Puerto Rico: Life after Section 936

Global Finance, Oct 2000 by Luxner, Larry

An example of high value apparel is Puerto Rico's Olympic Mills, which plans to create 1,000 new jobs from the consolidation of its purchase of Hampshire Group, the largest sweater company in North America. Olympic will invest $10 million in Hampshire's Glamourette Fashion Mills in Quebradillas, says Alejandro G. Asmar, president of Olympic Group. Glam ourette also has plans to expand into nearby Isabela. Similarly, BASF Pharmaceuticals will invest $30 million to expand its Jayuya operation, building a new industrial complex and hiring 100 new workers.

And Intelligroup, an Indian software developer, will open a facility in Trujillo Alto, just outside San Juan, creating 500 engineering jobs over the next three years. The facility will begin operations by yearend, sere ing as a hub for the company's activities in the Americas, says David Olivencia, senior service support manager. Intelligroup has operations in Europe, Australia, and Asia, reporting annual revenues of $146 million.

Such new investments are taking place at a slower rate than Puerto Rican officials hope for. Part of the problem is the challenge of economic diversification. "In the late 1980s, [former governor] Rafael Hernandez Colon tried to encourage globalization," says Lewis. "But 98% of the island's exports today are to the United States. What are we doing in Europe? zilch. Latin America? Nothing. The economy is less diversified than before. Puerto Rico is not a global player. It's a player within the US domestic economy, and I don't think that's good for Puerto Rico.You don't see Florida or California or Illinois doing that. They're all internationalizing."

One avenue of diversification for Puerto Rico may lie in a greater role in transportation services. The government has proposed construction of a $1 billion transshipment hub linking the US mainland and Latin America, Europe, and Asia. In late July the town of Guayanilla, perched on the island's south coast, had been nominally selected as the site for the transshipment port, following a feasibility study commissioned by the Government Development Bank (GDB). The Guayanilla project would vie with trans shipment ports in Kingston, Jamaica, in Freeport, Bahamas, and even San Juan. GDB president Lourdes Rovira explains that the government will finance $360 million, or 35%, of the total cost. The remaining 65% would be financed by private investors to cover the cost of engineering services and infrastructure, though the Puerto Rican government would own the port facility's land and equipment.

But the port development business is another global market rife with competition for Puerto Rico, already straining to diversity its economy. Leo Holt, spokesman for Philadelphiabased Holt Group, which owns the Navieras shipping line, reckons that "this project is a generation away at best:' t

Larry Luxner is a Bethesda, Maryland-based contributor to Global Finance and former Puerto Rico resident. E-mail: larry@luxner.com