Local and midsize companies could be the solution of the economic crisis of Puerto Rico.

By Héctor L. Díaz Morales

It is a fact that the economic crisis on the island is on the rise. Economist Dr. Edwin Irizarry Mora, through a recent online interview on Nov. 4, 2013, said that local and midsize companies must be the main targets of a new economic development strategy in the foreseeable future in Puerto Rico.

Dr. Irizarry Mora, who is also professor at the University of Puerto Rico – Mayagüez, said that the economic crisis on the island is due to “the dramatic reduction in productive capacity, the extremely low participation rate of the labor force, the drastic decline in manufacturing activities, the serious increase in public debt, and the very low capacity of tax collection.”

The British magazine “The Economist” estimated that between 1990-2009, the U.S. government spent $182,000 million in Puerto Rico more than it received in tax territory. Eleven other states had a larger deficit, but the island was the highest when evaluated for percentage of annual economic output, gross domestic product (GDP). Puerto Rico’s deficit was 290% of GDP.

Dr. Irizarry said that part of this issue is because large corporations occupy most of the commercial field on the island. However, Dr. Irizarry said that the most of tax policies approved throughout the last three decades have mainly impacted consumers’ finances, instead of large corporations’ profits.

He also said that our tax structure is based on direct and indirect taxes collected from individuals and families and that has been estimated that more than 70 percent of taxes received by the central government are paid by consumers, the remaining 30 percent is paid by the local and foreign companies who are producing more capital.

In other hand, Former Governor Carlos Romero Barceló once said that “initially was a good trick to attract industries to Puerto Rico”, but he also said that the tax credits based on the payroll would have generated more work for Puerto Ricans and now are these big companies who are hogging the economy of Puerto Rico.

Dr. Irizarry proposed in his interview that the greater attention should be given to developing the local and midsize companies to balance the commercial field. He said that most of the newly founded economic activities are being conducted by local companies (small and midsize), which are diversifying their operations in industrial sectors such as agro-industry, specialized services at all levels, recycling, labor-intensive manufacturing, retail trade at a community level, savings and loans, etc.

Dr. Edwin Irizarry Mora recommended to identify market opportunities within regions and municipalities. He said “this does not exclude the possibilities of marketing globally both, goods and services, employing effectively tools provided by the Internet web.”

Dr. Edwin Irizarry Mora proposed that to relieve the Puerto Rican economy the people should make their own space in marketing. Creating their own companies according to the necessity of the civilization. The main goal of this strategy is the substitution of the overload of the corporation’s capital with local and midsize companies.

An article published in the “Business News Daily” in April 25, 2013, said that according to a first-ever survey of the health and outlook of middle-market companies in the U.S mid-size companies are expected to outpace larger companies in growth over the next 12 months. These companies commonly referred to as middle-market, have revenue between $10 million and $1 billion and typically have between 100 and 3,000 employees.

It’s for that reason that Dr. Edwin Irizarry Mora said that the government of Puerto Rico should promote the local and midsize companies. This strategy could be “strongly related”, as he said, to the key of success for the economic crisis of Puerto Rico. He said that the people and the government should consider these companies as a good and effective alternative

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