The San Juan Star
Sunday, December 8, 2002 Viewpoint
A.W. Maldonado is a journalist and longtime columnist for The Star

Puerto Rico has high quality industry managers and professionals

Back in the early 1970s, when Teodoro Moscoso was persuaded to return to the Government Development Company, he visited a pharmaceutical plant in Humacao, Syntex.

He was met at the entrance by an executive, Agustín Márquez, who was to lead him to the conference room where the other executives were waiting. But Moscoso said that first he wanted to go to the warehouse. Surprised, Márquez took him there. Moscoso began to ask: What is this ... what is that? Márquez answered. Then Moscoso asked: Why isn't this made in Puerto Rico? Why not that . . . ? Márquez, who today runs the Pharmaceutical Industry Association of Puerto Rico, still recalls the incident. For once, Moscoso got to the conference room and kept asking the same questions. As a result, Márquez said, the company adopted the policy to buy as many local products and materials as possible.

This anecdote makes two important points. One is historical. The government development program, and Moscoso in particular, have always been criticized for not doing enough to promote the local industry. In fact, nothing and no one in island history did more to promote local industry than the Government Development Company and Moscoso. Of course, this great success in industrializing the island economy was the result of the promotion of investment from the United States and other countries. I Today, what drives manufacturing — that in turn drives the entire Puerto Rican economy — are the pharmaceuticals.

The other point is this. When you say pharmaceuticals, you are talking about gigantic U.S. and foreign firms that manufacture an incredible number of the medicine and drugs consumed worldwide. As the association points out, 14 of the biggest 20 pharmaceuticals in the world are in Puerto Rico.

But something has happened since Moscoso’s visit to Syntex. Twenty-six of the 36 big pharmaceutical manufacturing operations on the island are run by Puerto Ricans.

And behind them, well over 90 percent of the managers and professionals — over 10,000 engineers, chemists, financial officers, accountants and other professionals — are Puerto Rican. This is the main reason why the pharmaceuticals not only have remained in Puerto Rico after the repeal of Section 936 in 1996, but many of them have made big expansions. The single most important factor is that these industries, by converting to CFC (Controlled Foreign Corporation,) have retained a good part of their US. tax-exempt status.

But the fact that in Puerto Rico there is an extraordinary pool of high-quality managers, professions and workers is another powerful incentive. These are people with experience in the enormously high standards of production and quality, and with the knowledge and experience to comply with and operate within the complex U.S. regulatory system.

There is still something else. The head of the development program today is veteran Héctor Jiménez Juarbe. He was persuaded by Gov. Calderón to come out of retirement after spending nearly three decades running the Puerto Rico Manufacturing Association.

He said recently that since the Government Development Company can no longer offer the Section 936 tax benefits, the promotion of "new business" investment has been seriously crippled. But, he quickly added that there is a definite change in what was once called Puerto Rico's "industrial climate." Today everyone knows that the government of Puerto Rico is "pro-development, pro-business, pro-manufacturing."

"I can assure you," the 66-year-old Jiménez said, "that when the Governor says that the creation of new jobs and reducing unemployment is her number one priority, it is true. The commitment is there, not only in her but in the entire administration. The cabinet is focused. I think that the business community can see it also in the Government Development Company. When an industrialist comes to see me with a problem, I don't tell him I will study it or resolve it. I get on the phone and try to resolve it right then and there."

Another factor helping Puerto Rico, he said, paradoxically, is the insecurity caused by the Sept. 11 terrorist attacks. On one hand, because of Puerto Rico's Commonwealth status, the 936 companies are able to convert to Controlled Foreign Corporation status. But at the same time, as part of the United States, Puerto Rico offers as much security. Then Jiménez pointed to a particularly important phenomenon. No one is doing a better job of "selling Puerto Rico" than the huge body of Puerto Rican managers and professionals.

Most, if not all the big expansions that have taken place, and will continue in the coming years, he said, were aggressively promoted by these managers and professionals within each one of the companies.

How critical this is becomes evident when one understands the nature of the pharmaceutical industry. The manufacturing operations remain on the island as long as they can keep up with the rapid changes, the evolution in the industry.

What all these Puerto Rican managers and professionals have done is to prove to their companies that they can keep up, as well or better, than anywhere else in the world. Needless to say, the competition within each company to produce the latest products, is fierce.

Puerto Rico today, Márquez said, is at the forefront of the new generation of pharmaceutical production called "biotechnology" the process based on biological systems, such as the use of genetically engineered organisms. Jiménez does not underestimate the magnitude of the challenge facing me government of Puerto Rico and me development program without the Section 936 incentive. He hopes the government will finally convince Congress to approve the Section 956 proposal.

But in the old Moscoso spirit of unrelenting enthusiasm, Jiménez said that he is optimistic"I feel hope. There is a growing sense that we are overcoming obstacles. We are going to win."