Mojito Madness
Informatics jobs in Puerto Rico are setting sail
A soft Caribbean breeze wafts through my open window. Below, the murmur of poolside guests provides an abrasive edge to an otherwise serene night. The idyllic setting is slowly dissipating the day’s tensions from the psyches of people clamoring around the odd-shaped pool.
But I’m in a foul and dark mood. My angst level has escalated in discrete steps for hours now. Is it too much to ask for a mojito in Puerto Rico? A short time ago, I skulked down to the poolside bar and the barkeep set a napkin before me.
“Yes, my friend.”
“Mojito, tall glass.”
“I’m sorry sir, I don’t make it.”
“Why not?”
“Because they don’t bring the leaves.”
Okay, I thought, does that mean there’s a shortage of mint on the island? Maybe it doesn’t even grow here? No, that can’t be. The mojito’s genesis dates back to the cane fields in Cuba, with an abundance of rum and sugar cane, and yerba buena, the Caribbean version of wild mint. If yerba buena grows in Cuba, it must grow here?
And even if it doesn’t, what’s the matter with importing mint leaves? Bruise a few of them, dump ice, rum, sugar, lime juice and soda in a glass, and you have Caribbean valium.
But a half hour out of San Juan where I’m working, I get the same shrug in every bar and restaurant I go to. Beer warms lightning-fast in the dank humidity and night heat of Puerto Rico, so iced drinks rule. I’m now half-mad for a mojito and I can’t get no satisfaction. I’m resigned to the prospect that I may have to make a hell run into Old San Juan for a righteous drink, and, looking at my watch, it’s time to roll. Traffic floods out of the city as I buck the trend and point the rental towards the sliver of land that defines Old San Juan.
There it was, a restaurant called Mojito’s. Like the Sea Sirens of mythology, I was helplessly drawn in, and halfway through the best mojito I’d had this side of Pepe’s in Key West, my blood pressure sank, and I pondered.
What is there to complain about? I’ve worked in some nice places. When I was at the Los Alamos National Laboratory, I stayed at the La Fonda hotel in Santa Fe, and was the first one in Pasqual’s for breakfast a block away. During the winter, skiing is less than 30 minutes away. At night, the square is filled with great restaurants, but the Coyote Café stands above most. Southern California ain’t so bad either. A little Californian-Mexican food at Las Brisas on the ocean in Laguna Beach…or maybe a round of golf at Torrey Pines.
Yeah, I best not complain, Puerto Rico is a great place to be working. Or it was, but that all changed with an undertow in the Puerto Rican economy that was created at the end of 2005 when an IRS ship called the Possessions Tax Credit, Section 936, left the port.
I apologize in advance for drawing you into the arcane world of tax laws, labor strife and political posturing, but it’s necessary to set the stage for why your plans to leave Minnesota or New Jersey, or wherever, for the wistful climes of the Caribbean are endangered.
Section 936 exempted U.S. corporations from paying federal income tax on profits generated by qualified Puerto Rican subsidiaries at the cost of $3 billion a year to the U.S. Treasury. When first implemented, many industries, but most pertinent to our corner of the science world, big pharma, reaped huge benefits from this exemption, meant to catalyze business when enacted in 1921. And catalyze it did. In 1989, by some estimates from the U.S. Department of Treasury, the big boys…Merck, Pfizer and American Home Products reaped an average of $66,281 per Puerto Rican employee.
Them’s some serious plantains.
But when someone wins, someone loses, or that was the contention of various labor groups and government honchos, such as the Oil, Chemical and Atomic Workers union (OCAW) who commissioned a report that, in a nutshell, contended that, yes, companies were incentivized to create jobs in Puerto Rico, but that had the toxic side effect of reducing jobs in the mainland U.S. The OCAW claimed that, in the 1980s to early 90s, 23,664 jobs were directly lost in the U.S. because of 936, and the collateral effect of those lost jobs indirectly eliminated another 80,006 lost jobs and cost local, state and federal governments between $71 and $94.7 million in the form of fewer taxes collected, reduced business taxes and increased social benefits for workers, including unemployment compensation, welfare and food stamps, according to Katherine Isaac writing for The Front.
It’s reasonable to believe those numbers were slanted in the direction of those paying for the study but, thus pressured by organized labor, President Bill Clinton, among others, sought to phase out Section 936, and the die was cast. Congress, in its 1993 budget, placed caps on how much profit corporations can exempt under Section 936 and corporations were forced into a damned if you do/damned if you don’t choice of an income-based limit, 60 percent before the action, to be shaved to 40 percent by 1998 on their tax exemption, or a limit based on a fixed percentage of the credit allowed under the 936 rules in place at the time.
Finally, an all-out assault on the exemption was launched in 1996, and the trade winds slowly began to blow big industry out to sea, and into cheap labor markets such as Mexico.
What does this all mean?
With the tax break now gone, one study placed the loss of jobs in Puerto Rico at more than 27,000, or 18 percent of its manufacturing positions. That’s a blunderbuss blast into the teeth of the Puerto Rican economy, and very difficult to recover from. Though an alternative tax exemption was positioned to stem the bleeding, Section 956, proposed in 2002 by then governor Sila Calderon called for a 90-percent tax deferral on taxable income invested in U.S. property or the exclusion of 85 percent of dividends received for income that is attributable to active business operations in Puerto Rico (or other U.S. territories). But in March 2002, the U.S. Congress Joint Committee on Taxation claimed the tax amendment would cost the U.S. Treasury at least $11.3 billion over an 11-year period plus another $21 billion over 10 years in conversion costs, and the measure was doomed.
Wow. My head hurts just writing that, I can’t imagine what it did to you. Barkeep! Another round por favor! My drink is delivered post haste, and I consider that big island south of Key West.
As though the 936 blow to the Puerto Rican economy wasn’t staggering enough, then there is the fear that Fidel Castro will die soon, and another economic cannonball will be fired amidships.
There is a leap of logic that is currently held as fact by many in Puerto Rico; when Castro goes to the cigar factory in the sky, his ham-handed rule over the country will not be passed along. Without his charisma and political infrastructure, not to mention the fear factor, Cubans may well back off Castro’s policies. The U.S., thus placated, will lift the embargo that has kept the Cuban economy in irons and, when that happens, a cataclysmic vacuum of tourism is expected when U.S. investors pump billions into returning Cuba to its pre-Castro days as the hottest tourist destination in the Caribbean. From Miami, the flight to Havana barely allows one to smoke a Cohiba before touching down, and the mojitos will flow like the Red River in spring.
Puerto Rico is justified in their worry. Despite promises, many companies have fled, and many more are expected to. And that’s a shame. Puerto Rico is one of the most upscale of the Caribbean nations. U.S. citizens who feel that any destination requiring a passport invites hassle, love the lack of U.S. Customs and Immigration. Puerto Rico is rife with a highly educated professional workforce, some of whom are now fleeing to the mainland in search of jobs.And even if Cuba doesn’t turn into some sort of Caribbean Las Vegas with better cigars and cheaper rum, the threat is real, and the pessimism quotient is heavy.
There are other stopgap measures being bandied about, but if you were thinking of taking an informatics job in paradise, think again.
It’s been nearly 300 years since Blackbeard’s Caribbean vacation came to a sudden end, the result of being shot 20 times and beheaded, but the shock that awaits Puerto Rican industry at the hands of bureaucrats might be even less attractive.
Randy Hice is the president of the Laboratory Expertise Center. He may be contacted at [email protected].
