Investor Presentaiton

Input/Output and Location Quotient Analysis I/O Quotients Sample I/O - Chemical Plant vs. Data Center ☐ ■ Each industry spends their dollar differently, purchasing the inputs required to produce their products input Synthetic Materials Water Items consumed in production: Various feedstocks, Energy Cost to transform the inputs: Labor, Cost of Capital investment Transportation: to bring inputs and deliver outputs ☐ Taxes: including regulatory compliance costs Two sample I/O for North American chemical plants vs. data centers (right) shows how differently they relate to supply chains, and how differently they impact a region's economy Each economic region (e.g. island, or metro area) has a location quotient for each main industry, which is simply measures an industry's relative concentration in that region. Industry concentration levers the I/O quotients to predict demand for a product in that region, thereby creating supply chain strengths and Industrial location theory and practice focuses on minimizing total costs of production, which often requires co-location with suppliers or customers. This trend combines with concentration of specially skilled labor creates localized industry clusters Industry clusters tend to over-produce products required locally, thus generating product exports and currency import (thereby becoming a means of local wealth generation) Business attraction strategy should focus the intersection of a particular industry's requirements and Puerto Rico's respective advantages (e.g. locally available feedstocks, lower relative transportation costs, better tax or regulatory environment) Business attraction strategy can also seek to complement and locally extend the supply chains of existing businesses. Start by asking business leaders, what do you buy, from whom, and where? What inputs cost more than they should because they're on an island? (see the Salad Dressing example, right) SEABURY MARITIME Organic Materials Chemical Cleaners Land Energy output input output IT Equipment Chemical Product DCPI VS. Computing Land Energy Hypothetical Example in Supply Chain Inquiry: Salad Dressing ☐ ☐ ☐ ☐ What does the Salad Dressing company purchase from others? (answer: vinegar, vegetable and olive oils, herbs, spices, cardboard boxes, plastic bottles and caps, and bottle labels). Which inputs have an outsized transportation cost inside them? How can that supply chain be increasingly localized for value retention? What inputs could be shipped in larger volumes or different form to reduce transportation costs? Which inputs are overpriced due to island logistics (vs. mainland)? IDEA: Can we reduce overall cost of salad dressing by shipping resin beads in bulk and making bottles and caps locally? Are there others nearby importing plastic bottles? Would there be a bottle supplier eager to secure these customers with a local bottle manufacturing facility? 13

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