Puerto Rico seeks to lure manufacturing to boost its economy as Trump’s tariff war deepens

SAN JUAN Puerto Rico AP A global deal war is offering Puerto Rico hope as the U S territory attempts to strengthen its fragile business sector Leadership bureaucrats are jumping on planes to try and convince international companies to relocate their manufacturing plants to the island where they would be exempt from tariffs Any relocation would be a boost to Puerto Rico s shaky market as the cabinet emerges from a historic bankruptcy and continues to struggle with chronic power outages The island also is bracing for potentially big cuts in federal funding under the administration of U S President Donald Trump with federal funds presently representing more than half of Puerto Rico s budget The tariff issue is a controversial one but for Puerto Rico it s a great opportunity stated Gov Jenniffer Gonz lez Manufacturing remains the island s biggest industry representing nearly half of its gross domestic product But the administration wants to recapture Puerto Rico s heyday when dozens of big-name companies especially in the pharmaceutical sector were based here and kept the economic activity humming So far functionaries have identified between to companies that might consider relocating operations to Puerto Rico given the ongoing commerce war noted Ella Woger Nieves CEO of Invest Puerto Rico a public-private partnership that promotes the island as a business and financing destination The companies identified work in sectors including aerospace pharmaceuticals and medicinal devices Administrators also have welcomed site selectors to Puerto Rico and organized tours to show them the island s available infrastructure and stress how tariffs wouldn t apply here This is the moment to plant those seeds Woger Nieves announced She mentioned administrators with Invest Puerto Rico and various regime agencies are expected to make almost more trips this year in a bid to attract more manufacturing to the island The ruling body praised an executive order that Trump signed Monday that aims to reduce the time it takes to approve construction of pharmaceutical manufacturing facilities in the U S From needlework to chemicals In the mid- s needlework was one of Puerto Rico s largest industries employing about workers who labored on handkerchiefs underwear bedspreads and other items according to a fair competition code signed by President Theodore Roosevelt Manufacturing later shifted to chemicals clothes and electronics By the late s a growing number of pharmaceutical companies began moving their operations to Puerto Rico lured by a federal tax incentive created in to help boost the island s economic rise However in the U S authorities began phasing out the incentive which exempted the subsidiaries of U S companies operating in Puerto Rico from federal taxes on local profits From to overall manufacturing employment fell by nearly but employment in the sectors of pharmaceuticals medicines and chemicals increased by at least according to the U S Bureau of Labor Statistics Puerto Rico continues to lead U S exports of pharmaceutical and medicine manufacturing representing nearly of total U S exports in according to the bureau In the island exported nearly billion worth of goods including billion worth of vaccines and certain cultures billion worth of packaged medicaments billion worth of hormones million worth of orthopedic items and million worth of physiological instruments according to the Observatory of Economic Complexity Sergio Marxuach agenda director and general counsel for the Center for a New Market system a non-profit non-partisan think tank reported the push to attract more companies makes sense especially recruiting those in the pharmaceutical and healthcare device sectors If I were advising the regime begin there because you already have a footprint he stated Marxuach noted that outside of those areas Puerto Rico could have an advantage when it comes to national defense and measure contracts including the manufacturing of drones or underwater surveillance systems They need a place to manufacture in scale he mentioned adding that doing so in a U S jurisdiction is key Puerto Rico s governing body also is meeting with university functionaries to potentially change curriculums if needed to ensure students are graduating with the skills required by companies The Achilles heel Puerto Rico touts its U S jurisdiction tax incentives and skilled workforce as reasons international companies should relocate to the island But it cannot escape its well-known resource problems Chronic power outages continue to plague Puerto Rico with two island-wide blackouts occurring on Dec and April Crews are still repairing the power grid after it was razed by Hurricane Maria in September a powerful Category storm But the grid was already fragile following a lack of maintenance and capital for decades Puerto Rico requirements more reliable ability for the economic advancement to improve reported Robert F Mujica executive director of a federal control board that oversees the island s finances Woger Nieves the CEO of Invest Puerto Rico revealed that when leaders meet with company leaders they explain the state of the island s power infrastructure and offer alternatives including cogeneration and renewables Power doesn t have to necessarily be an impediment she disclosed Marxuach with the Center for a New Business activity reported Puerto Rico s force system is costly and inefficient and noted that alternatives can be expensive Puerto Rico has to address selected issues that truly create additional costs for investors to come here he mentioned One those costs is that any goods sent to the U S from Puerto Rico must by law be sent aboard a U S -flagged vessel with a U S crew Other challenges remain At this time the short-term reaction of a great number of CEOs and companies is basically to wait and see how the tariff war plays out Marxuach disclosed Trump has commented that he wants to keep specific tariffs in place but he also has mentioned efforts to reach deals with trading partners His organization disclosed Trump is using strategic uncertainty to his advantage Another dilemma is that relocating operations takes years not months and other countries also are vying for the attention of international companies We re competing with Vietnam South Korea Malaysia Singapore that have very advanced manufacturing facilities already Marxuach reported It s not a slam dunk