Puerto Rico: an Economic Overview British Investment Mission
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Puerto Rico: An Economic Overview British Investment Mission Conrad Condado Plaza June 9, 2010 1 Presentation Plan Selected Economic Indicators 3 A Regional Economy of the U.S. 4 Recent Economic Performance 9 The Business Environment 13 Manufacturing Retail Internet penetration Advanced Services Mid Term Perspectives 24 Concluding Comments 25 2 Basic Economic Indicators Selected Indicators, 1990 and 2009 Indicator 1990 2009 Gross national product $21,619 $62,759 Gross domestic product $30,604 $95,708 Personal income $21,105 $59,035 Disposable personal income $19,914 $56,099 Personal consumption expenditures $19,827 $55,565 Gross fixed domestic investment $4,771 $9,842 Construction investment $2,493 $4,409 GNP per capita ($) $6,155 $15,846 Employment (Household Survey) ('000) 963 1,168 Unemployment rate 14.3 13.4 Labor force participation rate 45.5 44.1 Population (Th) 3,512 3,961 Source: Puerto Rico Planning Board, Statistical Appendix , 1999 and 2009. 3 Puerto Rico: a Regional Economy of the United States Puerto Rico’s External Trade - United States Fiscal years - In millions of dollars 60,000 50,000 40,000 30,000 20,000 10,000 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Exports 21,187. 27,397. 30,535. 33,763. 41,367. 41,739. 47,647. 45,418. 46,703. 49,651. 46,324. 47,262. 43,543. Imports 13,317. 13,225. 15,136. 15,079. 15,586. 14,561. 16,503. 17,596. 19,133. 21,502. 22,662. 21,322. 19,069. 4 Puerto Rico: a Regional Economy of the United States Transfers between the Federal Government and Puerto Rico - Total Receipts Fiscal years - In millions of dollars 16,000.0 14,989 13,925 14,000.0 12,025 12,000.0 11,352 10,451 10,551 9,818 10,087 10,000.0 9,317 8,627 8,659 7,758 8,000.0 7,399 6,000.0 4,000.0 2,000.0 0.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 5 Puerto Rico: a Regional Economy of the United States Other linkages The financial system operates within the U.S. regulatory framework Professional standards in fields such as engineering and medicine are those of the U.S. There are as many Puerto Ricans in the Mainland as in the Island Risk environment • No political risk • No foreign exchange risk • No legal risk 6 Puerto Rico: a Regional Economy of the United States A remarkably stable economic environment GNP GNP Total in current dollars Total in constant dollars 70,000.0 8,000.0 60,000.0 7,000.0 6,000.0 50,000.0 5,000.0 40,000.0 4,000.0 30,000.0 3,000.0 20,000.0 2,000.0 10,000.0 1,000.0 0.0 0.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 7 Puerto Rico: a Regional Economy of the United States Exports by Product Categories High and Low Tech Exports ($ MILLION) $60,000 52,609.6 47,540.9 $50,000 $40,000 Low Tech $30,000 High Tech 26,534.0 $20,000 8,367.8 $10,000 7,136.1 8,197.0 $- 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 8 Recent Economic Performance Annual growth of real GNP by periods, 1970 - 2005 Average: P.R. 2.3% 4.0% 3.6% 3.4% 2.6% 2.2% 1.8% 0.7% -1.1% 1970-75 1975-80 1980-85 1985-90 1990-95 1995-00 2000-05 2005-09 9 Recent Economic Performance GDP by Economic Sector Puerto Rico 2000 2009 Construction Construction Government 3% Government 2% 9% 9% Manufacturing 45% Manufacturing 45% Others 18% Others 21% Services 12% Services 10% Finance and Finance and Insurance Insurance Retail Trade Retail Trade Wholesalers Wholesalers 8% 5% 5% 6% 4% 3% 10 Recent Economic Performance Recent Performance Underlying factors Banking sector difficulties Fiscal imbalances Housing sector excess supply Spillover from U.S. recession and global financial crisis An obsolete institutional framework unchanged in decades 11 Recent Economic Performance How Puerto Rico compares with other economies Long Term Economic Growth Average 2000 - 2008 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 70's 80's 90's 00's East Asia & Pacific United States EMU LA & Caribbean Puerto Rico Sources; BBVA, LatinWatch; Puerto Rico Planning Board. * GNP in the case of PR 12 The Business Environment Major changes in the Institutional Framework New PPP Legislation considered as one of the most advanced in the U.S. New Permitting law that simplifies and makes the process more efficient Tax reform underway Labor and energy market reforms forthcoming 13 The Business Environment Manufacturing Exempt firms in Puerto Rico generated $18.0 billion in profits in 2008 They paid $1,370 million in taxes Total investment in the manufacturing sector is estimated at close to $100 billion A new incentives law approved in 2008 with very attractive incentives. Focus on strengthening local supply chains and R&D. 14 The Business Environment Manufacturing Recent expansions and new investments since 2005 Abbott Amgen Guidant Janssen IPR Canóvanas, Medtronic Lilly del Caribe, $250 Ortho, $400 million $440 $1.2 $43 million, $96.2 million million billion 115,000 sq ft. plant million $52 million Adchem Shering Infotech, Pratt & Honeywell Merck $60 Las Piedras, Pharma Whitney $5.8 million million $28 million $50 million $8 million $22 million Mayagüez 15 The Business Environment Retail World-renowned retailers operate in PR and many have their highest revenue stores here 16 The Business Environment Retail Top 20 Shopping Centers in Puerto Rico 2009 (by square footage) Location of Plaza Las Américas 2,358,000 Top Shopping Centers Mayaguez Mall 1,100,000 Plaza Carolina 1,092,103 Bayamón 4 Caguas 2 Plaza Centro I, II Shopping Center 980,000 Carolina 3 Los Colobos I,II,III Shopping Center 800,200 Guaynabo 1 Plaza del Caribe 683,000 Hatillo 1 Plaza del Sol 673,654 Humacao 1 Plaza del Norte 673,261 Mayagüez 2 Ponce 2 River Side Town Center 648,401 San Juan 2 Parque Escorial 636,340 Toa Baja 1 San Patricio Plaza 578,220 Yauco 1 Western Plaza 572,112 Las Catalinas Mall 569,109 Plaza Río Hondo 549,953 Montehiedra Town Center 546,000 Ponce Town Center 506,000 Santa Rosa Mall 474,370 Yauco Plaza I, II, III 450,000 Rexville Towne Center 450,000 Plaza Palma Real 441,495 - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 17 The Business Environment Retail Shopping Centers Sales per square foot 2007 $480 $466 $460 $440 $420 $406 $400 $380 $360 Puerto Rico Estados Unidos Source: International Council of Shopping Centers. 18 Connectivity: Internet Access Changes in Internet penetration 2005-2010 50% 45% 45% 1,510,738 40% 38% users 12+ 35% 35% 33% 30% 25% 9.3% 20% Annual 15% Average 10% Growth Rate 5% 0% 2005 2006 2008 2010 19 Connectivity: Internet Access Internet Penetration by Family Income 90.0% 85.7% 80.0% 80.0% 72.1% 72.7% 68.4% 71.4% 70.0% The median income of 61.6% 60.0% Internet users is 46.3% 50.0% $26,818 as compared 40.0% to the general 30.0% 27.5% 20.2% 20.0% population ($16,543) 10.0% 0.0% Less than $14,999 $15,000 to $30,000 $30,000 to $49,999 $50,000 to $74,999 $75,000 or more 2008 2010 20 Advanced Services as an Area of Opportunity Education • Puerto Rico universities have expanded abroad • Puerto Rico provides educational services to students in the region • Private and public universities have excellent programs in engineering, medicine and science Health • Important competitive advantages have been identified in areas such as orthopedics, cardiovascular surgery and oncology, among others • Integrating IT and health services is an area of opportunity • Rapid aging of the population presents major opportunities for development of new technology intensive services 21 Advanced Services as an Area of Opportunity Construction Related Services • Management of complex construction projects is a capability of the construction sector • Puerto Rican firms have exported construction management services to various countries • There is particular expertise in infrastructure related construction Knowledge Intensive Business Services* • Design and engineering • Environmental services • Financial services • Communications • Validation • IT *The KIBS concept was originally used by Ian Miles of Manchester University in the UK 22 Advanced Services as an Area of Opportunity Green Economics • Manufacturing of new products • Operation of alternative energy systems • Maintenance of new energy systems • Training services 23 Mid Term Perspectives GNP Growth 2006-2012 Forecast 1.8% 0.5% 0.4% -1.2% -2.8% -3.4% -3.7% 2006 2007 2008 2009 2010 2011 2012 Source: Puerto Rico Planning Board (2009) Apéndice Estadístico 2008, Table 3; PB data January 2010; Estudios Técnicos, Inc. 24 Concluding Comments • Puerto Rico is a risk free and business friendly environment. • Major institutional reforms are underway. • The economy will experience faster growth beginning in fiscal 2011/2012. • The island is well positioned to become a knowledge based economy. • Four major projects -Roosevelt Roads, San Juan Waterfront, Science City and Port of the Americas- will generate significant investment opportunities. • New PPP legislation will stimulate new investment in diverse areas: roads, school construction and maintenance, port and airport facilities, energy and water supply, as well as certain services. 25.