Posting in Aerospace
More than $5 billion in shipments of medical devices leave Puerto Rico every year. Between the tax and legal benefits, its geography and availability of skilled labor, it's no surprise these medical device companies want to set up shop on the island.
Medtronic, which supplies about half of the world’s pacemakers, recently announced that the company is investing $5 million for a second facility in Puerto Rico. Baxter, another medical products giant, employs 4,000 people in its plants across the island. Why are many of the world’s biggest medical device companies investing millions on this island—a U.S. jurisdiction with a foreign-like tax structure?
According to Puerto Rico Industrial Development Company (PRIDCO), a government economic development branch, more than $5 billion in shipments of medical devices leave Puerto Rico each year. The government recently enacted Law 73, which provides up to a 50 percent tax credit of qualified research and development expenses for developing new technologies.
After last month’s AdvaMed 2010: The Medtech Conference in Washington, I talked with Victor Merced, the PRIDCO’s business development officer for Life Sciences, to learn why the medical device industry accounts for 10 percent of Puerto Rico’s jobs and 5 percent of the island’s GDP.
Merced said Puerto Rico manufacturers devices including Ace bandages, pacemakers, defibrillators, surgical equipment, sutures, scalpels, implantable orthopedics and eyeglasses. “Thirteen of the top 15 medical device companies are established in Puerto Rico,” he said. He told me there are five primary reasons these medical device companies want to set up shop on the island:
1. Tax Benefits: Puerto Rico is a U.S. jurisdiction that under the IRS code is treated as a foreign jurisdiction, so we don’t pay federal taxes. The only taxes are those negotiated between the company and the Puerto Rican government. We tell them they will be subject to the taxes of the country where they repatriated their money.
2. Legal framework: The legal framework in Puerto Rico is the same as in the U.S. We are covered by the same laws, so intellectual property that people are working so hard for is protected by federal law. So that [guarantees] that the technologies brought to Puerto Rico are safe in Puerto Rico. For example, we prosecute people who record movies in the theater; when you’re in the movies and you see these very nice black Chargers or black Explorers with black windshields, you know someone’s going to get arrested. Let me put it this way: Microsoft prints and develops all the CDs for Windows in Puerto Rico, so Microsoft trusts Puerto Rico.
3. Skilled Labor Availability: Puerto Rico has been in the life sciences market for about 40 years. We’ve done pharmaceuticals and had our footprint in medical devices. They tailor the courses here to what the industry needs. Puerto Rico graduates 30,000 degrees every year; of those, 10,000 are in a technical field—engineers and scientists. It’s just part of the culture. Your dad would tell you go to college, get a degree and get a good job. Here it’s encouraged to get a technical degree because of our large footprints of pharma and biotech and aerospace. There’s a market for that here. Right now the pharma sector alone is more than 100,000. In job creation, 34 percent of the jobs created in Puerto Rico are in the life sciences market. It’s big.
4. Infrastructure: We have a solid infrastructure, just like any state in the U.S. Puerto Rico is surrounded by freeways. We have a port in San Juan, which is where we receive all the cargo, and one in Ponce, which is under construction and will be at full capacity this year. We have 11 airports in Puerto Rico. We have a life sciences hub for UPS in Puerto Rico. Say you make pacemakers. They’re delivered straight to the doctor. So instead of going to a distribution center, they go from the manufacturer to the UPS logistics center to the doctor. At the UPS center, they do all the logistics. Say you need XYZ chemicals. From your computer you can say you need two tons, and UPS ships two tons. So UPS is sending out the raw material and the finished goods. They have boxes and insert, and it’s all created there.
5. Geographic Location: We’re surrounded by water, but our geographic location puts us at a six-hour flight from Europe, two to three hours from the East Coast, a40 minute flight to the north of South America. Puerto Rico is the farthest eastern port of America coming from Europe.
Of course anything that’s going to shipped in is going to take time, and one of the challenges we have sometimes, when there’s bad weather, some shipments get delayed. But even though we are in the hurricane path our record in hurricanes has been three in the past 50 years. The building codes here are made to withstand hurricanes.
Nov 23, 2010
Mind you that, tax money not collected is not available for actual "redistribution". In fact, if they are subsidies, then, there are many thousands of businesses in the U.S. clamoring for that type of subsidy. If you want to call tax breaks the same as allowing people and businesses to keep their money and pay less in taxes, then that would be the best way of subsidizing economic growth.
are farmed out to more business friendly and less expensive places, you d_mba_s! Fretting about jobs leaving and not understanding why they are lost to the mainland U.S., is just plain stupid. Like I already said, taking them from P.R. is not going to bring them to the other states. Those jobs will just go to the same places where the other lost jobs went to.
PR is not a foreign country. it's a "possession" of the US, and its people are US citizens who come to the US without visas; they can live in either place. they are not much different from alaska and hawaii in that sense. they could be taxed federally, but then they'd expect proportional votes in congress, and that won't be allowed for reasons that you can figure out. their choice is to stay on the island and work for cheap for US corporations --one big maquiladora--, or come to the mainland (check out orlando, florida). the "subsidies" given to the PRs are really a subsidy --your tax dollars-- of the mainland corporations: the same ones who say they don't like the govt getting in their way.
adrornoe, I have nothing against Puerto Ricans, I just don't like to see our tax policies driving jobs offshore a--hole.
coming "home"; they be getting sent to other offshore locations which are business friendly and less costly. But, something tells me that, your post is more to do with what seems to be an anti-Puerto Rico (anti-Puerto Rican) sentiment.
to other offshore areas like China and Korea and Mexico. When the cost of doing business is so high in the U.S., especially due to our high corporate taxes and heavy government regulations, then, of course, businesses will be looking to move their plants and their jobs to friendlier and less expensive countries.
Please, give Puerto Rico it's freedom. Take away our subsidies, let them take the responsibility for their country, and quit shipping jobs there.
since operation bootstrap in the 1950s --designed the break the independence movement-- PR has been a tax haven for US companies. not mentioned here is that the workers are way underpaid compared to those on the mainland. the companies, selling at world market prices, make a big profit; the islanders are perennially in debt. that includes the govt, which last year fired tens of thousands of workers. this new advertising is no doubt a pitch to attract industry to an island of the unemployed.