Puerto Rico - Overview of economy
Until about 1950, the Puerto Rican economy depended heavily upon the sugar plantations typical of Caribbean islands. By the mid-1950s, however, industry began to surpass agriculture as the base of the economy, especially in pharmaceuticals, electronics, textiles and clothing, petrochemicals, processed foods, and tourist-related businesses. By 1999, industry provided 45 percent of total GDP, and services provided 54 percent, with agriculture accounting for only 1 percent. Dairy and livestock production has replaced sugar as the leading source of agricultural income.
Puerto Rico is relatively poor in natural resources, which resulted in economic dependence on the United States. Imports include chemicals, machinery, food, textiles, and fuel, most of which come from the continental United States. Puerto Rico's ideal location, however, allows the island to profit greatly from trade and commerce, thanks to its many port cities. The island is situated on many paths between the Americas as well as paths from Europe to the Panama Canal.
Since Puerto Rico is a U.S. commonwealth, the United States has a large impact on the island's economy. Tax incentives and duty -free access to the island encourage the U.S. firms that have invested a great deal in Puerto Rico since the 1950s and that now dominate industry, finance, and trade on the island. An overwhelming majority of Puerto Rico's foreign trade is with the United States, but the North American Free Trade Agreement (NAFTA) also encourages Puerto Rico to trade with Canada and Mexico. Still, the economy relies heavily on the United States, and receives many forms of federal economic aid. The island's biggest government expenditures are in health, education, and welfare. As a U.S. commonwealth, Puerto Rico's external debt is part of the U.S. debt, but the island has a public debt approaching US$16 billion.