FDI, Rural Investments, & Puerto Rico

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It's easy to discount Foreign Direct Investment (FDI) as but a small and insignificant portion of our total U.S. economy.  After all, it generally contributes but 2.6 percent or so to total GDP in the U.S.  However, despite the small percentage, the contribution to the creation of jobs and growth is substantial, and can and should be in Puerto Rico as well.  

Consider that, as of 2015, FDI accounted for nearly 7 million jobs across the country, or nearly 5 percent of all jobs.  And these are just the direct jobs accounted for; indirect jobs that ripple throughout a dynamic economy will increase that number substantially.  

In Puerto Rico, FDI contributes to nearly 25,000 direct jobs . . . or at least it did before last year's hurricane season.  To put it in context, if all of these jobs suddenly left Puerto Rico, the unemployment rate would skyrocket from the palatable 9.6 percent (as of May) to nearly 12 percent - almost a 25 percent increase - overnight. 

Today, the Department of Commerce (through its subsidiary SelectUSA) released a report highlighting the value that FDI in rural areas provides to the country as a whole.  While total investment in new projects in rural areas makes up a small percentage of aggregate investment, the economic impact is disproportionately large, adding tens of billions to economic output over the last decade, with an average project size in rural areas that equals nearly double that in metro areas (in terms of dollars invested) with 25 percent more jobs.

Given rural FDI's disparate impact on economic growth, an opportunity becomes apparent.  FDI in the rural areas of Puerto Rico could likely create more impressive economic outcomes than that in the metro area.  In policy terms, perhaps this allows for an opportunity to ensure that foreign investors are made aware of rural investment opportunities and are incentivized (i.e. tax and other financial incentives) to consider the benefits therein.  After all, the return to Puerto Rico for such an investment may be higher  than in other areas.

Justin Vélez-Hagan is the executive director of The National Puerto Rican Chamber of Commerce.  He is also the author of The Common Sense behind Basic Economics, as well as the upcoming The Paradox of Fiscal Austerity (Lexington Books, 2018). @JVelezHagan