Why Puerto Rico Now
By Adam Greenfader
Every crisis creates opportunity. In my recent book, Why Puerto Rico Now: A Masterplan for Resurgence, Resiliency, and Long-Term Economic Growth, I examine how Puerto Rico has moved beyond recovery and is positioning itself in 2026 for robust economic expansion.
Today, we are navigating the aftermath of the global COVID-19 pandemic, escalating geopolitical conflicts, and the increasing devastation caused by the ongoing climate crisis. Supply chain disruptions and inflation have highlighted the vulnerability of global markets. Nation blocks are prioritizing the domestic production of essential goods, including pharmaceuticals and medical supplies. As countries implement stricter trade policies, tariffs, and border controls, the world is shifting toward a new era of isolation and economic self-reliance.
At the same time, environmental pressures continue to demonstrate that no region can address these risks in isolation. Cooperation is essential.
Wildfires in California, flooding across the southern United States, heat waves in Europe, and stronger hurricanes in the Caribbean reflect a shared pattern of climate stress. These are not isolated events. They signal the need for coordinated global action.
Puerto Rico sits at the front line of this reality. As storm intensity increases, coastlines erode, and temperatures rise, the island faces immediate adaptation and resilience challenges. Its experience is not unique. It is an early indicator of what many coastal markets are beginning to face.
In this complex landscape, Puerto Rico stands at a pivotal crossroads. With over 70 years of leadership in pharmaceutical and critical manufacturing, Puerto Rico is uniquely positioned to strengthen the United States' supply chain resilience. Its strategic location, highly skilled workforce, and robust industrial infrastructure make it an indispensable asset in ensuring national economic security.
In recent years, what once seemed improbable has begun to reemerge. Following the closure of major military installations across Puerto Rico, the island’s strategic role appeared to decline. Today, shifting geopolitical dynamics are reversing that trend.
Recent U.S. actions in Venezuela, including direct intervention and control over key energy assets, alongside the ongoing war with Iran, have reshaped global security priorities and supply chains. This oil instability has reinforced the importance of maintaining a strong U.S. presence in the Caribbean basin.
In this context, Puerto Rico is once again emerging as a critical strategic location. Its geographic position enables rapid air and maritime deployment across the Caribbean and into South America. Existing infrastructure, including airfields, ports, and logistics networks, supports both military and humanitarian operations.
This renewed strategic importance reinforces a broader point. Puerto Rico is not only an economic and investment story, but also a geopolitical one, shaped by global conflict, energy security, and its role within the United States.
This triple role, as a manufacturing powerhouse, climate crisis leader, and strategic geo-political location positions Puerto Rico as a vital case study for how island communities around the world can thrive in the face of global uncertainty.
But before that can be done, Puerto Rico will need to pull itself out from its long-term economic challenges. Economic reconstruction is not easy, and, in the case of Puerto Rico, it calls for abandoning old approaches and cultural biases that have persisted since 1898. Puerto Rico's economic development is not simply putting things back as it was before; or by replacing previously inadequate infrastructure or existing systems, but by making profound restructuring of existing ones.
Those who do not learn from the past are doomed to repeat it.
Since the beginning, U.S. Congress has employed a two-pronged approach to the island's economic growth: encourage Puerto Rico to borrow heavily to perform critical government functions and create lucrative tax incentives to motivate U.S. companies to move to the island. Triple tax-exempt bonds were first introduced in 1917. The bonds were used to finance the island's economy. Companies were also provided lucrative tax incentives to industrialize Puerto Rico. For a long while, it worked extraordinarily well. By the 1960s, The New York Times called Puerto Rico "one of the most spectacular economic achievements of the post-war era." Puerto Rico prospered for thirty years. It had one of the highest per capita incomes and became one of the world's top pharmaceutical production hubs (it still is today).
Globalism and the end of the cold war however revealed cracks in Puerto Rico's economic policy. U.S. companies, searching for even cheaper labor and raw materials, were going farther across the planet. Ease of credit and tax incentives ultimately deflected attention from the fact that Puerto Rico did not have fundamental economic revenues models in place. "Real estate taxes, land use planning and zoning for instance, were ineffective to generate sufficient revenue to fund its own budget internally.
Lucrative tax incentives like Section 936, also could not hide structural economic deficits; high unemployment, a large informal economy, and people emigrating to the U.S. mainland to find better paying jobs. When the Section 936 incentive expired, Puerto Rico went into debt. Adding real injury to insult, two category five hurricanes and multiple deadly earthquakes slammed Puerto Rico, causing more than 100 billion dollars of damage and the loss of over 4,700 lives. Then in 2020, the Covid 19 pandemic brought massive quarantines and huge reductions in tourism and other industries.
Amidst these challenges, there are rays of hope. Puerto Rico formally exited bankruptcy on March 15, 2022, after completing the largest public debt restructuring in U.S. history. This milestone followed a federal judge's approval of the debt adjustment plan on January 18, 2022, which set the stage for the territory to begin its financial recovery. The restructuring process, initiated in 2017 under the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), will address approximately $70 billion in debt and $50 billion in pension obligations.
As the island is recovering, it has now regained access to capital markets. Its banks are extremely well capitalized according to the Tier 1 Capital Ratio which is used to determine a bank's financial health and ability to absorb potential losses.
Puerto Rican bank’s ability to outperform U.S. banking powerhouses in Tier 1 Capital Ratios signals resilience and significant growth potential, making them attractive to domestic and international investors, inspiring confidence and solidifying their role as pivotal components of the island's economic stability and growth.
Notwithstanding overall stability in Puerto Rico's banking sector, commercial lending remains significantly below pre-pandemic levels. Banks continue to prioritize real estate lending and liquidity management, limiting financing options for businesses. Policymakers and financial institutions must work together to create incentives encouraging business lending, particularly for SMEs. Commercial lending remains stagnant despite economic recovery efforts. Compared to 2014 levels, commercial lending has declined by 34.7%, suggesting that banks remain risk-averse in lending to businesses.
While the traditional banking has waned, Puerto Rico's alternative capital ecosystem is filling the vacuum and is experiencing significant growth with International Banking Entities (IBE) and International Financial Entities (IFE). The IFE Act (Act 273) was created to modernize Puerto Rico’s financial sector and attract a wider range of financial services companies beyond traditional banking. The primary goal of this legislation is to attract U.S. and foreign investors to Puerto Rico by authorizing entities to engage in specific banking and financial activities, primarily with non-residents.
While IBEs were primarily focused on offshore banking, IFEs allow investment banking, asset management, fintech, and other financial innovations. As a result, many IBEs are transitioning to IFE status to take advantage of broader services and more attractive tax incentives. As of 2020, Puerto Rico's financial services sector included 27 International Banking Entities (IBEs) managing $59.3 billion in assets. The International Financial Entities Act provides significant tax incentives to encourage the establishment and operation of these entities in Puerto Rico. Benefits include a fixed 4% income tax rate on net income, full property and municipal license tax exemptions, and favorable tax treatment for shareholders on distributions.
Puerto Rico's insurance market is notably diverse, encompassing 47 domestic insurers, 33 international insurers, and 271 foreign insurers. International insurers in Puerto Rico are companies established under the International Insurance Center, offering services primarily to clients outside the island. These insurers benefit from Puerto Rico's favorable tax incentives and regulatory environment. Notable international insurers include AIG Insurance Company-Puerto Rico, MAPFRE Life Insurance Company, Chubb Insurance Company of Puerto Rico and Pan American Life Insurance Company of Puerto Rico.
The island hosts over 1,247 private companies within its startup ecosystem, spanning various sectors. This includes 96 new fintech startups in Puerto Rico, including notable companies like Zenus Bank, EVERTEC, FV Bank, Ready Player DAO, and Olé Life. Of these, 27 startups have secured funding, with 8 reaching Series A or beyond. This expansion highlights Puerto Rico's emergence as a burgeoning hub for fintech innovation and entrepreneurship.
Fueling the growth of both traditional and alternative financial sectors, Puerto Rico has been granted the largest allocation of federal relief funds in U.S. history. Dubbed "Operation Bootstrap 2.0," the island has already received over $35 billion to rebuild homes, develop critical infrastructure, implement renewable energy solutions, and fund other essential projects. This unprecedented federal investment is a crucial opportunity for Puerto Rico to rise from the ashes and emerge more resilient and self-sustaining.
In addition to relief funds, the Puerto Rican government and the U.S. Internal Revenue Service have introduced a series of tax incentives to attract businesses and individuals to Puerto Rico. Among these, Act 60 (previously Acts 20 and 22) offers significant tax advantages, including an exemption from almost all U.S. federal income taxes for United States citizens! The ACT has led to an influx of over 3,500 high-net-worth individuals and pioneering entrepreneurs. With thousands of new residents bringing innovative ideas, global connections, and significant capital, Puerto Rico is experiencing a rapid transformation.
Act 60 grants are contractual in nature, typically issued for a 15-year term with the possibility of extension, and the broader incentives framework is currently authorized through 2035. Puerto Rico has granted more than 5,800 investor tax decrees since 2012, along with nearly 4,000 export services decrees. However, only about 2,600 investor decrees remain active today, reflecting both attrition and stricter compliance.
As the island navigates this unprecedented growth, the challenge is ensuring these investments result in long-term benefits for all island residents, not just individual beneficiaries.
Financial support from the United States Government, however, is not limitless. The urgency to implement new strategies has never been greater. Rebuilding Puerto Rico for the long term requires a forward-thinking approach that moves beyond temporary relief and toward lasting economic independence. In my book, “Why Puerto Rico Now,” (available on amazon) I explore Puerto Rico’s historical economic landscape to uncover valuable lessons from the past. More importantly, I present forward-thinking strategies and innovative solutions for the future. By examining key industries, emerging technologies, and transformative opportunities, “Why Puerto Rico Now” is an out-of-the-box blueprint for economic self-sufficiency, innovation, and adaptability.
Whether you're an entrepreneur, investor, policymaker, community leader, or just someone who wants to come back home, Puerto Rico invites you to play a pivotal role in the island’s future. This is your chance to not just witness change, but to actively impact Puerto Rico’s future. The window of opportunity is wide open, and the time to act is now.
Adam Greenfader
Chairman
AG&T
Since 1993, AG&T is a premier Caribbean real estate development and advisory firm headquartered in Miami, Florida. AG&T has played an integral role in over 55 high-profile development projects valued over $1.5 billion, including master-planned communities, luxury hotels, affordable housing, and private island resorts. Key markets include Puerto Rico, Sint Maarten, Jamaica, USVI, Costa Rica, and Mexico. AG&T proudly serves a clientele that includes developers, hedge funds, private equity firms, and various institutional capital groups. Adam Greenfader is the Chairman of AG&T. He has notably chaired the Caribbean Council at the Urban Land Institute (ULI) and currently serves as the Florida Liaison for the Puerto Rico Builders Association. His recent work, the 2025 edition of “Why Puerto Rico Now: A Masterplan for Resurgence, Resiliency, and Long-Term Economic Growth,” encapsulates his vision for a vibrant, forward-thinking future for Puerto Rico.
