Puerto Rico has long been a destination for exotic vacations in the Caribbean sun. Yet, unlike other Caribbean islands that seem locked into tourism as their premier industry, the autonomous Commonwealth of the United States is well-developed in key industries such as pharmaceuticals and biotechnology, medical device manufacturing, the electrical/electronic sector and, soon, aerospace.
“Investment clearly points out that Puerto Rico is moving towards a knowledge-based economy,” says Gary Bingham, marketing director for Puerto Rico Industrial Development Co (PRIDCO).
Economic development policies and Puerto Rico’s educated, available, bilingual workforce are key to the island’s success. “We were ranked sixth by the World Bank in terms of people in college,” Mr Bingham says. “We have some 22,000 to 23,000 graduates per year.” Puerto Rico also offers US protections for intellectual properties. “This is key for the kinds of companies we are seeking,” he says.
Puerto Rico is very competitive with the US mainland. Its commonwealth status gives it the economic and political security of the US with the business advantages of an offshore investment destination. Companies there are taxed at a rate of only 2%-7% compared with the US rate of 30% or more.
Many US companies with international operations have found that channelling Puerto Rico source income through a European subsidiary results in minimal or no further taxation of that income until it is repatriated to the parent. Consequently, increasing numbers of European companies are investing in Puerto Rico and Asian firms are seriously considering it. “We recently had a group from Singapore visiting the island,” Mr Bingham says.
Puerto Rico has carved out a niche as a global player for pharmaceutical manufacturing and now biotechnology. “We have attracted about $2bn in biotechnology investment over the last couple of years from companies like Amgen, Abbott Laboratories and Eli Lily,” says Mr Bingham. “They are putting up plants, which demonstrates how biotechnology has moved from the laboratory to the factory.”
When completed this year, Amgen’s $1.2bn expansion will create a process-development laboratory and childcare centre. This is in line with corporate strategies to develop scientific and economic activities that help to make the island a centre of excellence in life-sciences manufacturing.
Other companies that have made recent investments in the pharmaceutical sector include Pfizer, Johnson & Johnson, Merck and IVAX. These join European pharmaceutical companies such as Warner Chilcott (Ireland), Clariant (Switzerland), AstraZeneca (UK) and GlaxoSmithKline (UK).
Today, the US is ranked as the largest, most profitable life sciences market in the world. Puerto Rico’s relationship with and proximity to the US allows investors to access that market. “We have the cadre of management teams available for a company,” says Mr Bingham. “We also have the largest Food and Drug Administration station outside of Washington DC, which allows companies to roll out products quicker.”
Medical device manufacturing also weighs in well. Four of Puerto Rico’s top medical device manufacturing companies – Becton Dickinson Caribe, Johnson & Johnson’s Ethicon, St Jude Medical Puerto Rico and Tyco USSC – recently announced future expansions amounting to $29.7m. European medical/ scientific device companies operating in Puerto Rico include B. Braun (Germany), Unilever (UK) and Roche (Switzerland).
Firms operating in Puerto Rico’s second-largest manufacturing sector, electrical and electronics, also highlight the island’s knowledge-based economy. They include giant companies such as Siemens, General Electric, Hewlett-Packard, Solectron, Smart Modular, Cutler-Hammer, Microsoft, Storage Technology and Hubbell.
Thanks to Puerto Rico’s many advantages and PRIDCO’s hard work to reel business in, the island will soon see its first entrant into the aerospace sector. Last June, officials announced that Infotech Aerospace Services Inc, which maintains a strategic alliance with aerospace heavyweight Pratt & Whitney, will invest $28m in operations on the island. The company possesses a full range of advanced technology in electronics, robotics, control engineering, materials technology and control techniques, which should stimulate development of other industrial sectors and diversify manufacturing activities in Puerto Rico.