MARCH 7, 2016
BY LINDA BALL
Puerto Rico seems like an island paradise, full of history, picturesque beaches and bright, sunny days. But for the past decade, this small Caribbean territory of the United States has seen its economy shrink by 14 percent, with employment dropping 12 percent over the same period, according to The Economist.
The economic decline began in 2006, when tax credits for companies that set up manufacturing on the island expired. Many younger workers left for the mainland, leaving an older, poorer population that strained the territory’s social services. From a peak of 3.8 million in 2004, Puerto Rico’s population fell to about 3.5 million in 2014, and the territory is now approximately US$72 billion in debt. In January, negotiations to restructure the Puerto Rico Electric Power Authority’s $9 billion debt collapsed. Despite these problems, it is unlikely that the U.S. Congress will bail out Puerto Rico for fear of mainland states extending their hand as well.
It seems like a dire economic situation. Or does it?
Tom Vincent, vice-president of Prime Air Corp. – Puerto Rico, which is an agent and forwarder for island-based Stevens Global Logistics, said the situation is actually healthy, business-wise. The debt, due to mistakes by the territory’s administration, is a government issue, he said, whereas the private sector is doing well.
“We’re going through some interesting times,” said Vincent, who is from the mainland, but has lived and worked in Puerto Rico for 50 years. “It’s regretful that the negative news is out there.”
Joselin Ramos, senior vice president at international freight forwarder and logistics provider CaribEx Worldwide, said the economy of Puerto Rico is growing – albeit slower than expected – thanks to the new taxes and all of the bad publicity about the government problems. “The private sector has many challenges but, as you know, we need to move fast and change to keep our business growing,” Ramos said. “The private sector, like any other state in the nation, moves around demand for service/goods.”
Since Puerto Rico is an island, Vincent said air and sea imports – including live animals, perishables, auto parts and electronics – account for 80 to 85 percent of Puerto Rican cargo value. But on the export side, the vast majority of cargo is bio-pharma and medical supplies. “Puerto Rico is sort of the pharmaceutical capital of the world,” he said. Pfizer, Amgen, Merck, Bristol- Myers Squibb, Eli Lilly and more all have large manufacturing facilities on the island.
“That’s why all the airfreight companies are here,” Vincent said, as well as the three big integrators, Strategic Air Services, ABX Air and Amerijet. The island also exports goods for the industrial sector, beverage ingredients and of, course, the famous Puerto Rican rum, which goes by sea. “The air industry remains healthy,” he said.
Ramos said that, in 2015, the airfreight industry suffered due to cuts by certain main carriers (which he did not name) between the United States and Puerto Rico. He said the island lost the majority of wide-body passenger planes carrying belly freight, and one major carrier consolidated its flights in Memphis. Additionally, Puerto Rican shippers have had to endure air rates increases not in line with taxes or volume. As a result, cargo demand is still down in some areas, due to the restrictions in passenger airplanes and the reduction in lift capacity. He added, however, that the low fuel cost has been a good thing for the industry.
Vincent said there is an active Puerto Rican manufacturing association, working to have a single voice for the private sector, making recommendations both on the island and in Washington, D.C., to foster open market approaches. Whatever happens with the debt, he said, there has to be an economic angle.
Pam Rollins, senior vice president of business development for Amerijet, said the airline has seven scheduled flights to San Juan Luis Munoz Marin International (SJU) weekly. “Some weeks, we operate as many as 11 flights, based on the needs of the market,” she said. This year, she said, Amerijet is on track to move about 16,300 tonnes of air cargo into SJU and around 9,500 tonnes out of SJU. Last year the carrier moved about 22,680 tonnes total, she added.
Ramos acknowledged that the government is awash in debt, but he said this has nothing to do with the private sector, with the exception of taxes, and the exodus of the islanders looking for work. Given the strength of the pharmaceutical and medical supply business and the people who live, work and love the island, one has to believe this is a resilient population that won’t easily give up on their island paradise.
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