Economy of Puerto Rico

Economy ofPuerto Rico

Currency	United States dollar (US$)
Fiscal year	1 July – 30 June
Trade organizations	CARICOM(observer),IOC,ITUC,UNWTO(associate),hUPU
Country group	Developed/Advanced High-income economy
Statistics
Population	3,285,874
GDP	$118.68 billion (nominal, 2022 est.) $135.28 billion (PPP,2022 est.)
GDP rank	— (nominal, 2022) — (PPP, 2022)
GDP growth	−2.7% (2017) −4.9% (2018) −1.1% (2022) −0.7% (2020e)
GDP per capita	$17,203 (nominal, 2024 est.) $20,155 (PPP, 2024 est.)
GDP per capita rank	— (nominal, 2019) — (PPP, 2019)
GDP by sector	agriculture:0.8% industry:50.1% services:49.1% (2017 est.)
Inflation(CPI)	9.0% (2024 est.)
Population belowpoverty line	N/A
Gini coefficient	0.537high(2010)
Human Development Index	0.845high(2015) (n/a rank)
Labor force	1,097,861 (2019) 35.2% employment rate (2015)
Labor force by occupation	Services: 29.9% Government: 23.7% Trade: 21.8% Manufacturing: 9.2% Transportation and other public utilities: 5.2% Construction and mining: 4.9% Finance, insurance and real estate: 3.7% Agriculture: 1.6% (2010)
Unemployment	31.2% (May 2024)
Average gross salary	$16,026 annual (2024)
Main industries	Pharmaceuticals,electronics,apparel,food products,tourism
External
Exports	$73.17 billion (2017 est.)
Export goods	Chemicals,electronics,rum,beverage concentrates,medicalequipment,canned tuna,apparel
Main export partners	United States76.5% Belgium6.1% Netherlands3.4% Italy1.7% Spain1.6% (2016)
Imports	$43.32 billionCIF(2016 est.)
Import goods	chemicals,machineryand equipment, food, petroleum products,clothing,fish
Main import partners	United States55.6% Ireland13.4% Singapore6.1% Switzerland2.9% South Korea2.8% (2016)
Current account	$0 (2017 est.)
Grossexternal debt	$56.82 billion (31 December 2010, est.)
Public finances
Government debt	51.6% of GDP (2017 est.)
Budget balance	−0.7% (of GDP) (2017 est.)
Revenues	9.268 billion (2017 est.)
Expenses	9.974 billion (2017 est.)
Credit rating	Standard & Poor's D
All values, unless otherwise stated, are inUS dollars.

Theeconomy of Puerto Ricois classified as ahigh income economyby theWorld Bankand as the most competitive economy inLatin Americaby theWorld Economic Forum.The main drivers ofPuerto Rico's economy aremanufacturing,primarilypharmaceuticals,textiles, petrochemicals, and electronics; followed by the service industry, notablyfinance,insurance,real estate,andtourism.Thegeography of Puerto Ricoandits political statusare both determining factors on its economic prosperity, primarily due to its relatively small size as an island;its lack of natural resourcesused to produceraw materials,and, consequently, its dependence on imports; as well as its relationship with the United States federal government, which controls itsforeign policieswhile exerting trading restrictions, particularly inits shipping industry.

At the macroeconomic level Puerto Rico has been experiencing aneconomic depressionfor 18 consecutive years, starting in 2006 aftera series of negative cash flowsand the expiration of the section 936 that applied to Puerto Rico of theU.S. Internal Revenue Code.This section was critical for the economy of the island as it establishedtax exemptionsfor U.S. corporations that settled inPuerto Ricoand allowed its subsidiaries operating in the island to send their earnings to the parent corporation at any time, without paying federal tax on corporate income. Puerto Rico has, however, been able to maintain a relatively low inflation rate in the past decade. Academically, most of Puerto Rico's economic woes stem from federal regulations that expired, have been repealed, or no longer apply toPuerto Rico;from its inability to become self-sufficient and self-sustainable throughout history; from its highly politicized public policy which tends to changewhenever a political party gains power;as well as fromits highly inefficient local governmentwhich has accrued apublic debtequal to 66% of itsgross domestic productover time. Despite these issues, the economy continues to gradually grow.

In comparison tothe different states of the United States,Puerto Rico is poorer thanMississippi,the poorest state of the United States, with 45% of its population living below thepoverty line.However, when compared to Latin America, Puerto Rico has the highest GDP per capita in the region.The Commonwealth has a massive bond debt that it is unable to service, $70 billion in early 2017, or $12,000 per capita,at a moment when its unemployment rate (8.0%, October 2018) is more than twice as large as the mainland's.The debt had been increasing during a decade-long recession.It is essential for Puerto Rico to reach restructuring deals with creditors to avoid a bankruptcy-like process underPROMESA.More specifically, Puerto Rico has been in an unusual situation since 2016: its economy is under the supervision of a federal board that is managing finances and helping to get access again to capital markets.

Thecommonwealthhas a modern infrastructure, a large public sector, and an institutional framework guided by the regulations ofU.S. federal agencies,most of which have an active and continued presence in the island. Its main trading partners are the United States itself,Ireland,andJapan,with most products coming fromEast Asia,mainly fromChina,Hong Kong,andTaiwan.In 2016, additional trading partners were established, withSingapore,SwitzerlandandSouth Koreacommencing import trades with Puerto Rico. At a global scale, Puerto Rico's dependency on oil fortransportationandelectricity generation,as well as its dependency on food imports and raw materials, makes Puerto Rico volatile and highly reactive to changes inthe world economyandclimate.

History

Puerto Rico, like many other countries, has transitioned froman agricultural economytoan industrial one.Its economy is currently experiencing a transformation caused by theInformation Age,albeit slowly.

Pre-colonialism

The economic history of Puerto Rico prior to the arrival of the Spaniards is not heavily documented. The part that is known about its inhabitants, theTaíno,is that their economy was a mixture ofhunting and gatheringwith agriculture. They inhabited the island for centuries before the arrival of the Spanish in 1493 marked the beginning of their extinction.History

The Taíno captured and ate small animals, such as mammals, earthworms, lizards, turtles, and birds.Manateeswere speared and fish were caught in nets, speared, poisoned, trapped in weirs, or caught with hook and line. Wild parrots were decoyed with domesticated birds, and iguanas were taken from trees and other vegetation.Livestockhusbandrywas not practiced as there were no large animals native to Puerto Rico that could be raised in an agricultural setting in order to producecommoditiessuch as food,fiberorlabor.

Fields for important root crops, such asyuca,were prepared by heaping up mounds of soil, calledconucos.This improved soil drainage and fertility, as well as delaying erosion, and it allowed for longer storage of crops in the ground. Other crops, such as corn, were raised in simple clearings created byslash-and-burntechnique. Typically,conucoswere three feet high and nine feet in circumference and were arranged in rows. The primary root crop was yuca/cassava,a woodyshrubcultivated for its edible andstarchytuberous root.It was planted using acoa,a kind ofhoemade completely from wood. Women processed the poisonous variety of cassava by squeezing it to extract the toxic juices. Then they would grind the roots into flour for baking bread.Batata(sweet potato) was another important root crop.

Corn was cooked and eaten off the cob. However, corn bread became moldy faster than cassava bread in the high humidity of the West Indies.The Taíno also grewsquash,beans,peppers,peanutsandpineapples.Tobacco,calabashes(West Indian pumpkins) and cotton were grown around the houses. Other fruits and vegetables, such as palm nuts,guavasandZamiaroots were collected from the wild.

Spanish rule

Merchants in Puerto Rico, circa 1900-1917

The economy of Puerto Rico was transformed drastically upon the arrivals of Spaniards in 1493 until their departure in 1898. Spain was initially drawn to Puerto Rico due to its gold deposits. However, the gold deposits were small and depleted quickly.Spain's interest in Puerto Rico after that point was primarily tactical and strategic.

The economy during that period was driven by slavery of the native population, theTaíno,and by slaves brought fromAfrica.Slaves were minimally remunerated for or forced to work in farms, mines, households, and other aspects. Agriculture was the primarymean of production,as well as livestock which was originally imported from Europe.Sugar cane,tobacco, coffee, cocoa and minor fruits were the primary cultivations which were exported to Europe and, by so, constituted the main economy for the island.Mining of gold, silver, and copper occurred as well, although not as much as in other territories during theSpanish colonization of the Americas.

The financial administration of Puerto Rico was directly from Madrid, although there were limited elements of home rule.Taxation under Spanish rule entailed stamp taxes on transfers of property and consumption taxes on foodstuff.

United States rule

A train transporting Sugar Cane in Puerto Rico, c. 1911

In the early 20th century the greatest contributor to Puerto Rico's economy was agriculture and its main crop was sugar, displacing other cash crops such as tobacco, cocoa, and coffee. In 1935,United States PresidentFranklin D. Rooseveltlaunched the Puerto Rican Reconstruction Administration, which provided agricultural development, public works, and electrification of the island.

Growing tobacco in 1941 in Puerto Rico

Economic conditions had improved since theGreat Depressionbecause of external investment in capital-intensive industries such aspetrochemicals,pharmaceuticalsandtechnology.Starting in the late 1940s a series of projects calledOperation Bootstrapencouraged, using tax exemptions, the establishment of factories. Thus manufacturing replaced agriculture as the main industry of the island. Operation Bootstrap was based on an "industrialization-first" campaign and modernization, focusing the Puerto Rican economy on exports, especially to the United States. As a result, Puerto Rico is now classified as a "high income country" by theWorld Bank.Although 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 theNorth American Free Trade Agreementand theDominican 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. Following theFair Minimum Wage Act of 2007,Puerto Rico is also subject to theminimum wagelaws of the United States, which gives lower-wage countries such asMexicoand theDominican Republican economic advantage in theCaribbean.Once the beneficiary of special tax treatment from the U.S. government, today local industries must compete with those in more economically depressed parts of the world where wages are not subject to U.S. minimum wage legislation. In recent years, some U.S. and foreign owned factories have moved to lower wage countries in Latin America and Asia. Puerto Rico is subject to U.S. trade laws and restrictions.

Also, starting around 1950, there was extensive migration from Puerto Rico to theContinental United States,particularly with Puerto Ricans moving toNew York City,in search of better economic conditions.Puerto Rican migration to New Yorkdisplayed an average yearly migration of 1,800 for the years 1930–1940, 31,000 for 1946–1950, 45,000 for 1951–1960, and a peak of 75,000 in 1953.As of 2003,theU.S. Census Bureauestimates that more people of Puerto Rican birth or ancestry live in the U.S. than in Puerto Rico.

I'd be happy to receive my salary and save my job; a plea after the government shut-down in Puerto Rico in 2006

On 1 May 2006, the Puerto Rican government faced significantshortages in cash flows,which forced the closure of the local Department of Education and 42 other government agencies. All 1,536 public schools closed, and 95,762 people were furloughed in the first-ever partial shutdown of the government in the island's history.On 10 May 2006, thebudget crisiswas resolved with a new tax reform agreement so that all government employees could return to work. On 15 November 2006, a 5.5% sales tax was implemented. Municipalities are required by law to apply a municipal sales tax of 1.5% bringing the total sales tax to 7%.

Thepublic debt of Puerto Ricohas grown at a faster pace than the growth of its economy, reaching$46.7 billionin 2008.InJanuary 2009,Luis Fortuñoenacted several measures aimed at eliminating the government's$3.3 billiondeficit,including laying off 12,505government employees. Puerto Rico's unemployment rate was 15.9 percent inJanuary 2010.Some analysts said they expect the government's layoffs to propel that rate to 17 percent.

In November 2010, Gov. Fortuño proposed a tax reform plan that would be implemented in a six-year period, retroactive to 1 January 2010. The first phase, applicable to year 2010, reduces taxes to all individual taxpayers by 7–15%. By year 2016, average relief for individual taxpayers will represent a 50% tax cut and a 30% cut for corporate taxpayers, whose tax rate will be lowered from 41 to 30%.

At the same time, the latest report by the President Task Force on Puerto Rico Status recognizes that the status question and the economy are intimately linked. Many participants in the forums conducted by the Task Force argued that uncertainty about status is holding Puerto Rico back in economic areas. And although there are a number of economic actions that should be taken immediately or in the short term, regardless of the ultimate outcome of the status question, identifying the most effective means of assisting the Puerto Rican economy depends on resolving the ultimate question of status. In short, the long-term economic well-being of Puerto Rico would be dramatically improved by an early decision on the status question.

Duringfiscal year(FY-2012), the Consolidated Budget for the archipelago, including both direct transfers from federal programs (Social SecurityandMedicarebenefits for workers,Veteran's benefits,Pell Grantsand student loan's interest subsidies and miscellaneous temporary appropriations -e.g.American Recovery and Reinvestment Act of 2009grants totalling $2.6 billion-) represented more than $28.7 billion, or approximately 30% of its GDP, while revenues surpassed $31 billion.In 2010, federal transfers amounted $16.710 billion, while the Commonwealth's government managed funds of $10.12 billion.

In June 2013, a $300 million US Medicaid payment to Puerto Rico was delayed because the Puerto Rican Government had changed their nationally sponsored insurance carrier without obtaining approval from the US Health and Human Services Department. This one of several troubling economic developments, including high debt to population ratios that have caused consternation in the US municipal bond market.

Puerto Rico has been experiencing aneconomic depressionfor 18 consecutive years, starting in 2006 aftera series of negative cash flowsand the expiration of the section 936 that applied to Puerto Rico of theU.S. Internal Revenue Code.In 2014, it was still in an economic depression.

Section 936 was critical for the economy as it establishedtax exemptionsfor U.S. corporations that settled in Puerto Rico and allowed its subsidiaries operating in the island to send their earnings to the parent corporation at any time, without paying federal tax on corporate income.The government has also experienced 24 consecutivenegative cash flowssince 2000, exacerbating its fragile economic situation as the government is forced to incur into new debt in order to pay the old one.

Puerto Rico has, however, surprisingly been able to maintain a relatively low inflation in the past decade. Academically, most of Puerto Rico's economic woes stem from federal regulations that expired, have been repealed, or no longer apply to Puerto Rico; its inability to become self-sufficient and self-sustainable throughout history; its public policy which tends to changewhenever a political party gains power;as well asits slightly inefficient local government,which has accrued apublic debtequal to 66% of itsgross domestic productthroughout time.

• 
  Puerto Rico's Economic Activity Index for FY 2005–2013 evidences its depression.
• 
  Puerto Rico's month-over-month Economic Activity Index for FY2013 evidences its sluggishness and decline.

By mid January 2017, the debt had reached $70 billion or $12,000 per capita in a territory with a 45 percent poverty rate and double digit unemployment that is more than twice the mainland U.S. average.It is essential for Puerto Rico to reach restructuring deals with creditors to avoid a bankruptcy-like process underPROMESA.In late January, the federal control board gave theGovernment of Puerto Ricountil 28 February to present a fiscal plan (including negotiations with creditors) to solve the problems. A moratorium on lawsuits by debtors was extended to 31 May.

GovernorRicardo Rossellóstrongly favored statehood for Puerto Rico, thinking in particular on the financial benefits statehood would offer. These include an additional $10 billion per year in federal funds, the right to vote in presidential elections, higher Social Security and Medicare benefits, and a right for its government agencies and municipalities to file for bankruptcy.Afifth plebisciteis due to be held on 11 June 2017. The two options at that time will be "Statehood" and "Independence/Free Association". It will be the first referendum not to offer the choice of "Commonwealth". Regardless of the outcome, Congress will be the body to make the final decision on the status of Puerto Rico.

A review of the economic situation in May 2017 by the Official Monetary and Financial Institutions Forum, an independent think tank, led to a warning that the planned "draconian budget-tightening" would cut up to 6% of the island's GNP over the next four years, leading to continuing decline. "Puerto Rico urgently needs an International Monetary Fund-style programme involving debt relief in return for a commitment to far-reaching reforms... that will facilitate growth", the group concluded.

ThenHurricane Mariastruck the island on 20 September 2017, destroying infrastructure, causing great loss of life, and leading to a large exodus of residents. The 2020 census showed the population of Puerto Rico dropping by 11.8%.

In August 2023, Governor Pedro Pierluisi floats a proposed resolution that would extend many of the benefits of Act 22 to all Puerto Ricans, but it risks being rejected by the U.S. Congress as part of the bankruptcy of the Commonwealth of Puerto Rico. The only merit of this proposal is that it would correct a fundamental inequity in the tax code.

Sectors

The economy of Puerto Rico is mainly driven bymanufacturing,primarilypharmaceuticals,textiles,petrochemicals,andelectronics;followed by theservice industry,primarilyfinance,insurance,real estate,andtourism.

Primary sector

Agriculture

Main article:Agriculture in Puerto Rico

Agriculture constitutes about US$808 million or about 0.8% of the island'sgross domestic product(GDP).However, Puerto Rico imports 85% of its food even though most of the land is fertile. Only a mere 6% is arable; a fact that poses a direct threat to Puerto Rico'sfood security.This perple xing situation has been caused due to a shift in priorities towards industrialization, bureaucratization, mismanagement of terrains, lack of alternative methods, and a deficient agricultural workforce. Puerto Rico's geographical location within the Caribbean exacerbates these issues, making the scarce existing crops vulnerable to the devastating effects ofAtlantic hurricanes.

The following fruits are industrially cultivated and widely consumed:

• acerola(acerola)
• avocado(aguacate)
• banana(guineo)
• coconut(coco)
• grapefruit(toronja)
• guava(guayaba)
• guinep(quenepa)
• lemon(limón)
• mango(mangó)
• olives(aceitunas)
• papaya(papaya)
• pineapple(piña)
• plantain(plátano)
• pumpkin(calabaza)
• red banana(guineo manzano)
• soursop(guanábana)
• tamarind(tamarindo)

Apples(manzanas),bananas(guineos),grapes(uvas),oranges(chinas), andwatermelons(melones) are imported, as well as some of the aforementioned cultivated fruits.

Grains cultivated industrially and widely consumed includebarley(cebada),maize(maíz),rice(arroz),rye(centeno), andwheat(trigo). Legumes includeblack beans(habichuelas negras),chickpea(garbanzo),kidney beans(habichuelas rojas),pea(pitipuá),pigeon peas(gandules), andpink beans(habichuelas rosadas). Tubers includecassava(yuca),eddoe(malanga),potatoes(papas),sweet potatoes(batata),taro(yautía), andyams(ñame).

Vegetables includeasparagus(espárragos),cabbage(repollo),cauliflower(coliflor),carrots(zanahorias),chayote(chayote),cucumber(pepinillo),eggplant(berenjena),lettuce(lechuga),onions(cebolla), andpeppers(ají).

Herbs includebasil(albahaca),bay leaves(hojas de laurel),cilantro(cilantrillo),culantro(culantro), andparsley(perejil). Spices includeachiote(achiote),cinnamon(canela),cloves(clavos),garlic(ajo),ginger(jengibre), andpaprika(sazón).

Recent studies have suggested there is a lack of young farmers and that 65% of the island's agriculture force is over 55 years of age. The decrease in new farmers will have significant negative effects on the island.

Fisheryis common in all coastal towns but Puerto Rico does not have enoughwild fisheriesto supply the demand required to sustain a profitablefishing industry.There are no industrialfish farmson the island either. Common fish consumed by residents includecod(bacalao),mahi-mahi(pez dorado),marlin(marlín),salmon(salmón),snapper(chillo),trunkfish(chapín), andtuna(atún). Other seafood includesclams(almejas),crabs(cangrejos),lobsters(langostas),mussels(mejillones),octopuses(pulpo),oysters(ostras), andsquids(calamares). It is quite common for restaurants on the coast to serve fresh seafood.

Cows in Arecibo, Puerto Rico

Livestockused for food includescattle,goats,pigs,andrabbits.Donkeys,horses,andmulesare strictly used for labor or recreation as consumption is frowned upon culturally by locals. Cattle is used for both meat anddairywith a strong and self-sufficient localmilk industrythrough processors such asSuiza DairyandTres Monjitas.Poultryincludeschickens,ducks,geese,turkeys,andquail.Thepet industryis one of the only two industries experiencing consistent significant growth on the island withdogs,cats,fishkeeping,canaries,parakeets,andparrotsbeing quintessential in homes. Consumption of animals commonly used as pets is frowned upon culturally save for rabbits.

The Fall Armyworm is a highlypolyphagousand economically significant pest here.SeePuerto Rico Fall Armyworm.

Forestry

Almost allwoodused on the island is imported even though a study conducted more than two decades ago by theU.S. Forest Serviceconcluded that local soil could sustain a lumber industry if the proper species were used.Regardless of this, several smallsawmillsdo exist on the island.

Mining

There are some metal deposits ofcopper,gold,silver,zinc,andmolybdenumon the island but they are not large enough to sustain a profitable mining industry.Mismanagement of terrains and poor urban planning has made it difficult for the mining industry to thrive as well, as many deposits are directly below or nearby residential complexes. Puerto Rico also possesses industries oflime,marble,salt,cement,clay,crushed stone,dimension stone,industrial sand,gravel,andstone.The cement industry is tracked meticulously as it has shown to be highly correlated to the GDP of the island.

Secondary sector

Main article:Manufacturing in Puerto Rico

Manufacturing is the largesteconomic sectorof the island; composing almost half (about 46%) of itsgross domestic product(GDP) through more than 2,000 manufacturing plants scattered throughout the island.Allmanufacturers in Puerto Rico are in some way interconnected with thePuerto Rico Industrial Development Company(PRIDCO) which provides substantial incentives for companies that manufacture in Puerto Rico. Manufacturers are also voluntarily interconnected through thePuerto Rico Manufacturers Associationwhich serves as their primarytrade associationand their mainlobby groupupon theLegislative Assembly of Puerto Rico.Most manufacturing in Puerto Rico today is the product ofOperation Bootstrap.

In terms of specialization, more than half of all manufacturing done in Puerto Rico is attributed to the pharmaceutical industry which generates more than 18,000 jobs, pays more than US$3 billion in taxes, comprise about half of total exports, and has generated more than 25% of the island's GDP for the past four decades.Comparatively, Puerto Rico is the fifth largest area in the world for pharmaceutical manufacturing with more than 80 plants, including:

• Abbott
• Amgen
• AstraZeneca
• Baxter
• BD
• Biovail
• Bristol Myers Squibb
• Cardinal Health
• CooperVision
• Eli Lilly
• GlaxoSmithKline(gsk)
• Ivax
• Johnson & Johnson
• Merck Sharp & Dohme
• Mylan
• Novartis
• Patheon
• Pfizer
• Procter & Gamble
• Schering Plough
• Warner Chilcott
• Watson
• Wyeth

Puerto Rico is also the third-largest biotechnology manufacturer with more than two million square feet and the seventh-largest medical-device exporter with more than 50 plants. Pharmaceutical companies originally came to Puerto Rico in the late 1960s and 1970s to take advantage of the now-expired federal tax incentive known as Section 936. This incentive allowed U.S.-based manufacturers to send all profits from local plants to stateside parent plants without having to pay any federal taxes. However, expired patents, cheaper manufacturers (such as those in Brazil, China, India, and South Korea), the rise ofgeneric drugs,and high production costs pose a challenge to the industry.As of 2014,Puerto Rico produces 16 of the top 20-selling drugs in the mainland United States.

The aeronautical industry is relatively young on the island and concentrates mostly on the northwestern corridor composed byAguadillaandIsabela.These municipalities serve as local headquarters forHoneywell Aerospace,Lufthansa,andPratt & Whitney.GE Aviation,Lockheed Martin,andRaytheonalso have presence on the island although their local operations do not focus on aeronautics but rather focus on business support.

Education in aeronautics is provided by theCaribbean Aviation Training Instituteand theInteramerican University of Puerto Rico.TheUniversity of Puerto Rico, Mayaguez Campus(UPRM), thePolytechnic University of Puerto Rico(PUPR), and theTurabo Universitygraduate most of the engineers on the island.

Tertiary sector

Finance

Thefinancial sectoris of great prominence, accounting for 5.75% of Puerto Rico'sGross National Product(GNP) in 2010. Similar to any other state of the union, Puerto Rico's financial sector is also fully integrated into the U.S. financial system. Federal regulations govern the sector, being a constituent part of the jurisdiction of theFederal Reserve Bank of New York,responsible for implementing monetary policy enacted by members of theFederal Reserve Boardin Washington, D.C. throughout the United States.

Real estate

Main article:Real estate in Puerto Rico

Thereal estate industryconstitutes about 14.8% of the GDP, about 1% of all of theemployee compensationon the island and, together withfinanceandinsurance(FIRE), about 3.7% of all the employment on the jurisdiction.

Tourism

Main article:Tourism in Puerto Rico

St Regis Bahia Beach Resort in Puerto Rico view of El Yunque

Tourism is an important component of the Puerto Rican economy supplying an approximate US$1.8 billion per year. In 1999, an estimated five million tourists visited the island, most from the United States. Nearly a third of these werecruise shippassengers. An increase in hotel registrations, which has been observed since 1998, and the construction of new hotels and thePuerto Rico Convention Centerare indicators of the current strength of the tourism industry. In 2009, tourism accounted for nearly 7% of the islands' gross national product.

The following includes some public and private projects aimed at increasing the tourism industry in Puerto Rico:

• Camuy River Cave Park
• Condado
• Condado Vanderbilt Hotel
• El Yunque National Forest
• Flamenco Beach
• Fort San Felipe del Morro
• Isla Verde
• José Miguel Agrelot Coliseum
• La Concha Resort
• Luis Muñoz Marín International Airport
• Old San Juan
• Plaza Las Américas
• Ponce Art Museum
• Puerto Rico Convention Center
• The Mall of San Juan
• Cuevas Las Cabachuelas

The gambling sector is also important to the economy (employing 3,409 people, 2017), and it encompasses20 casinosall attached to hotels and resorts acting as tourist destinations. This is mandatory, according to Laws of Puerto Rico, casinos must be attached to hotels and resorts, and must be located within "zonas históricas, antiguas o de interés turístico" – historically important zones of tourism.There is a significant and growing Chinese presence in the Puerto Rico gambling sector, so far 10% of the casinos are owned by Chinese individuals or companies, and more are partially owned.In 2019, contribution of travel and tourism to GDP (% of GDP) for Puerto Rico was 6.9%.However, the exact contribution of the gambling sector within the tourism and travel sector is not measured separately by the government.

Trade

As an unincorporated territory of the United States, travel and trade between Puerto Rico and either the U.S. mainland or other U.S. territories are not subject to international border controls. However, all goods moving from Puerto Rico to the U.S. mainland are subject to agricultural inspection controls by theU.S. Department of Agriculture(USDA).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 are 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 receivescross-over subsidies,which generated approximately $371 million in 2008.

Puerto Rico's Imports and Exports from 2005 to 2013 (in millions)

Year	Imports	Change	Exports	Change	Balance	Ratio	Total	Change
2005	$41,911	9.5%	$56,995	3.5%	$15,084	15.25%	$ 98,905	6.0%
2006	$43,858	4.6%	$59,404	4.2%	$15,546	15.05%	$103,262	4.4%
2007	$44,917	2.4%	$62,558	5.3%	$17,641	16.41%	$107,474	4.1%
2008	$43,422	-3.3%	$63,800	2.0%	$20,378	19.01%	$107,223	-0.2%
2009	$40,113	-7.6%	$59,726	-6.4%	$19,613	19.64%	$ 99,840	-6.9%
2010	$41,429	3.3%	$68,555	14.8%	$27,126	24.66%	$109,984	10.2%
2011	$47,031	13.5%	$57,616	-16.0%	$10,585	10.12%	$104,647	-4.9%
2012	$46,067	-2.1%	$58,805	2.1%	$12,738	12.15%	$104,871	0.2%
2013	$43,805	-4.9%	$61,920	5.3%	$18,115	17.13%	$105,726	0.8%

Similar to other states of the union, Puerto Rico is subject to trade agreements signed by the United States. As an unincorporated territory, the commonwealth is restricted from joininginternational organizationswithout the consent of the United States due toits current political status.However, due to its geographical and cultural nature,theU.S. Department of Stateallows Puerto Rico to participate in a limited number of international organizations to which it would potentially belong if Puerto Rico were a sovereign state.

Organizations to which Puerto Rico belongs under consent by the United States

Name	Abbreviation	Category	Status
Caribbean Community	CARICOM	regional	observer
Caribbean Tourism Organization	CTO	tourism	observer
Organization of American States	OAS	continental	observer
United Nations Economic Commission for Latin America and the Caribbean	ECLAC	regional	associate member

Countries with whom Puerto Rico can freely engage in trade without diplomatic restrictions

Country	Region	Agreement	Establishedtrade promotion officein foreign country
Australia	Oceania	AUSFTA	No
Bahrain	Western Asia	USBFTA	No
Canada	North America	NAFTA	No
Chile	South America	ChFTA	No
Colombia	South America	CFTA	Yes
Costa Rica	Central America	CAFTA	No
Dominican Republic	Caribbean	CAFTA	Yes
El Salvador	Central America	CAFTA	No
Guatemala	Central America	CAFTA	No
Honduras	Central America	CAFTA	No
Israel	Western Asia	USIFTA	No
Jordan	Western Asia	USJFTA	No
Mexico	North America	NAFTA	No
Morocco	North Africa	USMFTA	No
Nicaragua	Central America	CAFTA	No
Oman	Western Asia	OFTA	No
Panama	Central America	PTPA	Yes
Peru	South America	USPTPA	Yes
Singapore	Southeast Asia	USSFTA	No
South Korea	East Asia	KFTA	No
United States	North America	NAFTA	Yes

Quaternary sector

Entrepreneurshipandresearch & development(R&D) is relatively young on the island but has become increasingly important for its economy due to its downturn. Companies likeNeolpharmaandRock Solid Technologiespossess significant R&D operations on the island.Regarding entrepreneurship, several organizations have presence on the island as well, such as theFounder Institute,theSmall Business Administration,SCORE,andStartup Weekend.Most entrepreneurial activities are driven by regional organizations that join academia, local government, and private businesses such asDISUR,INTECO,INTENE,andINTENOR.Other initiatives such as thePuerto Rico Technoeconomic Corridor,thePuerto Rico Science, Technology and Research Trust,and thePuerto Rico Small Business Technology and Development Centerprovide significant support to entrepreneurship and R&D on the island.

Quinary sector

Majormanagement consultingfirms have presence in the island includingAccenture,theBoston Consulting Group,Booz Allen Hamilton,Deloitte,McKinsey & Company,andPricewaterhouseCoopers.

Data

The following table shows the main economic indicators in 1980–2021 (with IMF staff estimtates in 2022–2027). Inflation below 5% is in green.

Year	GDP (in Bil. US$PPP)	GDP per capita (in US$ PPP)	GDP (in Bil. US$nominal)	GDP per capita (in US$ nominal)	GDP growth (real)	Inflation rate (in Percent)	Unemployment (in Percent)	Government debt (in % of GDP)
1980	22.2	6,926.1	14.4	4,507.2	n/a	n/a	17.1%	n/a
1981	24.5	7,599.8	16.0	4,940.8	1.1%	9.5%	19.8%	n/a
1982	25.3	7,756.6	16.8	5,146.9	-3.0%	3.2%	22.8%	n/a
1983	26.4	8,026.3	17.3	5,257.2	0.5%	0.3%	23.4%	n/a
1984	29.3	8,842.5	19.2	5,777.4	7.3%	1.7%	20.7%	n/a
1985	30.9	9,221.0	20.3	6,058.6	2.1%	0.2%	21.8%	n/a
1986	34.1	10,074.0	22.0	6,495.5	8.2%	-0.2%	18.9%	n/a
1987	36.6	10,719.7	23.9	6,987.4	4.9%	2.1%	16.8%	n/a
1988	40.4	11,694.6	26.2	7,579.3	6.5%	2.6%	15.0%	n/a
1989	44.1	12,613.9	28.3	8,094.3	4.9%	2.8%	14.6%	n/a
1990	47.4	13,444.4	30.6	8,675.6	3.8%	4.4%	14.2%	n/a
1991	50.2	14,127.4	32.3	9,093.5	2.3%	2.2%	16.0%	n/a
1992	53.6	15,006.5	34.6	9,687.4	4.6%	1.5%	16.7%	n/a
1993	57.5	15,961.9	36.9	10,255.5	4.6%	1.0%	17.0%	n/a
1994	61.2	16,859.8	39.7	10,942.9	4.2%	1.4%	14.6%	n/a
1995	65.3	17,857.8	42.6	11,667.6	4.5%	1.9%	13.7%	n/a
1996	68.0	18,456.3	45.3	12,305.0	2.3%	3.3%	13.4%	n/a
1997	72.6	19,526.6	48.2	12,968.4	4.9%	1.9%	13.5%	n/a
1998	78.2	20,851.5	54.1	14,430.2	6.5%	0.1%	13.3%	n/a
1999	82.8	21,879.9	57.8	15,293.2	4.4%	0.7%	11.7%	n/a
2000	87.4	22,935.2	61.7	16,192.1	3.3%	3.1%	10.1%	n/a
2001	97.8	25,617.3	69.7	18,243.7	9.5%	0.6%	11.4%	n/a
2002	101.5	26,547.0	72.5	18,972.8	2.2%	0.2%	12.3%	n/a
2003	105.9	27,687.4	75.8	19,820.2	2.3%	1.4%	12.0%	n/a
2004	110.9	28,989.6	80.3	20,989.0	2.0%	2.5%	10.6%	n/a
2005	112.1	29,346.9	83.9	21,959.3	-2.0%	5.6%	11.3%	n/a
2006	114.0	29,952.6	87.3	22,936.0	-1.4%	5.2%	10.5%	33.4%
2007	115.7	30,583.1	89.5	23,664.9	-1.2%	4.2%	11.2%	36.9%
2008	115.7	30,774.7	93.6	24,898.3	-1.8%	5.2%	11.8%	40.8%
2009	114.2	30,533.3	96.4	25,768.7	-2.0%	0.3%	15.3%	46.5%
2010	115.1	30,928.8	98.4	26,435.7	-0.4%	2.5%	16.4%	48.3%
2011	117.1	31,824.1	100.4	27,278.9	-0.4%	2.9%	15.9%	50.0%
2012	118.4	32,582.6	101.6	27,944.7	0.0%	1.3%	14.5%	53.7%
2013	119.2	33,172.7	102.5	28,513.2	-0.3%	1.1%	14.3%	52.3%
2014	119.1	33,682.7	102.4	28,981.3	-1.2%	0.6%	13.9%	54.5%
2015	118.1	34,006.7	103.4	29,755.4	-1.0%	-0.8%	12.0%	52.7%
2016	117.0	34,300.2	104.3	30,585.6	-1.3%	-0.3%	11.8%	49.9%
2017	114.3	34,627.2	103.4	31,347.3	-2.9%	1.8%	10.8%	51.2%
2018	112.1	35,044.5	104.9	32,789.1	-4.2%	1.3%	9.2%	50.4%
2019	115.8	36,201.4	104.9	32,785.9	1.5%	0.1%	8.3%	48.9%
2020	112.7	35,660.3	103.1	32,645.4	-3.9%	-0.5%	8.9%	50.2%
2021	120.5	38,608.2	108.5	34,751.9	2.7%	2.4%	7.9%	47.9%
2022	135.3	43,820.1	118.7	38,442.9	4.8%	4.4%	6.0%	16.0%
2023	140.7	46,023.1	123.4	40,360.2	0.4%	3.5%	7.9%	14.8%
2024	141.3	46,704.0	124.3	41,074.4	-1.6%	2.4%	8.8%	14.2%
2025	142.5	47,572.0	126.0	42,075.9	-1.0%	2.4%	8.9%	13.5%
2026	144.5	48,722.5	128.5	43,316.9	-0.5%	2.4%	9.0%	12.8%
2027	147.3	50,167.0	131.4	44,769.6	0.0%	2.3%	9.0%	12.0%

Infrastructure

Puerto Rico has a modern infrastructure and an institutional framework guided by the regulations of U.S. federal agencies, most of which have an active and continued presence in the island. For most intents and purposes, Puerto Rico is treated as if it were astate of the United States,despite not being one. Virtually all federal laws apply on the island, save a few exceptions, including a strong and robust protection forintellectual propertyandcontracts.

Education

Main article:Education in Puerto Rico

Preschool education, care, and services (includingEarly Head StartandHead Start) are free for low income families with privatedaycaresbeing common and within walking distance in urban areas. Primary and secondary education iscompulsoryand free regardless of income through more than 1,400 public schools. Only ten public schools are considered prestigious locally, all of them beingmagnet schools,which graduate the highest scores on the island of theCollege Board's PEAU(Latin America's equivalent of theSAT). Two examples of these areCIMATECandCROEMwhich focus on science, technology, and mathematics. There are more than 700private schoolson the island, most of themCatholic.It is constitutionally illegal to deny entrance or take action against students that profess a difference faith than the school they attend or intend to attend. Students from differing denominations are legally freed from attending religious activities on the schools they attend. Prominent private schools includeAcademia del Perpetuo Socorro,Academia Maria Reina,Academia San Jorge,Colegio Marista Guaynabo,Colegio San Ignacio de Loyola,andColegio San Joséwhich maintain a high rate of students being accepted into prominent universities in the United States.

There is a plethora ofjunior colleges on the island,the most prominent being theHuertas College,theICPR Junior College,theInstituto de Banca y Comercio,and theNational University College(NUC). There is only one state-run system, thePuerto Rico Technological Institute,which possesses several prestigious programs at the local level and whose costs are significantly below market prices. Thanks to this abundance of junior colleges—and the presence of other institutions of higher education— the percentage of Puerto Ricans with bachelor's degrees, at 18.3% according to the 2000 Census, is roughly comparable to the lower tier of American states.

Not a singlecollege or university in Puerto Ricoranks in the top 700 global rankings, with only thestate university,theUniversity of Puerto Rico(UPR), appearing on the ranks. Several schools and programs appear on different rankings, but none of these is considered a prestigious ranking system, either nationally or internationally. The three major university systems on the island are: theUniversity of Puerto Rico,with 11 campuses; theAna G. Méndez University System(SUAGM) with three major, local campuses and five satellites located on the mainland; and theInteramerican University of Puerto Rico(Inter) with nine campuses and two specialized schools.

The University of Puerto Rico is considered one of the most elite secondary schools on the island, and within the Caribbean:

• it produces more than 80% of all post-secondary research on the island,
• it graduates the largest number of Hispanic engineers in the United States,
• it graduates the largest number of chemical engineers in the United States,
• it graduates the second largest number of female engineers in the United States,
• it possesses the largest number of patents by a university on the island,
• it possesses the largest enrollment on the island and one of the largest in the United States,
• it possesses the largest faculty body on the island and one of the largest in the United States,
• it possesses the largest number of academic programs on the island and one of the largest in the United States,
• it possesses the largest number ofdoctoral programson the island,
• it possesses the largest number of campuses on the island,
• it possesses the highest ratio of students from the island that enroll in graduate studies,
• it confers the largest number of post-secondary degrees on the island,
• it conducts almost all medical research on the island,
• it is considered the best university in all the Caribbean,
• its flagship campus has won 24 out of the 95 global cups of thePuerto Rico college athletics,and
• it has graduated six out of tengovernors of Puerto Rico.

The system, however, is highly politicized with itsboard of trustees,chancellor,rectors,deans,andprogram directorschangingwhenever a political party gains power(about every 4 or 8 years) as the university isa government-owned corporation.Its flagship campus is also prone tostudent strikes,averaging about one strike every three years that halts the whole campus, with the system as a whole averaging about one strike every five yearsthat halts the whole system.Most strikes derive from the extremely cheap costs per credit the institution offers: US$55 per undergraduate credit and $117 per graduate credit.It is highly unlikely that a student graduates with college debt as a fullPell Grantcovers most costs for low income students, and those that don't receive a full Pell Grant or a Pell Grant at all can easily cover tuition costs.However, this economic accessibility comes at a price for the residents of Puerto Rico: 9.6% of theGeneral Budget of the Government of Puerto Ricois automatically assigned to the university by law. As the economy shrunk in recent years, so did the university's endowment, suffocating an already highly indebted university incapable of generating enough revenue to maintain itself.Because of this, the board of trustees increased tuition costs, which led to strikes. Other strikes were caused by the mere mention of lowering the aforementioned percentage automatically assigned to the university even though no bill has ever been filed for such purpose.

In terms of specialized schools and programs, not a single school and program in Puerto Rico is ranked in a prestigious system. The University of Puerto Rico possesses the largest academic offer with 472 academic programs of which 32 lead to a doctorate. UPR is also the only system with a business school, an engineering school, a law school, a nursing school, a school of architecture, and a school of medicine. Almost all its schools and programs rank first on the island, although competition has increased in the last decades with private universities gaining track at a fast pace. The Ana G. Méndez System, the Interamerican University, and theUniversity of the Sacred Heartpossess a business school with the University of Sacred Heart leading innon-profit managementandsocial enterprise,as well as in communications. ThePolytechnic University of Puerto Ricoand theTurabo Universityboth have engineering schools with the Polytechnic University leading incomputer securityand offering the only master's degree incomputer scienceon the island. Ranking regarding law schools is subjective with theUniversity of Puerto Rico School of Law,theInteramerican University of Puerto Rico School of Law,and theEugenio María de Hostos School of Lawconsidered the best although UPR still leads inconstitutional law.In terms of medicine theUniversity of Puerto Rico School of Medicineand theUniversity of Puerto Rico School of Dental Medicineare simply unmatched, with theInteramerican University School of Optometrybeing the only school of optometry on the island. TheCarlos Albizu Universityleads in psychology while theMetropolitan Universityleads inenvironmental managementalthough UPR leads by far in environmental science. In terms of arts, theAtlantic University Collegeleads in digital arts by far, while theConservatory of Music of Puerto Ricoand theEscuela de Artes Plásticas y Diseño de Puerto Ricoare considered the most prestigious in music and arts respectively; both by far. The onlyschool of international relationswas created in November 2013 under the name ofMorales Carrión Diplomatic and Foreign Relations School,ascribed to theDepartment of State of Puerto Ricoand still in development. There are no veterinary schools on the island with most veterinarians studying abroad at theUniversidad Autónoma de Santo Domingoin theDominican Republic.

Almost all junior colleges, colleges, universities, and schools are accredited by theMiddle States Association of Colleges and Schools.Specific programs tend to possess their respective accreditation as well (such asABET,AACSB,LCME,and so on) although it is not uncommon for programs to not possess its expected accreditation—for example, only two business schools are accredited by AACSB.

Energy, water, and public utilities

PREPA's operating expenses for FY2013 denote how fuel purchases take over 58% of the authority's operating expenses.

Puerto Rico does not have any coal, natural gas, nor oil reservesso it must import all its fuel in order to produce energy. ThePuerto Rico Electric Power Authority(PREPA), a government-owned corporation, produces 70% of all energy in Puerto Rico through several power plants dependent on fossil fuels. 58% of PREPA's budget goes directly to these costs. Additional indirect costs of imported fossil fuels are paid through power purchase agreements for the 30% of the country's energy produced through private companies dependent on fossil fuels. To meet energy demands, Puerto Rico must import oil at a rate of 8.0 billion kWh and about 1,499,196 km3 of natural gas per year as well as a very large amount of coal.

Perple xing ly, less than 3% of all energy is produced through renewable energy even though Puerto Rico enjoys more than 65% sunny hours per day in average and 19-knot (22 mph; 35 km/h) winds year round. The island could also generate all its energy through hydroelectric dams thanks to its local geography which features many rivers but it has opted to leave that industry behind. Public policy has also opted not to pursuenuclear powereither. Biofuel, biomass, geothermal energy, wave power andtidal powerare still in its infant stages although there are some microbusinesses providing energy from those sources or performing research on the subject. The Puerto Rican government has made plans to reduce dependency on costly imported fossil fuels,but lacks funds to make more than modest progress.

An example of a utility pole in Puerto Rico

As a result, Puerto Ricans pay 26¢ per kilowatt per hour of electricity, compared to an average of 11 to 12 cents or less across the United States.This places Puerto Rico at an enormous disadvantage when compared to other states that produce electric power at less than half of Puerto Rico's price.Electric utility costs ultimately create a ripple effect on the economy as it adds to the cost of living and the cost of doing business.For example, 20% ofBacardi'sexpenses on the island come from electricity, while the company that owns allWendy's,Applebee's,andLongHorn Steakhouseon the island has simply opted to keep the lights and air conditioning off in certain areas when employees arrive.

Thewater industryis administered in whole by thePuerto Rico Aqueducts and Sewers Authority(PRASA), another government-owned corporation and government monopoly which owns and manages all thewater supply networkin Puerto Rico. All potable water comes either fromraw water(primarilyrainwater,lakes,andrivers) orsewage treatmentsubject to regulations by theDepartment of Natural and Environmental Resources of Puerto Rico(DRNA), theEnvironmental Protection Agency(EPA), thePuerto Rico Environmental Quality Board(JCA in Spanish), and theSafe Drinking Water Act.Thewater bottlingindustry is diverse with several plants on the island.

Healthcare

In 2023, the Washington Post reported on elevated death rates in Puerto Rico as a result of its "crumbling healthcare system".

The system meets the regulations of theU.S. Department of Health and Human Serviceswhich has jurisdiction over the island, and the localDepartment of Health of Puerto Rico.Medical offices within walking distance are common in urban areas as well aswalk-in clinics,urgent care,emergency rooms,andhospitals.There are specialized hospitals for cardiovascular diseases, cancer treatment, children (pediatrics), psychiatric care, and veterans. Every medical specialty is covered in the island thanks tothe different medical schools on the island,including theUniversity of Puerto Rico School of Medicine,theUniversidad Central del CaribeSchool of Medicine (UCCSoM), thePonce School of Medicine,and theSan Juan Bautista School of Medicine.

Veterinary healthcare is provided by private veterinarians, clinics, and animal hospitals which are common and scattered all over the island.

Postal service and shipping

TheUnited States Postal Servicehas at least one postal office in each municipality in Puerto Rico with the island usingzip codesas its postal code system.DHL,FedEx,andUPShave well established operations on the island.

Shipping cargo is expensive,as Puerto Rico is restricted to using theUnited States Merchant Marinewhen shipping from and to the United States, as per theMerchant Marine Act of 1920(the Jones Act).

Security

Main articles:Puerto Rico Commission on Safety and Public ProtectionandPuerto Rico Department of Justice

Local security is overseen by thePuerto Rico Commission on Safety and Public Protectionand theU.S. Department of Homeland Security.Law enforcement is carried out by thePuerto Rico Police,the localstate police forcewhich has many stations scattered throughout all municipalities. Municipal laws are enforced by each respectivePuerto Rico municipal police.The legal systemis a mix of thecivil lawand thecommon lawsystems. Disputes under local jurisdiction are carried out by a system of municipal courts,district courts,andappellate courtswith the higheststate courtand thecourt of last resortbeing theSupreme Court of Puerto Rico.

MostU.S. federal lawsapply in Puerto Rico as the island isa territory of the United States.Issues that trespass into federal jurisdiction are managed by theFederal Bureau of Investigation(FBI), theDrug Enforcement Administration(DEA), theBureau of Alcohol, Tobacco, Firearms and Explosives(ATF), theUnited States Marshals Service(USMS), theU.S. Department of Justice(DOJ), andother federal agencies.Disputes that trespass the local jurisdiction are managed by thefederal court system,with theUnited States District Court for the District of Puerto Ricobeing the first in line.

Fire protection, rescue, and protection from hazards is provided by thePuerto Rico Firefighters Corpswhich has at least one fire station in each municipality on the island. A separate agency, thePuerto Rico Medical Emergencies Corps,provides emergency medical services to all Puerto Rico. The island is also part of the9-1-1system. All local emergencies and disasters are managed and overseen by thePuerto Rico State Agency for Emergency and Disaster Management(AEMEAD) which works closely and directly with theFederal Emergency Management Agency(FEMA). Puerto Rico also has a localNational Weather Servicestation which provides forecasts and public warnings, as well as a localPuerto Rico Seismic Networkwhich tracks seismic activity and provides public warnings.

The localnational guardis thePuerto Rico National Guardwhich has a branch for ground forces, thePuerto Rico Army National Guard,and another for aerial warfare, thePuerto Rico Air National Guard.Thestate defense forceis thePuerto Rico State Guardunder the sole jurisdiction of thegovernor.Both the Puerto Rico National Guard and the Puerto Rico State Guard are considered two of the most active and well-prepared local forces in the nation.Nine servicemenhave been bestowed theMedal of Honor,the highest military decoration in the United States, with Puerto Ricans having served in every U.S. military conflict sinceWorld War I,including theWar in Afghanistanand theIraq War.

Key posts include thePuerto Rico Police Superintendent,thePuerto Rico Adjutant General,theSecretary of Justice of Puerto Rico,and theChief Justice of the Supreme Court of Puerto Rico.

Telecommunications

Main article:Telecommunications in Puerto Rico

Telecommunications meet the regulations of theFederal Communications Commission(FCC) which has jurisdiction over the island, and the localPuerto Rico Telecommunications Regulatory Board(JRT in Spanish). Broadcasts are transmitted throughradioandtelevision stations,as well as the Internet.Uno Radio Groupand theSpanish Broadcasting Systemare two of the most prominent radio operators on the island.Telemundo,Univision,andWAPA Americatransmit television from the island throughWKAQ-TV,WLII-TV,andWAPA-TVrespectively.

Severalcommunications service providersoffertriple play(Internet + television + telephony) on the island withClaro Puerto Rico,andLiberty Mediabeing the most prominent. Most downtime is caused by power failures in the electric grid rather than in telecommunications networks with outages being rare and fixed within hours. High speed internet access and mobile telephony is ubiquitous with providers such asLiberty,andT-Mobilebeing the most prominent. Chains likeBurger King,Church's Chicken,McDonald's,andStarbucksprovide free Wi-Fi at their numerous establishments.

Submarine communications cableslanding in Puerto Rico includeARCOS-1,Americas II,andANTILLAS I.

Transportation

Main article:Transportation in Puerto Rico

Map ofPuerto Rico's interstate highways

Cities and towns in Puerto Rico are interconnected by a system of roads,freeways,expressways,andhighwaysmaintained by thePuerto Rico Highways and Transportation Authority(PRHTA) under the jurisdiction of theU.S. Department of Transportation,and patrolled by thePuerto Rico Police.The island's metropolitan area is served bya public bus transit systemanda rapid transit system.Other forms of public transportation include seaborne ferries (that serve Puerto Rico's archipelago) as well asshare taxis.

The island has three international airports, theLuis Muñoz Marín International Airport(SJU) inCarolina,Mercedita AirportinPonce,and theRafael Hernández AirportinAguadilla.Puerto Rico is also served by another 27 local airports. The Luis Muñoz Marín International Airport is the largest aerial transportation hub in the Caribbean, and one of the largest in the world in terms of passenger and cargo movement.

Puerto Rico has nine ports in different cities across the main island. TheSan Juan Portis the largest in Puerto Rico, the busiest port in the Caribbean and the 10th busiest in the United States in terms of commercial activity and cargo movement, respectively.The second largest port is thePort of the Americasin Ponce, currently under expansion to increase cargo capacity to 1.5 million twenty-foot containers (TEUs) per year.

Comparative advantages

Puerto Rico does not have any comparative advantages in international markets but has a few at the U.S. national level.Its high costs of doing business are the primary factor, amongst many, that hinder the island from competing against foreign markets. These costs are typically offset by a combination of incentives or subsidies where the government either does not collect taxes against the foreign firm, assumes capital expenditures, subsidizes workers salaries and trainings, or, more often than not, offers a combination thereof. This is the case forLufthansa's operations in Aguadilla where the local government invested US$46 million against $20 million invested by the company, aiming at recouping the investment in the long run.

Domestically, however, several comparative advantages emerge when comparing Puerto Rico to other U.S. jurisdictions. These advantages base themselves on lower wages and beneficial legal loopholes that exist as a result ofPuerto Rico's political status.For example, a company likeMicrosoftmay create a subsidiary based in Puerto Rico in order to transfer its intellectual property to it, so that it can benefit fromtransfer pricingloopholes thereafter.Since the subsidiary is based in Puerto Rico, the company lawfully uses a loophole that allows it to undervalue the transferred intellectual property through the use ofcost-sharing agreements,and by taking advantage of the revenue exceptions within the U.S. legal framework that apply exclusively to Puerto Rico.

This lack of advantages pervades the economy of the island extensively. As the territory is unable to compete against foreign markets, multinational corporations choose to close operations on the island and open them elsewhere. All while domestic businesses struggle to export their products and services when competing against external firms that offer lower prices. The same scenario occurs against other U.S. jurisdictions capable of producing goods and services at lesser costs.

Public finance

Monetary policy

See also:Puerto Rican peso

Puerto Rico does not have a local coin, using instead theUnited States dollaras its only currency. Because of this, Puerto Rico controls neither itsmoney supplynor its interest rates, being subject instead to themonetary policy of the United States;particularly to the operations performed by theFederal Reserve System.Puerto Rico, however, has a representative in theFederal Reserve Bank of New Yorkthrough a local businessman by the name ofRichard Carrión,Chairman and CEO ofPopular, Inc.,who has served as member of the board for the reserve bank several times.

Public debt

Main articles:Public debt of Puerto RicoandPuerto Rico government-debt crisis

Thepublic debt of Puerto Ricohas grown at a faster pace than the growth of its economy, reaching $46.7 billion in 2008.In January 2009,Governor Luis Fortuñoenacted several measures aimed at eliminating the government's $3.3 billion deficit.

Since 2000, the government of Puerto Rico has experienced 24 consecutivenegative cash flowswhich has contributed to the enlargement of its public debt, as the government incurs in new debt in order to pay the older one.

On 4 February 2014, Standard & Poor'sdowngraded the debt of Puerto Rico to junk status.Puerto Rico has roughly $70 billion outstanding debt for a population of four million inhabitants. Despite its small population it is the third issuer of municipal bonds in all 50 states and territories. First being California, second New York.

In early 2017, thePuerto Rican government-debt crisisposed serious problems for the government which was saddled with outstanding debt of $70 billion or $12,000 per capitaat a time with a 45 percent poverty rate and 14.2% unemployment that is more than twice the mainland U.S. average.

The Commonwealth had been defaulting on many debts, including bonds, since 2015. Newly elected governorRicardo Rossellódiscussed the situation in an interview with the internationalFinancial Timesin mid January and indicated that he would seek an amicable resolution with creditors and also make fiscal reforms. "There will be real fiscal oversight and we are willing to sit down. We are taking steps to make bold reforms.... What we are asking for is runway to establish these reforms and have Washington recognise that they have a role to play." He had instructed Puerto Rican government agencies to cut operating expenses by 10 percent and reduce political appointees by 20 percent.To ensure that funds would be available to pay for "essential" government services, Rosselló signed a fiscal emergency law on 28 January 2017, that would allow for setting aside funds that might otherwise be required for debt payments.

In mid January, the cash strapped government was having difficulty maintaining health care funding. "Without action before April, Puerto Rico's ability to execute contracts for Fiscal Year 2018 with its managed care organizations will be threatened, thereby putting at risk beginning July 1, 2017 the health care of up to 900,000 poor U.S. citizens living in Puerto Rico", according to a letter sent to Congress by the Secretary of the Treasury and the Secretary of Health and Human Services. They also said that "Congress must enact measures recommended by both Republicans and Democrats that fix Puerto Rico's inequitable health care financing structure and promote sustained economic growth."In late January, the federal control board created underPROMESAgave the government until 28 February to present a fiscal plan (including negotiations with creditors) to solve the problems. It is essential for Puerto Rico to reach restructuring deals to avoid a bankruptcy-like process under PROMESA.A moratorium on lawsuits by debtors was extended to 31 May.

Governor Rosselló hired investment expertRothschild & Coin January 2017 to assist in convincing creditors to take deeper losses than they had expected on Puerto Rico's debts. The company was also exploring the possibility of convincing insurers that had guaranteed some of the bonds against default, to contribute more to the restructuring, according to reliable sources. The governor also planned to negotiate restructuring of about $9 billion of electric utility debt, a plan that could result "in a showdown with insurers". Political observers suggest that his negotiation of the electrical utility debt indicated Rosselló's intention to take a harder line with creditors. Puerto Rico has received authority from the federal government to reduce its debt with legal action and this may make creditors more willing to negotiate instead of becoming embroiled in a long and costly legal battle.

Taxation

Main articles:Taxation in Puerto Rico,Internal Revenue Code (Puerto Rico),andPuerto Rico Sales and Use Tax

Taxation is highly complex due to a lack of uniformity inthe local internal revenue codeand a disparate amount of incentives, subsidies, tax exemptions, tax breaks, and tax deductions. For example, an ordinary retail sale might have to pay: import taxes, sales taxes, property taxes, corporate net income taxes, national taxes, excise taxes, and sin taxes depending on the item being sold. Regardless of all this, American citizens that reside in Puerto Rico do not pay federal income taxes unless they work for the federal government, do business with the federal government, or send funds to the mainland United States. This peculiarity has been taken as an advantage by the local government which now offers a plethora of tax exemptions and tax benefits forhigh-net-worth individualsthat relocate to the island. These benefits have been ratified into law throughAct 20 of 2012,Act 22 of 2012,andAct 273 of 2012.Thanks to these acts, business owners residing on the island might be completely exempt from paying any local and federal taxes at all, depending on their line of business.

On 15 November 2006, the government implemented a 5.5% sales tax.

Comparatives

Business sizes

More than 99% of all businesses in Puerto Rico are consideredsmall businesses(less than 250 employees) with more than 75% beingmicro-enterprises(less than 10 employees).However, in terms of payroll, small businesses constitute about 63% of all payroll on the island with about 14% of all payroll coming from medium businesses (between 250–499 employees) and about 23% coming from large enterprises (more than 500 employees).

Business sizes and payroll in Puerto Rico

Number of employees	Number of businesses	Annual payroll (in thousands)
1–5	24,559	$ 1,270,973
5–9	8,065	$ 1,237,288
10–19	5,086	$ 1,564,863
20–49	3,504	$ 2,596,935
50–99	1,099	$ 2,023,165
100–249	652	$ 2,599,972
250–499	219	$ 2,485,160
500–999	104	$ 2,105,349
1,000+	41	$ 2,062,669
Total	43,329	$ 17,946,374

Only 7.5% of the corporations registered in the Department of State of Puerto Rico—or about 6,000 out of 80,000—exceed $3M in revenue.Of these 6,000, a mere six compose more than 30% of all of Puerto Rico's corporate income tax collections; all six being multinationals.

Cost of living

The cost of living in Puerto Rico, specifically San Juan, is quite high compared to most major cities in the United States.One factor is housing prices which are comparable toMiamiandLos Angeles,although property taxes are considerably lower than most places in the United States.Statistics used for cost of living sometimes do not take into account certain costs, such as increased travel costs for longer flights, additional shipping fees, and the loss of promotional participation opportunities for customers "outside the continental United States". While some online stores do offer free shipping on orders to Puerto Rico, many merchants exclude Hawaii, Alaska, Puerto Rico and other United States territories.

The median home value in Puerto Rico ranges from US$100,000 to $214,000, while the national median home value sits at $119,600.

Ease of doing business

Puerto Rico is considered the 40th economy out of 189 in rank ofease of doing businessby theWorld Bank;surpassed only by Chile in Latin America.It ranks very poorly in construction permits but very well in getting credit and protecting investors.

Income

Puerto Ricans hadmedian household incomeof $18,314 for 2009, which makes Puerto Rico's economy comparable to the independent nations ofLatviaor Poland.By comparison, the poorest state of the Union,Mississippi,had median household income of $36,646 in 2009.Nevertheless, Puerto Rico's GDP per capita compares favorably to other independent Caribbean nations, and is one of the highest in North America. SeeList of North American countries by GDP per capita

Puerto Rico has a GDP per capita of $16,300 (2010 est.). Compared to the rest of the world they are ranked 73rd.Puerto Rico's GDP per capita has been declining in recent years ($18,100 (2008 est.), and $17,400 (2009 est.)). According to statistics from the Central Intelligence Agency (CIA), itsGDP per capitais the 10th highest in the Caribbean, behind the Bahamas ($30,400), Aruba ($25,300) Barbados ($25,000), Trinidad and Tobago ($20,000), Antigua & Barbuda ($17,800) and British dependencies Cayman Islands ($43,800), British Virgin Islands ($42,300) and Turks & Caicos ($29,100).

In terms of personal income, federaltransfer paymentsto Puerto Rico make upmore than 20% of the island's personal income.By comparison, the poorest state, Mississippi, had a median level of $21,587, according to theU.S. CensusBureau'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 the poorest state in 2007.

In 2010 the median income in Puerto Rico was $19,370, which is just over half that of the poorest state (Mississippi, $37,838) and 37% of the nationwide average ($51,144).According to theBureau of Labor Statisticsof theDepartment of Laborof the United States,the mean annual salary of residents of Puerto Rico is $27,190, the lowest among U.S. territories continuously surveyed periodically by the institution. Guam has the second lowest mean salary to $31,840, closely followed Mississippi, a state, with $34,770. This spread in mean wages could be explained by a minimum wage law for certain industries that are capped to 70% of the federal minimum wage of $7.25 per hour.

In 2017, the median income in Puerto Rico was $25,332.

Workforce

Puerto Rico's most competitive advantage lies on its labor force: a highly competitive, educated, and skilled labor force that enjoysAmerican citizenship.This allows U.S.-based companies to relocate some of its operations to the island for cheaper labor costs while still maintaining a labor force subject to the rights and benefits given by American citizenship and federal regulations. Educated workers tend to be bilingual as well while costing 30–35% less than a worker in the mainland.

Workforce of Puerto Rico by sector

Sector	Number of persons (in thousands)	Percentage
Professionals, Executives, and Managerial	344	31%
Technical, Salespeople and Administrative Support	279	25%
Service Workers	186	17%
Operatives and Related	112	10%
Craftsmen, Foremen, and Related	72	7%
Farm Workers	38	3%
General Laborers Workers	78	7%
Total	1,111	100.0%

Challenges

Costs of doing business

Map ofJones Actcarrier routes for Puerto Rico.

One of the most significant contributors to the high cost of living in Puerto Rico is theMerchant Marine Act of 1920(also known as theJones Act) which prevents foreign-flagged ships from carrying cargo between two American ports (a practice known ascabotage).Because of the Jones Act, foreign ships inbound with goods fromCentralandSouth America,Western Europe,andAfricacannot stop in Puerto Rico, offload Puerto Rico-bound goods, load mainland-bound Puerto Rico-manufactured goods, and continue to U.S. ports. Instead, they must proceed directly to U.S. ports, where distributorsbreak bulkand send Puerto Rico-bound manufactured goods to Puerto Rico across the ocean by U.S.-flagged ships.

Puerto Rican consumers ultimately bear the expense of transporting goods again across the Atlantic and Caribbean Sea on U.S.-flagged ships subject to the extremely high operating costs imposed by the Jones Act.This also makes Puerto Rico less competitive with Caribbean ports as a shopping destination for tourists from home countries with much higher taxes (like mainland states) even though prices for non-American manufactured goods in theory should be cheaper since Puerto Rico is much closer toCentral and South America,Western Europe, and Africa.

Thelocal government of Puerto Ricohas requested several times to theU.S. Congressto exclude Puerto Rico from the Jones Act restrictions without success.The most recent measure has been taken by the17th Legislative Assembly of Puerto Ricothrough R. Conc. del S. 21.These measures have always received support from all themajor local political parties.In 2013 theGovernment Accountability Officepublished a reportwhich concluded that "repealing or amending the Jones Act cabotage law might cut Puerto Rico shipping costs" and that "shippers believed that opening the trade to non-U.S.-flag competition could lower costs."The report, however, concluded that the effects of modifying the application of the Jones Act for Puerto Rico are highly uncertain for both Puerto Rico and the United States, particularly for theU.S. shipping industryand the military preparedness of the United States.

The costs of doing business in Puerto Rico are further increased by complex labor laws that force employers to pay for severalemployee benefitsfrom their own pockets.Puerto Rico also lacksat-will employmentwhich puts significant restraints on employers when they want to dismiss an employee.

Residents of Puerto Rico are also subject to a highly complex tax system with many different exemptions and disparities between taxes.

Inefficient government

The political class has proven to be highly stubborn when examining existent public policies.This stubbornness ultimately forced Puerto Rico to incur in higheropportunity costs.For example, even though the island's geography features many rivers, the government has opted to leave thehydroelectric industrybehind. Public policy has also opted not to pursuenuclear powereither. Instead, even though Puerto Rico does not have any oil-based resources, it has opted to power its electric plants with fossil fuels: less than 3% of all energy is produced throughrenewable energyeven though Puerto Rico enjoys more than 65% sunny hours per day in average and 19-knot (22 mph; 35 km/h) winds year round. This forcesPREPA,thegovernment-owned corporationandgovernment monopolythat owns and manages allelectric power distributionandtransmission,to spend 58% of its operational expenses in fuel purchases alone.

In terms of food production, Puerto Rico imports 85% of its food even though most of the land is fertile with only a mere 6% being arable.This perple xing situation has been caused due to a shift in priorities towards industrialization, bureaucratization, mismanagement of land, lack of alternative methods, and a deficiency in the number of agricultural workforce.

Similarly, when looking at forestry, even though a study conducted more than two decades ago by theU.S. Forest Serviceconcluded that local soil could sustain a lumber industry if the proper species were used, almost allwoodused on the island is imported.

Higher education suffers the same fate: Puerto Rico spends almost $800M per year onits state universityeven though none of its programs and schools appear in any prestigious ranking whatsoever.In addition, the system graduates about 50,000 students per year even though the labor market generates only about 6,000 jobs per year of which 25% of them require a college education.This effectively means that the Puerto Rican labor market has no demand for 97% of those who graduate with an undergraduate or graduate degree in Puerto Rico.

NAEP scores 2005

The same occurs in primary education and secondary education: Puerto Rico spends almost $4 billion per year inits public education systemeven though 40% of all the students that entertenth gradein public schools in Puerto Ricodrop outand never finish secondary education.In addition, ninety-five percent (95%) of public school students in Puerto Rico graduate at a sub-basic level while sixty percent (60%) do not even graduate.Furthermore, according to theDepartment of Education of Puerto Rico,thirty-nine percent (39%) of public school students perform at a basic level (average performance) in Spanish in thePuerto Rican Tests of Academic Achievement.Likewise, 36% perform at a basic level inMathematicswhile 35% perform at a basic level inEnglishand 43% at a basic level inSciencein the relevant tests.Overall, 1,321 out of 1,466 public schools in Puerto Rico (about 90%) do not comply with the academic progress requirements established by theNo Child Left Behind Act.

The local government has also proven to be highly inefficient in terms of management and planning; with some newspapers, such asEl Vocero,stating that the main problem is inefficiency rather than lack of funds.As an example, theDepartment of Treasury of Puerto Ricois incapable of collecting 44% of thePuerto Rico Sales and Use Tax(or about US$900 million), did not match what taxpayers reported to the department with the income reported by the taxpayer's employer throughForm W-2's, and did not collect payments owned to the department by taxpayers that submitted tax returns without their corresponding payments.The Treasury department also tends to publish itscomprehensive annual financial report(CAFR) late, sometimes 15 months after a fiscal year ends, while the government as a whole constantly fails to comply with its continuing disclosure obligations on a timely basis.Furthermore, the government's accounting, payroll and fiscal oversight information systems and processes also have deficiencies that significantly affect its ability to forecast expenditures.

Similarly, salaries for government employees tend to be quite disparate when compared to the private sector and other positions within the government itself. For example, a public teacher's base salary starts at $24,000 while a legislative advisor starts at $74,000. The government has also been unable to set up a system based onmeritocracy,with many employees, particularly executives and administrators, simply lacking the competencies required to perform their jobs.

There was a similar situation at the municipal level with 36 out of78 municipalitiesexperiencing abudget deficit,putting 46% of the municipalities in financial stress.Just like the central government, the municipalities would issue debt through thePuerto Rico Municipal Financing Agencyto stabilize its finances rather than make adjustments. In total, the combined debt carried by the municipalities of Puerto Rico account for US$3.8 billion or about 5.5% of Puerto Rico's outstanding debt.

Population decline

Main article:Demographics of Puerto Rico

From 2000 to 2010, the population of Puerto Rico decreased, the first such decrease in census history for Puerto Rico; it went from 3,808,610 residents registered in 2000 to 3,725,789 in 2010 (a −2.2% decrease);it peaked at 3.91 million in 2005.A declining and aging population presents additional problems for any society as its labor force decreases and, consequently, so does its economic output.Two years later, another estimate noted that the population of Puerto Rico decreased further to 3,667,084 residents from 1 April 2010, to 1 July 2012; a −1.6% decrease.

Emigrationis also major part of Puerto Rico's declining population. Starting soon afterWorld War II,poverty, cheap airfare, and promotion by the local government causedwaves of Puerto Ricans to move to the mainland United States.This trend continued even as Puerto Rico's economy improved and its birth rate declined. In recent years, the population has declined markedly, falling nearly 1% in 2012 and an additional 1% (36,000 people) in 2013 due to a falling birthrate and emigration.

The US Census Bureau's estimate for 1 July 2016, was 3,411,307 people, down substantially from the 2010 data which had indicated 3,725,789 people.As fewer people reside in Puerto Rico, the government collects less revenue from its residents. As revenues were declining in the past, the government opted to issue more outstanding debt (such as bonds) to maintain its operations rather than making adjustments. Hence, the declining - and aging - population continues to present problems for the commonwealth.

Suzeraintyto the United States

Main article:Foreign and intergovernmental relations of Puerto Rico

Puerto Rico is subject to theCommerceandTerritorial Clauseof theConstitution of the United Statesand, therefore, is restricted on how it can engage with other nations, sharing most of the opportunities and limitations that state governments have, albeit not being one. Puerto Rico is also subject to the different treaties and trade agreements ratified by the United States, as well as all other laws enacted at the federal level.

Unemployment

Unemployment is a significant issue in Puerto Rico with the unemployment rate being as high as 11.7% in 2006. By November 2009, it stood at 12% and had increased to 15.7% by October 2010.Currently the unemployment rate is at 13.7% The U.S. state with the highest unemployment in October 2007 was Michigan, at 7.7%, and the U.S. average was 4.4%.

In mid January 2017, unemployment remained in the double digits and the poverty rate was at 45 percent. By that time, the Commonwealth's debt had increased to $70 billion or $12,000 per capita.The debt had been increasing during a decade long recession.It is essential for Puerto Rico to reach restructuring deals to avoid a bankruptcy-like process underPROMESA.

• 
  Puerto Rico's labor force from 2005 to 2014 evidences a decline.
• 
  Puerto Rico's unemployment rate (seasonally adjusted) is significantly higher than the U.S. national average.
• 
  Percent population living below poverty level in Puerto Rico by census tract in 2015.

Facts & figures

• Debt - External:$70 billion (23 January 2017, 2010 est.)
• GDP
  • Purchasing power parity:$64.84 billion (2010 est.)
  • Official exchange rate: $93.52 billion (2010 est.)
  • Real growth rate: -5.8% (2010 est.)
  • Per capita: $16,300 (2010 est.)
• Inflation rate (consumer prices):2.9% (2011 est.)
• Industrial production growth rate:NA%
• Median household income (2016 est.):
  • $19,350
• Persons living in poverty (2016 est.):
  • 46.1%
• Budget:
  • revenues: $8.1 billion Central Government, $25 billion with public corporations
  • expenditures: $9.6 billion Central Government
• Electricity
  • production: 23,720 GWh
  • consumption: 22,600 GWh
  • exports: 0 kWh
  • imports: 0 kWh (2007 est.)
• Electricity – production by source (2020):
  • Petroleum 49.5%
  • Natural gas: 29%
  • Coal: 19%
  • Renewable: 2.5%
• Agriculture – products:sugarcane, coffee,pineapples,plantains,bananas; livestock products, chickens
• Exports – commodities:chemicals, electronics, apparel, cannedtuna,rum,beverage concentrates, medical equipment
• Exports:$64.88 billion (2011 est.)
• Imports – commodities:chemicals, machinery and equipment, clothing, food, fish, petroleum products
• Imports:$44.67 billion (2011 est.)
• Sales Tax:11.5%
  • 7% (only for prepared food)
• Labor Force:1.286 million (March 2012)

See also

• Economy of the United States
• List of companies of Puerto Rico
• Public debt of Puerto Rico
• Welfare in Puerto Rico

External links

• The Bankrupt Economy
• Codigo Postal De Alaska
• History of Puerto Rico
• Changing of the Guard: Puerto Rico
• UW Press: Sugar and Slavery in Puerto Rico
• Life After Debt in Puerto Rico: How Many More Lost Decades?,Center for Economic and Policy Research