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Caribbean: Business Locations in Sunny Places

Sophisticated technology and infrastructure attributes, friendly wage rates, multilingual skilled labor, and sometimes surprising real estate deals make the Caribbean islands an attractive option for investment.

Q1 2021
Companies involved in the knowledge sector, software, and financial 
and business services are showing interest in locating in Puerto Rico.
Companies involved in the knowledge sector, software, and financial and business services are showing interest in locating in Puerto Rico.
It’s one of the top tourist destinations in the world, and with good reason. The scenery in the Caribbean is stunning, the cultures inviting and diverse, the location convenient but with a refreshing out-of-the-way feel. How do the warm and sunny nations and territories of the Caribbean fare as locations for business operations beyond tourism?

Some of the opportunities are obvious; some may be surprising. The benefits for ocean-centric businesses, including those tied to resources and commodity exports, almost go without saying. But there are also great opportunities in services, from financial operations to call centers, as well as the digital and creative sectors and advanced manufacturing.

Similarly, there are some challenges that come immediately to mind for most observers, but advantages that may be less apparent to outsiders. Natural disasters from hurricanes to earthquakes make global headlines and thus won’t surprise anyone as they tally up the challenges. But some observers may overlook various bright points, from advanced digital infrastructure in some jurisdictions to diverse workforce capabilities in others.

A Wide Range of Industries
Consider a recent summation from the financial analysis website Investopedia. “The Caribbean region consists of small island economies that are major players in a wide range of global industries,” the analysis points out. Trinidad and Tobago, for example, has grown by way of oil and gas export revenues, and Jamaica sends the world not just tasty rum but lots of bauxite, valuable for production of aluminum and various other products. “The Dominican Republic and the Cayman Islands are well-known offshore tax havens of choice for multinational corporations and billion-dollar financial service companies,” Investopedia adds.

The World Bank describes the Caribbean as “a diverse region with significant economic potential and growth opportunities…Many small economies, including those that are tourism-dependent, were maintaining a positive growth rate prior to the onset of the COVID-19 pandemic.”

The United Nations’ Economic Commission for Latin America and the Caribbean also keeps watch over the Caribbean economy, and its most recent overview also found generally positive growth rates (again, before the pandemic rewrote the story all over the world). In particular, economies of those Caribbean nations that are part of the Eastern Caribbean Currency Union had a positive growth rate of 4.1 percent in 2019, even as there was a bit of a decline overall in the growth rates of the region’s service-producing economies. Goods-producing economies in the region were seeing slow but positive growth in 2019.

Opportunities for Renewal
Needless to say, the coronavirus pandemic threw a major wrench into the picture in 2020, but that is certainly not a challenge unique to the Caribbean. For the record, the World Bank last year was forecasting economic contraction of just under 2 percent in 2020, with tourism-dependent economies taking a hit from the slowdown in travel and the global economic struggle.

There are great opportunities in services, from financial operations to call centers, as well as the digital and creative sectors and advanced manufacturing. Aside from that wild card that affects just about everyone around the world, “Caribbean countries are extremely vulnerable to climate change and natural disasters,” according to the World Bank. “Extreme weather events are common — the region experienced three Category 5 hurricanes between 2017 and 2019.” For example, according to the U.N.’s Economic Commission for Latin America and the Caribbean, Hurricane Dorian in 2019 affected most of the population of the Bahaman islands of Abaco and Grand Bahama, with an economic price tag of $3.4 billion that’s more than a quarter of the nation’s GDP.

But fixating on such challenges would create a misleading and unfair picture of the region’s economic development prospects. Indeed — as proven by the pandemic and resulting economic downturn, along with weather catastrophes in the mainland U.S. and elsewhere — negative events can come into the picture anywhere. What’s more important is, how do the locals respond to challenges, and do the various upsides outweigh the fears of potential downsides?

Check the sidebar to this article focused on Puerto Rico for thoughts related to that first question. Disasters are a challenge, to be sure, but they also build character, strengthen ingenuity, and in some cases open the door to unexpected opportunities for renewal. As a U.S. territory, Puerto Rico gains access to relief funds that are helping the island not just recover from past natural disasters but wind up in a better place in everything from the electrical grid to educational facilities.

Other resources also provide opportunities for improvement, too. The World Bank, for example, points to an electrical distribution system modernization project that will rehab more than a thousand kilometers of distribution networks in the Dominican Republic.

Driving Positive Outcomes
And the other upsides of Caribbean business locations are more numerous than many people understand. Jamaica, for example, has a strong investment climate that drives positive outcomes in a number of focus sectors, including energy, global digital services, manufacturing, mining, agribusiness, film and, of course, tourism.

Regulatory safeguards that coexist with business friendliness is an important consideration — one for which there are positive answers in numerous Caribbean destinations. The Bahamas strives to supplement its tourist economy with investments in a variety of sectors, including banking/insurance, IT/data processing, light manufacturing, pharmaceuticals, offshore medical services, and ship repair. Or consider Barbados, which encourages investment in everything from financial services to informatics and e-commerce, which supplement tourism and light manufacturing, among other sectors.

Take manufacturing as an example. Jamaica is seen as a prime choice for near-shore facilities, aided by location, infrastructure, trade agreements that open market doors, generous business incentives, and an experienced English-speaking labor pool. Digital services is another opportunity that is an eye-opener for some. In Jamaica, for example, the sector drives more than 30,000 jobs, enabled by solid IT infrastructure, skilled labor, and laws that safeguard data.

That last point — regulatory safeguards that coexist with business friendliness — is an important consideration, one for which there are positive answers not just in Jamaica but numerous Caribbean destinations. Those with past or ongoing ties to major Western nations are among those ensuring that they deliver the right levels of regulatory security to companies that make an investment.

Puerto Rico, for example, offers intellectual property protections that stem from its U.S. ties. Turks and Caicos has British historical ties that are still reflected in its safeguards for those in financial services. The U.S. Virgin Islands as a territory has tax benefits that make doing business there in many ways like operating within America’s states. Barbados prides itself on a well-developed legal system with roots in English Common Law. Saint Lucia promotes, among other things, strong protections for intellectual property and patents.

The bottom line is, as with most places in the world, it’s well worth digging deep to get beyond the most obvious Caribbean attributes. For some, 300-plus days of sunshine and year-round warmth is plenty of reason to give Caribbean destinations high quality-of-life marks. For others, headlines of hurricanes provide enough concern to steer clear.

The real story is in the middle ground of less obvious details. That’s where the picture emerges of locations with sophisticated technology and infrastructure attributes, friendly wage rates, multilingual skilled labor, and sometimes surprising real estate deals. The culture and landscape may feel like a world apart, but the actual distance in miles can be comfortably close to markets and home offices.
Puerto Rico: A “Muscle Memory” to Meet Any Challenge

As anyone who has been around through 2020 and the first part of 2021 knows, disaster can strike anywhere. And while no one volunteers to be part of a severe weather event or a pandemic, the one silver lining of such terrible occurrences is how they can teach ingenuity and build resilience.

That’s certainly the case in Puerto Rico, according to Rodrick Miller, CEO of Invest Puerto Rico. The island has seen its share of tragedy, such as the devastating Hurricane Maria in 2017, a series of earthquakes, and financial crises. Through these challenges, Miller says, “There is a muscle memory of response. There is no market that is immune to risk, but Puerto Rico has a muscle memory that allows us to respond to disasters.”

To that strengthened resolve and ingenuity, add in the fact that the island is a U.S. territory. “We are part of the United States but also part of the Caribbean and Latin America. That is a unique picture,” Miller says, with the benefits of U.S. connections ranging from intellectual property protection to billions of dollars’ worth of federal funds now being pumped into the infrastructure.

No wonder Puerto Rico has a strong manufacturing economy, led by pharmaceutical companies and medical device-makers. Lots of big pharma names operate there, and newer biotech additions include CytoImmune Therapeutics and Biosimilar Solutions, which among other things are developing cancer therapies and COVID-19 vaccines, respectively. Add in an ever-growing location interest from companies involved in the knowledge sector, software, and financial and business services.

The bottom line, Miller says, is Puerto Rico knows how to reinvent a better picture after getting through challenges. “If people think they know Puerto Rico, I’d advise them to look at Puerto Rico again. The last three to five years have put us on a different path and an exciting path.”

U.S. Virgin Islands: American Advantages with a Caribbean Address

The U.S. Virgin Islands combines the benefits of a Caribbean location with the advantages of U.S. connections. It’s an unincorporated U.S. territory, which means American currency, courts, and protections. And products made in the USVI can be labeled “Made in the USA.”

Locating here comes with shipping advantages, duty-free imports, plus exports into the U.S. that are duty- and quota-free. There’s no state or territory tax, either. In fact, companies that qualify for the Economic Development Commission’s tax program can see their corporate and personal income tax dwindle by 90 percent, and there’s a 100 percent exemption on excise taxes, property taxes, and gross receipts tax.

The local workforce has plenty of experience in both industrial work and services. That includes advanced manufacturing, rum distilling, and energy, along with financial/professional services, call center and back office operations, knowledge industries, and e-commerce. And of course, being in the Caribbean, there are plenty of opportunities in tourism and hotel development, as well as marine businesses.

That said, USVI has all of the workforce-development options that you’d expect on the American mainland. The labor department’s One Stop Centers provide wide-ranging training and skills-upgrade options, along with recruitment and screening services and lots of consultation on labor markets and laws.

Infrastructure is highly advanced as well, including two international airports, numerous ports, and shipping options that connect with major routes and the Panama Canal. Broadband connections are speedy, thanks to the public corporation known as Virgin Islands Next Generation Network, which makes sophisticated and affordable fiber connections available all over.

The Turks and Caicos Islands: Sophisticated and Business-Friendly

In some ways, this small chain of islands is a separate world unto itself, but its strong cultural and business ties to both the United States and United Kingdom are quite apparent, too. It’s an easy 90-minute flight out of Miami, with an economy tied to the U.S. dollar. And it’s a British Overseas Territory; its citizens are British citizens; the educational system is based on the British model; and the judicial system is based on English Common Law.

Given its breathtaking natural beauty, it’s hardly surprising that tourism is a prime industry and major investment opportunity, with more than a million annual visitor arrivals. Adventure tourism is a big deal, thanks to a wealth of great dive sites, and ecotourism is quite the draw, too. Marina and lodging development are seen as promising sectors, and so is a completely different draw for visitors: medical tourism. An exceptional medical system combines with the lovely location, creating an enticing place to get cosmetic surgery or a new hip or knee, and then recuperate on the beach.

Turks and Caicos is also an offshore financial center, one that is seen as safe and secure for international banking, corporate and offshore investing. That’s because its regulatory system fits snugly into the standards and practices of its bigger partners across the Western business world. Turks and Caicos is fully compliant with the International Monetary Fund, the Organization for Economic Cooperation and Development, and Financial Action Task Force standards. The territory is committed to the Foreign Account Tax Compliance Act as well as early adoption of the Common Reporting Standard.

The business-friendly government is eager to encourage light manufacturing, especially businesses that serve the tourism and hospitality sectors. The government has also identified such things as agri-industries, food processing, and fish farming and processing as priority sectors.

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