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<div class="header reader-header reader-show-element"> <font
size="-2"><a class="domain reader-domain"
href="https://www.gq.com/story/how-puerto-rico-became-tax-haven-for-super-rich">https://www.gq.com/story/how-puerto-rico-became-tax-haven-for-super-rich</a></font>
<h1 class="reader-title">How Puerto Rico Became a Tax Haven for
the Super Rich</h1>
<div class="credits reader-credits">Jesse Barron - September 18,
2018<br>
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<p>A year after the tragedy of Hurricane Maria, the
51st state has become the favorite playground for
extremely wealthy Americans looking to keep their
money from the taxman. The only catch? They have
to cut all ties to the mainland (wink, wink).</p>
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<p><strong>The party known as Cocktails and Compliance</strong>—so
called for mixing alcohol with tax advice—was thrown
on a Friday evening in May, in a warehouse turned
art gallery in Old San Juan. The host had kept his
guest list confidential: It contained the names of
hundreds of ultra-wealthy mainland Americans who'd
moved to Puerto Rico to avoid paying taxes, most of
whom were reluctant to advertise that fact. More
than 1,500 mainlanders have established residency
here since 2012, when the island rebranded itself as
a tax haven, and the annual Cocktails is at the
center of their social calendar.</p>
<p>At a high table, polishing off a bourbon on the
rocks, sat a compact man in his 60s wearing a black
T-shirt and black suede loafers, no socks. This was
Mark Gold, the Florida-born kingpin of
traffic-ticket contesting. Gold has attended
Cocktails and Compliance every year since moving to
Puerto Rico in 2016. “I was looking at different tax
havens,” he said, “Andorra, Lichtenstein, Monaco.
But the problem is, you have to give up your U.S.
passport. When I heard about this, it was too good
to be true. But it's real. I live in paradise. I
live at the Ritz-Carlton. I drive my golf cart to
the beach club for breakfast. Then I go to my sunset
yoga class on the beach.”</p>
<p>A waiter offered to replace his drink. “Why not?”
said Gold.</p>
<p>Only seven months had passed since Hurricane Maria
laid waste to the island's power grid, and one month
remained until hurricane season returned. A reliable
estimate placed the death toll at 4,600; 11,000
still reportedly lacked electricity. Residents were
showering with pots and plastic cups. In Manhattan,
a federal judge was trying to mediate between the
various hedge funds that held billions of dollars of
the island's debt. Every so often the MIT-educated
governor went on television to extol the virtues of
austerity.</p>
<p>In San Juan, the recovery had been notably uneven.
Brand-new shopping centers abutted hotels that
looked arsonized; traffic lights stared dead-eyed
into the street; FEMA was shuttling relief supplies
from the waterfront to staging areas. Inside
Cocktails and Compliance, however, the atmosphere
resembled the aftermath not of a natural disaster
but of a corporate convention, with people who
usually saw one another in the daytime gradually
succumbing to alcohol and dim lighting.</p>
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<p>From the valet station, guests had entered a
red-carpeted freight elevator, where bartenders
poured them sangria. There were reasons to raise a
toast. In 2012, Puerto Rico had passed two laws
intended to make the island a “global investment
destination.” Act 20 allows corporations that export
services from the island to pay only 4 percent tax.
Act 22 goes much further: It makes Puerto Rico the
only place on U.S. soil where personal income,
capital gains, interest, and dividends are untaxed.</p>
<p>In order to qualify for Act 22, individuals must
prove to the IRS that they have become bona fide
residents of Puerto Rico, without “close contacts”
on the mainland. (Most native Puerto Ricans are not
eligible for the exemption.) At the party, I heard
about a man who had lost his tax-free status because
the IRS smoked out a wife back in Dallas. I asked
Gold, 63, whether his wife had moved along with him.
“Now, this is where the colorful-character shit
comes in,” he said. “My third wife, she's 25. She
was in college. I told her, ‘Babe, you gotta go to
college in Puerto Rico, I'm really sorry. We have
this opportunity that I <em>cannot</em> pass up.
You can stay if you want, but if you stay, we gotta
get divorced.’ ”</p>
<p>Though the law requires him to spend at least 183
days a year on the island, Gold claimed he spends
closer to 250. <em>“Soy boricua,”</em> he said
proudly—I am Puerto Rican.</p>
<p><strong>The mainlanders who have relocated</strong>
are not quite <em>Forbes</em>-list billionaires,
who have access to more complex tax strategies than
leaving town; they belong to the middle class of the
ultra-rich. They are new-money people who might not
have their congressman's cell-phone number back home
but who wield influence here in Puerto Rico. “Back
in the States, I'm just one of 300 million voters,”
James Slazas, a hedge-fund quant, told me at the
party. “Here I've already met a lot of the key
players.”</p>
<p>Seated nearby was Harry Dent, the best-selling
finance writer, who established residency in Puerto
Rico two years ago. Dent's latest book, <em>Zero
Hour,</em> foresees an imminent “economic winter
season” that will eclipse the Great Recession, due
in part to the shortage of consumers occasioned by
the bottoming out of the birth rate in 1973. (The
happy prospect of the boomer generation hurtling
toward decrepitude makes him bullish on the health
care sector, however.) Puerto Rico appealed to him
because it was cheaper than Miami and offered
excellent small airports. He also got to keep his
American citizenship, though he had to give up his
right to vote for president. This last bit didn't
worry Dent in the slightest.</p>
<p>“I could give a flying fuck,” he said. “We've got a
civil war going on. Red versus blue. We've got 4
percent unemployment, and I feel safer being here
than in Miami or New York. The world's going to
shit, and that doesn't mean Puerto Rico won't go
down further. But they are already way down. Our
bubble hasn't even burst yet.” Behind him waiters
circulated silver trays of golden phyllo florets. A
giant artwork on the wall showed a slave on a
tobacco plantation, emerging from a background of
gold leaf.</p>
<p>A little after eight o'clock, a tax consultant
named David Marshall Nissman strode to the front of
the room, where a lectern had been set up. Nissman
used to be the U.S. attorney for the Virgin Islands.
Today, he helps wealthy clients parry audits, which
tax exiles regard with abject terror.</p>
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<p>To comply with Act 22, Nissman said, it all came
down to what everyone called “making days.” If you
spent fewer than 183 days a year on the island, the
feds could recoup all the taxes you hadn't been
paying. The good news was that there were a lot of
ways to obey the letter, if not the spirit, of the
law. There was the “one minute” rule: A single
minute on the island counts as a full day, as far as
the IRS is concerned. You can touch down your
Learjet, get a receipt at the airport Starbucks,
then continue on to the Virgin Islands for dinner.
The local government could be accommodating as well:
In 2017 all Puerto Rican tax exiles got a 117-day
“award” due to Maria.</p>
<p>A Puerto Rican–born lawyer specializing in Act 22
compliance, who asked for anonymity to speak about
his work, told me that he no longer represents
clients seeking to relocate because “people were
taking advantage.” He described a prospective Act 22
recipient saying, “ ‘I'll take my private jet and
fly down; then I'll take my boat and go somewhere
else. They won't know.’ ”</p>
<p>As Nissman warned against exactly such behavior, a
slim man in a black blazer and jeans sat nearby with
his hands folded in his lap. Robb Rill was the host
of Cocktails and Compliance and the glue at the
center of the tax-exile community. During the party,
he observed his guests like an anxious football
coach hoping a rowdy busful of athletes will refrain
from mooning the highway. And that was at the <em>beginning,</em>
while people were mostly sober.</p>
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<p>The open bar kept serving during dinner and through
the lectures. Neckties loosened. In the middle of my
interview with Mark Gold, Rill stopped by our table
to caution him, “Once it's in print, it's in print.”</p>
<p>This warning, of course, made it inevitable that
Gold would demonstrate its wisdom. During a
presentation on the Trump tax plan, Gold shot up his
hand: “Is it true that we can now write off the
purchase of a jet in one year?”</p>
<p>“No, no,” said Rill, almost inaudibly. But it was
futile. All the pent-up energy in the room, stifled
by the minutiae of the SALT deduction and the
income-sourcing rule, unwound itself into cheering
and applause.</p>
<p>“That is exactly the image,” said Rill, “that we
are <em>not</em> trying to portray.”</p>
<p><strong>Robb Rill grew up in Florida</strong> and
made his money in private equity. In 2011 he and his
wife, then a securities trader, went looking for tax
havens. At first they settled on the Virgin Islands,
selecting a house on the edge of a cliff. The house
turned out to be a metaphor: Immediately after they
found it, a dispute with a local official blew up
their plan. A Google search led them to Puerto Rico
and Act 22, and by 2013 they were here.</p>
<p>Rill invited me to his office for a “healthy yet
delicious meal,” and I parked on a bright afternoon
at an office building behind a Starbucks. Rill is 47
but looks younger, with his hair pulled back in a
bun and a goatee framing a pale, tapered face. “I
was one of the first ten people to actually move
under Act 22,” he said, taking his seat in a
red-walled conference room. “There was literally
nobody here.” His accountant, Jorge Kuilan, sat to
his left, wearing a paisley shirt and a cryptic
smile.</p>
<p>Rill wanted to convince me that the acts were an
economic boon to the island. The “tax hacks”—as he
called them—created jobs for Puerto Ricans, like
Kuilan. (The acts together have created 12,000 new
jobs, according to the government, out of a total
workforce of 1.1 million.) Rill's 20/22 Act Society,
the organization that hosts Cocktails and
Compliance, also funded relief work after Maria. On
weekends, he rescued street dogs; he had opened a
shelter for them, on an old farm several miles
outside the city. “We're trying to break the
stereotype,” he said, of “a bunch of rich guys
flying in on their private planes, helicoptering
into their private walled resort.”</p>
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<p>During a presentation on the Trump tax plan,
one audience member shot up his hand: “Is it
true that we can now write off the purchase of
a jet?”</p>
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<p>As he spoke, his personal chef entered the
conference room. She was carrying plates of
branzino, lentils, zucchini, and mushrooms,
prepared—Rill explained—according to the principles
espoused in a dietary manual called <em>How Not to
Die.</em> Page 135 counsels the reader to drink
hibiscus tea; Rill sipped a crimsony liquid from his
thermos. “This may all be ridiculous,” he said, “but
if it's true, I'll be healthy forever. It's an
asymmetric trade, the kind of trade I like.”</p>
<p>As a rule, tax hackers in Puerto Rico live in one
of two neighborhoods. Single people favor the
beachfront in Condado, which has easy access to
hotel bars and nightclubs. Married people like the
Rills prefer Dorado Beach, where the Ritz-Carlton
runs a hotel and residential enclave. In Dorado, the
couple bought two units and combined them. “I'm told
I have the largest condo on the island,” Rill said.
“I'm in 8,000 square feet.” (The acts used to
require that mainlanders buy property, but like most
of their requirements—including a stipulation to
employ five local residents—it was erased by
subsequent revisions meant to entice more wealthy
people to relocate.)</p>
<p>Rill was emphasizing his footprint because it
demonstrated his investment in the island; no “close
contacts” on the mainland for him. “Some people I
know have tried to play fun and games,” he said. “We
don't want the schemers here.”</p>
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<p>Rill assured me that I would find more people like
him. I did find a few. Lauren Cascio, 30, moved to
the island six years ago. There were incentives here
she didn't have elsewhere, like a tax credit for
manufacturing and the ability to hire from an
incubator for Puerto Rican–born engineers. She's
raised her two children here while starting a
company, Abartys Health, which sells data-management
software and employs ten local engineers.</p>
<p>“Everyone I employ is Puerto Rican,” she said. “I
live a Puerto Rican life. I'm not ‘making days.’ ” I
asked whether she believed everyone should have to
hire locals in order to get the exemption. “People
here will hate me for saying this,” she said, “but
they shouldn't have reduced the job requirement.”</p>
<p>I also spoke with María del Mar Ortiz, a Puerto
Rican native who left the island for college and
eventually took a job in finance. A few years ago,
she opened We Got This, a concierge-and-lifestyle
business that caters to tax hackers. “It's a big
opportunity for me,” she said. Her employees drive
men like Rill and Gold, cook their meals, clean
their bathrooms, help them furnish a new house. I
asked how much of her business was attributable to
the acts. One hundred percent, she said.</p>
<p>While Rill, Cascio, and Ortiz could speak
convincingly about the positive effects of the tax
policies, they were not the most ardent believers in
Act 22. That distinction went to an independent
stock trader I met named Lobo Tiggre. A slim man in
middle age wearing silver bracelets and a black
beard, he met me for a beer on the terrace at the
Condado Vanderbilt Hotel. He and his wife had
arrived as residents four minutes before midnight on
December 31, 2013.</p>
<p>“I believe it is my moral duty to minimize my
taxes,” Tiggre said, and Act 22 was a legal way to
pay the absolute least. Tiggre thought, indeed, that
the privilege he enjoyed should be extended to
everyone. Some things that taxes pay for, like the
police and the military, he said could be supported
through voluntary contributions. “If people are too
stupid to voluntarily agree to band together and
defend themselves,” he said, “then maybe they
deserve to be conquered by Attila the Hun.”</p>
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<p><strong>The Serafina Beach Hotel in Condado</strong>
hosts a pool party every weekend that is popular
with the younger tax hackers. Here the proprietor is
Vittorio Assaf, the parodically charismatic
restaurateur who made his name and fortune in New
York City, opening Café Candiotti, with original
paintings by Andy Warhol inside, in the '80s and
establishing Serafina in 1995. He had been lured to
Puerto Rico by John Paulson, a hedge-fund manager
who'd bought up much of the real estate in Condado.
“When John invited me, you know, he was trying to
invent Puerto Rico,” Assaf said. (Paulson still
lives in New York.)</p>
<p>I asked if Act 22 had delivered on its promise of
lifting the island's economic fortunes. “They come
all the time, they spend money,” he said of tax
hackers. “They buy apartments, they do investment on
the island. I mean, I guess it's fantastic. If they
didn't have these guys coming down, then there would
be really big trouble.”</p>
<p>There were bottles of pink champagne in dewy silver
buckets, a DJ, an infinity pool. Shimmy McHugh, a
nightlife impresario from New York, was at a prime
table, chatting with a friend, the Puerto Rican–born
president of a water-filtration company. They
surveyed the scene. “We lost, I have to say, 80
percent of our good-looking women in the last two
years,” McHugh said. “Bad economy, and Maria was the
icing on the cake.”</p>
<p>For McHugh, Act 22 was essential, an unmitigated
good. “See that guy right there?” he said. “Black
shirt and khaki pants? Five million a year in the
Internet affiliate-marketing space. This guy has no
problem dropping four grand a night.”</p>
<p>McHugh's friend agreed: “For a club owner or a
promoter like Shimmy, it's good. You have this guy
at a table, and he's spending that money, and you
have other guys at another table. They start
competing with each other.” I excused myself to go
find a pack of cigarettes.</p>
<p>At the liquor store across the street, George
Rivera, 29, was working his shift. He knew about the
tax hackers but never saw them; they didn't do their
own shopping, as far as he could tell. Rivera earned
$7.25 an hour. “I pay 11.5 percent in taxes” plus a
30 percent markup on imports, he said. Yet the
island was a mess. The power grid lay shattered, and
hurricane season was on its way. “We need taxes from
the <em>rich.</em>” Rivera shook his head. It's
like the rest of the U.S., he concluded: “It's the
same shit.”</p>
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<p><strong>In San Juan,</strong> I often heard some
version of the following aphorism: “A few percent of
something is better than 39 percent of nothing.”
Meaning: “The few dollars we contribute in sales and
property tax is better than the zero dollars we'd
contribute if the incentives hadn't drawn us down
here.” Peter Schiff, a libertarian podcast
personality who moved to Puerto Rico after Act 22,
put it bluntly: “Who would come to a bankrupt island
to pay high income taxes?”</p>
<p>Act 22 was only the latest tax incentive cooked up
by the government. The economy here used to run on
sugar, and when the price of sugar sank in the
1930s, the island began offering tax breaks to
corporations that opened factories here. In the
short term, the policy ignited a boom. Workers sewed
clothing; StarKist canned tuna; factories churned
out paper, cement, and glass.</p>
<p>When manufacturing collapsed in the '70s, the
federal government engineered a second boom by
enticing pharmaceutical companies to relocate to the
island. In 1989, Pfizer got $156,400 in tax breaks <em>per
employee.</em> By 2004, they were reportedly
manufacturing 100 million Viagra pills a year in
Barceloneta. But the tax break that supported those
jobs was sunsetted by Congress in 2006, just in time
for the Great Recession.</p>
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<p>She asked, “Are we on record?” When I said we
were, she smiled, touched her sunglasses, and
stared silently out the window.</p>
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<p>To sell Act 22, the secretary of economic
development met privately with financiers in cities
across the United States, and the government hosted
investment summits in San Juan. At one event, in
2015, Rudy Giuliani gave the keynote address.
Bloggers predicted the next Singapore, the next
Dubai, the next Hong Kong.</p>
<p>Manuel Laboy Rivera, the official currently in
charge of the policy, told me, “The rationale is
these individuals will never consider Puerto Rico in
the first place, never consider bringing their
capital and wealth on the island.” He stressed the
importance of “bringing diversity,” people with “all
kinds of backgrounds: investment bankers,
consultants.” He has never turned down an
application under Act 22.</p>
<p>Rafael Bernabe, a professor of literature at the
University of Puerto Rico and two-time candidate for
governor on the Working People's Party ticket,
doubted the new laws would be any more durable than
those that had come before: “They can't think of
anything besides new versions of the same policy.
‘Let's try and invite wealthy people.’ That's a drop
in the bucket. They will hire a few gardeners,
create jobs for a few more waiters.”</p>
<p>Bernabe suggested that the government has kept the
initiatives hidden in gated communities and hotel
conference rooms entirely by intention. “Having a
little island of affluence in the midst of this
crisis? The more hidden it is, the better. When
people find out, they will say, ‘Motherfucker, why
can't the government find some programs to help <em>me?</em>’
”</p>
<p>“Well,” I said, “they claim a few percent of
something is better than 39 percent of nothing.”</p>
<p>“If I am a beggar in the street,” Bernabe shot
back, “and they give me ‘something,’ I will say
thank you. But it would be better if I wasn't a
beggar.”</p>
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<p><strong>It was gray and spitting rain</strong> when
Mark Gold took me out in his golf cart in Dorado
Beach, a lush and quiet development of 500 homes,
some of which are managed by the Ritz-Carlton,
invisible from the main road. Once a coconut and
grapefruit plantation, Dorado Beach is now flooded
with tax hackers; home prices doubled overnight
after the passage of the acts.</p>
<p>“The guy I bought my house from paid one point
three million,” Gold said. “I paid two point six. My
property tax is $4,000 a year. They haven't
re-assessed it since 1957.”</p>
<p>“What?”</p>
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<p>“Mm-hmm. Go ahead and print that. Maybe they'll
figure it out.”</p>
<p>We passed a trio of luxury-apartment towers. “This
is called Plantation One, Two, and Three,” said
Gold. “That's where Robb lives. He's got 8,000
square feet. I guess he needs that for him, his
wife, and his dog.” We passed a water park where
children were playing in the sunlight. “We've got
two slides,” said Gold. “The slides are sick, man.”</p>
<p>On the drive back toward Gold's house, we skirted a
wide green field where a helicopter was parked—the
quickest way to the airport. A woman supervised her
toddler, who was playing on the gleaming black
machine.</p>
<p>I asked Gold, who was not on the island during
Maria, how the hurricane had affected the area.
“Half the island closed and didn't reopen,” he said.
“Unfortunately the Ritz spa is closed. It was
phenomenal. Part of our nature trail, too. It was
like a tropical forest. It was hammered.” Even the
Ritz hotel itself—where, for $999 a night, the rooms
include dedicated butlers—remained closed, though in
the aftermath of the storm, when much of the island
wanted for fuel and emergency services, a private
security force with firearms protected the Dorado
Beach grounds, so nothing befell them.</p>
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<p><strong>On one of my last afternoons in San Juan,</strong>
I met Brian Tenenbaum, a real estate developer.
Tenenbaum moved here in 2014, looking for distressed
buildings to buy and renovate. Starting from the
Vanderbilt hotel, we took my rental car for a tour
of his properties.</p>
<p>“So you see,” Tenenbaum said as we bounced on
spotty roads, through glitching streetlights.
“Bombed out, bombed out, bombed out, bombed out,
bombed out, bombed out, abandoned, abandoned. Here,
we're fixing this up.”</p>
<p>Across from the fenced-off waterfront, we saw
several blocks of concrete skeletons. These, said
Tenenbaum, were a new development project, located
where a thousand public-housing units had previously
been demolished. The new buildings would hold 200 or
300 larger apartments, some market-rate and some
subsidized. “It's the new model of how you do
affordable housing,” he said.</p>
<p>We stopped at a white stucco building with rounded
colonial edges, azure trim, and a terra-cotta roof.
Tenenbaum's firm bought it out of foreclosure—the
Puerto Rican owner lost the property during the
crisis to a bank, which sold it to Tenenbaum's firm
at a discount. Tenenbaum would lease the studios
there for $1,800. He then took me to Santurce, a
central neighborhood built around a wide tree-lined
boulevard, to look at his potential pool of tenants.
“See how it's getting lusher and green? This is
where my office is.”</p>
<p>Tenenbaum's lunch date was a scout from a hedge
fund who was here to meet with the Puerto Rican
authorities about the government's bond debt. Most
of the people who spoke with me for this article
seemed unsure of how to talk to a reporter, and it
was not uncommon to spend a relaxed afternoon with a
person and receive several urgent messages the next
day. Marc Bejarano, who works at a local start-up
incubator, spoke to me on the phone for an hour,
then texted to ask if we could “collaborate” on this
article because, he explained, “it'll be hard to
write a piece with this subject matter in such a way
as to not lead the reader to draw certain
conclusions.” This scout belonged to a different
stratum of financial player. No sooner had the car
door closed than she asked, “Are we on record?” When
I said we were, she smiled, touched her sunglasses,
and stared silently out the window.</p>
<p>I tried to imagine the city through the eyes of
this scout and her hedge-fund clients. As soon as I
did, Robb Rill and Mark Gold and even the acts
themselves began to seem like a sideshow to what was
really happening in Puerto Rico. There were forces
operating here that had no interest in the property
taxes at the Ritz or which pool you swam in on
Saturdays. The real money talked directly to the
government about the power grid and the outstanding
debt, issues that could make or break the entire
economy. The acts only reflected reality: Government
is a business, and its most important customers are
the rich.</p>
<p>“At some point soon, we're going to have 10,000
individuals,” José Pérez-Riera, the government
secretary who first conceived of the acts, told me.
“Just imagine the amount of development. This is the
beginning of the story, if you will.”</p>
<p>As I was driving Tenenbaum through the center of
San Juan, I saw something in the middle of the road,
green and fluorescing in the afternoon sunlight. I
realized it was an iguana just before I drove over
it.</p>
<p>“Did I hit him?” I said.</p>
<p>“Don't worry,” said Tenenbaum. “Here they encourage
you to eat them.”</p>
<p>He was right. Green iguanas are an invasive species
in Puerto Rico, and the government was encouraging
consumption as a form of population control.
Introduced as pets, the animals were initially quite
rare. Indeed, no one noticed iguanas in the early
years: Puerto Rico contains a highly diverse
biosphere, in which a thousand new animals could
exist for a brief period without anyone paying any
mind. But the climate of the island agreed with
them, and soon their numbers grew exponentially,
until suddenly iguanas were turning up
everywhere—burrowing under roads, swarming airport
runways, consuming all the crops. The farmers
realized they should kill them, but by now it was
too late.</p>
<p><strong>Jesse Barron</strong> <em>is a journalist
based in Los Angeles.</em></p>
<p><em>A version of this story originally appeared in
the October 2018 issue with the title "Puerto
(Very) Rico: The Newest Haven for the Super Rich."</em></p>
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