Economy of Puerto Rico

The Economy of Puerto Rico is one of the most dynamic in the Caribbean region. A diverse industrial sector has surpassed agriculture as the primary focus of economic activity and income. Encouraged by duty-free access to the US and by tax incentives, United States firms have invested heavily in Puerto Rico since the 1950s. US minimum wage laws apply. Sugar production has lost out to dairy production and other livestock products as the main source of income in the agricultural sector. Tourism has traditionally been an important source of income for the island, with estimated arrivals of nearly 5.9 million tourists in 2007.

History

Spanish Colonialism

In 1935, United States President Franklin D. Roosevelt launched the Puerto Rican Reconstruction Administration, which provided agricultural development, public works, and electrification of the island.

In the late 1940s a series of projects called Operation Bootstrap encouraged, using tax exemptions, the establishment of factories. Thus manufacturing replaced agriculture as the main industry.

Since the Great Depression there has been external investment in capital-intensive industry such as petrochemicals, pharmaceuticals, and technology.

Operation Bootstrap was based on an "industrialization-first" campaign and modernization, focusing the Puerto Rican economy on exports, especially to the United States. Though initially there were large gains in employment and per capita income, recessions in the United States were magnified in the country and have repeatedly hampered Puerto Rican development.^[2]

With the signing of the North American Free Trade Agreement and the Dominican Republic–Central America Free Trade Agreement, Puerto Rico lost a trade advantage over some Latin American countries as the right to duty-free imports to the U.S. market were expanded. Puerto Rico is also subject to the minimum wage laws of the United States, which gives lower-wage countries such as Mexico and the Dominican Republic an economic advantage in

Current economic overview

Puerto Ricans had a per capita GDP estimate of $17,100 for 2009.^[3] Federal transfer payments to Puerto Rico make up more than 20% of the island's personal income. ^[4] By comparison, the poorest state, Mississippi, had a median level of $21,587, according to the U.S. Census Bureau's Current Population Survey, 2002 to 2004 Annual Social and Economic Supplements.^[5] Since 1952 the gap between Puerto Rico's per capita income and the national level has changed substantially — From one third the U.S. national average and roughly half that of the poorest state in 1952, to 10% less than poorest state in 2007. As of 2006, the unemployment rate was 11.7%.^[6] The U.S. state with the highest unemployment in October 2007 was Michigan, at 7.7%,^[7] and the U.S. average was 4.4%.^[8] On November 15, 2006 the Government of Puerto Rico implemented a 5.5% sales tax. An optional 1-1.5% municipal tax had been in effect since May 2006.

Puerto Rico’s public debt has grown at a faster pace than the growth of its economy, reaching $46.7 billion in 2008.^[9] In January 2009, Governor Luis Fortuño enacted several measures aimed at eliminating the government's $3.3 billion deficit. ^[10] The island unemployment rate is 12% as november of 2009. ^[11]

Tourism

Tourism is an important component of the Puerto Rican economy supplying an approximate $1.8 billion. In 1999 an estimated 5 million tourists visited the island, most from the United States. Nearly a third of these are cruise ship passengers. An increase in hotel registrations, which has been observed since 1998, and the construction of new hotels and the Puerto Rico Convention Center are indicators of the current strength of the tourism industry.

The following are significant public and private projects (finished, planned or under construction) which are aimed at increasing the tourism industry in Puerto Rico:

• The Puerto Rico Convention Center (finished)
• The Puerto Rico Convention Center District (under construction)
• The Pan American Port Terminal in Isla Grande for cruise ships and liners (finished)
• The Coliseum of Puerto Rico Jose Miguel Agrelot (finished)
• The Condado Trio Renovation Project (Condado Vanderbilt and La Concha hotels) (under construction)
• Luis Muñoz Marín International Airport expansion and renovation project (under construction)
• Fairmont Coco Beach Resort
• JW Marriot Resort at Río Grande (planned)
• Numerous other hotel projects underway (including new hotels and expansions) adding hundreds of rooms to the industry

Trade with the United States

Puerto Rico is within the customs territory of the United States, but travellers from the island to the U.S. mainland are subject to customs and agricultural controls.^[12][13] U.S. citizens may travel without restriction between Puerto Rico and other U.S. territory; the proof of citizenship required at border crossings varies depending on the mode of travel.^[14]

Mail bound for the mainland from Puerto Rico and Hawaii is subject to USDA inspection for quarantined plant matter. ^[15]

Puerto Rico may collect import duties only to the same degree it taxes the same goods produced domestically.^[16]

Puerto Rico receives cross-over subsidies, which generated approximately $371 million in 2008.^[17]

Other statistics

• Industrial production growth rate: NA%

• Household income or consumption by percentage share:

• lowest 10%: NA%
• highest 10%: NA%

• Budget:

• revenues: $8.1 billion Central Government, $25 Billion with Public Corporations
• expenditures: $9.6 billion Central Government

• Electricity

• production: 23,720 GWh
• consumption: 22,060 GWh
• exports: 0 kWh
• imports: 0 kWh (2007 est.)

• Electricity - production by source:

• fossil fuel: 98.06%
• hydro: 1.96%
• nuclear: 0%
• other: 0% (1998)

• Agriculture - products: sugarcane, coffee, pineapples, plantains, bananas; livestock products, chickens
• Exports - commodities: pharmaceuticals, electronics, apparel, canned tuna, rum, beverage concentrates, medical equipment
• Imports - commodities: chemicals, machinery and equipment, clothing, food, fish, petroleum products

• Tax: 7.0%

See also

• Cross-Over Subsidies
• Economy of the United States

External links

• The Bankrupt Economy
• History of Puerto Rico
• Changing of the Guard: Puerto Rico
• UW Press: Sugar and Slavery in Puerto Rico

Notes

Caribbean Community (CARICOM) Secretariat (Secretary-General) Nations Members Antigua and Barbuda · Bahamas1 · Barbados · Belize · Dominica · Grenada · Guyana · Haiti1 · Jamaica · Montserrat2 · St. Kitts and Nevis · St. Lucia · St. Vincent and the Grenadines · Suriname · Trinidad and Tobago Associate members Anguilla · Bermuda · Cayman Islands · British Virgin Islands · Turks and Caicos Islands Observers Aruba · Colombia · Curaçao · Dominican Republic · Mexico · Puerto Rico · Sint Maarten · Venezuela Institutions CSME · CDEMA · CMO · CMO · CXC · CCJ · CFC · CEHI · CARDI · REPAHA · ACCP · CARICAD · CFNI · CCC · CRITI · Related organizations Organisation of Eastern Caribbean States 1 Member of the Community but not of the CARICOM Single Market and Economy (CSME).   2 British overseas territory awaiting entrustment to join the CSME.