Puerto Rico is one of the most manufacturing-intensive economies in the Western Hemisphere. In fiscal year 2024, manufacturing made up 44.2% of the island’s GDP, a share that dwarfs most U.S. states and rival nations. While many people associate Puerto Rico with beaches and rum, the island’s real economic engine runs on pharmaceuticals, medical devices, aerospace components, and a surprisingly diverse agricultural sector.
Pharmaceuticals and Biotechnology
Puerto Rico is one of the world’s most important hubs for pharmaceutical production. Dozens of major drug companies operate manufacturing plants on the island, producing everything from cancer treatments to vaccines to injectable biologics. The concentration is so significant that after Hurricane Maria in 2017, the FDA had to monitor roughly 90 medical products for potential shortages because their supply chains ran through the island.
Several factors explain why so many pharmaceutical companies set up operations here. Puerto Rico offers a 4% corporate income tax rate for manufacturers, a 100% tax exemption on raw materials, machinery, and equipment, and up to 50% tax credits on research and development expenses. Combined with a bilingual, college-educated workforce and direct access to the U.S. regulatory system (no customs barriers, FDA oversight applies directly), the island became a natural fit for high-value drug production starting in the 1970s and 1980s.
Medical Devices
Beyond pharmaceuticals, Puerto Rico is a major producer of medical devices that hospitals around the world depend on. Factories on the island manufacture pacemakers, insulin pumps, glucose monitors, blood collection systems, hernia patch implants, contact lenses, stents, and surgical bandages. Some of these products have only a single manufacturer globally, and that manufacturer operates in Puerto Rico. After Hurricane Maria, the FDA flagged approximately 50 medical devices as critically important to patient care because they were life-sustaining or life-supporting and had limited alternative sources.
The medical device sector continues to grow. A 2025 industry profile from Puerto Rico’s Department of Economic Development highlights the island’s expanding role in this space, with companies investing in advanced manufacturing techniques and automation to keep pace with global demand.
Aerospace Components
Puerto Rico has carved out a niche in aerospace manufacturing that often surprises people unfamiliar with the island’s industrial base. Collins Aerospace, a division of RTX (formerly Raytheon Technologies), employs nearly 2,900 people on the island and recently announced an expansion that will grow its Collins workforce to 2,100 at facilities in Santa Isabel and Aguadilla. The expansion focuses on electronics manufacturing, from design through production, with an emphasis on automation and connected factory technology.
Collins’ vice president of global operations described Puerto Rico as “a strategic hub for Collins’ continued sustainable growth.” The island’s combination of tax incentives, proximity to the mainland U.S., and a workforce experienced in precision manufacturing makes it competitive for aerospace work that demands tight tolerances and reliable delivery schedules.
Coffee
Puerto Rican coffee has a long and storied reputation. In the 19th century, the island’s beans were served in European royal courts, and coffee remains a point of deep cultural pride. Under normal conditions (meaning no major hurricanes), the island produces between 14,000 and 15,000 tons of coffee per year from roughly 65,000 acres, with about 95% of that acreage harvested annually.
Here’s what makes Puerto Rican coffee distinctive: nearly all of it stays on the island. Local consumption accounts for about 97.2% of production, with only around 400 tons exported in a typical year. That scarcity outside Puerto Rico is part of what gives the coffee its mystique. Specialty Puerto Rican varieties, particularly those grown in the mountainous Yauco and Adjuntas regions, command premium prices when they do reach mainland U.S. or international markets.
Agriculture Beyond Coffee
The 2022 Census of Agriculture revealed that milk is Puerto Rico’s top agricultural commodity, generating $173 million in sales. Poultry and poultry products came in second at $111.2 million, followed by grains and field crops at $74 million. Together, these three categories accounted for 51% of all agricultural products sold on the island.
Plantains, a staple of Puerto Rican cuisine, ranked fourth at $56.3 million. Nursery, greenhouse, and floriculture products brought in $49.8 million, while fruits and coconuts totaled $47.5 million. Vegetables and melons added $42.5 million, and cattle and calves contributed $36 million. The agricultural sector is relatively small compared to manufacturing, but it remains culturally significant and supports rural communities across the island’s interior.
Rum and Spirits
Puerto Rico produces roughly 70% of the rum sold in the United States. Bacardí operates one of the world’s largest premium rum distilleries in Cataño, just across the bay from San Juan, and the island is also home to Don Q, produced by Destilería Serrallés, the oldest family-owned rum producer in the territory. Rum production benefits from the same tax structure that supports other manufacturers, and excise taxes on rum produced in Puerto Rico are largely returned to the island’s treasury by the federal government, making the spirit both a cultural symbol and an economic pillar.
The Sugar Industry’s Rise and Fall
For much of the 20th century, sugar was Puerto Rico’s defining product. At its peak in 1952, the island grew 12.5 million tons of sugarcane on more than 400,000 acres and processed over 1 million tons of raw sugar at 34 mills and seven refineries. Production averaged above 1 million tons annually from 1950 to 1956, making sugar the backbone of the economy.
The decline began in 1957 and never reversed. By the 1980s, annual production had dropped to between 90,000 and 151,000 tons. By 1998, only two mills and one refinery remained, producing an estimated 16,000 tons. Puerto Rico shifted from being a sugar supplier to the United States to importing sugar to meet its own domestic needs. The transformation from a sugar economy to a pharmaceutical and technology powerhouse happened within a single generation, fundamentally reshaping the island’s workforce and landscape.
Why Manufacturing Dominates
Puerto Rico’s outsized manufacturing sector didn’t happen by accident. The island’s Incentives Code, currently governed by Act 60 of 2019, offers manufacturers a package that’s hard to match anywhere else under the U.S. flag: a 4% income tax rate, a 75% property tax exemption, a 50% municipal tax exemption, and full tax exemption on dividends, raw materials, and equipment. Companies conducting research and development can claim up to 50% in tax credits on qualifying expenses. Cash grants are also available for job creation, infrastructure development, and equipment purchases.
These incentives, combined with the legal and logistical advantages of operating within U.S. territory (no tariffs, FDA and EPA compliance built in, U.S. courts and contract law), have made Puerto Rico a preferred location for industries where regulatory certainty and intellectual property protection matter. That’s why the island punches so far above its weight in pharmaceuticals, medical devices, and aerospace, sectors where the cost of regulatory disruption far exceeds the savings from lower wages elsewhere.