- Economy of Puerto Rico
The Economy of Puerto Rico is one of the most dynamic in the
Caribbean region, also ranking as the second biggest economy in the region, only behind to theDominican Republic . A diverse industrial sector has surpassedagriculture as the primary focus of economic activity and income. Encouraged by duty-free access to the US and by tax incentives, US firms have invested heavily inPuerto Rico since the 1950s. US minimum wage laws apply. Sugar production has lost out to dairy production and other livestock products as the main source of income in the agricultural sector.Tourism has traditionally been an important source of income for the island, with estimated arrivals of nearly 5.9 million tourists in 2007.History
panish Colonialism
In the early sixteenth century,
Juan Ponce de León and theConquistadores were led by theTaíno s to areas enriched withgold . This discovery encouraged the Spanish Crown to create a gold mining industry and attracted many settlers to the island who wanted to strike it rich. In 1521, concerned about threats from European enemies, Spain began constructing massive defenses around the city of San Juan. The strengthening of El Morro Castle, San Cristóbal, and San Gerónimo forts as well as the city walls were the stronghold elements of these successful defenses. The Spanish Crown allowed the enslavement of the native Taínos for the construction of these fortifications and for the further development of the gold mining industry. Gold mining became the first modern economy of Puerto Rico. Many Taínos died as a consequence of the harsh treatment that they were subject to. This eventually led to the importation of African slaves as a new source of manpower. The black slaves were forced to work the mines whose gold was sent to Spain.When the Spaniards found gold in Puerto Rico, they established farms for cattle, grain, fruits, and vegetables to supply mining camps. These farms later grew into plantations for cash crops of
ginger ,sugarcane ,tobacco , andcoffee . The settlers who were farmers, began what was to become the agricultural economy of the island. Ginger cultivation was to become the main agricultural product, helping to establish a thriving economy until 1570 when the gold mines were declared depleted and no longer produced the precious metal. After gold mining came to an end in the island, The Spanish Crown basically ignored Puerto Rico by changing the routes of the west to the north. The island became mainly a garrison for the ships that would pass on their way to or from the other and richer colonies. Therefore, the commercial trade between Puerto Rico and Spain was greatly affected and since commercial trade with other countries was prohibited the islands economy became precarious. During this period the merchants in the island resorted to contraband, trading with ships fromEngland ,Netherlands or whomever would trade for the main produce of the island, which at that time was ginger. As much as 10 or 11 years would pass beforeSpain would renew it commercial links with Puerto RicoIn 1493,
Christopher Columbus , on his second voyage, introduced the ancestors of the Pure Puerto RicanPaso Fino s to theNew World . During this and subsequent trips by Columbus and other conquistadors, Andalusians, Barbs and SpanishJennet s were brought into what is now Puerto Rico. Spanish land owners in Puerto Rico used the Paso Fino in the plantations because of their endurance and the comfortable ride they provided. Breeding and exporting of the Paso Fino horses became an important source of income for the struggling economy of Puerto Rico.From the sixteenth to the nineteenth century Puerto Rico was characterized primarily by underpopulation, poverty and neglect by Spain. Spanish law was changed to allow unrestricted trade with the neighbors and the Spanish Crown approved the
Royal Decree of Graces of 1815 , which promised free land for the Spanish citizens who were willing to establish themselves in Puerto Rico and develop its lands. Puerto Rico had basically remained economically undeveloped until 1830, when the immigrants from the Spanish provinces ofCatalonia ,Mallorca and theCanary Islands began to arrive and gradually develop the sugarcane, coffee, and tobacco plantations.The French who fled St. Dominique (what is now
Haiti ) from the slave uprisings and settled in the island bought with them the knowledge and expertise to develop the islands sugar industry. This led the way to the development of the Puerto Rican Rum industries which would have a positive impact on the island.Even though sugar became the backbone of Puerto Rico's economy, coffee was close behind. Out of the three main groups which immigrated from Spain, the Mallorcans were the ones who helped develop the islands early coffee industry. Many established coffee plantations in towns such as Lares however, they employed what was to become known as circular migration. For the Mallorcan immigrants the coffee economy of Puerto Rico was a mechanism for capital accumulation and instead of investing their profits in the economy of Puerto Rico, they sent their earnings to their families in Spain.By 1850, Spain had lost all but two of its colonies in the New World, Puerto Rico and
Cuba . The Spanish Crown modified the Decree of 1815 to include those European of non-Spanish origin to settle and develop the lands of both islands. Waves of Corsicans, French, Irish and Germans immigrated to Puerto Rico and contributed to the creation of a thriving agricultural economy. Of this group the Corsicans converted the islands coffee industry into one of the best in the world. Unlike the Mallorcans, the Corsicans settled with their families in the island and invested their profits in Puerto Rico's economy. The German immigrants established many importing and exporting firms in San Juan the islands capital.Despite the fact that the economy of the island had greatly improved, the vast majority of the islanders lived in poverty. The Spanish Crown needed funds to subsidize its troops in an effort to regain control of the
Dominican Republic and therefore, increased the tariffs and taxes on most import and export goods. As a consequence Puerto Rico once more began to suffer a severe economic crisis.United States control
The economy of the island became dependent on that of the United States after the
Spanish-American War of 1898. Companies from the United States took over the operations of the main agricultural entities of the island. An example of this is the American Tobacco Co. which took control of the tobacco industry of the island. OnAugust 8 ,1899 ,Hurricane San Ciriaco , with winds of over 100 miles per hour, struck Puerto Rico and onAugust 22 another hurricane followed. These events practically destroyed the island's agricultural industry, causing the mass emigration of Puerto Rican laborers to other parts of the world and a sudden economic crisis. Another event which further deteriorated Puerto Rico's economy was theGreat Depression of the1930's .In 1945, U.S. President
Franklin D. Roosevelt launched the Puerto Rican Reconstruction Administration, which provided agricultural development, public works, and electrification of the island.In the late 1940's a series of projects called
Operation Bootstrap encouraged, using tax exemptions, the establishment of factories. Thus manufacturing replaced agriculture as the main industry.Since the Great Depression there has been external investment in capital-intensive
industry such aspetrochemical s,pharmaceutical s, andtechnology .Operation Bootstrap was based on an "industrialization-first" campaign and modernization, focusing the Puerto Rican economy on exports, especially to the United States. Though initially there were large gains in employment and per capita income, recessions in the United States were magnified in the country and have repeatedly hampered Puerto Rican development. [F. Rivera-Batiz, Island Paradox: Puerto Rico in the 1990s, chapters 1,2,5 & 8.]
With the signing of the
North American Free Trade Agreement and theDominican Republic–Central America Free Trade Agreement , Puerto Rico lost a trade advantage over some Latin American countries as the right to duty-free imports to the U.S. market were expanded. Puerto Rico is also subject to theminimum wage laws of the United States, which gives lower-wage countries such asMexico and theDominican Republic an economic advantage in certain industries.Current economic overview
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