Puerto Rico Economic Structure
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Puerto Rico’s economic structure is dominated by an upper middle class, largely engaged in the manufacturing and services sectors. As a US Commonwealth nation, Puerto Rico controls only its internal affairs while the US federal government controls all interstate and international trade relations. Puerto Rico’s economic performance is closely tied to that of the United States, its business cycle, its tax regime and the level of federal transfers.
Puerto Rico’s economic structure is dominated by an upper middle class, largely engaged in the manufacturing and services sectors. As a US Commonwealth nation, Puerto Rico controls only its internal affairs while the US federal government controls all interstate and international trade relations. Puerto Rico’s economic performance is closely tied to that of the United States, its business cycle, its tax regime and the level of federal transfers. The government continues to play a significant role in the country’s economic performance despite the privatization of several industries.[br]
High welfare spending and the overuse of tax incentives have restricted the country’s economic growth in recent years. The global financial crisis of 2007-2009 has also restricted the demand for goods manufactured in Puerto Rico, as well as the island nation’s tourism earnings. Puerto Rico’s economic growth has turned negative in the past couple of years and stood at -4.5% in 2009.
Puerto Rico Economic Structure: Major Contributors
Puerto Rico’s economy is largely driven by its services segment, especially tourism, which contributes over 50% of the country’s GDP. Remittances from Puerto Ricans living in the United States also contribute significantly to the island nation’s GDP. Nearly 80% of the country’s population is employed in this segment.
The country’s manufacturing segment is highly efficient, since it employs only 19% of the population while contributing nearly 45% of its GDP. Puerto Rico’s high tech manufacturing technology comprises of pharmaceuticals, electronics, and scientific and precision instrument units.
Puerto Rico’s agriculture segment is handicapped by the country’s vast mountainous terrain, which has led to high reliance on the import of food items. The country’s agriculture segment employs nearly 2% of the population, while contributing only 1% to its GDP.
Puerto Rico Economic Structure: Problems[br]
Puerto Rico’s growth has been impeded by the country’s high public debt, low employment levels and high deficits. The country’s public debt has grown at a faster pace than the growth of its economy, reaching $46.7 billion in 2008. Puerto Rico’s government needs to take urgent measures to reduce the mounting public debt and deficit. Several efforts are being made to reduce the country’s high unemployment level, which stood at 12% in November 2009. The company also has a relatively low rate of labor force participation, which means that it has a lower proportion of eligible workers employed or are actively seeking work.
