Puerto Rico has been bankrupt for four long years. Now, creditors owed billions have until October 4 to vote on a plan for the U.S. territory to eliminate its debt and emerge from bankruptcy. Separately, there’s an aggressive business outreach underway that could also help launch an economic comeback for the island. It has to do with converging interests in medicine, manufacturing and dependence on China.
Robert Salcedo: This will be where gene and cell therapy will come.
This 90,000 square foot warehouse in the town of Aguadilla, in northwest Puerto Rico, will soon be a $200 million high-tech bio lab.
Daniel Chang: Normally, a building like this, would take anywhere between three to four years to make.
But not this time.
Sharyl: How long before it looks like this?
Salcedo: Probably about 90 days.
The breakneck speed of progress is the result of stepped up efforts to lure more pharmaceutical businesses to the tropical island.
Robert Salcedo and Daniel Chang recently brought two biotech companies to Puerto Rico and with them a combined investment of $228 million and 400 jobs. The pair met at a biotech company in California 25 years ago before starting their own company.
Chang: One of the reasons that we picked Puerto Rico is because first of all, it's the talent. We've got a lot of talents over here. And then with the government subsidy, basically the incentive we bring the overhead also lower, so we can compete with the China or Indian companies out there.
Salcedo: So with the Puerto Rico set up that we have here, we can actually make product as cheap as China and India with the US quality, which is the gold standard for the planet.
Sharyl: Can you, in simple terms, describe some of the incentives that Puerto Rico is offering?
Salcedo: They provide incentives for us to hire and train employees. They give us a grant to be able to renovate the facility, as you see it today. Also, as part of that, they also give us R&D tax credits. That means for every dollar you have, you can make it grow to almost $2, which is important.
The lab couldn’t be built in 90 days without a radical change in mindset, in a place that’s legendary for bureaucracy and red tape.
Julio Roldan: I am a businessman, I want to make transformation for Aguadilla for my people.
Julio Roldan is mayor of Aguadilla. He told us he’s made it his mission to personally shorten the process of getting clearances to build from one year to just one day.
Roldan: I know the big problem is when you talk about opening a facility like that, "In Aguadilla, you take like a year in permission." and yeah, I'm trying to move up, to 24 hours. I am a mayor, I had to endorse that permission very fast. That's what I want. We need employment, we need money in Aguadilla, we need keep moving the economy. That's what I want.
For decades, the beautiful island of Puerto Rico has been considered “America’s medicine cabinet.” In large part due to tax breaks that made it more profitable for pharmaceutical companies to do business. The biggest pharmaceutical companies still make some of the world’s top-selling drugs here.
Manuel Laboy heads up Puerto Rico’s recovery effort.
Manuel Laboy: Back in the 1990s and some portions of the early 2000s, Puerto Rico had a bigger footprint, not only pharmaceuticals, there were other manufacturing sectors that had a lot of presence in Puerto Rico.
But by 2005, Congress had eliminated the corporate tax breaks for Puerto Rico saying they disproportionately helped the rich corporations. Some pharmaceutical companies cut back their footprint.
Meantime, India and China became more dominant in medicine.
Salcedo: Puerto Rico was the hotspot for pharmaceutical, but it was centered primarily on making capsules and tablets. As that technology became much simpler and cheaper to make, those processes and systems moved from here to China, and to India.
Sharyl (on-camera): Puerto Rico is mired in challenges. Technically bankrupt fighting a series of corruption scandals, still suffering Hurricane damage, they’re banking on the pharmaceutical industry to eventually provide a ticket out of their financial troubles.
Now, the U.S. territory is poised to pull out of its four year-long insolvency, and hoping to retake an even more dominant position in manufacturing medicine in part with a focus on “biosimilars” — generic biomedicine.
Salcedo: The products here are being sold for $3,000, we're going to be selling them for $300.
100 miles away on the other side of the island, Arthur Deboeck says Puerto Rico is well-positioned for growth.
He came here from Belgium 35 years ago and started up Galephar Pharmaceutical. On this day, we got a rare closeup look at production, where lab workers transform raw ingredients, including for two cancer drugs, into final dosage forms. Deboeck employs 160 people and says he expects to double that in the next 2 years.
Sharyl: So is it true that India and China are very cheap, but they're not known for high quality? And here we can-
Deboeck: You said that. You said that, I cannot say that. They must take shortcuts, because otherwise they cannot compete in price. They must take shortcuts, there's no doubt there. And when it comes to serious stuff then, oh, aspirin, if it doesn't work too good, you have a little bit more of a headache, it's okay. But pacemaker? If it doesn't work too good, six feet underground. Guaranteed.
Covid provided added incentive and a sense of urgency to expand Puerto Rico’s medical portfolio. With about 80% of active pharmaceutical ingredients made in China, the pandemic highlighted America’s unwise dependence on an adversary.
Laboy: Covid changed everything for Puerto Rico, too and for the U.S. as a whole, because now everybody realizes that they cannot depend on foreign countries to source very basic important drugs, medical devices, and the whole healthcare supply chain. Now where's that going to leave Puerto Rico down the road? There's still a lot of factors that will play in, but if the U.S. as a nation as a whole, really, really want to tackle this very serious, which we know that's the case, Puerto Rico will play a fundamental role in that.
Salcedo: Our hope is to eventually have the cure for cancer from this little island.
Salcedo came from the Dominican Republic as a boy, Chang as a Vietnam refugee in 1975. They say helping elevate Puerto Rico to a fuller manufacturing potential is their idea of living the American dream and spreading it.
Salcedo: So this is an immigrant story also, and the story of America, right?
Sharyl: Okay, so along those lines, if you were still living in Vietnam and you were still living in the Dominican Republic, what would stop you from doing this there?
Chang: There's no opportunity. I mean, we wouldn't have the opportunity to create a company like this.
Salcedo: So if you go to the third world countries and Caribbean countries, they have a stratification and you’re stratified into layers, right? So if you're born in a poor stratification, you're likely going to stay there. If you were born rich, you'll get richer and richer. I was part of the lower part. There was absolutely no way I would be able to do what I do if I stayed in those places. Only with the opportunity of education that comes with America and hard work and perseverance also helps, we're able to do what we do.
Sharyl: Do you feel like these ventures will help pull Puerto Rico out of its economic crisis?
Salcedo: Well, we're hoping we're going to be a piece of that ripple, right? So we're throwing our first big rock into the ocean and hoping that that ripple effect continues to go. And that is the transformation that we're hoping to not only help ourselves, but help Puerto Rico terminate or complete.
Sharyl (on-camera): After the Covid pandemic broke out, both Presidents Trump and Biden have taken steps to try to reduce U.S. dependence on foreign medicine.