With federal funds declining, Puerto Rico’s economy must grow by transforming its productive structure rather than relying on tax exemptions, economist Indira Luciano argues. Luciano, who took part in a symposium held by the Fiscal Control Board, proposes linking industrial policy to clear development objectives and evaluating its impact on production and government revenues. Her strategy starts by defining economic development goals, then identifying the strengths and weaknesses of industries, their competitive advantages, and the relationships among them, so that sector selection reflects each industry’s potential contribution to development rather than only its ability to attract investment.
She wants industries tied to local production, with export capacity and the ability to substitute imports. Not every incentive, she says, needs to be fiscal, and not every industry responds to fiscal incentives. She questioned the need for large, long-lasting tax benefits, citing Law 60 of 2019, which offers exemptions that can reach 100% and periods of up to 15 years, and asked whether the cost to the treasury is justified.
A company may need support in its early stages, but once mature the conditions justifying that stimulus may have changed. She proposes evaluating each incentive’s need, magnitude and duration, and tracking results to confirm whether incentives fulfill their purpose and whether their costs match the benefits obtained.