Export Industry

After Hurricane Maria exports dropped to $60.7 billion in 2018, the lowest point in six years. This year, however, the arrow seems to peer upward. >Archive

The news didn’t make waves. A delegation of 13 Puerto Rican companies sealed a deal for $5.2 million in sales during a recent trade mission to Spain, coordinated by Puerto Rico Emprende, an initiative of the Puerto Rico Trade and Export Company.

It may not seem like a big event; after all, it competed with the headline revealing that the Walton heirs (the world’s wealthiest family) earn $4 million per hour. But, in local terms, it’s an indicator that the export sector regained its footing after tumbling in the aftermath of Hurricane Maria.

“Spanish companies showed great interest in the offer of local products and services that we brought over,” Trade and Export Executive Director Ricardo Llerandi said. “Twelve years had passed since we last visited Spain. We have plans to return next May.”

Ricardo Llerandi

Trade and Export Company Executive Director Ricardo Llerandi recognizes that the inventory tax hurts startups. >Carlos Rivera Giusti

Previous trade missions had buckled investments of over $15 million this year. One exchange alone with the Dominican Republic secured $7 million.

Sitting in his office at the headquarters of the Trade and Export Company in Hato Rey, the former representative from Arecibo thinks about the agency’s mission to promote the development of small to midsize enterprises (SMEs) in the midst of a decade-long economic slump and a $70 billion-plus debt load.

The road has been challenging.

After taking a nosedive in fiscal year 2012, Puerto Rico exported goods worth about $62.3 billion over the next two years, inching its way up to $71.7 billion in 2016 and keeping the same pace in fiscal year 2017, according to data from the Planning Board. Then Maria plowed into Puerto Rico causing almost 3,000 deaths and more than $100 billion in damages. Exports dropped to $60.7 billion in 2018, the lowest point in six years.

This year, however, the arrow seems to peer upward.

“We are projecting exports to exceed the $77 billion mark,” Llerandi told THE WEEKLY JOURNAL. “Our numbers, in 2019, should be in the $70 billion range as we reclaim the position we had prior to Maria.”

To reach that goal, the chief of staff of former Gov. Ricardo Rosselló implemented a combination of strategies that range from coordinating commercial exchanges to facilitating the warehouse space for a fulfillment center, and organizing workshops to equip new and old entrepreneurs with the tools to succeed in the global and digitalized economy.

“We are trying to be more aggressive with commercial missions. Fourteen are scheduled for next year, 12 subsidized by the federal State Trade and Export Promotion program of the U.S. Small Business Administration, and two paid by the office,” he explained.

With Llerandi at the helm since 2017, the Trade and Export Company has coordinated 24 commercial missions to countries like the Dominican Republic, Jamaica, Aruba, Curaçao, Chile and Trinidad and Tobago, among others. Some 427 executives of small and midsize businesses traveled to promote and sell their goods and services abroad.

The top-five products in demand are chemicals, pharmaceuticals, medicines, miscellaneous manufacturing, medical equipment and supplies, computer and electronic products. Food occupies the seventh position in the ranking. The United States remains the main buyer of locally produced goods and merchandise, followed by the Dominican Republic, Costa Rica and Panama.

“We are setting eyes on the Caribbean. It presents a good opportunity for the export of beverages, foods and services,” Llerandi indicated.

It should be noted that tourism, which is hitting record numbers, is also considered an export of services, as the vast majority of visitors are from outside Puerto Rico. Based on 2017 figures from the World Travel and Tourism Council, the total contribution of tourism (direct and indirect) to the island’s economy was $7 billion, or roughly 7 percent of gross domestic product (GDP).

Aside from the commercial trip and—in part—due to budgetary constraints, this year, the agency started a virtual meeting program using the PR Emprende B2B platform to introduce local vendors to prospective buyers and coordinate business exchanges. So far, four virtual meetings connected local entrepreneurs with buyers from Dubai, Qatar, Spain, the United States and the Caribbean.

In an attempt to address some of the demands of the virtual ecosystem, a partnership between the Trade and Export Company with Brands of Puerto Rico offers micro, small and midsize enterprises an e-commerce platform and fulfillment center to ease the order of processing, packing and shipping of merchandise.

“More local businesses are selling online, through social media or websites like Amazon and Etsy,” Llerandi noted.

The agency also offers strategic business advisory and workshops on a wide range of subjects like marketing trends or intellectual property and copyrights. The program “Puerto Rico Emprende Conmigo,” a joint initiative with the Labor Department, gives an opportunity for a new breed of entrepreneurs to develop and start a business on wheels, after competing for one of the 360 government street-vending carts.

Before and After Maria

Nobody denies the importance of the SME sector. In 2015, a report from the Trade and Export Company revealed that small and midsize enterprises accounted for 95 percent of the businesses on the island and added 13 percent to the overall GDP.

Hurricane Maria

A view of the municipality of Humacao, after Hurricane María on 2017. >Carlos Rivera Giusti

Not only do they contribute to the island’s economic development, but these enterprises also adapt quickly to economic changes and offer a fast mechanism to generate employment in moments of distress. Eight months after the storm devastated the island, the Trade and Export Company certified 1,680 small and midsize enterprises, 732 of which were new businesses.

“Women are reinventing themselves. They are more willing than men to enter into the business world,” Llerandi mentioned.

The historic juncture also encouraged business transformation to help cope with the inevitable shifts in the economic environment.

“There was a change in attitude. Companies that had shied away before were enrolling in trade missions. The hurricane was the catalyst that made them dare to try,” he said.

Two months after Maria, a commercial mission arrived in Chile. Half of the participants had never been on a commercial exchange. According to Llerandi, the sales secured during the trip helped companies like Gascó Industrial Corp. and Nosotras Boutique mitigate the losses caused by the storm and generate profits. “Both lost clients on the island, but were able to offset the losses with new clients in Chile.”

A Trade Barrier

While it uncovered business adaptability and creativity, the hurricane exposed the negative side of the inventory tax, which discourages businesses from keeping large inventories to avoid paying the levy on items stored over a month. The shortage of food, water and supplies for basic repairs prompted an ongoing debate over the need to repeal the tax.

The levy has also had other unintended consequences: it has become a trade barrier.

“It affects exports. I can’t say the contrary,” Llerandi recognized. “It certainly affects small businesses. The startups and the ones growing, they have a greater challenge.”

A solution to this dilemma, he pointed out, are the free-trade zones. However, there aren’t enough tax-free havens. For instance, the agency’s free-trade zone warehouse is packed to capacity.

“We need to expand the free-trade areas and that is what we are doing. We are requesting that our warehouses in the port of Ponce become a free-trade zone,” Llerandi said.

The Agency’s Merger

The storm was not the only test that the Trade and Export Company has been juggling. Its budget decreased from $20.5 million in fiscal 2017 to $14.5 million this year. While dealing with the cut, the agency began its merger with the Department of Economic Development and Commerce, which should be completed next year.

“We have fewer resources, 30 percent fewer people and 30 percent less money. That is also a challenge,” said Llerandi.

Reporter for The Weekly Journal. She is a curious and fearless journalist, equipped with 16-plus years of writing. Cynthia received a bachelor’s degree in Spanish and English Literature from Sacred Heart University.

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