pharmaceutical glass bottles production line

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The pharmaceutical industry is undoubtedly the workhorse of Puerto Rico’s economy. It pays $3 billion in annual taxes, which is over 33 percent of our budget, employs 78,000 direct workers who earn on average $62,000 and spends $500 million annually in capital expenditures in its plants. To put this into perspective, pharma represents 30 percent of Puerto Rico’s GDP, while tourism is just 7 percent.

However, for some inexplicable reason, our government has spent decades without a coherent strategy to keep them investing in the island. Instead, our politicians refer to them as foreign, when they are US companies, and continuously attack them, threatening to raise their taxes one way or another whenever there is a budget shortfall or some governor wants to spend more money.

Therefore, it is not surprising that a large portion of our population does not understand the importance of the pharmaceutical and medical device industries to our economy and society as a whole. Our politicians’ populist rhetoric has actually led many to believe that these are evil, corporations that take, take and take while giving nothing backto their communities and the island.

As we see in the first paragraph, this is simply not true. You might think these companies should contribute even more, but ignoring that they already are one of the most important contributors to our economy and society in terms of job creation and paid taxes, is completely absurd.

I write this op-ed because this industry, which we’ve already established plays a vital role in our economy, is coming under attack, for the second time in 20 years. It worries me to see a lack of action from our government and pharma leaders. I fully expected that by now, industry and government leaders would have come out to announce a joint workgroup dedicated solely to solving the issues generated by the phaseout of Act 154.

But this hasn’t happened; both groups appear to have taken an “ignore and pray nothing happens” mentality and that is not acceptable. Hoping our government takes the lead in these conversations is futile, we are in the middle of an election cycle, and it is evident that our governor and her opponents are more worried about campaigning than actually preventing an economic crisis. Therefore, I think it’s time for pharma’s industry leaders to take control of the narrative and force our government into action by making the phaseout of Act 154 an election issue.

The people need to clearly understand what will happen if the deductions provided by Act 154 are phased out by the federal government. We need to understand what options are on the table to help pharma grow in Puerto Rico and maintain the sector’s contribution to the economy. Whether it’s changing the industry’s tax structure so that Trump’s guilty tax does not apply, extending current decrees, allowing plants to build out power generation without interference from the AEE, or some otherthing that only industry insiders know.

I genuinely believe that through proactive communication and education, we can change the current narrative of locals versus foreigners and get everyone to understand that what is good for the industry is good for the people and vice versa. As Puerto Ricans, we can’t allow for a repeat of the 936 debacle to happen; the island might not survive it.

Founder of Los Cidrines, Former President of the Puerto Rico Products Association, Former President of the Puerto Rico Manufacturing Association and Former Independent Candidate for Governor during Puerto Rico’s 2016

(1) comment

Thomas Forester

I am 100% in agreement with the article. If you add the IVU and income tax contribution of the direct, indirect and induced employment that this activity generates it is much more than 33% of all taxes. I was able to calculate using public government data that in 2016 all manufacturing contributed 50.24% of all taxes when all factors are considered. Having economic means to generate primary income and wealth is necessary for the island to survive and function under any status. The federal government has made changes in the USA policies to retain and attract more manufacturing activities. Many states are active in providing incentives and facilitating manufacturing. So it will work for statehood. Most successful republics and those that want to be successful are working hard to win more manufacturing by providing incentives and facilitating things to retain and attract manufacturing. They would all love to have our business in their territories and are succeeding in making many activities move due to the lack of understanding of our leaders. So it will work in a republic. The truth is that having wealth generating activities in Puerto Rico is status neutral. It will help the economy under any future status and will be necessary if we want to have similar standards of living as we have had and still have under any status. The calculation provided of 33% of all taxes is only the direct contribution of the sector. Missing is the IVU and income taxes of the direct, indirect and induced employment. Another thing to consider is that when some leaders say that they take millions is because they cannot distinguish between the commercial activities of foreign capital that and the manufacturing activities. The commercial activities of foreign capital do have a net negative effect but that is another topic. For now it is a necessary service until the island can solve the fact that nearly 90% of all the food is imported. Another topic that is ignored.

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