#1INVEST PUERTO RICO dci AN EXTERNAL PERSPECTIVE... Executive Perceptions of Puerto Rico's Business Climate March 13, 2020 P Cherts#260 YEARS SPECIALIZING IN 500+ represented places cities states MARKETING regions PLACES countries 4 OFFICES NEW YORK 65 LOS ANGELES A DENVER TORONTO MARKETERS WITH A PASSION FOR PLACES#3OBJECTIVE HELL RESPONDENTS CELAR METHODOLOGY To understand the current perceptions and misperceptions among key target audiences and establish a baseline for future marketing campaigns, messaging and policy development. A total of 202 respondents: 149 corporate executives and 53 location advisors. Two 17-question online surveys conducted in December/January 2020.#4KEY TOPICS 1. Perceptions of Puerto Rico 2. Project History 3. The Competition 4. Role of Invest Puerto Rico 5. Key Findings www Scotiabank#5Respondent Profile (Corporate Executives) INDUSTRY SECTORS: Software and Information Technology Manufacturing Life Sciences 16% 12% Professional and Technical Services 11% Medical Devices 10% Business Support Services 8% Financial Services 7% Pharmaceutical 6% Aerospace 5% Logistics 4% Agriculture 2% 19% 100 to 499 employees, 39% NUMBER OF EMPLOYEES 50 to 99, 3% 500 to 999 employees, 19% 1,000+ employees, 25%#6PERCEPTIONS OF PUERTO RICO#7Q: Regardless of whether you have considered Puerto Rico for a relocation or expansion project, how would you rate the overall business climate of Puerto Rico on a scale of 1 (poor) to 5 (excellent)? 2.9 2.8 Location Advisors Corporate Executives#8Location Advisors Q: Understanding that each project is unique, please rate the importance of each of the following factors in your client's relocation/expansion projects? (On a scale of 1 = Less Important, 5 = Extremely Important) Availability of skilled workers Overall operating costs Competitive labor costs Available sites/buildings Internet/broadband infrastructure Business continuity Competitive incentives Ability to recruit talent from outside the state/territory 4.3 4.2 4.2 4.1 4.1 3.9 3.9 Corporate tax rate 3.8 Proximity to customers/suppliers Real estate and/or construction costs 3.8 3.7 Quality of K-12 education 3.6 Quality of Life 3.6 4.6#9Importance of Factor Location Advisor Rating Location Advisors Q: Understanding that each project is unique, please rate the importance of each of the following factors in your client's relocation/expansion projects? (On a scale of 1 = Less Important, 5= Extremely Important) Q: Based on your perceptions of Puerto Rico, please rate each of the following factors on a scale of 1 = Poor, 5 = Excellent. Availability of skilled workers Overall operating costs Competitive labor costs Available sites/buildings Internet/broadband infrastructure Business continuity 1.7 Competitive incentives Ability to recruit talent from outside the state/territory Corporate tax rate Proximity to customers/suppliers Real estate and/or construction costs Quality of K-12 education Quality of Life 2.1 2.7 2.6 2.4 2.9 2.9 4.3 3.4 4.2 3.6 4.2 3.9 3.3 3.9 3.8 3.4 3.8 3.7 2.8 3.6 3.6 3.4 4.1 4.1 4.6#10Corporate Executives Q: Understanding that each project is unique, please rate the importance of each of the following factors in your organization's relocation/expansion projects? (On a scale of 1 = Less Important, 5 = Extremely Important) Availability of skilled workers Internet/broadband infrastructure Overall operating costs Competitive labor costs Ability to recruit talent from outside the state/territory 4.1 Corporate tax rate 4.1 Quality of Life 4.0 Business continuity 4.0 Competitive incentives 4.0 Proximity to customers/suppliers Real estate and/or construction costs Available sites/buildings Quality of K-12 education 3.7 4.0 3.9 3.9 4.3 4.2 4.4 4.3#11Corporate Executives Q: Understanding that each project is unique, please rate the importance of each of the following factors in your organization's relocation/expansion projects? (On a scale of 1 = Less Important, 5 = Extremely Important) Q: Based on your perceptions of Puerto Rico, please rate each of the following factors on a scale of 1 = Poor, 5 = Excellent. Importance of Factor Corporate Executives Rating Availability of skilled workers Internet/broadband infrastructure Overall operating costs Competitive labor costs Ability to recruit talent from outside the state/territory 4.4 3.3 4.3 3.4 4.3 3.8 4.2 3.8 4.1 3.9 4.1 3.3 Corporate tax rate Quality of Life Business continuity Competitive incentives Proximity to customers/suppliers Real estate and/or construction costs Available sites/buildings Quality of K-12 education 4.0 3.4 4.0 2.9 4.0 4.0 4.0 2.9 3.9 3.7 3.9 3.5 3.7 3.3 * Depending on factor, between 8% and 25% could not provide a rating on Puerto Rico#12Pharmaceutical Industry Associations 70% 21% Medical Devices Location Advisors Corporate Executives 48% 46% 37% 38% 32% 32% 32% 10% Agriculture Manufacturing Life Sciences 6% Business Support Services 15% Financial Services 30% 21% 16% 14% 12%12% 12% 8% 8% 8% 4% 2% Other Software and Information Technology Q: Which of the following industries/functions do you associate with Puerto Rico? (Choose all that apply) Aerospace Logistics Professional and Technical Services#13Top Associations Poverty/low income Lack of real estate Corrupt San Juan Island Bankruptcy Educated Weak infrastructure Challenging Beaches Second World Work ethic Lack of talent Strong workforce Tropical Unstable Unstable Climate Tourism Potential Baseball Pro-business Cost of labor Rum Earthquake Debt Friendly Declining Territory Bilingual Remote Tax climate Scenic beauty Favorable incentives Expensive Life sciences Low operating costs Q: What are the top three words or phrases that come to mind when you think of Puerto Rico? (Location Advisors Only)#14PROJECT HISTORY#15Q: Have You Considered Puerto Rico for a Relocation or Expansion Project? Location Advisors - have 36% explored a Puerto Rico location for a client. 31% Corporate Executives - have considered Puerto Rico for a relocation or expansion project.#16Projects NOT Ultimately Locating in Puerto Rico 78% Location Advisors - reporting that project did not locate in Puerto Rico. 63% Corporate Executives - reporting that project did not locate in Puerto Rico.#17Puerto Rico Would Have Been a More Competitive Location if... ...we could find professional assistance with real estate, licensing, etc. We move considered PR, however, we found had a terribly hard time finding realtors, getting business insights and just general disorganization. No one could answer basic questions about incentives and if they answered they were dead wrong. Corporate Executive, Information Technology, Florida They were more experienced about telling their story. The "why Puerto Rico" focusing on their competitive advantages (particularly talent pool). Location Advisor, New York ...more detailed talent information was available to us and better real estate options were identified. And if they had more productive information on the website. Location Advisor, Illinois ...there were fewer weather related disasters and better infrastructure. Corporate Executive, Business Support Services, Massachusetts It is a poor location for business, with unreliable electric power and a severely limping, bankrupt economy. Corporate Executive, Financial Services, Virginia#1822% of location advisors and 37% of corporate executives reported that Puerto Rico was ultimately chosen for the project. Top Reasons for Selection / Value Proposition ➤ Operating costs / Cost savings and advantages associated with being a U.S. territory. ➤ Tax climate / Tax law advantages Available workforce#19I Location Advisors ■Corporate Executives Overall cooperation from public/EDO officials Q: On a scale where 1 = Poor and 5 = Excellent, please rate your experience in Puerto Rico during your most recent expansion or relocation project in the following areas: Arranging site visits Responsiveness to information requests/needs Discussion and/or negotiation on relevant incentive or financing programs Assistance in finding suitable sites and/or buildings Obtaining accurate business location information 3.7 3.5 3.6 3.7 3.5 3.5 3.4 3.6 3.4 3.5 3.2 3.5#20Experience Working with Puerto Rico Versus Other Locations More difficult to work with Puerto Rico Similar experience working with Puerto Rico as with other U.S. states/regions Not Applicable 6% Easier to work with Puerto Rico 3% 31% 59% Q: Thinking about previous expansion or relocation projects, how was your experience working with Puerto Rico versus working with other U.S. states/regions? (Location Advisors Only)#21THE COMPETITION#2250% of Corporate Executives Report They Will Make A Location Decision in the Next 24 Months Top Domestic Locations Being Considered 1. Texas 2. New York 3. Florida 4. Unknown Top International Locations Being Considered* 1. Canada 2. Unknown 3. United Kingdom 4. France/Mexico/India (tied) *59% of respondents report they are not currently considering an international location#23Likelihood of Considering Domestic States / Territories 4.5 4.1 3.5 3.0 I Location Advisors Corporate Executives 3.8 3.4 3.3 3.3 2.8 2.4 2.2 1.9 Texas Arizona Florida New York California Puerto Rico Q: What is the likelihood (you) will consider the following states/territories for a new corporate location or expansion in the next 24 months (1 = not at all likely, 5 = extremely likely)?#24Likelihood of Considering International Locations Location Advisors Corporate Executives 2.6 2.6 2.4 2.2 Costa Rica Colombia 1.9 2.4 2.4 2.1 Puerto Rico Dominican Republic 2.4 2.0 Jamaica Q: What is the likelihood your clients will consider the following international locations for a new corporate location or expansion in the next 24 months (1 = not at all likely, 5 = extremely likely)?#25ROLE OF INVEST PUERTO RICO#26Familiarity with Incentives Location Advisors Corporate Executives Act 20 - Incentive for Export Services Act 73 Incentive for Industrial Development 2.1 2.4 2.0 2.5 Act 22 - Incentive for Individual Investors 1.7 2.4 Act 273 - Incentive for Financial Institutions 1.7 2.3 Act 74 - Incentive for Tourism Development 1.5 2.5 Act 399 - Incentive for International Insurers and Reinsurers 1.4 2.4 0.0 0.5 1.0 1.5 2.0 2.5 3.0#27Puerto Rico's Marketing Efforts 2.0 Location Advisors 2.9 Corporate Executives Q: On a scale from 1(not well) to 5 (very well), how well do you feel Puerto Rico is promoting/marketing itself to the business and site selection community?#28How Can we Better Promote / Market Puerto Rico? (Corporate Executives) Show that they have overcome the disasters which have plagued the country...it is my perception they haven't and are nowhere close to doing at this point in time. Puerto Rico needs an economic road map with true investments in the infrastructure. Marketing / Promotion will not help until political change creates a stable economy. I have never seen and advertisement promoting Puerto Rico, so anything would be a start. I would start with stressing available quality work force and prevailing wage. Much of what I know about PR is from the media, which isn't positive at the moment (i.e. natural disasters and government corruption) Email and marketing campaign to push the pluses of the quality of life of basing a business in the Caribbean.#29How Can we Better Promote / Market Puerto Rico? (Location Advisors) Telling specific success stories - (1) who has moved to or expanded in Puerto Rico and how are they doing; (2) how have companies weathered natural disasters - earthquake, hurricane, etc. Publicize the cost advantages and breadth/depth of talent pool. Have a data rich website. Generate public relations in social media and general media. Highlight business success stories. Sponsorships at site selection and trade industry shows. Marketing trips to visit site consultants and companies. More pro-active outreach digitally, visits to major markets and attendance at site selector events There used to be much more direct outreach to companies and consultants. My first trip to PR was an inbound marketing trip arranged by the economic development team. I feel that has really fallen off in recent years. Direct outreach to decision makers in target industries. direct outreach to site selectors that focus on your target industries. relationship building and work toward dissipating negative perceptions of the island#30KEY FINDINGS#31Puerto Rico's business climate is perceived to be below average and it is considered less frequently than other domestic locations.#32A perception gap exists between the importance of location factors and how Puerto Rico rates on these factors. This gap is more notable among location advisors. ANS TH#3311 Puerto Rico's top advantages are related to operating and labor costs according to both audiences. BBVA#34ודי Corporate executives and location advisors agree on the challenges of Puerto Rico as a business location.#35FOR SALE APARTMENT-STUD 586 SF ZONING-C RESIDENTIAL TIEMPO REALTY TEL. 787-467-2675 FURALEZA BILONS Opportunity exists for additional marketing/promotional efforts and education. FEGUARD va SVITISX 3x $90