Economy of Puerto Rico
Encyclopedia
The Economy of Puerto Rico is one of the most diverse in the Caribbean
region. Services and industrial production have 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 3.4 million tourists in 2007.
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 petrochemical
s, 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.
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 the Caribbean.
The U.S. state with the highest unemployment in October 2007 was
Michigan, at
7.7%,
and the U.S. average was 4.4%. 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. In January 2009, Governor Luis Fortuño
enacted several measures aimed at eliminating the government's $3.3 billion deficit. The island unemployment rate is 12% as of November 2009. The rate further dropped to 15.7% in October 2010.
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:
As an unincorporated territory of the United States, travel and trade between Puerto Rico and the U.S. mainland or other U.S. territory is not subject to international border controls. All goods moving from Puerto Rico to the U.S. mainland are subject to agriculture inspection controls by USDAhttp://www.aphis.usda.gov/import_export/plants/manuals/ports/downloads/puerto_rico.pdf. Travelers and goods move without restriction between Puerto Rico and other U.S. territories such as U.S. Virgin Islands. Travel and trade between Puerto Rico and territory outside U.S. jurisdiction is subject to international border controls.
Mail bound for the mainland from Puerto Rico and Hawaii is subject to USDA inspection for quarantined plant matter.
Puerto Rico may collect import duties only to the same degree it taxes the same goods produced domestically.
Puerto Rico receives cross-over subsidies
, which generated approximately $371 million in 2008.
Caribbean
The Caribbean is a crescent-shaped group of islands more than 2,000 miles long separating the Gulf of Mexico and the Caribbean Sea, to the west and south, from the Atlantic Ocean, to the east and north...
region. Services and industrial production have surpassed agriculture
Agriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
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
Puerto Rico
Puerto Rico , officially the Commonwealth of Puerto Rico , is an unincorporated territory of the United States, located in the northeastern Caribbean, east of the Dominican Republic and west of both the United States Virgin Islands and the British Virgin Islands.Puerto Rico comprises an...
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
Tourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...
has traditionally been an important source of income for the island, with estimated arrivals of nearly 3.4 million tourists in 2007.
Spanish Colonialism
In 1935, United States President Franklin D. RooseveltFranklin D. Roosevelt
Franklin Delano Roosevelt , also known by his initials, FDR, was the 32nd President of the United States and a central figure in world events during the mid-20th century, leading the United States during a time of worldwide economic crisis and world war...
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
Operation Bootstrap
For other uses, see Bootstrapping and Bootstrapping .Operation Bootstrap is the name given to the ambitious projects which industrialized Puerto Rico in the mid-20th century.-History:...
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
Industry
Industry refers to the production of an economic good or service within an economy.-Industrial sectors:There are four key industrial economic sectors: the primary sector, largely raw material extraction industries such as mining and farming; the secondary sector, involving refining, construction,...
such as petrochemical
Petrochemical
Petrochemicals are chemical products derived from petroleum. Some chemical compounds made from petroleum are also obtained from other fossil fuels, such as coal or natural gas, or renewable sources such as corn or sugar cane....
s, 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.
With the signing of the North American Free Trade Agreement
North American Free Trade Agreement
The North American Free Trade Agreement or NAFTA is an agreement signed by the governments of Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994. It superseded the Canada – United States 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
Minimum wage
A minimum wage is the lowest hourly, daily or monthly remuneration that employers may legally pay to workers. Equivalently, it is the lowest wage at which workers may sell their labour. Although minimum wage laws are in effect in a great many jurisdictions, there are differences of opinion about...
laws of the United States, which gives lower-wage countries such as Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
and the Dominican Republic
Dominican Republic
The Dominican Republic is a nation on the island of La Hispaniola, part of the Greater Antilles archipelago in the Caribbean region. The western third of the island is occupied by the nation of Haiti, making Hispaniola one of two Caribbean islands that are shared by two countries...
an economic advantage in the Caribbean.
Current economic overview
Puerto Ricans had a per capita GDP estimate of $17,100 for 2009 and $16,300 for 2010. Federal transfer payments to Puerto Rico make up more than 20% of the island's personal income. 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. 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%.Currently the unemployment rate is at 15.9% The ledger.com http.//www.ledgerdata.com/unemployment/puerto-rico//2011/january/The U.S. state with the highest unemployment in October 2007 was
Michigan, at
7.7%,
and the U.S. average was 4.4%. 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. In January 2009, Governor Luis Fortuño
Luis Fortuño
Luis Guillermo Fortuño Burset is the governor of the Commonwealth of Puerto Rico, a territory of the United States of America. Fortuño is also the president of the New Progressive Party of Puerto Rico , a member of the Republican National Committee, and will be president of the Council of State...
enacted several measures aimed at eliminating the government's $3.3 billion deficit. The island unemployment rate is 12% as of November 2009. The rate further dropped to 15.7% in October 2010.
Tourism
Tourism is an important component of the Puerto Rican economy supplying an approximate $1.8 billion. In 1999, an estimated five million tourists visited the island, most from the United States. Nearly a third of these are cruise shipCruise ship
A cruise ship or cruise liner is a passenger ship used for pleasure voyages, where the voyage itself and the ship's amenities are part of the experience, as well as the different destinations along the way...
passengers. An increase in hotel registrations, which has been observed since 1998, and the construction of new hotels and the Puerto Rico Convention Center
Puerto Rico Convention Center
The Dr. Pedro Rosselló González, Puerto Rico Convention Center is a convention center located in Isla Grande , in San Juan, Puerto Rico owned by the Puerto Rico Convention District Authority, a government agency of Puerto Rico, and...
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 CenterPuerto Rico Convention CenterThe Dr. Pedro Rosselló González, Puerto Rico Convention Center is a convention center located in Isla Grande , in San Juan, Puerto Rico owned by the Puerto Rico Convention District Authority, a government agency of Puerto Rico, and...
(finished) - The Puerto Rico Convention Center District (under construction)
- The Pan American Port Terminal in Isla Grande for cruise ships and liners (finished)
- Coliseo de Puerto Rico, José Miguel AgrelotJosé Miguel Agrelot ColiseumThe José Miguel Agrelot Coliseum, officially named "Coliseo de Puerto Rico José Miguel Agrelot" , is the biggest indoor arena in Puerto Rico dedicated to entertainment...
(finished) - The Condado Trio Renovation Project (Condado Vanderbilt and La ConchaLa Concha ResortLa Concha Resort is a modern chic luxury resort located at the Condado oceanfront within the district of Santurce in San Juan, Puerto Rico.-History:...
hotels) (under construction) - Luis Muñoz Marín International AirportLuis Muñoz Marín International AirportLuis Muñoz Marín International Airport is a joint civil-military public airport located in Carolina, Puerto Rico, three miles southeast of San Juan. Over 4 million passengers board a plane at the airport per year according to FAA reports . It is owned and managed by the Puerto Rico Ports...
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
Mail bound for the mainland from Puerto Rico and Hawaii is subject to USDA inspection for quarantined plant matter.
Puerto Rico may collect import duties only to the same degree it taxes the same goods produced domestically.
Puerto Rico receives cross-over subsidies
Cover-over subsidies
Cover-over subsidies are annual payments from the U.S. government to the U.S. Virgin Islands and Puerto Rico out of federal excise taxes. For example, when a bottle of rum is produced in either the Virgin Islands or Puerto Rico, and then sold in the United States, the federal excise tax on that...
, which generated approximately $371 million in 2008.
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, corn, coffee, pineapplePineapplePineapple is the common name for a tropical plant and its edible fruit, which is actually a multiple fruit consisting of coalesced berries. It was given the name pineapple due to its resemblance to a pine cone. The pineapple is by far the most economically important plant in the Bromeliaceae...
s, plantainPlantainPlantain is the common name for herbaceous plants of the genus Musa. The fruit they produce is generally used for cooking, in contrast to the soft, sweet banana...
s, bananaBananaBanana is the common name for herbaceous plants of the genus Musa and for the fruit they produce. Bananas come in a variety of sizes and colors when ripe, including yellow, purple, and red....
s; livestock products, chickenChickenThe chicken is a domesticated fowl, a subspecies of the Red Junglefowl. As one of the most common and widespread domestic animals, and with a population of more than 24 billion in 2003, there are more chickens in the world than any other species of bird...
s - Exports - commodities: pharmaceuticals, electronics, apparel, canned tunaTunaTuna is a salt water fish from the family Scombridae, mostly in the genus Thunnus. Tuna are fast swimmers, and some species are capable of speeds of . Unlike most fish, which have white flesh, the muscle tissue of tuna ranges from pink to dark red. The red coloration derives from myoglobin, an...
, rumRumRum is a distilled alcoholic beverage made from sugarcane by-products such as molasses, or directly from sugarcane juice, by a process of fermentation and distillation. The distillate, a clear liquid, is then usually aged in oak barrels...
, beverage concentrates, medical equipment - Imports - commodities: chemicals, machinery and equipment, clothing, food, fishFishFish are a paraphyletic group of organisms that consist of all gill-bearing aquatic vertebrate animals that lack limbs with digits. Included in this definition are the living hagfish, lampreys, and cartilaginous and bony fish, as well as various extinct related groups...
, petroleumPetroleumPetroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
products
- Tax: 7.0%
See also
- Cross-Over SubsidiesCover-over subsidiesCover-over subsidies are annual payments from the U.S. government to the U.S. Virgin Islands and Puerto Rico out of federal excise taxes. For example, when a bottle of rum is produced in either the Virgin Islands or Puerto Rico, and then sold in the United States, the federal excise tax on that...
- Economy of the United StatesEconomy of the United StatesThe economy of the United States is the world's largest national economy. Its nominal GDP was estimated to be nearly $14.5 trillion in 2010, approximately a quarter of nominal global GDP. The European Union has a larger collective economy, but is not a single nation...