In a time frame of over four decades, Puerto Rico has transformed from an agricultural economy, based on tobacco, sugar and coffee products to a progressive, industrial and services-focused economy. In the 1940’s, agriculture accounted for 33.7% of Puerto Rico’s total net income with manufacturing contributing 12.8%. By the year 2002, agriculture consisted of no more than 1.0% of net income, while manufacturing has upped its contribution to 45.7%. The financial sector, with a 15% contribution was the 2nd largest contributor.
To allow the Puerto Rico economy to evolve and become competitive in today’s globalized markets, the government needs to address new challenges with innovative, creative and responsive strategies. The fact that Puerto Rico is a commonwealth and enjoys fiscal autonomy in relation to the US has given the authorities discretion to design tax incentives aimed at attracting direct foreign investments. It was this major tool that created opportunities for different administrations to push the manufacturing and services sectors of the economy. In addition, the government has begun to adopt a more efficient system associated with regulations and permits processing that should hasten the development of new business and the creation of a more robust climate of entrepreneurship.
Puerto Rico’s Infrastructure
Puerto Rico does not rely solely on its fiscal advantages. Its human resource and physical infrastructure are fairly well-developed. Its modern highways, ports and airports make the movement and distribution of merchandise fast within and out of the island. Its communication network and systems are efficient. It has a sophisticated workforce that is bi-lingual and driven to face the continuing transformation of the Puerto Rican economy. The private and public sectors have combined forces to develop in Puerto Rico 5 major and critical clusters: pharmaceuticals, communications and information technology, biotechnology, medical devices and health services. These business clusters help the country to deal more optimistically with the wave of new challenges that it faces today.
The Rough Times
Economy-wise what generally happens in the US happens in Puerto Rico. The latest economic downturn though has been fiercer and has stayed longer in Puerto Rico than in the US Mainland. This recession began in the latter part of 2006 when the economy contracted. During the ensuing 8 years Puerto Rico’s real GDP has either gone down or grown very little.
According to the Census Bureau’s Community survey, in the previous years, 55,000 Puerto Ricans had left for the US. In the last decade 300,000 residents had left in search of better opportunity. There are now more Puerto Ricans in the US (4.9 million) than in Puerto Rico itself (3.7 million).
Unemployment – The Big Problem
Per Department of Labor and Human Resources, the figure for jobs has fallen by 15.4% in 2004 and in 2013, there were just a little over a million jobs available. The labor force participation in productive economic activities has dropped to only 41% compared to the US and Latin America’s average of 60%.
El Nuevo Dia recently (Sat, Dec. 13 2014) did a poll of their readers asking why Puerto Ricans are leaving the island and moving to the U.S. Here are the results:
1) Higher quality of life – 46%
2) Personal Economic Situation – 28%
3) Has a job in Florida – 5%
4) High crime rate (escaping from) – 5%
5) Other reason – 5%
6) Professional advancement – 4%
7) no job – 3%
8) Cheaper to live in U.S. – 2%
9) family in U.S. – 2%
Tourism – Helping to Boost Puerto Rico’s Economy
The Puerto Rican government is looking at tourism to help boost the economy. Their plans over the next three years aim to jack up Tourism’s GDP contribution from 6 to 8% which spells an increase of US $1.2 billion or an expected total of US $3.6 billion by 2015. In the works are construction of more hotel rooms and guest houses and the expansion of air connections to more than its current 17 countries and 24 destinations.
This, along with the encouraging response to Acts 20 and 22 that economy news is reporting to be attracting new, foreign businesses into Puerto Rico might just be the light at the end of the tunnel.