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San Juan • Puerto Rico's government is trying to convince hundreds of wealthy investors to move to the U.S. territory, hoping they could help lift it out of a deepening economic crisis.
Officials hosted a meeting for investors on Thursday to promote local tax incentives aimed at luring the wealthy. Speakers include former New York City Mayor Rudy Giuliani and New York hedge fund billionaire John Paulson, who recently bought several upscale resorts in Puerto Rico as the island struggles to emerge from a nine-year economic slump.
Puerto Rico has already convinced a couple hundred hedge funds and traders to move to the island with measures approved in recent years that exempt people from taxes on any capital gains accrued after they move to Puerto Rico.
But critics question whether the amount of jobs created and real estate bought has been enough to boost the economy. And some investors at the meeting made clear their interests don't always overlap with those of the territory's government — especially efforts to win congressional approval to let it restructure part of its $72 billion public debt.
"It is a terrible idea. It will chase consumer confidence to zero," said Nader Tavakoli, CEO and president of Ambac Assurance Corporation, which holds millions of dollars in Puerto Rico debt and recently filed a lawsuit against the island's government over how it shifted funds to meet certain bond payments amid a cash crunch.
Tavakoli, who was on stage as a speaker, said it was surreal to be talking about bankruptcy while at a meeting for investors. He also demanded to see Puerto Rico's audited financial statements, echoing demands made by Republican lawmakers as they prepare to introduce legislation to address the island's crisis by next month.
Puerto Rico's governor was quick to assure investors that the government is working hard to resolve its crisis and he stressed the need for a restructuring mechanism. Gov. Alejandro Garcia Padilla also noted that Puerto Rico legislators are debating a bill needed to help the heavily indebted public power company finalize a separate restructuring deal with creditors.
"Despite whatever you may have heard about doing business in Puerto Rico, our commitment to the costs of utilities will be the last of your concerns," Garcia said.
Puerto Rico's power bills are on average twice those of the U.S. mainland, and critics warn it is a deterrent to potential investors as the electric company struggles to reduce its dependence on petroleum.
Hundreds of investors attended the meeting at Puerto Rico's convention center. Protesters outside accused the government of burdening the working class with new taxes while giving preferential treatment to the wealthy.