Puerto Rico BPO and ITO Seeing Significant Gains as Tax Breaks Attract New Players

The BPO sector in Puerto Rico is reportedly undergoing a boom, with the government recording 110% market growth in the last four years.

According to data provided by the Puerto Rico Industrial Development Company (PRIDCO), the government-owned investment promotion agency, the rapid growth is attributed to the Act 20 law, which offers a 4% income tax rate to companies that export services to mainland US or foreign countries.

Erika Medina-Vecchini, Chief Business Development Officer at PRIDCO, said that the number of BPO companies on the island has risen to 21 in 2016 from 10 in 2013, also highlighting the growth in the ITO sector.

“IT establishments related to data processing, hosting, and related services increased 34.5% in the last five years, to 39 establishments in 2016 from 29 establishments in 2012,” said Medina-Vecchini, crediting the statistics to US BLS Data.

Medina-Vecchini attributed this growth to Puerto Rico’s “excellent, highly specialized, and diversified industrial base; a first class communications infrastructure; a highly educated workforce; and all the legal and banking structures within a US jurisdiction.”

Between January 2017 and July 2017, 91 companies have applied for the approval of Act 20 decrees, and will either be commencing operations in the next few months, or already have operations in Puerto Rico, according to Medina-Vecchini.

Of those 91 establishments, 24 are dealing directly as BPOs, with either shared services centers or centralized management services; 3 are dealing directly as ITOs, with electronic data processing centers and software development; and 64 are exporting other services from Puerto Rico.

“These numbers for 2017 are hard evidence of a booming BPO industry in Puerto Rico, as well as a superb effort to curb the country’s present economic problems and show confidence in the developing business climate in the private sector, despite the fiscal problems that are affecting government operations,” Medina-Vecchini told Nearshore Americas.

Just two months ago, Governor Ricardo Rosselló announced the creation of three hundred jobs over the next three years at the opening of the Santander Consumer International Puerto Rico (SCI) call center.

“Thanks to Santander Consumer International Puerto Rico for relying on the island and contributing to our economic recovery,” he said. “As we develop the plan for Puerto Rico, our administration is committed to being a facilitator and not hampering the development of new businesses.”

Santander Consumer USA Holdings (SCUSA) is expected to develop the SCI in San Juan and will reportedly invest at least US$5 million in training capital.