Puerto Rico often makes headlines in U.S. news media, and daughters and sons of the island, from pop star Ricky Martin to actor Benicio Del Toro, have given U.S. and world audiences a taste of the enormous talent of this small island, which is also evident in the storied ledger of island baseball sluggers and boxing champs, from Roberto Clemente to Felix Trinidad. Of course, the news is not always good, and recent struggles with both crime and economic issues have also drawn headlines.
Puerto Rico, however, also draws attention because it is among the most developed destinations in the Caribbean and a true regional hub for transportation and telecommunications, with a modern infrastructure and a diversified economy.
A Changing Economy
Puerto Rico is the easternmost of the Greater Antilles (18 15 N, 66 30 W), and the fourth largest island in the Caribbean after Cuba, Hispaniola (which comprises the Dominican Republic and Haiti), and Jamaica. The island is located at the crossroads between North and South America, at just 3 1/2 hours airtime from New York, 60 minutes from Caracas, and at only 4 days sailing from Atlantic ports in the U.S. and ports in the Gulf of Mexico. The Puerto Rican territory includes three other small islands, Vieques, Culebra and Mona, as well as numerous islets.
Some 3,900,000 people live in Puerto Rico, approximately one-third of them within the San Juan metropolitan area. The island, with an area of 3,435 square miles (9,000 sq. km) -- 110 miles long by 39 miles wide -- has a mountainous interior and is surrounded by a wide coastal plain where the majority of the population lives. Rainfall averages 69 inches (175 cm) per year and year-round temperatures range from 74°F (23°C) in the winter to 81°F (27°C) in the summer.
Relationship with the United States
Puerto Rico came under the European sphere of influence in 1493, when Christopher Columbus landed here. Shortly thereafter the island was conquered and settled by the Spaniards. It remained a Spanish possession for 4 centuries.
The territory of Puerto Rico was ceded to the United States upon signature of the Treaty of Paris, on December 10, 1898, a pact which ended the Spanish-American War. Puerto Ricans have been citizens of the United States since 1917. In 1950, after a long evolution toward greater self-government for Puerto Rico, the Congress of the United States enacted Public Law 600, which is "in the nature of a compact" and which became effective upon its acceptance by the electorate of Puerto Rico. It provides that those sections of existing law which defined the political, economic, and fiscal relationship between Puerto Rico and the United States would remain in full force. It also authorized the people of Puerto Rico to draft and adopt their own Constitution. The Constitution was drafted by a popularly elected constitutional convention, overwhelmingly approved in a special referendum by the people of Puerto Rico and approved by the United States Congress and the president of the United States, becoming effective upon proclamation of the governor of Puerto Rico on July 25, 1952. Puerto Rico's relationship with the United States is referred to herein as commonwealth status.
The United States and the Commonwealth of Puerto Rico (the "Commonwealth") share a common defense, market, and currency. The Commonwealth exercises virtually the same control over its internal affairs as do the 50 states. It differs from the states, however, in its relationship with the federal government. The people of Puerto Rico are citizens of the United States but do not vote in national elections. They are represented in Congress by a Resident Commissioner who has a voice in the House of Representatives but no vote. Most federal taxes, except those such as Social Security taxes, which are imposed by mutual consent, are not levied in Puerto Rico. No federal income tax is collected from Puerto Rico residents on income earned in Puerto Rico, except for certain federal employees who are subject to taxes on their salaries. The official languages of Puerto Rico are Spanish and English.
The Constitution of the Commonwealth provides for the separation of powers of the executive, legislative, and judicial branches of government. The governor is elected every 4 years. The Legislative Assembly consists of a Senate and a House of Representatives, the members of which are elected for 4-year terms. The highest court within the local jurisdiction is the Supreme Court of Puerto Rico.
Puerto Rico constitutes a District in the Federal Judiciary and has its own United States District Court. Decisions of this court may be appealed to the United States Court of Appeals for the First Circuit and from there to the Supreme Court of the United States.
Its progress and relative economic strength compared to Caribbean nations has stemmed from its economic diversity. The $93.3-billion economy comprises manufacturing 41.5%, finance, insurance and real estate 17.7%, trade 12.7%, government 9.6%, transportation and public utilities 6.5%, construction and mining 2.1%, and agriculture 0.5%.
Puerto Ricans' 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 island. 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 phase-out 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. Puerto Rico continues to produce about half the prescription drugs sold in the United States, nevertheless.
In response to the industrial exodus, the government is trying to entice 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 will also compensate for the loss in manufacturing by increasing other economic drivers, from agriculture to shipping to increased professional services, which could be anything from healthcare to 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 redirect its focus, providing more opportunity for those interested in ecotourism, and smaller scale projects, diverging from the oceanfront resort tourism of Condado and Isla Verde, which still define the Puerto Rico experience 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 an unemployment rate surpassing 14% in recent years 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 nonbinding referendum in 1998 stayed the New Progressive's bid for 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.
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