One Policy Angering Puerto Rico Protesters Impacts Black and Brown People Across the US

Aug 3, 2019
1:52 PM
Originally published at BET

(Photo via the Centro de Periodismo Investigativo)

Editor’s Note: The following piece was originally published on July 30 by BET. We have been given permission to reprint it here. We did make one update to indicate that Ricardo Rosselló is no longer the governor of Puerto Rico.

During Puerto Rico’s historic debt crisis and the U.S. government’s slow allocation of post-hurricane disaster aid, (now former) Governor Ricardo Rosselló and his cabinet desperately sought funding from the private sector. One of the main ways Puerto Rico hoped to garner investment was a little debated policy tucked into Trump’s Tax Cut and the Jobs Act of 2017: Special Opportunity Zones (OZ). The OZ tax breaks, created and promoted by some of the wealthiest in Silicon Valley, allow U.S. citizens to shield their massive profits by investing in an OZ fund property for 7-10 years. The program allows investors to substantially reduce their tax liability and avoid taxes on gains that result from the OZ investment.

Almost 9,000 newly designated Opportunity Zones are spread out across the United States and its territories. Spurring desperately needed investment in poor areas is how the OZ program has been billed by supporters like Senators Tim Scott and Cory Booker and presidential candidate Andrew Yang. That’s how Rosselló and his cabinet have advertised the program in Puerto Rico. When speaking to voters, they all casually avoid the fact that OZs allow the nation’s wealthiest to buy property with money they would normally pay in taxes.

U.S. Treasury Secretary and former CIO at Goldman Sachs Steven Mnuchin predicted OZs would release $100 billion dollars into private investments, money that otherwise would have gone to the public sector. Though this sounds like a conservative estimate when one considers there are over $6 trillion in unrealized personal and corporate capital gains that are now eligible for the program. Place-based tax incentive policies and development programs aren’t new in the U.S. Similar programs have been used since the 1970s to encourage economic development and job creation in low-income areas. One commonly cited critique of these development models is displacement and a lack of safeguards.

Writing on the East Harlem Empowerment Zone (EZ), Arlene Davila showed how culture and community spaces were reconstituted and displaced for the real estate and tourism sector. In 2002, then Congressman Charles Rangel defended the EZ to a room of discontent constituents: “This is not an antipoverty program. This is not about your dreams. This is about business, profit, and jobs.”

To be fair, it is hard to compare “Empowerment Zones,” “‘Renewal Communities,” “Enterprise Communities,” etc. to OZs. Many of those market-driven programs were conditioned on providing tangible benefits to communities they operated in, such as local hiring. OZs, on the other hand, are not blunted by any such legal requirement to benefit local communities in exchange for the tax benefits. No previous place-based tax incentive programs in the U.S. approach the size and scope of the current OZ program, particularly in Puerto Rico.

Jenniffer Gonzales, resident commissioner of the island, fought to get Puerto Rico included in the special opportunity zones legislation and to include almost 95 percent of the island in it. Coincidentally, the Center for Investigative Reporting found that the main lobbyists pushing Special Opportunity Zones are also her political donors. The Secretary of the Department of Economic Development and Commerce Manuel Laboy has advertised OZs to investors as a “once in a lifetime opportunity.”

Billionaire crypto investor (and new Puerto Rican resident) Brock Pierce explained, Puerto Rico is “the only qualified opportunity zone that’s a luxury destination… You’re competing with Oakland, Inglewood, Bronx, etc. and…there’s just things that can be done down here that are very different than everywhere else.” The Rosselló administration’s attempt to lure wealthy speculators comes as over a quarter of a million homes on the island face possible foreclosure in 2019. The fear of displacement is so bad legal advocates called on Rosselló to declare a state of emergency—he did not.

A Zillow study showed prices in OZ-eligible areas across the U.S. are already skyrocketing, rising over 20 percent in 2018. OZ speculation is pressuring renters while creating windfall benefits for landowners and investors. As the California Reinvestment Coalition noted, OZs “assume a trickle-down philosophy that all and any investment in low-income areas is good for neighborhoods,” yet they argue that OZs will contribute to the displacement pressures low-income residents and residents of color face in the OZs.

In Puerto Rico, property values are also skyrocketing. Puerto Rico’s recently resigned secretary of state claimed the growth in the luxury real estate market was an example of Puerto Rico’s recovery. A claim that Rosario Rivera, former president of the Puerto Rico Economist Association, asserts ignores the economic reality of Puerto Rican born residents: “luxury does not equal recovery.”

Communities could benefit from OZs, but the federal legislation doesn’t require that. Since these are private investments, transparency is also not required for projects financed through Opportunity Zone tax breaks. Oscar Perry Abello, at Next City, explains that the only meaningful check on what developers can build using opportunity zones, aside from what the market will support, is local zoning.

In Puerto Rico, at the same time historic protests against the governor have been taking place, so have the only public meetings regarding an island-wide rezoning process. Residents across the island have sounded the alarm, demanding more time to review the wide-scale zoning changes the island’s government is pushing through. As Marissa Reyes, coordinator at El Puente Latino Climate Action Network, explained:

“This island-wide rezoning allows for building in ecologically protected areas and facilitates the process of construction for wealthy investors. We asked the government for a suspension of the rezoning process so communities can have time to simply understand the thousands of documents being submitted through this enormous rezoning process. Sadly, we’ve been ignored.”

The billions in private financing unleashed by OZs will not be distributed equally among the almost 9,000 census tracts impacted by the OZ program. Funding will go to areas that, as Brock Pierce explained, “are waving the flag.” Municipalities that place checks and balances on OZs become less attractive investments than ones who don’t. That’s why many impoverished municipalities across the country are passing extra benefits on top of the federal benefits. Expedited permitting, zoning, tax breaks on construction, additional public money are just some of the benefits areas in economic distress are offering the nation’s wealthiest.

Thanks in part to Pierce’s advocacy and that of wealthy new migrants to Puerto Rico, one of Rosselló’s last acts as governor was passing extra benefits for OZs on the island. Rosselló even sought to use $400 Million in post-Maria disaster aid to help subsidize QOZ deals before his ouster. Over the last two weeks, as protesters in Puerto Rico screamed, “Ricky esta vendiendo lo que queda del pais” and “Ricky is selling what is left of our country,” these are the types of policies that angered and continues to anger them.

As millions of Puerto Ricans demand more representative government, investors behind the billions in OZ investments headed for the island will inevitably demand a leader that will represent their own interests. But the impact OZs will have on democratic governance stretch beyond Puerto Rico and into every U.S. community targeted by Trump’s development strategy.

“When $100 billion dollars of capital is being unleashed you know… some of the worst possible people show up, and they can screw it up for everyone,” said Brock Pierce.

Note: As cited, multiple sources in this article come from news broken by Centro de Periodismo Investigativo (CPI), a Puerto Rico-based investigative journalism outlet responsible for releasing the bombshell telegram chats that sparked the downfall of Governor Ricardo Rosselló. See if your community is an OZ here.


Andrew J. Padilla is a Puerto Rican artist, educator and independent journalist from East Harlem. You can follow Andrew @apadillafilm6 and learn more about him on