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The Integration of the Puerto Rican Economy Into the Global Economy
 
As stated in our Strategic Model for a New Economy, one of the key strategies to enable long-term growth of the Puerto Rican economy is our integration into the global economy. In 2010, Puerto Rico exported over $69 billion in goods and services, almost a 15% increase from the prior year. We believe there’s ample potential for our local small and medium-sized businesses to export more of their products and services to the United States and other countries. This is achieved by encouraging direct exports to other markets and by taking advantage of already established export platforms in order to insert ourselves into the supply chains of other businesses that export and operate within Puerto Rico. Thus, it is our priority to foster and promote the development and strengthening of our local companies so that they have the ability to expand their capacity for exporting goods and services competitively on a global scale.
 
In order to achieve this goal, we are increasing the awareness and utilization of the resources and programs that are already available. We have also put in place several new initiatives that will help Puerto Rican businesses increase their presence on a global scene.  The main strategies in our efforts to promote exports include:
 
Global Presence
  • Network of offices and representatives
  • The U.S. Commercial Service
  • Trade and economic missions
  • A uniform brand: Puerto Rico Does It Better
Access to Capital
  • Small business lending program (PYMEXPORTA)
  • Export-Import Bank of the United States
Exports of Goods
  • Foreign Trade Zones
  • Puerto Rico Supply Chain Online
  • Export Transportation Assistance Program (ETA) 
  • Export Market Intelligence Assistance Program (EMIAP)
Export of Services
  • Export services under Act 73
Federal Procurement to US Government
  • Federal Contracting Center (FeCC)
Foreign Direct Investment
  • Asia
  • Venezuela
GLOBAL PRESENCE
 
Network of Offices and Representatives
 
Puerto Rico has reorganized its network of offices in the United States and abroad to maximize its presence in the global economy and increase efficiency.  With offices in New York, Panama, Santo Domingo and Madrid, representatives are focused on attracting FDI from Asian countries and promoting tourism from the United States and Latin America.  
The U.S. Commercial Service
 
The U.S. Commercial Service, with a presence in over 75 countries around the globe, assists companies in the process of exporting services and increasing sales to new global markets by providing market intelligence, trade counseling, business matchmaking, trade advocacy and other services. In order to take advantage of this service, we hope to sign a Memorandum of Collaboration in the coming weeks. This Memorandum will help increase awareness and facilitate access to the services offered by the U.S. Commercial Service to business in Puerto Rico looking to export their goods and services and do business globally.  We are also evaluating the possibility of offering additional incentives in the form of refunds to those businesses that utilize and pay for the various services offered by the Commercial Service.
 
Trade and Economic Missions
 
A key component of Puerto Rico’s strategy to promote exports is the trade mission program. Government supported trade missions offer a cost-effective tool for helping local companies learn first-hand about global markets.
 
Furthermore, not only do trade missions enhance the export capacity of local companies and foster entrepreneurship, but they also generate real sales and create jobs. In the past 30 months, over 150 companies in sectors as diverse as construction, green technology, and food and beverages have shown interest in participating in our trade missions and expand their horizons. The 13 national and international trade missions we have conducted have generated over $119MM in sales for participating companies. Based on our belief in the export capacity of Puerto Rican companies, and the results of our previous 13 missions, we have decided to schedule an aggressive calendar of trade missions for the next 18 months. Currently, there are 16 trade missions in the pipeline. We are very optimistic that these missions will be very productive and generate business activity for local companies and our economy, and help reach the National Export Initiative’s goal of doubling US exports in 5 years.
 
In addition to our trade missions, we regularly promote Puerto Rico as the ideal destination for foreign direct investment. Recently, the Government of Puerto Rico participated in two key economic missions to Spain and the Dominican Republic. A major component of these missions was attracting FDI. The agendas for both missions were designed to combine a series of events that gathered key decision makers from the public and private sector. In the case of the Dominican Republic, our presentations on the benefits and incentives offered by Puerto Rico and the participation of Puerto Rico’s private sector generated over $100 million in import/export business. Likewise, our mission to Spain allowed us to initiate a dialogue with some of the country’s most profitable investors, with full support from Banco Santander (BSCH), and Banco Bilbao Vizcaya Argentaria (BBVA). Beyond recruiting new and innovative investments for Puerto Rico, these economic missions stimulated the sharing of ideas on economic growth with other economic development stakeholders. Learning from other countries’ successes is essential to the formulation of projects and strategies for the continued well-being of our economy.
 
A Uniform Brand: Puerto Rico Does It Better
 
We have instituted a uniform brand – Puerto Rico Does it Better – that projects Puerto Rico as an ideal place to visit, do business and live. This brand encompasses all of the components of our promotional efforts, including Export promotion, FDI attraction, and Tourism campaigns.  It projects a consistent image of confidence and quality to inspire and elevate perceptions of our products and services and has a synergistic effect on all promotional investments across various sectors and audiences, thus maximizing impact and return on investment.
 
ACCESS TO CAPITAL
 
Pymexporta
 
Pymexporta is a program being developed by the Economic Development Bank (EDB) in conjunction with the Puerto Rico Trade and Export Company, which is oriented to help finance the exports of small and mid-sized local companies. Properly diagnosed, bona-fide exporting businesses which secure the sale of a product or service that will be exported, can apply at BDE for a working capital line, secured by the income of the sale, in order to finance its fulfillment. This initiative will address the limited access to capital, which has been identified as one of the main obstacles to exporting by small and mid-sized local businesses.
 
Export-Import Bank of the United States
 
The Ex-Im Bank, as it’s commonly known, has the mission to assist in financing the exports of the U.S. goods and services to international markets. We know that their products, such as working capital loans and the export insurance program, will be of great value to Puerto Rican businesses looking to export. We have worked hard to reestablish our government contacts with Ex-Im Bank in order to promote their offerings in Puerto Rico. To that effect, we hosted an Ex-Im Bank forum on July 7th, 2011, which included a visit by one of its Directors.  During this forum, both entrepreneurs and local banks acquired the information they require in order to begin accessing these services.
 
EXPORTS OF GOODS
 
Foreign Trade Zones
 
Puerto Rico has the largest, non-contiguous Foreign trade zone (FTZ) system in the United States. The system allows companies to obtain significant financial savings, since raw material, components and packaging can be transported tax free through these zones and items shipped abroad after processing are exempt from U.S. taxes. Puerto Rico has three FTZs:
  • FTZ #7, operated by the Puerto Rico Industrial Development Company (PRIDCO)
  • FTZ #61, is operated by PROMOEXPORT, a unit of the DEDC's Commerce & Export Company (CCE by its Spanish acronym)
  • FTZ #163, is operated by the Ponce Foreign Trade Zone Development Corporation (CODEZOL, C.D.)
The main benefits of an FTZ in Puerto Rico include:
  • Deferment of federal customs duties
  • Deferment of Puerto Rico excise tax
  • No payment of municipal license taxes on exports outside the United States
  • No duty paid on damaged, scraped and obsolete merchandise
  • U.S. customs duties are not owed on labor, overhead and profit attributed to production operations in a FTZ
Puerto Rico Supply Chain Online
 
We have launched the Puerto Rico Supply Chain Online, a website that currently provides information on companies and local products available to manufacturing industry buyers in Puerto Rico. The site now includes additional components of the supply chain and provides Puerto Rico’s exporters a platform to market and sell their products online to customers all over the world. The portal will soon include catalogs of products and services, details about suppliers’ qualifications and certifications and the ability to start doing business online in order to become a robust virtual marketplace.
 
For more information on the Puerto Rico Supply Chain network click here:

Export Transportation Assistance Program (ETA)

In the coming months we will be initiating a pilot program to help small and mid-sized businesses export their Puerto Rican products to mainland U.S. markets and ports of interest in the Caribbean and Central America. The program was conceptualized hand-in-hand with the private sector and seeks to reduce transportation and logistic costs of shipping cargo from the port of San Juan to ports of interest for Puerto Rican exporters such as Jacksonville, FL, Santo Domingo and Panama. With this program we hope to expand the market for products manufactured in Puerto Rico in areas like the Southeastern United States, whose Hispanic population has increased significantly in recent years, and areas in Latin America where our local products enjoy a competitive advantage.  The program will consist of incentives in the form of refunds for qualified transportation and logistics expenses incurred in the export of products.  The government is also in the process of negotiating preferred shipping rates for the transportation companies that will be providing services under this program.
 
Export Market Intelligence Assistance Program (EMIAP)

The Export Market Intelligence Assistance Program (EMIAP) is an export promotion program to be established at the Puerto Rico Trade Company (CCE). The goal of EMIAP is to provide financial assistance to small and medium sized enterprises (SMEs) in Puerto Rico wishing to export their products abroad. Pursuant to EMIAP, CCE will reimburse participant SME’s for “market intelligence costs” incurred as part of their exportation plans. For EMIAP purposes, the term “market intelligence costs” shall mean, and be limited to, costs related to services provided by a United States Commercial Service (“USCS”) office for the purposes of exporting a product or service internationally.
 
Every year, the U.S. Commercial Service helps thousands of companies export billions of dollars in U.S. goods and services. The USCS’s global network of trade professionals has a presence in nearly 80 countries across the world. The USCS offers the trade counseling, market intelligence, business matchmaking, and commercial diplomacy required to connect with lucrative business opportunities. In addition, the USCS assists in the development of trade, finance and insurance strategies that align with an SME’s particular business objectives. These services may include but are not limited to: trade counseling, planning and strategy, solving trade problems, providing information on trade finance and insurance, market Intelligence, country and industry Reports, and or customized market research, researching background reports, organizing business matchmaking and/or contact lists among others.
 
EXPORTS OF SERVICES
 
Export Services under Act 73

The Government of Puerto Rico is actively promoting the export of services through incentives offered under Act 73 of 2008.  Puerto Rico boasts a highly educated and professional labor force that can fulfill the labor market demands for the provision of these services. The Act provides tax benefits to “eligible businesses” which include “service units” which meet certain requirements, such as that at least 80% of the service units’ employees must be PR residents. The Act also provides that certain “designated services” will be considered within the meaning of service units when such services are provided to foreign markets. Designated services for foreign markets include investment banking and other financial services, public relations, management and technical consulting, graphic design, engineering and architecture, among others.
 
The main tax incentives provided by Act 73 include:
  • 4% on net service income from the designated export service
  • 4% on gains on sale of the export service company stock
  • 0% on dividend distributions
  • 50% tax-credit for R&D expenses
  • Employee training subsidies
 
FEDERAL PROCUREMENT TO US GOVERNMENT
 
Federal Contracting Center (FeCC)

The Puerto Rico Procurement Technical Assistance Center’s mission is to maximize the number of Puerto Rico companies participating in the government marketplace by providing businesses with an understanding of the requirements of government contracting and the marketing know-how they need to obtain and successfully perform Federal Government contracts (US).
 
The recently created FeCC, an expansion of the services previously provided by the Procurement Technical Assistance Center (PTAC), provides a one-stop shop for all resources related to contracting with the federal government and help our local companies insert themselves into the national economy. Puerto Rican companies only participated in 0.165%, or $890 million of the total $538 billion in Federal contracts awarded in 2009. As part of the initiative, we identified three clusters: Information Technology, Electronics and Materials, and Textiles as initial focus areas. So far, two trade missions to Washington, D.C. have been coordinated. During the most recent visit, a local company secured a multi-million contract with the federal government. We aim to increase Puerto Rico’s participation in the federal procurement market to $1 billion. Based on the results we have seen so far, we are confident we will get there.
 
For more information on how to do business with the Federal Government please visit  http://www.federalcontractingpr.com/
 
FOREIGN DIRECT INVESTMENT
 
ASIA: Puerto Rico seeks to diversify sources of capital and industries through investment promotion in Asia. The strategy targets 5 jurisdictions at different levels of outbound investments:
  • China
  • Taiwan
  • Singapore
  • South Korea
  • Japan
 Investments sought in the following sectors:
  • Life sciences
  • Aerospace
  • Information technology
  • Infrastructure project finance

VENEZUELA: Puerto Rico seeks to diversify sources of capital and industries through investment promotion in Venezuela. The strategy targets Venezuelan corporations with different levels of outbound investments based on the following sectors:
  • Rum manufacturing
  • Manufacturing
  • Financial sector
For more information on incentives and statistics from successful businesses, please contact us at 787-765-2900 or send us an email to infotrade@prdoesitbetter.com.
 
Helpful Links: 
 
Export-Import Bank of the United States
 

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