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Puerto Rico study optimistic on job creation under tax breaks

SAN JUAN (Reuters) – Tax incentives aimed at spurring Puerto Rico’s economy have created 5,800 jobs in the four years since their enactment, but could create 50,000 more jobs in the next eight, a study commissioned by the island’s government said.

The study, released on Tuesday by the economic consulting firm Estudios Tecnicos, said the laws passed in early 2012 and referred to as Act 20 and Act 22, have generated about 3,349 and 2,483 jobs, respectively. The study estimated a steep increase of a combined 56,000 jobs to be created by 2024.

The acts were designed to stimulate a Puerto Rican economy that is facing a 45 percent poverty rate and rapidly shrinking tax base as residents jump ship for the continental United States.

The island is $70 billion in debt and trying to sway creditors on taking pay cuts, while lobbying Washington lawmakers to let it file for bankruptcy.

Acts 20 and 22 have not been a silver bullet for Puerto Rico, and some numbers in the study are less aggressive than projections Puerto Rico’s government has made.

But Alberto Bacó Bagué, the island’s economic development minister, said he is confident the predicted spike in job growth will come to pass.

“This is a new program and as it progresses we are seeing bigger companies that are bringing shared services centers to Puerto Rico,” Bacó Bagué said on Tuesday.

Act 20 offers low corporate taxes to export businesses that set up shop on the island, while Act 22 aims to attract such entrepreneurs by exempting newcomers from taxes on passive income.

There are 763 participants under Act 22 and 528 under Act 20, but those numbers should climb to 4,000 and 3,500 respectively by 2024, the study estimates.

People who have moved to the island under Act 22 have planned $228 million in capital investments in the U.S. commonwealth, and 52 percent have businesses on the island, said the study, which was commissioned by Puerto Rico’s Department of Economic Development and Commerce.

Act 22 participants spent $266 million in real estate, generating some $50 million in mortgages for local banks. Buyers spent an average of $1.8 million on homes, while renters pay about $2,800 in monthly rent, the study said. Overall real estate investment by Act 22 grantees is forecast to reach $1.7 billion by 2024.

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