Puerto Rico Tax Incentives for Polluters, Environmental Injustice

These facilities play a critical role in ensuring that hospitals worldwide have access to sterile medical equipment.

However, the process used by these plants, particularly the use of ethylene oxide, a potent carcinogen, has severe health implications for the communities living nearby.

In 2022, the Environmental Protection Agency (EPA) identified 23 commercial sterilization facilities in the U.S. and its territories that emit dangerous levels of ethylene oxide. Alarmingly, four of these facilities are located in Puerto Rico.

This is no accident; the clustering of these facilities on the island is directly tied to its tax code, which has a long history of incentivizing industries that bring economic benefits at the expense of public health.

The origins of Puerto Rico’s status as a tax haven can be traced back to the 1940s when the U.S. federal government initiated programs to transition the island’s economy from agriculture to industry.

This shift was accelerated in 1976 with the introduction of Section 936 of the federal tax code, which granted U.S. corporations complete federal tax exemptions for operating in Puerto Rico.

Pharmaceutical companies were the primary beneficiaries, attracted by the promise of tax savings, cheap labor, and abundant natural resources.

The repeal of Section 936 in 1996 forced the Puerto Rican government to enact its own tax incentives to retain these industries. The result was the Tax Incentives Act and the Economic Incentives Act, later consolidated into the Puerto Rico Incentives Code in 2019.

These laws have allowed companies, including those operating medical sterilization facilities, to continue enjoying substantial tax breaks despite their harmful environmental impact.

Ethylene oxide is widely used in the sterilization of medical devices due to its effectiveness in killing microorganisms without damaging delicate equipment. However, it is also a known carcinogen.

The EPA’s 2022 findings revealed that communities near Puerto Rico’s sterilization facilities face cancer risks that far exceed acceptable levels. For example, residents of Salinas, a town in southern Puerto Rico, are exposed to toxic emissions and cancer risks 1,000 times higher than what the EPA considers safe due to emissions from the Steri-Tech facility, the most toxic sterilizer in the U.S. and its territories.

Despite this, Steri-Tech, along with other companies like Edwards Lifesciences, Medtronic, and Customed, continues to receive generous tax incentives from the Puerto Rican government.

The DDEC, responsible for approving these tax breaks, rarely revokes them for environmental noncompliance, raising serious concerns about the priorities of local authorities.

Environmental Justice (DNER) and EPA -vs- Economic Development (DDEC)

The Puerto Rican Department of Economic Development and Commerce (DDEC) plays a crucial role in granting and renewing tax incentives for companies operating on the island. However, the agency’s ability to assess the environmental impact of these companies is severely limited.

This is not new nor unique to Puerto Rico.

The Puerto Rico Department of Natural and Environmental Resources (DNER) does not share its environmental compliance reports with the DDEC, instead communicating directly with the EPA. This lack of coordination means that the DDEC often lacks the critical information needed to evaluate the true impact of these companies on public health.

Even when companies are found to pose significant health risks, the regulatory response is often inadequate.

The EPA has implemented new rules requiring companies to install pollution controls to reduce ethylene oxide emissions, but these measures are not sufficient to protect the health of Puerto Rican communities.

The DDEC remains focused on economic growth, frequently at the expense of environmental and public health.

The situation in Puerto Rico is a stark reminder of the ongoing legacy of exploitation that dates back to the island’s colonial past. The tax incentives that were once seen as a means of economic development have instead become tools for corporations to maximize profits while disregarding the well-being of local communities.

The environmental and public health crises brought on by toxic emissions in Salinas, Puerto Rico, have had a profound impact on the local real estate market.

After examining the current state of the market on Realtor.com, it's clear that the area is suffering from widespread economic decline. Property values have plummeted, with many homes either in foreclosure or abandoned—some of them generational homes that have been passed down through families for decades. This decline reflects the broader consequences of allowing polluting industries to operate unchecked, further illustrating the deep and lasting damage being done to Puerto Rican communities.

As a resident of Puerto Rico, I am deeply disappointed by the persistent environmental injustices that continue to afflict the island.

The natural beauty of Puerto Rico and the health of its people are being sacrificed for the economic benefit of mainland corporations. It is imperative that we hold these industries accountable and demand a more just and equitable approach to economic development - one that prioritizes the health and well-being of all Puerto Ricans.

This article is based on the exclusive article "Why Puerto Rico Remains a Tax Haven for Polluters", by Grist (Aug 22, 2024), and, in collaboration with the Centro de Periodismo Investigativo (Center for Climate Investigation), and, reports from the Environmental Protection Agency (2022).

Héctor A. Suárez de Jesús / Centro de Periodismo Investigativo / Grist

Joaquín A. Rosado Lebrón, Lylla Younes, & Navena Sadasivam

Mark Derho is a seasoned expert in the Internet industry with over 25 years of experience in NYC's software development, digital marketing, and advertising sectors. A certified Google Partner, Mark specializes in content creation, AI chatbot development, open-source software, modern website design, and SEO/SEM marketing. He leads PR Website Agency and lives in Puerto Rico with his dog, Luno.

EPA Report (2022): Ethylene Oxide Commercial Sterilization

Google Maps: Salinas, Puerto Rico

Puerto Rico Department of Natural and Environmental Resources

Puerto Rican Department of Economic Development and Commerce (DDEC)