Encouraging entrepreneurs
Creating a favorable environment for investors and business people

Puerto Rico intends to maximize its strategic location and take advantage of the liberation of trade across the continent. The Free Trade Agreement of the Americas (FTAA) and the Central America Free Trade Agreement (CAFTA) both offer significant opportunities for local exporters and manufacturers.

The government is eager to inject momentum into the island’s industrial and commercial sector with a series of innovative development plans, aimed at stimulating investment, creating jobs and supporting the growth of small businesses. These include financial incentives for foreign and local investors, tax breaks and infrastructure improvements.

MILTON SEGARRA Secretary of Economic Development and Commerce

Milton Segarra, Secretary of Economic Development and Commerce, says these measures will make the island more competitive in its attempts to attract global capital. The elimination of the U.S. internal revenue code Section 936 – directly related to the development of the local industrial sector – was a setback, but now the island must find its own way to compete. He believes it is ideally placed to partner U.S. interests with an eye on Latin America. “With Puerto Rico knowing the way Latin Americans think and do business, we can help and bring added value to a U.S. firm in negotiations.”

Puerto Rico’s track record in pharmaceuticals production means it can realistically expect to bring in innovative new companies in areas such as biotechnology, nanotechnology, robotics and space engineering. In addition to its well trained, bilingual labor force, unique tax system and a strategic geographical position, large infrastructure developments are set to make the island even more attractive to exporters.

“We need to continue reducing the cost of doing business here and to make the permit process more flexible and less burdensome for investors, to keep the economy moving,” adds Mr. Segarra.

The Puerto Rico Industrial Development Company (Pridco), a state agency responsible for promoting the island’s advantages to investors, is helping to refine this competitive profile, in collaboration with other groups. Héctor Jiménez Juarbe, Pridco’s Executive Director, says Puerto Rico has everything it needs to be successful. “We have the infrastructure and we have a government committed to that purpose. We also have the private sector and academia working to that end.”

GROSS DOMESTIC PRODUCT BY MAJOR INDUSTRIAL SECTOR

In San Juan, new legislation has been approved to promote future industrial development, to compensate for the demise of traditional labor-intensive manufacturing activities. The Industrial Tax Incentive Act provides a tax bracket of 7% and can go down to 2% or less in the case of pioneer industries, those that introduce new products and innovations to the country.

Puerto Rico is also promoting the industrial cluster concept to attract like-minded businesses who can interact in fields like pharmaceuticals, medical devices and IT services.

Mr. Juarbe thinks credibility is very important. “We need to convince people that our programs are good, that we are the best place to invest, that we can compete with any other country and that we can create the appropriate environment to help companies grow and be profitable.”

PromoExport, a public corporation in charge of promoting exports, wants to make sure that Puerto Rican enterprises benefit from the changes. Executive Director Antonio Sosa Pascual says there are plenty of areas where local firms are already strong, such as food and beverages, manufacturing and technology.

“The trade balance is positive because of the high value of the production that takes place here,” says Mr. Pascual. “This is largely due to the level of pharmaceutical exports.” These goods make up approximately two thirds of total exports.

While Puerto Rico has shown it can manufacture world-class products there is a need to filter the export success down the line to locally-based small- and medium-size companies. It is a priority to ensure that local businesses understand the implications of the new free-trade agreements.