Puerto Rico is finding a glimmer of hope amidst the global trade tensions as it seeks to revitalize its delicate economy. Government officials from the U.S. territory are actively traveling to persuade international businesses to move their manufacturing plants to the island, where they can operate without the burden of tariffs.
Such relocations could significantly bolster Puerto Rico’s economy as it recovers from a severe economic downturn and continues to deal with frequent power outages. Moreover, the island is preparing for possible reductions in federal funding under the Trump administration, which currently forms over half of its financial resources.
“The tariff discussions present a challenge for many, but for Puerto Rico, they could be advantageous,” notes Governor Jenniffer González. Manufacturing remains a critical sector in Puerto Rico, contributing nearly half of its GDP. The government is eager to recapture the booming era when numerous prominent companies, notably in the pharmaceutical industry, established their operations on the island.
At present, officials have pinpointed around 75 to 100 companies that might consider moving to Puerto Rico due to the ongoing trade dispute, says Ella Woger Nieves, CEO of Invest Puerto Rico. This public-private initiative promotes the territory as an appealing destination for business and investment. Potential sectors include aerospace, pharmaceuticals, and medical devices.
Officials have also invited site selectors to Puerto Rico, organizing tours to showcase the available infrastructure and underscore the benefits of tariff-free operations. “Now is the time to sow those seeds,” Woger Nieves emphasizes. Furthermore, representatives from Invest Puerto Rico and various governmental entities are slated to make nearly 20 additional trips this year to attract more manufacturers.
The government has praised a recent executive order aiming to expedite the approval of pharmaceutical manufacturing facilities within the U.S. Historically, Puerto Rico’s economy has transitioned from needlework in the mid-1900s to chemicals, clothing, and electronics, eventually becoming a hub for pharmaceuticals by the late 1970s.
However, the phasing out of a critical federal tax incentive in 1996, which gave U.S. companies tax exemptions on local income, led to a reduction in manufacturing employment. Despite this, sectors like pharmaceuticals and chemicals saw employment increases. Today, Puerto Rico leads in pharmaceutical exports in the U.S., accounting for approximately 20% of total exports in 2020.
In 2024, Puerto Rico exported about $25 billion worth of goods, with substantial contributions from vaccines, packaged medicaments, hormones, orthopedic items, and medical instruments. Sergio Marxuach from the Center for a New Economy advocates targeting pharmaceutical and medical device companies, given Puerto Rico’s established presence in these fields.
Beyond these industries, Puerto Rico could also capitalize on opportunities within national defense and security contracts, such as the production of drones or underwater surveillance equipment. University partnerships are also in discussion to ensure students gain skills that align with industry needs.
However, one major challenge remains: Puerto Rico’s persistent energy problems. Frequent power outages, compounded by infrastructure damage from Hurricane Maria and longstanding neglect, continue to hinder economic progress.
“Puerto Rico requires more reliable energy for economic growth,” remarks Robert F. Mujica, head of the federal control board managing the island’s finances. Woger Nieves adds that discussions with company leaders reveal alternatives like cogeneration and renewable energy options, suggesting that energy issues don’t need to be a barrier.
Critically, Puerto Rico faces additional logistical costs due to regulations requiring goods shipped to the U.S. to travel on U.S.-flagged vessels. While the current uncertain international trade climate leads many companies to adopt a “wait and see” approach, Puerto Rico competes with other countries like Vietnam, South Korea, Malaysia, and Singapore, which already possess advanced manufacturing facilities.