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Report On The Competitiveness Of Puerto Rico’s Economy
Puerto Rico has a number of features that make it a strong and potentially highly competitive economy: literacy rates and educational attainment compare favorably with most economies in the region, the labor force is bilingual, the economy is open and occupies a central position in the Caribbean which provides a gateway between the U.S. mainland and Latin America, and the close ties to the U.S. mainland provide it with many advantages.
So the challenge to policymakers is clear—harness the Island’s considerable strengths to raise living standards and improve growth.
The term competitiveness refers to productive efficiency, or getting the most output from available resources. For Puerto Rico, being competitive means that its workforce and capital stock are fully utilized and allocated to their most productive uses. In a more dynamic sense, being competitive implies that conditions and policies are in place to support business development and innovation. Increasingly, competitiveness also encompasses the capacity to adapt quickly and efficiently to the many changes taking place in the global economy. This latter dimension is particularly important for Puerto Rico, because as a small island economy, it faces stiff competition from a variety of alternative locations.
The challenge to policymakers is to marshal the Island’s considerable strengths to raise living standards and restore growth. In this report, we identify five factors that in our view pose significant competitive challenges to the Island:
- Improving Labor Market Opportunities
- Developing Human Capital
- Reducing the Costs of Doing Business
- Mobilizing Finance for Business Development and Growth
- Lowering Dependence on a Shrinking Industry
Puerto Rico has made noteworthy efforts in recent years to address different aspects of these complex and interrelated challenges. But more can be done. We present five policy recommendations. Several reflect themes that have been actively discussed and debated—and in a few cases, already addressed—on the Island:
- Reduce Barriers to Job Creation and Labor Force Participation
- Reform the Energy Industry
- Lower the Costs of Doing Business
- Foster Partnerships between Industry and Higher Education
- Promote Independent Policy Evaluation