Puerto Rico, in deep economic slump, tells investors: come to island
{{#rendered}} {{/rendered}}An American flag and Puerto Rican flag fly next to each other in Old San Juan. (2015 Getty Images)
Puerto Rico’s government has a message for wealthy investors: come to the island – despite the deepening economic crisis.
Officials hosted a meeting Thursday aimed at luring hundreds of investors with local tax incentives that they hope could help lift the U.S. territory out it’s nine-year economic slump.
Speakers included former New York City Mayor Rudy Giuliani and New York hedge fund billionaire John Paulson, who recently bought some of the island’s most upscale reports.
{{#rendered}} {{/rendered}}Paulson said solving the island's fiscal situation is essential to encouraging more investment.
"It has created some halo around Puerto Rico," he said, adding that he has no immediate plans to move to the island. "I find the lifestyle very, very attractive. It's something I would consider in the future, but right now I'm in New York."
Paulson declined to say how much he has invested in Puerto Rico and acknowledged that he doesn't own any of the island's staggering $72 billion public debt.
{{#rendered}} {{/rendered}}Puerto Rico already has convinced other millionaires and billionaires 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 the island.
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.
"Bankruptcy and default would be a catastrophic mistake for Puerto Rico...It will chase consumer confidence to zero," said Nader Tavakoli, CEO and president of Ambac, 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.
{{#rendered}} {{/rendered}}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.
{{#rendered}} {{/rendered}}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.
Some investors who flew to Puerto Rico to learn more about the tax incentives said they were not bothered by the island's economic crisis.
"You're operating your business elsewhere," said David Jones, president of a Naples, Florida-based insurance services company that bears his name.
{{#rendered}} {{/rendered}}Jones was one of hundreds of investors attending the meeting at Puerto Rico's convention center. They were confronted by protesters outside who accused the government of burdening the working class with new taxes while giving preferential treatment to the wealthy.
"It's a valid point," said hedge fund manager Michael Tennenbaum, who recently moved to Puerto Rico from Los Angeles.
"One of the reasons I came here is because I thought you'd hit bottom," he told the audience. "When you run out of cash, I think that brings change."
{{#rendered}} {{/rendered}}Based on reporting by the Associated Press.