Puerto Rico's Strategy to Boost Manufacturing Amid Global Trade Turmoil

Pursuing Economic Revival: Puerto Rico Looks to Attract Manufacturing Amid Global Tariffs As the ongoing global trade conflict reshapes international relations, Puerto Rico is seizing the moment to revitalize its economy. The U.S. territory's officials are actively engaging with foreign companies to encourage them to establish manufacturing operations on the island, leveraging the advantage of tariff exemptions. In the wake of financial instability—including a historic bankruptcy declaration and persistent issues like chronic power outages—Puerto Rico's leadership is eager to attract businesses to aid economic recovery. Federal funding, which currently constitutes over 50% of the island's budget, is also under threat, prompting officials to seek new revenue sources. Governor Jenniffer González remarked, “The tariff issue is a controversial one, but for Puerto Rico, it’s a great opportunity.” This optimism is reflected in the government’s focus on revitalizing the manufacturing sector, which accounts for nearly half of Puerto Rico's gross domestic product. To date, the government has pinpointed 75 to 100 potential companies—primarily in the aerospace, pharmaceutical, and medical device fields—that may consider relocating due to the trade war dynamics. Ella Woger Nieves, CEO of Invest Puerto Rico, a public-private initiative aimed at business development, outlined the strategic outreach to site selectors to showcase the island's infrastructure and tariff benefits. Woger Nieves stated, “This is the moment to plant those seeds,” emphasizing the importance of making connections with companies interested in manufacturing. Invest Puerto Rico, alongside other agencies, plans nearly 20 trips within the year to further entice businesses, particularly under the recent executive order aimed at expediting the approval process for pharmaceutical facilities. Historically, manufacturing was robust on the island, with pharmaceutical companies being a key driver of economic stability during the latter half of the 20th century, particularly after the implementation of federal tax incentives in 1976, which have since been phased out. Moreover, from 1995 to 2005, the manufacturing workforce dwindled by almost 30%, although sectors focused on pharmaceuticals and related fields gained at least 10%. The U.S. still relies heavily on Puerto Rico for pharmaceutical exports; recent figures indicate that the island contributed approximately 20% of the U.S. total pharmaceutical exports in 2020. Looking at the export landscape, projections for 2024 show that Puerto Rico's goods could reach around $25 billion, with significant contributions from vaccines and medical instruments. Sergio Marxuach, policy director at the Center for a New Economy, emphasized that targeting the pharmaceutical and medical device markets makes strategic sense due to the existing industry footprint on the island. Nevertheless, Puerto Rico's leaders recognize persistent challenges, particularly concerning the energy sector, as chronic outages continue to impact economic activities. Recent blackouts have underscored the urgency for a more stable energy infrastructure, which has suffered from inadequate maintenance and investment post-Hurricane Maria in 2017. Marxuach mentioned that addressing the energy inefficiencies is crucial for attracting investors. Compounding the issue is the legal requirement for goods transported to the mainland U.S. from Puerto Rico to be shipped on U.S.-flagged vessels, which raises costs and complicates logistics. Additionally, Puerto Rico faces competition from countries like Vietnam, South Korea, and Malaysia, which already have well-established manufacturing capabilities. Companies may hesitate to relocate due to the lengthy transition involved in shifting operations to the island, as many CEOs adopt a wait-and-see approach amid the tariff uncertainties instigated by the Trump administration. As U.S. trade policies continue to evolve, Puerto Rico is poised to navigate these complexities in hopes of rebuilding its economic foundation and attracting a robust manufacturing sector.