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Financial Times - USA Edition
Puerto Rico Changing Even As It Seeks To Stay The Same
Financial Times Survey: Puerto Rico
Richard Lapper and Canute James
March 11, 1999
©Copyright 1999 Abstracted from the Financial Times, Source: Dow
Jones & Company, Inc.
Puerto Rico voted last December not to seek
statehood but to retain its status as a U.S. territory, giving Puerto
Ricans U.S. citizenship while preserving their Latin American culture.
However, as Cuba enters more and more into regional agreements with
Puerto Rico 's Caribbean neighbors, the island must still continue to
yield on foreign policy to U.S. wishes. As a result, it is becoming
isolated from the Caribbean community economically and politically,
leaning more heavily on the U.S.
The current governor of Puerto Rico had
sought statehood as an important step in his economic-reform effort,
turning the economy from an industrial base to a "knowledge" base. The
voting population decided otherwise. However, his ambitious plan has
already seen some success, since the privatization of many
government companies has resulted in lower prices and improved service.
The government seeks to promote technology-based businesses to build on
the strength of Puerto Rico 's growing pharmaceuticals business. An
important impetus for reform has been the expected U.S. decision to
phase out Section 936 of the U.S. Internal Revenue Code, which prevents
taxes being levied on profits that remain on the island.
The reforms
emphasize the service sector, and a new program of tax incentives is
especially generous to companies investing in education, training,
research and development. Jobs have been lost in the manufacturing
sector, a main sore point for critics of the current government, but
some impressive successes remain. Water- and electric-supply problems
are expected to improve as a result of privatization and investment.
Telecommunications and transportation are also being expanded.
The government sees ultimate success down the road, comparing the
current reforms to "Operation Bootstrap," the policies under which the
island moved from an agrarian-based to an industry-based economy. Those
reforms, the government points out, took a decade or two to take effect.
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