Building a Strategic Trade and Industrial Policy for Puerto Rico in the Context of Colonial Exclusion and Lack of a Development Strategy

• Date: 01 May 2020
• Published date: 01 May 2020
• DOI: 10.1177/0094582X20911447
• Subject Matter: Articles

https://doi.org/10.1177/0094582X20911447

LATIN AMERICAN PERSPECTIVES, Issue 232, Vol. 47 No. 3, May 2020, 30–48

DOI: 10.1177/0094582X20911447

© 2020 Latin American Perspectives

30

Building a Strategic Trade and Industrial Policy for

Puerto Rico in the Context of Colonial Exclusion and

Lack of a Development Strategy

by

Maribel Aponte-García and Karen Orengo-Serra

Given Puerto Rico’s colonial exclusion from Latin American and Caribbean regional-

ism and its ruling parties’ disregard for stimulating an industrial base of small and

medium-sized local enterprises rather than U.S. multinational corporations, Puerto Rico

needs to construct new pathways to inclusive socioeconomic development. One approach

is articulating strategic and industrial policies to stimulate these enterprises from below

by promoting value chains focused on exports or export potential. A proposed systematiza-

tion draws on the experience gained in a project carried out under an agreement between

the University of Puerto Rico and Puerto Rico’s Trade and Export Company to generate

strategic export plans and map value chains for small and medium-sized enterprises.

Dada la exclusión colonial de Puerto Rico del regionalismo latinoamericano y caribeño

y el desprecio de sus partidos gobernantes por estimular una base industrial de pequeñas y

medianas empresas locales en lugar de corporaciones multinacionales estadounidenses,

Puerto Rico necesita construir nuevas vías hacia el desarrollo socioeconómico inclusivo. Un

enfoque es articular políticas estratégicas e industriales para estimular a estas empresas

desde abajo mediante la promoción de cadenas de valor centradas en las exportaciones o el

potencial de exportación. La sistematización propuesta se basa en la experiencia adquirida

en un proyecto llevado a cabo en virtud de un acuerdo entre la Universidad de Puerto Rico

y la Compañía de Comercio y Exportación de Puerto Rico para generar planes estratégicos

de exportación y mapear cadenas de valor para pequeñas y medianas empresas.

Keywords: Strategic trade policy, Mapping value chains, Small and medium-sized

enterprises, Puerto Rico, export plans

Facing the internal and international crisis with an outdated development

model and constrained by lack of sovereignty in regional trade agreement nego-

tiations, Puerto Rico needs to construct new pathways to inclusive socioeconomic

development. At present, and for at least the next seven to ten years, Puerto Rico

has been placed under the control of a federal board that is overseeing the coun-

try until its fiscal crisis is stabilized. In June 2016, Congress enacted legislation

Maribel Aponte-García is a full professor and researcher in the Graduate School of Business and

the Social Science Research Center of the University of Puerto Rico and former Caribbean Region

Representative on the directing committee of the Latin American Council of Social Sciences. Karen

Orengo-Serra is a full professor and researcher in the University of Puerto Rico’s Graduate School

of Business and coordinator of its doctoral program. They are grateful to the University of Puerto

Rico for a grant from its Research Initiatives Program and to the reviewers for insightful com-

ments and suggestions.

911447LAPXXX10.1177/0094582X20911447Latin American PerspectivesAponte-García and Orengo-Serra / Building a Strategic Trade Policy

research-article2020

Aponte-García and Orengo-Serra / BUILDING A STRATEGIC TRADE POLICY 31

responding to an ongoing economic crisis in Puerto Rico. The Puerto Rico

Oversight, Management, and Economic Stability Act (PROMESA, P.L. 114-187)

established a process for restructuring the island government’s public debt and

a federal oversight board, formally known as the Financial Oversight and

Management Board for Puerto Rico (FOB hereafter), with “broad powers of bud-

getary and financial control” (Austin, 2016: 9) over the island.

PROMESA and the FOB highlight the demise of the colonial development

model. Puerto Rico is threatened by vulture-fund interests that are pressuring

the board and the government into repaying them first even at the cost of trig-

gering and worsening a humanitarian crisis on the island. Consensus in the

United States and on the island is that Puerto Rico lacks a development strategy

and that without one stabilization is infeasible. Our research is an attempt to

contribute to the building of alternatives within the complex economic and

political situation the island faces today.

This research has three underlying propositions. The first is that as a U.S.

colony Puerto Rico has the potential for growth through increasing trade with

the United States and with some of the countries with which the United States

has trade agreements in the region (e.g., the Central American Free Trade

Agreement–Dominican Republic [CAFTA-DR] [Costa Rica, El Salvador,

Guatemala, Honduras, Nicaragua, the Dominican Republic], the North

American Free Trade Agreement [NAFTA, now the USMCA] [Canada and

Mexico], and bilateral agreements [Colombia, Panama, Peru, and Chile]). The

country’s alarming unemployment rate (12 percent in October 2016), the nega-

tive growth rates (−2 percent to −3 percent) of the real gross national product

(GNP) and the projected potential contraction of real GNP of −16 percent in

2018 and 1.2 percent in 2019 make growth strategies necessary. The second

proposition is that export growth must be linked to employment generation

and to business growth patterns that benefit small and medium-sized enter-

prises and not just larger firms. The third is that education should be the axis

of development proposals—in particular, that the University of Puerto Rico,

the island’s top public academic institution, should play an important role

given that its academic excellence and Puerto Rico’s tertiary education levels

are what still distinguish the island from other countries in the region. The chal-

lenge is to develop an analytical method capable of promoting value chains

focused on the exports or export potential of small and medium-sized enter-

prises and formulating commercial, industrial, and strategic policies for these

enterprises to stimulate inclusive socioeconomic development.

The objective of this article is to suggest how strategic trade and industrial

policies can be articulated from below given Puerto Rico’s colonial exclusion

from Latin American and Caribbean regionalism and its ruling parties’ disre-

gard for articulating these policies by stimulating an industrial base dependent

on small and medium-sized local enterprises rather than U.S. multinational

corporations. It summarizes a method developed to address this knowledge

gap and systematize its replication that draws on the experience gained in a

two-year project carried out under an agreement, signed in 2015, between the

University of Puerto Rico and Puerto Rico’s Trade and Export Company to

generate strategic export plans and map value chains for small and medium-

sized enterprises. With Donald J. Trump’s victory, the task at hand became even