Exports from Puerto Rico have been volatile during the pandemic, but are rebounding this year.
source: tradingeconomics.com
A century ago, Puerto Rico was seeing fairly steady growth in its major exports, with a striking increase in 1920.
Looking at a similar timeframe, from 2003 to 2021, we can see that Puerto Rico’s exports have failed to show the same kind of growth. There was some increase before Hurricane Maria, but since then exports have fallen in as many years as they have grown.
source: tradingeconomics.com
Puerto Rico’s main trading partner is domestic; about 70% of the Island’s exports head to states.
The graph below, from the Governor’s Report, shows that the 50 states were Puerto Rico’s top trading partner a century ago as well.
Puerto Rico’s most important exports
Pharmaceuticals make up about 50% of all Puerto Rico’s exports. Whereas at the beginning of the 20th century, the Island’s top exports were sugar, cigars, and coffee, most of Puerto Rico’s exports are now medical in nature. After medications, the highest revenue items include medical devices, prosthetics, contact lenses, and blood fractions. According to U.S. census data, the only other exports in the top 25 are electronics.
In addition to healthcare items and electronics, Puerto Rico also exports clothing, rum, and foods.
However, these numbers are a little bit deceptive. Puerto Rico’s pharmaceutical exports are finished items produced by and for multinational corporations. Puerto Rico sends more medications to the states than any state, but the Island also sends $30 billion a year in profits to the states (out of a GNP of $65 billion).
Alongside increases in productivity and automation that reduce the number of human jobs in manufacturing, this means that Puerto Rico can be proud of exporting more pharmaceuticals than any state, but that this economic activity doesn’t spell prosperity for Puerto Rico.
However, while pharmaceuticals account for more than half of Puerto Rico’s exports, this industry also employs 30% of manufacturing workers. Total income flowing to the States may be $30 billion a year, but total wages on the Island (before Hurricane Maria) came to $800 million year. The benefits of the industry go mostly to the owners of the companies, but there are also some rewards on the Island.
Evening it out
Puerto Rico can benefit from its free trade with the states if more companies based in Puerto Rico produce goods for export. The Small Business Administration is supporting this change with the State Trade Expansion (STEP) grant program. This program provided $384,930 for local businesses in 2020 and more than $513,000 has been awarded in Puerto Rico to date. In 2021, STEP offered up to $10,000 to companies willing to create online sales systems.
“The opportunities for small businesses to grow through exporting are substantial, especially during this unprecedented time. The COVID-19 pandemic has resulted in a paradigm shift to increased web-based sales and virtual trade missions,” said SBA Regional Administrator Steve Bulger in a press release.
As of 2016, roughly 80% of small businesses in Puerto Rico had no exports and no online sales, according to a NewYorkFed survey. The world has changed since then, and Puerto Rico’s small businesses can take advantage of the new opportunities.
