control booth.

TASIS Dorado’s nonprofit status helps grow the school’s success. “We ran TASIS [Dorado] as a for-profit entity for 10 years, but we are now ready to look at the school’s future and leave a legacy,” said Fernando L. González, who is an architect,

cation available here in Puerto Rico,” Howard said. “The rigor and complexity of the curriculum, as well as the passion and preparation of the teachers from PreK to 12th grade, rival the best schools in the States. Add to this that your children are growing up learning two languages in a second culture and you’ve really added value to their lives.” 䡲

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Luxury Apartment in Dorado Beach Relives the Dream

BY LUIS VALLDEJULI

There will never be another Dorado Beach. The glamour of what had been one of the most publicized resorts in the world evolved into the monumental extravagance of the present retreat submerged within a sunny and vibrant seashore paradise. If the marvelous beach were not enough to enrapture guests, a visit to this West Beach residence may forever imprison one’s soul, much as a mermaid’s embrace would for a sailor lost at sea.

Hiram Gabriel Albino, founder of Luxury Estates, could not feel prouder of the property his family’s company has for sale. The two-bedroom, two-and-a-half bathroom apartment comes with an infinity plunge pool and three terraces. The property, designed to the Leadership in Energy & Environmental Design (LEED) Silver standard for sustainability, blends perfectly with the ambiance created by the surrounding Dorado Beach, a RitzCarlton Resort.

Completely decorated, the apartment includes amenities such as a private golf cart; room and maid service provided by the hotel; and maintenance. Residents are welcomed through a separate lobby from that of the hotel’s and driven by golf cart to their properties while a valet tends to their cars.

Luxury Estates is an offspring of a family company that includes Luxury Rentals,

founded by Valeria Albino, Hiram Gabriel’s sister. Their parents, Hiram Albino and Wanda Ithier, founded the parent company in 1999. After purchasing properties as investments in the Dorado Beach area, the couple found they could

offer these services to friends and clients.

“We have desire and experience,” they said. Because of the area’s beauty and amenities offered, the properties have been easy to sell, even during Puerto Rico’s long depression.

Luxury Properties offers rental listings at Dorado Beach and elsewhere. Investors who come to Puerto Rico to take advantage of the incentives from Acts 20 and 22 of

2012 can first rent a property with Luxury Property Rentals and later purchase a residence from Luxury Estates. Once clients contact the company, whose offices are located in the Dorado Plaza Shopping Center, they are assured of excellent service.

Luxury Estates and Luxury Property Rental may also be reached at www.luxuryestatespr.com and www. luxuryrentalsinternational.com. 䡲

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THURSDAY, FEBRUARY 11, 2016

Carrerá Arquitectos Creates Masterpieces; Signature Project is Santander Tower

BY CB STAFF

Towering over San Patricio in Guaynabo is the Santander Tower, a 17-story work of art by the renowned firm Carrerá Arquitectos. The firm not only designed the building, but also created a masterpiece within a masterpiece. The building is located next to San Patricio Plaza, one of the busiest malls in the San Juan metro area, and a sprawling road packed with eateries to meet all tastes.

Carrerá Arquitectos’ signature high rise, Santander Tower, is a mixed-use project within a larger urban plan. Carefully balanced together, the Santander Tower and its sister GAM Tower incorporate two “AAA” commercial office towers— complete with a helipad—and housing a University of Phoenix urban campus; a commercial mall segment with shops and restaurants; and a bank branch with drive through. Inside, the design is just as impressive including, for example, the world’s largest lamp sculpture, designed by internationally renowned sculptor Pablo Rubio.

Established in 1984, Carrerá Arquitectos is a multifaceted firm. The team of architects, headed by founder Edelberto Carrerá and his daughter Rebecca, works together to meet a client’s specific needs, starting from the consulting stage, to create schematic and environmental graphic designs for the client’s approval.

The team then develops entitlement and zoning reviews, supervises construction,

designs the interiors and manages the property after it is finished.

“Our ultimate goal is to make clients happy and productive, making them part of the design team,” Edelberto Carrerá said. To this end, the firm also assists clients to obtain financing for construction and remain as tenant coordinators in large retail centers. “To be cost-effective is a must. The design must be very practical and the final product protected so it may last for a very long time,” he added.

ENVIRONMENTAL GRAPHICS Carrerá Arquitectos provides a project and brand with everything needed to create a singular, powerful image including: environmental graphics, signage and way-finding, strategic branding, project identity, place-making and paving.

The firm develops sustainable settings in which people live, work and entertain through cooperation between the public and private sectors.

SUSTAINABILITY The aim of preserving natural resources is to design spaces where people can collaborate, communicate and socialize. By keeping a clear focus on their clients’ needs, corporate culture and operational objectives, Carrerá Arquitectos designs spaces that promote productivity and make business engaging and dynamic.

The firm provides clients all the necessary tools and services to make this happen, from top quality architecture and

interior design, to branding and environmental graphics.

INTERIOR ARCHITECTURE Through programming, space planning and interior design work, the company’s interior design staff complements every project by integrating the latest trends in interior design and providing spaces with the edge that clients want.

PLANNING & URBAN DESIGN Carrerá Arquitectos creates landmarks that are integrated with and respect their urban context. The firm carefully designs all components of urban developments to provide a living project that can grow with the clients’ needs and are independently yet fully interconnected with the surrounding cityscape.

As far as retail design, the company strives to focus on engaging customers and providing a vibrant, interactive place by transforming a regular space into an experience. The retail space is designed to maintain the brand’s identity while capturing the interest of users.

Decades-long clients, who have continually turned to the firm for their retail needs, have evolved with Carrerá Arquitectos, helping

to fuse and cement customers’ desires and expectations.

The firm’s broad scope also includes entertainment design, which demands creating living spaces brimming with subtleties specific to a client’s individual identity, and residential areas designed to accommodate the needs of entire communities while sustaining an eco-friendly environment.

Carrerá Arquitectos’ careful planning and meticulous attention to detail on every project is a standard that has come to be expected by its loyal clients.

The Santander Tower was designed in six months and fully occupied in less than a year. “High rentable square footage with common areas, whereby costs are kept to a minimum, is very important since the cost of maintaining those areas is divided among the renters,” Rebecca Carrerá said. “Each day, we incorporate more sustainability elements and make use of recyclables.” She has a clear vision of the evolution of the industry, including futuristic concepts as those of the “Mall of the Future” and expects her team to deliver new technology in design and construction accordingly.

In 2017, the firm will begin work on the remodeling of San Patricio Plaza, thus maintaining their longstanding partnership and taking it to another level. 䡲

THURSDAY, FEBRUARY 11, 2016

Christiansen Commercial Excels in Meeting the Real-Estate Needs of Clients

BY CB STAFF

Companies and investors working in the Puerto Rican market and those seeking to relocate or expand into the Caribbean region can always rely on Christiansen Commercial Real Estate to assist in identifying local properties and evaluating investment real-estate opportunities that meet their general criteria.

According to Ryan G. Christiansen, president & broker at Christiansen Commercial Real Estate, “the value of commercial and industrial properties has decreased over the past few years and if

you have the liquidity and are ready to act quickly, this is the right time to buy or lease in Puerto Rico.”

“Landlords and sellers have become extremely competitive and creative in covering their properties’ operational costs.

Furthermore, certain properties are being repositioned, as lending institutions are disposing of large loan portfolios and pushing for an improved credit market,” Christiansen added. He also noted that Puerto Rico is transitioning away from the stagnant real-estate market it has experienced in past years, as commercial and industrial real-estate opportunities are now more readily available.

Christiansen Commercial Real Estate is a boutique commercial and industrial real-estate firm with offices located at American International Plaza in the Hato Rey area of San Juan. The company specializes in catering to the real-estate needs of local and multinational, as well as corporate and institutional clients. The firm primarily provides “leasing, tenant representation, property acquisition, disposition, location consulting, asset management, site selection, broker price-opinion reports, loan portfolio acquisition and advisory services,” Christiansen stated.

The agency also provides clients with a market assessment that includes a Puerto Rico market update, current market conditions & overview, general area information, survey of property alternatives, square foot assessment, project timeline, financial analysis incorporating associated costs, survey & floor plans, aerial photographs, zoning maps and available governmental incentives such as tax benefits, among other relevant information.

The company’s office, commercial and industrial opportunities currently available for purchase or lease include: a well-maintained manufacturing and warehouse facility consisting of 238,000 square feet; two Class A office buildings consisting of over 500,000 square feet in a central business district; two interconnected prime commercial buildings in historic Old San Juan on Tetuán Street that consist of 33,635 square feet; a prime 1.9 acres commercial lot in Plaza Escorial in Carolina; and 365,000 square feet of strategically located office space.

As president & broker, Christiansen’s primary responsibilities include, but are not limited to, “devoting all our time and energy in creating value and opportunities for our clients within a constantly changing business environment.” 䡲

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Cossec Remains Strong in its Commitment to Cooperatives

BY MARIO BELAVAL DÍAZ

Membership in cooperatives in Puerto Rico grew by some 25,000 in 2015, as people continue to seek the financial solidity and strength of savings and credit cooperatives, especially during these tough economic times.

“If you take a look at the data from the [P.R. Financial Institutions Commissioner’s Office], banks have experienced a decrease in actives in all segments, and only cooperatives have grown,” said Daniel Rodríguez Collazo, executive president of the Cooperatives Supervision & Insurance Corp. (Cossec by its Spanish acronym), the government entity charged with the task of ensuring and fiscalizing savings and credit cooperatives in Puerto Rico.

“Factors for this growth may range from issues such as a bank that ceased to exist to better promotion by the cooperatives themselves and the advantages cooperatives represent, such as low interest rates, among others.”

But the financial strength and growth of cooperatives is better appreciated and more impressive when tracking their performance over the past five years. A comprehensive Cossec report released in late 2015 states that there were 116 savings and credit cooperatives in Puerto Rico, which Cossec insures and regulates.

While in 2011 there were 880,179 members, as of September 2015, there were a total of 966,274 members, which represents an increase of 86,000 members, or 9.78%. Growth was more palpable in 2015, with new members joining cooperatives at a rate of 2,000 per month. From 2011 to 2015, cooperative members’ shares increased by $622 million, or from $7.8 billion to $8.4 billion, a 7.93% increase.

People’s growing preference for cooperatives as a financial institution is reflected in the fact that as of Sept. 30, 2015, loans issued by cooperatives increased by $290 million, from $4.3 billion in 2011 to $4.6 billion in 2015, or an increase of 6.66%.

With more than $2.6 billion in liquidity, the loan capability of Puerto Rico’s cooperatives represents an essential element in the island’s financial system,

Rodríguez Collazo said.

“The rate of delinquency for loan payments is from 4% to 5%, when at other institutions it is from 12% to 15%, which means members are complying with their commitments,” Rodríguez Collazo said. “We can conclude that in the area of loans, Puerto Rico’s cooperatives enjoy stable financial health, and the fact that the loan portfolio represents 53% of the shares of the cooperatives, it says a lot about their strength and liquidity, especially when you take into consideration the situation in Puerto Rico’s financial sectors.”

Rodríguez Collazo added that Cossec is also carrying out efforts and initiatives to further help strengthen and develop the cooperative movement to benefit Puerto Rico’s economy.

He said that for the first time, Cossec is developing and implementing a system through which the cooperatives’ legally required quarterly reports could be electronically submitted to Cossec. As of Dec. 31, 2015, 40 of the 116 savings and credit cooperatives in Puerto Rico had implemented the system and many more are sure to follow.

“The system has benefits that range from savings of time to the accuracy of the information,” Rodríguez Collazo said.

“It is also an example Cossec’s commitment to assist cooperatives to become even more competitive, and remain an important component of Puerto Rico’s financial sectors.” 䡲

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Kelly Services Direct Hire Solutions Delivers top Talent

BY MARIO BELAVAL DÍAZ

Throughout its more than 50 years in Puerto Rico, Kelly Services has reiterated its commitment to the island and its belief in the quality of its human capital by providing the most relevant and effective staffing and workforce management solutions.

“We treat every client as if they were our only client, and develop solutions for their specific needs,” said Ariel Díaz, executive search consultant at Kelly Services in Puerto Rico, who oversees Kelly Direct Hire Solutions on the island.

in-time solution to help bridge the gaps in the hiring process for small to midsize hiring initiatives, and RPO features unbundled or fully outsourced solutions across all positions, levels and professions for high-volume, longer-term hiring needs.

Boutique in nature, Kelly Direct Hire Solutions draws on the formidable resources and infrastructure built by Kelly Services to deliver a range of expertise covering the talent lifecycle. It is the best of both worlds—a specialist business unit with specific executive recruitment skills and knowledge backed by a captionc

Nairda Martínez, general manager of Commercial/ Professional & Technical Operations and Ariel Díaz, executive search consultant

“For example, when it comes to directhire talent, which requires different techniques than traditional temporary and contract staffing, we have a set of solutions specifically designed to find the right person for the right position.”

Kelly’s specialized Kelly Direct Hire Solutions include Direct Placement; Executive Search & Placement; Project PERM; and Recruitment Process Outsourcing (RPO). Direct-hire service caters to the employment of entry-level to professional and technical, nonmanagerial talent in a wide range of professions.

Executive Search & Placement encompasses a dedicated executive search practice that specializes in the placement of midlevel professionals on up to vice presidents in engineering, finance and accounting, information technology, science and others. Meanwhile, Project PERM consists of a customizable, just-

respected leader who has been staffing the world for more than 60 years. Kelly places more than 33,000 employees annually in permanent positions around the globe.

In Puerto Rico, Kelly Services’ success is reflected in the fact that 2015 results show a 49% year-over-year growth. Nairda Martínez, general manager of Commercial/Professional & Technical Operations for Kelly Services in Puerto Rico, said the company is aiming to maintain this healthy growth pace for 2016.

“Despite the tough economic situation, part of our success has been our focus on business solutions strategies,” Martínez said. “In times like these, our services become more valuable to our clients, allowing them to concentrate on their core business while we take on the task of finding the right talent that will be an asset for their operation.” 䡲

THURSDAY, FEBRUARY 11, 2016

E.P.I.C. Strategies Provides Grand Solutions for Clients

BY MARIO BELAVAL DÍAZ

Dictionaries define epic as great or monumental. At E.P.I.C. Strategies, it stands for Extraordinary Properties, Insurance Covered, and clients will not hesitate to qualify for the benefits from the insurance products and top-notch realestate services offered by the firm. Still, E.P.I.C. Strategies’ success is based on a very simple philosophy: hard, dedicated work.

“We are a network of professionals who look only for the best service providers, and no matter the business or field, E.P.I.C. always has the client’s unique specifications and needs in mind,” said Elena Delgado, founder & president of E.P.I.C. Strategies. “Thus, we can offer clients the best service in terms of quality and cost-effectiveness.”

Its approach is also reflected in the wide and comprehensive roster of services the company offers to both local and stateside clients in Puerto Rico; these include managing processes at the properties to revamping or renovation work in both residential and commercial segments.

“Our staff works as a tight-knit unit that manages the company’s various divisions, whether administrating a property or managing a project,” said Delgado, who is not only a veteran of the realestate and insurance business but also an Army veteran and a physical fitness instructor. “Flexibility is also important, which includes the ability to understand and match the client’s vision with the services or products that can make them a reality, which is at the heart of E.P.I.C. Strategies’ success.”

Whether a client is looking for a property to sell or buy, an investor or an asset manager, Delgado said the team at E.P.I.C. Strategies quickly adjusts internal processes and procedures by staying informed and in line with clients’ new directives or shifts in priorities.

Delgado explained she founded E.P.I.C. Strategies after noticing the need for what she termed a “navigator” among U.S.-based businesses, investors, private clients and the island. Based on the

Elena Delgado, founder & president of E.P.I.C. Strategies

premise that relationships are business, and having worked all her adult life on the U.S. mainland, she says she understood the needs, requirements and goals better than most, allowing her to position herself as a liaison between clients looking to do business in Puerto Rico and the island itself. Believing that each client is unique, the E.P.I.C Strategies team creates a tailor-made internal set of processes and procedures to follow.

“This is complemented with a customized quality-control plan to ensure all tasks are completed accurately and in a timely manner, based on the asset managers-investor-client requirements,” Delgado said. “Our growth and success is based on the difference we have made for our clients, through a relationship based on dependability and trust, and clear and open communication.” 䡲

THURSDAY, FEBRUARY 11, 2016

Interlink: An Excellent Path of Development and Construction

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Colegio Puertorriqueño de Niñas: The Power To Be

BY CB STAFF

BY CB STAFF

Interlink is easily associated with development and construction of the highest quality. It has been a key player of awardwining real-estate projects in Puerto Rico and the Caribbean, including resorts, hotels, master-planned communities, single-family homes, condominiums and mixed-use commercial properties.

Interlink’s signature projects inLas Casitas Village at El Conquistador Resort

Hunt Construction. Some recent projects include the remodeling of BMW’s showroom; Margaritaville, a 250-room time-share concept at Wyndham Río Mar; renovation of 527 rooms and new suites at the San Juan Marriott Hotel & Stellaris Casino, and four private residences at St. Regis Residences, Las Estancias.

Interlink has developed more than 3,200 housing units that were executed with quality, sensibility and respect for the environment. Interlink has fostered an unparallel reputation for building superior products with great attention to detail, and producing the finest finishes and value proposition.

The company has established partnerships and alliances in its long trajectory with renowned firms and commercial organizations, which are key to the firm’s

success. One of Interlink’s most important transactions was with Paulson & Co., which meant a great deal for Bahía Beach Resort and Puerto Rico.

Additional alliances have been established with Cosmopolitan Rockwood Capital for the acquisition and adminclude the St. Regis Bahía Beach Resort, istration of the San Juan Marriott Hotel; Sheraton Puerto Rico Convention Center Starwood Hotels & Resorts; MB Holdings; Hotel & Casino and Las Casitas Village Channel Conrol Merchant LLC (CCM); at El Conquistador Resort. In addition, Pietrantoni, Méndez & Álvarez; and the the company worked on such commerGovernment of P.R. for the development cial developments as Centro Europa and of the Sheraton Puerto Rico Convention City View Plaza, and residential projects Center Hotel & Casino; and with Wyndincluding Cosmopolitan in San Juan’s ham International for the development Miramar community, Las Verandas and of Las Casitas Village at El Conquistador Las Estancias at Bahía Beach Resort and Resort.

Los Paseos.

Founded 38 years ago, Interlink is an The company is working on the remodintegrated real-estate resource, offering eling and expansion of Luis Muñoz Marín unmatched expertise in construction, deInternational Airport in alliance with velopment and asset management. 䡲

F E A T U R E

Colegio Puertorriqueño de Niñas (CPN) is the only institution in Puerto Rico dedicated to girls and women’s education from kindergarten through their senior year of high school. The school is known for offering a comprehensive education based on a cutting-edge academic curriculum that focuses on excellence and a wide variety of activities and student organizations to develop women who are leaders, self-confident and ready to successfully take on college life and future challenges.

One hundred percent of CPN students go on to study at U.S. and local universities and colleges, many of them admitted to the institutions’ honors programs. A large number of students from the Class of 2015 were accepted in the nation’s top 35 universities, including Barnard College, Bryn Mawr, Carnegie Melon, Columbia University, Cornell University, Georgetown University, Haverford College, Notre Dame, Boston College, New York University, University of North Carolina, Swarthmore College, University of Virginia and University of Rochester.

Many of the students of the Class of 2016 have already been admitted, some of them in the honors program, through their early action and early decision options. According to the school’s university counselor, Caroline Oliveira, “not only are they accepted in excellent universities year after year, but once they arrive at these institutions, they manage to successfully cope academically and socially thanks to the education they receive at our school.”

There is a pool of talented women who are the results of the CPN experience and have given glory to Puerto Rico and their school, including: attorney Ana Mari Bermúdez, New York City Probation Commissioner; Beatriz Polhamus, executive director of the Banco Popular Foundation; Lt. Col. Mildred Bonilla, chief of the Department of Planning & Programs

at the Pentagon in Washington, D.C.; Laura Cantero, executive director of Grupo Guayacán Inc; and attorney Cecille Blondet, president of WIPR, Puerto Rico’s Public Broadcasting System.

Today, the CPN continues advancing its cutting-edge education philosophy.

At the preschool and elementary level, the school features a Creative Learning Center, which is used as a teaching strategy along with an integrated curriculum where every classroom becomes a unique

laboratory that provides students an opportunity to make connections between different topics and matters relevant to the world around them.

The school offers programs such as the CPN+Enrichment Program, through which students from sixth grade through their senior year can choose from more than 300 online courses, and the College Prep Network, which combines preparation for the PSAT and SAT standardized tests with guidance on university careers and exploratory experiences through a mentoring program.

CPN also has Advanced Placement courses and other offerings for its students, who always stand out in various local and national organizations, having received awards and acknowledgements from the National Hispanic Scholars Recognition Program, Presidential Scholar Program, invitations to National Youth Leadership Forums, the Adolfo Fortier Award for outstanding scores on the College Board’s Piense Test, awards in the United Nations’ annual competition held at University of Pennsylvania, as well as multiple awards in competitions on the island. 䡲

42

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THURSDAY, FEBRUARY 11, 2016

Advertising

Don’t mince words with the young

Buena Vibra Group Launches Inter American University Campaign

BY MARIO BELAVAL DÍAZ m.belaval@cb.pr

Buena Vibra Group recently launched a campaign for client Inter American University of Puerto Rico (La Inter, also known as Universidad Interamericana) that “talks the talk.”

“Young people like to be talked to directly, no mincing of words,” said Emil Medina, creative director at Buena Vibra Group. “So we

decided to blend some humor and exaggeration in the campaign spots and deliver a direct message that calls to action.”

The campaign, which has been running since January as part of the university’s efforts during the enrollment period for the current academic semester and will extend to the rest of year, is based on the message “No lo digas, hazlo” (“Don’t say it, do it”).

Its three video spots feature

FEBRUARY 18 SALESPERSONS WEEK The Puerto Rico Sales & Marketing Executives Association (SME) pays tribute to the island’s top sales professionals— and Caribbean Business salutes their initiative, drive and determination by publishing their compelling success stories and an overview of the week’s special events. An ad in this supplement is the perfect opportunity to congratulate your sales team and celebrate their achievements.

WHO TO WATCH IN HEALTHCARE Caribbean Business highlights the dedication, vision and achievements of the professionals who are making a name for themselves in the local healthcare industry. Our supplement will shed new light on their innovative approaches and strategies.

CLOSING DATE: FEBRUARY 12

FEBRUARY 25 BIG BUSINESS PROFILE: ENGINEERING & ARCHITECTS For all their valuable work in areas such as surveying, mapping, planning and interior design, engineers and architects play a critical role in ensuring the safety and structural integrity of Puerto Rico’s infrastructure. This special report presents the companies and the teams of professionals who work hard at creating the island’s commercial, residential and industrial complexes. Advertise your product, service or firm here.

CLOSING DATE: FEBRUARY 19 INNOVATIONS IN HEALTHCARE This informative report will focus on the different improvements and expansions within our island’s hospitals and the companies that offer advanced services such as digital medical recordkeeping, advanced diagnostics and much more. Make sure to advertise your company’s healthcarerelated product or service in this special-interest feature!

CLOSING DATE: FEBRUARY 19

So we decided to blend some humor and exaggeration in the campaign spots and deliver a direct message that calls to action.”

—Emil Medina, creative director at Buena Vibra Group

Creative Corner Client: Universidad Interamericana de P.R.

Communications Director: Migna Cruz

Agency: Buena Vibra Group

Digital Account Executive: Paloma Maymí

Concept: “No lo digas, hazlo” (“Don’t say it,

Community Manager: Kamille Frías

do it”)

In-House Producer: Tamara Latorre

Creative Director: Emil Medina

Director: Alejandro Pedrossa (World Junkies)

Associate Creative Director: Luis López

Media Used: TV, Print, Radio, Digital Platforms,

Copywriter: Luis López

Call 787-728-8415 today!

everyday settings: a line in a bank, the waiting room of a doctor’s office and a bus stop. In each situation, there is a young character who is talking excitedly and full of passion about plans to solve a social problem, for example, while the other people look either confused or surprised. The spots then end with the “No lo digas, hazlo” tag line.

The campaign was filmed on different campuses of the university and the talent featured in the ads was mainly students from the university. Medina said that this new campaign is a progression from the previous campaign, which ran from May 2014 to December 2015, whose message was just as direct, with the line “El éxito no te lo regalan” (“Success is not given to you”), and was also framed in humorous or exaggerated situations. That campaign garnered the agency recognition from Cúspide, Puerto Rico’s advertising festival, and the P.R. Sales & Marketing Executive Association.

“If, in the previous campaign, we were referring to how you can’t wait for success to be given to you and that La Inter is the place where you could start your way toward your success, this time we start from the premise that all those plans and dreams you have are real, that you don’t have to just talk and think about them but pursue them,” Medina said. 䡲

Art Director: Luis López, Hanky Fermín

Others Target Audience: Youth, 16+ years of age

THURSDAY, FEBRUARY 11, 2016 Top local economists to discuss solutions to move island from crisis to recovery

43

General Business

Chamber of Commerce’s Economic Outlook Event to be Held Feb. 17 Three Panels Will Cover Economic Recovery, Economic Outlook Beyond Fiscal Crisis and From IVU to IVA

BY JOSÉ L. CARMONA j.carmona@cb.pr

The Condado Plaza Hilton hotel in San Juan’s Condado sector will host Feb. 17 the annual Economic Outlook event of the Puerto Rico Chamber of Commerce (CofC).

This year’s gathering will feature the island’s top economists, who will exchange their ideas and recommendations on how to help move Puerto Rico from crisis to recovery mode.

“At a time when Puerto Rico’s fiscal and economic situation is heightened as we face the 10th anniversary of the start of this economic depression, this event should provide an effective analysis and action framework to begin to move the island from crisis to recovery,” José Vázquez Botet, CofC president, explained to Caribbean Business.

“I believe it’s a great opportunity for Puerto Rico’s diverse economists to present their analysis and recommendations, so that the CofC can put them in an action document that will go beyond the 2016 general elections,” Vázquez Botet added.

The opening presentation will be given by guest

speaker Gustavo Vélez, president & founder of Inteligencia Económica, and economic adviser to the CofC president. Vélez will speak on the reasons leading to the current fiscal crisis, what we have learned from the Great Depression, and analyze the fiscal and economic measures that have been implemented by the government.

The event’s first panel, “Strategic Programs Form Puerto Rico’s Economic Recovery,” will be moderated by Philipe Schoene Roura, executive editor of Caribbean Business, and will include economists Mohinder Bhatia, Carlos Colón De Armas, Vicente Feliciano and Juan Villeta Trigo as panelists.

The second panel, “Economic Outlook 2016, Beyond the Fiscal Crisis,” will be moderated by Ferdinand Pérez, producer &

moderator of the TV show “Jugando Pelota Dura.”

The panelists will be economists Julio CabralCorrada, Antonio Fernós, Juan Lara and Antonio Rosado.

The keynote speaker during the luncheon will be José Rafael Fernández, president, CEO & vice chairman of OFG Bancorp, the bank holding company of Oriental Bank.

The third panel, “From the IVU to the IVA,” refers to Puerto Rico’s switch from the sales & use tax (IVU by its Spanish acronym) to the value-added tax (VAT, or IVA by its Spanish acronym), to take place on April 1.

The event’s last panel will be moderated by David Rodríguez, chairman of the tax affairs committee of the CofC, and the main speaker will be P.R. Treasury Secretary Juan Zaragoza.

Panelists who will react to Zaragoza’s comments include CPAs Jorge Cañellas, Julián Londoño, Ana María de los Ángeles Rivera and Kenneth Rivera.

Attendees are required to register before the event.

The price for CofC members is $100, while for nonmembers is $125.