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The federal tax reform of December 2017, meanwhile, sought to impose new taxes on foreign companies, a tax concept most manufacturers on the island are now subject to. (AP)
The federal tax reform of December 2017, meanwhile, sought to impose new taxes on foreign companies, a tax concept most manufacturers on the island are now subject to. (AP)

Woodbridge, Virginia - Senator Tim Kaine, a former Democratic candidate for vice-president, thinks it's a good idea to promote more incentives to pharmaceutical production in Puerto Rico, now that the coronavirus crisis in China deepens the U.S. dependence on that market.

Kaine brought the issue up for discussion at a roundtable with representatives of the Puerto Rican diaspora in Woodbridge, Virginia. "Puerto Rico has to be in the front row of that discussion," said Kaine later in an interview with El Nuevo Dia.

Kaine had read the Sunday op-ed in the conservative New York Post on the coronavirus having exposed America's overdependence on the drugs its companies produce in China.

The newspaper called to revive federal tax incentives for pharmaceutical companies establishing in Puerto Rico, referring to the old section 936 of the federal Internal Revenue Code, which was in effect until the middle of the first decade of this century.

"Moving to ensure some domestic capacity for future crises is a no-brainer. And boosting Puerto Rico, now struggling with a debt crisis plus hurricane and earthquake damage, should be one, too," the newspaper added.

According to the newspaper, “about 90 percent of the active ingredients (manufactured “precursors”) used by US drugmakers now come from China.”

Both the White House and the chairman of the Senate Committee on Finance, Republican Charles Grassley (Iowa), are examining possible tax incentives for companies adversely affected by the coronavirus crisis.

Anoche, el presidente Donald Trump dijo que solicitará al Congreso que reduzca los impuestos sobre la nómina y brinde alivio a los que obtienen ingresos por hora.

Last night, President Donald Trump said he will ask Congress to discuss “a possible payroll tax cut or relief,” and that they “are also going to be talking about hourly wage earners getting help so that they can be in a position where they’re not going to ever miss a paycheck.”

"Several options are being considered within the committee's jurisdiction as we learn more about the effects on specific industries and the economy in general," said Michael Zona, director of communications for the Senate Committee on Finance, without referring to the New York Post op-ed.

Senator Kaine said he doesn't know if the answer should be a tax incentive like Section 936 - which raised opposition because of high profits for multinationals when compared to the number of jobs it created - or other alternatives like encouraging job training.

"What I do know is that the first part of the op-ed is correct. We're going to have to bring back manufacturing production," said Kaine, who as a U.S. vice-president candidate advocated in 2016 to explore a new federal tax incentive for investment in Puerto Rico.

In that sense, the senator said that if "medical supplies are going to be treated as a matter of national security, Puerto Rico is very well prepared for two reasons: it is a pillar of the pharmaceutical industry and it is an economy with a strong manufacturing base.

The president of the Private Alliance for Economic Growth, Rodrigo Masses, who has meetings in Congress this week, sees the call for incentives for drugs and pharmaceutical production to remain on U.S. soil as an opportunity for Puerto Rico.

"I've brought that to Congress years ago. U.S. manufacturing, like election equipment production, should be considered as critical infrastructure assets," said Masses, former president of the Manufacturers Association.

Masses called to develop a strategy in line with these times and that includes a formula that does not create problems at Congress level, the states, and that is productive for Puerto Rico.

"We've been tactical, but not strategic. We need to be strategic," said economist Joaquín Villamil, president of the firm Estudios Técnicos. However, Villamil warned that the island needs to make improvements to its energy industry that would make production cheaper and also point to changes in the federal tax system.

Since the elimination of Section 936 of the federal Internal Revenue Code, manufacturing employment reduced from 165,000 in 1996 to 70,000, Villamil said. In the case of pharmaceutical companies, it dropped from 26,000 to 17,000.

The federal tax reform of December 2017, meanwhile, sought to impose new taxes on foreign companies, a tax concept most manufacturers on the island are now subject to.

The pharmaceutical and manufacturing companies that develop medical equipment have to be among the goals of the Puerto Rican government since they have a significant impact on other areas, such as the clinical testing industry and the island's managerial class, the economist said.

For Villamil, the strategy is not only based on a 936-type incentive - which granted tax privileges on the profits of manufacturing companies and which he believes was a trigger for the economic recession on the island - but he said he does not see "a renewed pharmaceutical industry, with big companies returning to Puerto Rico, without an incentive of that nature".

Puerto Rico's current scenario, he said, requires not only big pharmaceutical companies but also those of that "second and third level" that produce new products and vaccines and that do not need "so many incentives".