Though the United States is phasing out a longstanding federal business tax waiver - it will be completely gone by 2006 - Puerto Rico has created its own incentives to compensate. These include property tax breaks and tax deductions for investment in buildings, machinery, and equipment. At the same time, the island's two leading economic development organizations have banded together to form Puerto Rico Industrial Development Co. (PRIDCO), a measure that already has streamlined business permitting from a months-long process to one that can be completed in less than 30 days.

Apparently the incentives are working. According to PRIDCO, foreign investment in 2000 was $717.4 million, up from $272 million in 1999 and $286 million in 1998.

Among the big investors: Hewlett-Packard recently spent $43 million to expand its print head manufacturing activities within its Ink Supplies Business Manufacturing hub; Searle Pharmaceuticals, now part of Pharmacia Corporation, invested $200 million in its manufacturing facility; and Wyeth upgraded its plant to the tune of $105 million. In addition to the tax breaks, Lucy Crespo, HP's operations manager in Puerto Rico, praises her local labor force. "Puerto Rican workers are very faithful," says Crespo, adding that her division boasts a turnover rate of only about 1 percent. "It makes good sense doing business here."

CHRIS WARREN is a Los Angeles-based freelancer who writes for the Los Angeles Times Magazine, Los Angeles Magazine, and Forbes.

CHARLES L. LEARY and VAUGHN J. PERRET have written on travel and foreign affairs for The Times-Picayune of New Orleans, among other publications.

BOBBY McGILL is a former dot-commer and business writer in San Francisco, who has also contributed to The Examiner.
A wealth of information is easily obtainable online about doing business in the Caribbean. Here is a sampling: