Business Leaders Call for Economic Freedom as Auto Sales Slump, Power Costs Mount, and the Economy Turns Anemic

Puerto Rico’s Chamber of Commerce is making the case for a broad overhaul of how the island is taxed, regulated and powered, and it is carrying that argument to the industries most exposed to the squeeze.

At a seminar for auto importers this week, Chamber President José Julio “Che” Aparicio Laspina said the island needs less government, lower taxes and less regulation, a formula he tied to what he described as a national economic emergency.

The auto sector, for one, captures the moment. New-vehicle sales fell 9% in 2025, to about 110,000 units, and the decline has deepened this year, with sales down roughly 13% from January through September, according to figures Aparicio cited.

The industry supports about 36,000 jobs across dealerships, repair shops, banks, cooperatives, insurers and shipping companies, so a slump in car sales reaches well beyond the showroom.

The speech sketches the cost of doing business on the island. A car’s price reflects federal tariffs, shipping rules, frozen excise brackets and the cost of financing, and the same layers of tax, regulation and energy weigh on most other firms. Of those, only the federal tariffs are out of local reach. That leaves the coming votes on permits and taxes, and the Board’s decisions on emergency relief, as the measures most likely to show whether the call for economic freedom gains traction.

Costs the island cannot set on its own

Some of the cost of a vehicle is set in Washington. Federal tariffs under Section 232 of the Trade Expansion Act apply to imported vehicles and auto parts, and Puerto Rico, as part of the U.S. customs territory, pays the same duties as the states. Bilateral trade agreements have adjusted rates for some trading partners since 2025, but the tariff layer is common to all buyers on the island.

Shipping adds a further layer. Trade between U.S. ports must move on U.S.-built, U.S.-flagged vessels under the Jones Act, a long-debated cost for an island economy. The Chamber, Aparicio told the seminar’s participants, has committed to documenting before Congress how tariffs and maritime transport raise the final price consumers pay for vehicles in Puerto Rico.

Because the island cannot change those federal rules, the Chamber’s proposals focus on the costs it does control, starting with taxes and the financing and insurance that surround every vehicle sale. It has committed to convening a working group with banks, cooperatives and insurers to expand competition and reduce red tape in auto loans and policies.

Excise taxes and the push for reform

Vehicle excise taxes are among the first targets. Aparicio said collections rose from about $300 million in 2015 to $740 million in 2024, more than double in less than a decade, “not because Puerto Rico is buying twice as many cars, but because prices went up and the brackets stayed frozen in time.”

The Chamber proposes updating and indexing those brackets as part of a comprehensive tax reform it is discussing with the Puerto Rico Manufacturers Association, the Puerto Rico Society of Certified Public Accountants and the Centro Unido de Detallistas.

The coalition publicly launched its effort on May 1 under a “high base, low rate” principle: broaden the tax base by trimming exemptions and preferential treatment, lower rates substantially, simplify the system and consolidate filings, according to the CPA Society.

The talks also involve public officials. On April 2, the Oversight Board met with the CPA Society, the Chamber, the Manufacturers Association and the Centro Unido de Detallistas to present simulations of a tax reform and gather recommendations, according to the CPA Society.

That consultation followed the governor’s second-phase tax bill, sent to the Legislature in January, which would lower rates for middle-income workers, double the dependent deduction to $5,000 and apply the top 33% rate only above $150,000 of income.

The Board said in January that the proposal violated PROMESA and the fiscal plan, estimating a net revenue loss of about $370 million in fiscal 2026, according to published reports. The private groups argue that piecemeal relief is no substitute for a structural overhaul, and the current status of both efforts is unclear as November begins.

Lessons from Switzerland, New Zealand and Chile

To support his argument, Aparicio pointed to Switzerland, New Zealand and Chile. None of them builds vehicles at scale, he said, yet each reduced tariffs and red tape until its market became more open and competitive than Puerto Rico’s.

Switzerland abolished import duties on industrial goods, including cars and bicycles, on Jan. 1, 2024, regardless of country of origin, while keeping duties on agricultural products. The Swiss government estimated welfare gains of about 860 million francs a year and said it would monitor whether the savings reach consumers.

New Zealand began cutting tariffs on imported vehicles in the late 1980s, and a wave of used imports followed. Local assembly ended by the late 1990s, and the country removed its remaining car tariffs in 1998, according to the government’s encyclopedia, Te Ara.

Chile applies a uniform 6% import tariff, but its network of free trade agreements has pushed the effective rate it collects below 1%, according to published reports based on Chilean customs data.

All three countries control their own trade policy, while Puerto Rico does not. What the island does control is its excise tax on vehicles, its permit process and the regulatory cost of financing and insuring a car, which is where the Chamber’s proposals aim.

An economic emergency and the power bill

Aparicio also repeated his warnings about what he calls a national economic emergency, driven by rising energy costs. He described the economy as showing “all the red lights, as if on a dashboard,” and his remarks land as economists tell the Oversight Board that the island is stuck in neutral.

The diagnosis matches the Board’s Economic Forecast Symposium on Nov. 4, where forecasts for the coming year ranged from a 1.4% contraction to 0.3% growth. V2A Consulting said commercial electricity prices have risen 31% since 2019, and estimated that a 20% increase in power costs removes about $935 million a year from the economy.

Residential electricity reached a record 33.86 cents per kWh in October, and small and midsize businesses face rates above 36 cents.

The Centro Unido de Detallistas has warned that as many as 12,000 small and midsize businesses could close, putting about 70,000 jobs at risk, the feared Pymes Power Cliff.

 Aparicio said the Chamber met with John Nixon, a member of the Financial Oversight and Management Board, to discuss using the government’s emergency fund for at least temporary relief on electricity costs.

“We told him they had to show sensitivity, that this is something that should be public policy. The emergency does not necessarily have to be a climate emergency,” Aparicio said, defending the use of those funds to soften the increase in power bills.

Permit reform and the search for consensus

On permit reform, Aparicio said about 10 business and professional groups continue to meet to build consensus on the legislative proposals under consideration. In addition to the Chamber, they include the Centro Unido de Detallistas, the Manufacturers Association, the Puerto Rico Builders Association and the Associated General Contractors.

He said the groups will likely work from the Senate bill, which they support at “80% or 90%,” while proposing amendments. “It looks like the work will be done on the Senate bill, which is a bill we agree with 80% or 90%, but we have amendments we want to suggest,” he said.

The Senate approved its reform on Oct. 13, merging Senate Bill 1173, by Senate President Thomas Rivera Schatz, with Senate Bill 1183, filed by the governor’s administration. The measure sets mandatory deadlines for agencies to decide permit requests, grants automatic approval when they miss them and creates a declaration-of-use mechanism for certain activities.

Gov. Jenniffer González Colón says her administration has accepted more than 70% of the Senate’s amendments and will send lawmakers a further package, with Nov. 12 the last day for approval of measures in the current session.

Taken together, the speech sketches the cost of doing business on the island. A car’s price reflects federal tariffs, shipping rules, frozen excise brackets and the cost of financing it, and the same layers of tax, regulation and energy weigh on most other firms. Of those, only the federal tariffs are out of local reach. That leaves the coming votes on permits and taxes, and the Board’s decisions on emergency relief, as the measures most likely to show whether the call for economic freedom gains traction.