Decolonization Models for America’s Last Colony: Puerto Rico

The Flight of the Pharmaceuticals and Commonwealth

225 The Flight of the Pharmaceuticals and Commonwealth May 27, 2010 News of the expiration of the patent for Lipitor (Pfizer), the prescription medicine with the greatest sales in history, and the consequent loss of thousands of direct and indirect jobs are an event that has been known to all and expected for years but ignored by the revolving-door governments of Puerto Rico’s two main political parties. The pharmaceutical industry is the cornerstone of Puerto Rico’s industrial program. Some forty-five pharmaceutical companies operating in Puerto Rico are estimated to generate directly more than 20,000 wellpaid jobs (36,500 in 2002) and indirectly some 50,000 more. Thirteen of the twenty most popular prescription medications sold in the United States are manufactured here. Exclusivity in producing these medications rests on the duration of their patents. Once the patents expire, any corporation may manufacture the medications anyplace in the world as generic drugs. It is estimated that in the next five years the pharmaceutical industry worldwide will lose $100 billion in sales due to the expiration of patents on medicines. The chief executive officer of the largest pharmaceutical company in the United Kingdom, Glaxo Smith Kline, recently remarked that for the industry to survive it would have to reinvent itself and diversify. The current economic model of the Commonwealth of Puerto Rico was established in 1947 with Operation Bootstrap, based on a plan conceived by the American economic planner Harvey S. Perloff to attract foreign investment. The plan fed on the postwar chaos produced by 226  Newspaper Columns the destruction of Europe and Japan. This new economic-development strategy displaced the one that had been followed by the last American governor, Rexford G. Tugwell, who supported the development of local industries and agriculture and warned against the dangers of an economy dependent on foreign investment. While Europe and Japan were being rebuilt, Puerto Rico was being reinvented with the petrochemical industry, the remains of which today are a mere “ghost town” along Puerto Rico’s south coast in Guayanilla. In the 1970s, Puerto Rico got a fresh breath of air with the arrival of the pharmaceutical industry and the implementation of Section 936 [of the US Internal Revenue Code], and it also increased its dependency on food stamps. At the end of the 1990s, the US Congress, using its plenary powers over the territory of Puerto Rico, eliminated Section 936, which caused the flight of funds attracted to Puerto Rico under Section 936 and the beginning of the withdrawal of the pharmaceutical industry. In 1996, when it was decided that Section 936 would be terminated after a ten-year phaseout period, there were more than 156,000 workers in the manufacturing sector. Today, that figure has dropped to 90,400. The principal strategy used by both the Popular Democratic Party and the New Progressive Party to replace the revenues that were generated under Section 936 was the issuance of public debt complemented by increased federal transfers. In 1972, Puerto Rico’s public debt was $2.7 billion ; today it exceeds $60 billion. While the pharmaceutical companies reinvented themselves, Puerto Rico’s lack of power to generate opportunities in the globalized economy of the twenty-first century meant that it could not reinvent itself, as have such successful sovereign countries as Singapore and Ireland. Sovereignty is not a magic wand that solves problems, but it is a first step in obtaining the powers and tools with which, along with good government, to maximize opportunities. For the years 2011 to 2014, the Economist Intelligence Unit has projected a growth for Singapore of between 4.6 and 5.2 percent. In the case of Ireland, it projects growth of between 0.9 and 2.4 percent. Projections for Puerto Rico for the year 2011 are no more than –3.4 percent, and there are no numbers for the following years. Flight of the Pharmaceuticals and Commonwealth  227 While some politicians spend their time on sterile status processes and others spend theirs defending structures from the past that are irrelevant in the world of the twenty-first century, Puerto Rico is missing the opportunities for prosperity and social justice that already exist in successful sovereign countries similar to it in size. ...