Carribean Med-Tech Movement

That brings us to today. The tax exemption has expired for the grandfathered companies. However, the U.S. Tax Act of 2003 compensates somewhat by reducing the income tax rate on dividends paid directly to U.S. investors from companies established on the island. In addition, companies that manufacture goods for off-island clientele can take advantage of a reduced local income tax rate: 7 percent, with additional incentives based on payroll, location within the island, and other factors.

But the real draw may be the work force. Because Puerto Rico is part of the United States, federal minimum-wage standards still apply, and the island will never be able to compete pricewise with low-wage offshore locations. But thanks to its acclaimed university system, Puerto Rico can supply a highly skilled and educated work force—from high-tech manufacturing workers all the way to upper management.

At the same time, wage standards are somewhat lower than in the United States, and a larger proportion of the population is unemployed or lives in poverty.  Because of the scarcity of work, locals are generally willing to accept somewhat lower pay for skilled jobs than their counterparts in Minnesota.

Thanks to its acclaimed university system, Puerto Rico can supply a highly skilled and educated work force—from high-tech manufacturing workers all the way to upper management.

And then there’s the comfort level: Because Puerto Rico is an American territory, investors there are covered by U.S. laws, including the ones that deal with intellectual property. Transactions take place in U.S. dollars, regulatory agencies are the same, and the ports lie within the U.S. customs area, allowing relatively trouble-free shipping to the mainland. Because biotech is so heavily represented, familiar companies complete the supply-chain lineup.

These benefits are why so many medical device companies, from Minnesota and around the world, are including Puerto Rico in their globalization efforts. They help explain why St. Jude is expanding there, even as it breaks ground on its new global headquarters in St. Paul. With about 12,000 employees worldwide, St. Jude hopes to double its size in the next five years—and the Arecibo plant is part of that strategy.

“It’s difficult to talk about Puerto Rico in isolation,” Janasz says. “This is part of a much bigger expansion plan. Yet it’s a very important piece of it, obviously, considering that we are acquiring a new facility and intend to bring in 1,200 new employees. It’s a significant investment.”