Hedge fund manager John Paulson said that he believes Puerto Rico is set to become the Singapore of the Caribbean at the 2014 Puerto Rico Investment Summit earlier today and that he is actively looking for more real estate opportunities as the beleaguered island turns itself around, reports Katherine Burton at Bloomberg. Paulson & Co already has $1 billion in commitments in Puerto Rico over the next two years, a significant investment even for such a large hedge fund.

John Paulson Puerto Rico

Paulson steadily building his Puerto Rico portfolio

Anyone who follows Paulson’s investments already knew that he was confident that the island would rebound. He recently finalized a deal to acquire two neighboring beach resorts in San Juan, the LA Concha Resort and the Condado Vanderbilt, for more than $200 million adding to his existing portfolio of Puerto Rican properties. He has reportedly decided against relocating to Puerto Rico to take advantage of the island’s generous corporate taxes (flat 4% of earnings and 100% tax exemption on dividends or profit distributions from export services), but plenty of other firms may decide that the deal is too good to pass up.

Investors bullish on Puerto Rican recovery

On the surface, Puerto Rico has had a rough six months. Its credit rating was downgraded and it was forced to start raising capital earlier than it may have liked if it weren’t under pressure. But investors have been confident that the commonwealth is on track to recover and that its government will get its budget under control in the next few years. Puerto Rico has previously been compared to Ireland, which recovered from the 2008 recession faster than almost anyone expected. Still, saying that it’s going to become the next Singapore, with its reputation for efficiency and business friendly laws, is surprisingly high praise.

For now, Puerto Rico still has double-digit unemployment and a recovering financial sector (though some analysts rate Puerto Rican banks among their top picks for the year). Paulson isn’t the only investor who thinks there is the potential for incredible returns there over the next few years, but that still depends on the government and local businesses delivering on their processes. Besides, a couple years from now Puerto Rico could become a US state, complicating some of the incentives that it is currently offering businesses to lure them away from the rest of the US.