At an event organized by CRECE Center at Our House Restaurant, former Treasury Secretary Francisco Parés Alicea delivered a sweeping and candid assessment of Puerto Rico’s economic future.
His central message: the island is not investing seriously in artificial intelligence, and it is still operating a government structure designed for a population size that no longer exists.
Parés, who led the Department of Treasury for seven years, said AI could dramatically improve government efficiency, expand tax compliance, and strengthen Puerto Rico’s competitiveness. But he warned that political leaders have yet to recognize the scale of the technological shift underway.
“There is a revolution of almost industrial character,” he said, noting that the government has allocated less than $2 million for AI development out of a nearly $14 billion budget — a level he called “surreal.”
Parés argued that AI will fundamentally reshape how Treasury interacts with taxpayers. Today, fewer than 1% of Puerto Ricans ever face an audit — a limitation driven by manpower, not policy.
“Eventually all taxpayers, through artificial intelligence, will have a more active intervention from Treasury,” he said. “The ability to read financial information at scale will make audits possible in ways that were impossible before.”
He described AI as “very efficient reading documents,” explaining that automated systems could analyze financial records, detect inconsistencies, and flag risks far more accurately than human auditors. That shift, he said, would increase transparency, expand the tax base, and ultimately allow for lower tax rates for compliant taxpayers.
Parés even outlined a long‑term vision he once hoped to pursue:
“My dream was that taxpayers who shared their information digitally could enjoy a lower tax rate. To reward that level of transparency.”
Beyond technology, Parés used the forum to highlight a structural problem he believes Puerto Rico must confront: the government is too large relative to its demographic reality.
He said Puerto Rico continues to operate hospitals, university campuses, and public services designed for a population that has significantly declined — and continues to decline.
“If you know you’re going to have a smaller population, you have to consolidate your systems,” he said. “You can’t afford to have hospitals that are empty, universities that are half full, and services operating at half‑capacity.”
Parés illustrated the problem with the example of a hospital in Humacao that recently shut down. He said the facility had effectively ceased functioning long before its official closure.
“That hospital had five patients in beds for the past week,” he said. “There are more sick people in their homes than in that hospital.”
He added that the Department of Health was surprised by the closure because the operator never formally requested authorization but the real issue was that the hospital had stopped being viable long before any paperwork was filed.
For Parés, the Humacao case shows how Puerto Rico’s political culture treats consolidation as a defeat rather than a necessary adaptation.
“We insist on distributing misery,” he said. “We want things functioning at half‑capacity instead of consolidating and having fewer, better‑equipped hospitals.”
Parés also pointed to the University of Puerto Rico (UPR) as another example of institutional misalignment. He taught at UPR while serving as Treasury Secretary and said he saw firsthand how demographic decline and political resistance have eroded the system’s effectiveness.
He described visiting the UPR where he taught a course on tax policy.
“It gave me great sadness to see the campus,” he said. “They distribute resources across too many campuses to keep them alive, instead of consolidating.”
He criticized the system for prioritizing payroll over student needs:
“There’s never a missed payroll or missed payment of benefits but there is missing infrastructure, missing systems, missing paper towels,” he said. “That tells me the university stopped prioritizing the student.”
Parés warned that if UPR continues resisting structural reform, it will eventually face federal intervention.
“I have no doubt that by the route we’re going, we will once again be placed under the National Student Loan Program because of the condition of the system.”
Parés said Puerto Rico’s demographic trajectory — accelerated outmigration and rapid aging — is the most important indicator of governance effectiveness.
“We can improve unemployment, GDP, all the metrics,” he said. “But why did 17,000 people leave last year? That number should be much better.”
Unlike U.S. states that offset population decline with immigration, Puerto Rico lacks the ability to manage its own migration policy and struggles to attract new residents.
Parés said the core obstacle is political: elected officials fear the optics of closing facilities, even when those facilities are already functionally obsolete.
“Leaders don’t want to take those decisions, and they didn’t in previous administrations either,” he said.
He argued that Puerto Rico must confront the reality that a smaller population requires a smaller, more efficient government footprint, not the maintenance of outdated systems for symbolic or political reasons.
Parés encouraged young professionals to prepare themselves, cultivate networks, and pursue public service, but also to demand seriousness and accountability from political leaders.
He emphasized that Puerto Rico’s future competitiveness will depend on whether its next generation embraces innovation and insists on evidence‑based governance.
“This is an immense opportunity for growth,” he said of AI. “But we must demand that our leaders make it a priority.”
