Puerto Rican industries need to build on their strengths and stop lobbying for protectionist measures if they wish to survive head-on competition vis-a-vis of the Free Trade Area of the Americas (FTAA) in 2005, leading businessmen, economists and trade experts say. At the 1994 Summit of the Americas, 34 countries in the Americas and the Caribbean (except Cuba) agreed to eliminate trade barriers and link all the hemisphere's economies by 2005, creating the largest common market in the world. Since 1998, trade representatives have been working to iron out trade issues among the participating countries and to set deadlines for phase out of tariffs.
Puerto Rican industries are too dependent on local markets and protectionist measures and have had little experience competing in global markets, says David Lewis, a Washington-based trade expert. "FTAA will open up opportunities for local companies with access to foreign markets, but they must be competitive and make their case before trade negotiators from those countries." The common market will encompass 75 percent of continental trade and commerce.
"We have to take the bull by the horn before it is too late," says Antonio Colorado, former president of the Government Development Bank of Puerto Rico. "The struggle for preferences and subsidies is going to end because the barriers are coming down, and businesses in Puerto Rico will eventually compete head-on with their counterparts in other countries." After growing faster than that of the United States in its "best years," the Puerto Rican economy is now falling behind due to lack of initiative by the private sector to be competitive in a globalized market." Despite a strong pharmaceutical industry, with its plant expansions, no major new undustries have settled on the island in the last decade," he says. "The local economy is too dependent on the government, which employs 25 percent of the workforce. It is an impossible economy to sustain, except, perhaps, for a communist government."
Under FTAA, local businesses will have to offer high quality services and goods in order to survive direct competition from foreign companies. Colorado adds: "Our industries will have to ask themselves if they will be able to compete head-on with other countries, and any business unable to answer yes would be wise to close and sell while there is still time left." Native industries must work together to promote their strengths, which include a highly educated workforce and a stable currency. "We have the base for a competitive manufacturing sector," says PR Manufacturing Association President Manuel Cidre. "We produce 80 percent of the 20 best-selling pharmaceutical products in the world and 90 percent of cardiac devices produced in the United States." Using manufacturing "clusters" to create interdependence among different industries and maximize use of economic resources will prepare the local economy for integration into the common market.
The food and construction material industries face strong competition from countries like the Dominican Republic, which have negotiated free trade pacts with other Latin American countries. Cidre notes that "we cannot wait for Section 956 or other federal tax credits...we have to take advantage of the commonwealth's current fiscal autonomy, which allows establishing Corporate Foreign Companies and other advantages that make us attractive."
