History
Manufacturing in Puerto Rico has evolved significantly over time, shaped by economic policies and industrial shifts. In the 1940s, the needlework industry accounted for more than half of the island’s manufacturing employment. However, wages were low, with most workers (primarily women) earning between one and two cents per hour. During the 1950s and 1960s, Puerto Rico transitioned away from an agriculture-based economy to an industrial one as part of Operation Bootstrap. To attract external investment, tax incentives were introduced in 1947, contributing to an expansion of factories producing consumer goods such as apparel. [1]
By the late 1960s, the manufacturing sector shifted from labor-intensive industries such as textiles to capital-intensive industries like chemical and electronics production. Between 1940 and 1960, per-worker gross national product (GNP) increased from $932 to $2,733, while the average annual income surpassed $500 for the first time. [1]
From the 1970s to 1996, manufacturers based outside Puerto Rico benefited from tax incentives such as Section 936, which allowed corporations to reduce tax liabilities while maintaining limited on-island employment. For instance, Microsoft classified software copied onto discs in Puerto Rico as island-generated profit, despite employing fewer than 200 workers there. [1]
Since the mid 1990s, some manufacturers departed; however, Puerto Rico remains a key center for pharmaceutical production. The island has become the largest exporter of medical supplies in the United States, surpassing states such as California and Indiana. The pharmaceutical industry now generates approximately $40 billion annually, representing 30% of Puerto Rico’s manufacturing output and employing 90,000 workers, who earn wages 60% higher than the island’s average manufacturing job. [1]
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