Economic incentives policies, specific assets investment and relocation of multinationals in Puerto Rico

Abstract

The relocation of multinationals in Puerto Rico raises the need to evaluate the policies of economic incentives in economic development strategy. The attraction of the island for the location of multinational enterprises has decreased, consequently relocation of manufacturing established in Puerto Rico have increased in recent years. This paper describes the relationship between the policies of economic incentives, investment in specific assets and relocation of manufacturing in Puerto Rico. Department of Labor and Human Resources of Puerto Rico, the Puerto Rico Industrial Development Company and the Office of Industrial Tax Exemption of Puerto Rico data show that 67% of the plants were established relocation performed by promotion policies of the Government of Puerto Rico. 48% of these plants were located in government buildings, 37% of plants with relocation had incentives to established industries and 89% had tax exemption. In addition, 63% of the plants with relocation had equipment and machinery investment related to promotion and economic incentives for industrial development in Puerto Rico. This indicates that the economic incentives policies have not been effective to retain the activities of multinational enterprises in Puerto Rico, validating previous work until 2011 by Morales, Juma”h, Lloréns-Rivera, Cué and Ruiz, 2012,2015.