Today

As the commonwealth moves more deeply into the new millennium, Puerto Rico continues to make headlines in mainland newspapers. Sometimes the news is good, other times troubling.

One result: People are visiting. Puerto Rico's tourism figures have been rising annually since the beginning of the 21st century; the island's aggressive hotel and marketing promotion seems to be paying off. Travelers from the United States are the major visitors, and their numbers rose steadily throughout the early 2000s. Tourism from Canada is also on the rise, and the greatest increase is in Latin American visitors.

A Changing Economy

The island's 3.88 million people -- 1 million of whom live in the San Juan metropolitan area -- have forged ahead economically and made rapid strides. Their annual income is the highest in Latin America, and their average life expectancy has risen to 73.8 years. The island's economy began evolving from its agricultural base in the 1950s when the Operation Bootstrap industrialization program began attracting stateside manufacturing plants. The sector, powered by Puerto Rico's unique political status that allows firms to escape federal taxation, grew to represent nearly half of the entire Puerto Rico. The demand for an educated workforce has resulted in at least 12 years of schooling for ordinary workers. More importantly, the solid manufacturing industry sparked the growth of a whole host of professional services on the island, including legal, financial, engineering, and accounting, so that today Puerto Rico remains a regional center for most professional services. The island has a number of universities, including the highly regarded University of Puerto Rico, with specialized programs in engineering, medicine, law, and increasingly research and development in a number of fields, including the life sciences.

Manufacturing, for so many years the workhorse of the island economy, has been hit by competition from low-cost destinations, as well as high local utility, shipping, and other fixed costs.

The sector's decline began in 1996, when a 10-year phaseout of U.S. industrial tax breaks began. This marked the end of 75 years of federal incentives that attracted stateside industries and helped make Puerto Rico the Caribbean's industrial powerhouse. It continues to produce about half the prescription drugs sold in the United States.

In response, the government is trying to entice its existing high-tech industry to stay through an increased focus on research and development. Another target is an island life-sciences research and manufacturing sector through joint private-industry and university ventures.

A big strategy is also to make up for the loss in manufacturing by increasing other economic drivers, from agriculture to shipping to increased professional services, which could be anything from health care to high finance.

The Tourism Industry

Tourism, which represents about 6% of the gross national product, is a small but important economic segment, and a good source of employment, especially for the island's well-educated, worldly, bilingual youths. The current administration, as with past administrations, wants to double the size of tourism to 12% of the economy.

At once both labor-intensive and environmentally friendly, tourism is seen as a partial answer to the slowdown in the manufacturing sector. Still, there are challenges: A Cuban reopening to the American tourism market could steal business from Puerto Rico, which saw its tourism industry's growth fueled enormously by the embargo imposed on Castro's communist government. Before Fidel Castro took over Cuba in 1959, Americans by the thousands flocked to Havana, and Puerto Rico was a mere dot on the tourist map.

Others say the island could still prosper with an open Cuba because the local tourism product is top of the line, aimed at the most wealthy and discriminating of travelers. They also predict Puerto Rico tourism industry players will have a role in an open Cuba.

Regardless, the tourism industry has been a perennially important part of the island's economic success, and it is poised to take on an even more significant role in the future -- the industry will focus on ecotourism, smaller scale projects, and diversifying away from the oceanfront resort style tourism of Condado and Isla Verde, which still defines the experience of going to Puerto Rico for most visitors. The effort to diversify will result in more boutique properties, secluded beach getaways and mountain eco-lodges, which is good news for travelers here.

Crime & Unemployment

Even with its advanced economy, Puerto Rico struggles with a 12.5% unemployment rate and a per capita income about half the level of the poorest U.S. state, Mississippi. Its bloated government bureaucracy is an increasing problem, responsible for deficit spending and high local taxation.

Mirroring the U.S. mainland, rising crime, drugs, AIDS, and other social problems plague Puerto Rico. Its association with the United States has made it a favorite transshipment point for drug smugglers entering the U.S. market (because once on the island, travelers don't have to pass through Customs inspectors again when traveling to the United States).

The drug problem is behind much of local violent crime, including killings that have pushed the local murder rate to among the highest in the United States.

Other violence and social ills associated with drugs have also beset the island.

Although the drug issue is of epidemic proportions, you can visit Puerto Rico and be completely unaware of any criminal activity. Tourist areas in San Juan (including Old San Juan, Condado, and Isla Verde) are generally free of violent crime and theft, and efforts in the past 20 years to resolve the drug and crime problem have helped make safer streets.

The 51st State

The New Progressive Party wants to make Puerto Rico the 51st state, but the opposition is strong, both on the island and in Congress. A non-binding reference in 1998 resulted in a defeat of statehood.

The other major party, the Popular Democratic Party, backs the continued commonwealth status, while the Puerto Rican Independence Party typically achieves about 5% of popular support in gubernatorial elections. These three parties have dominated island politics of the last 4 decades.