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Back to Basics

New Pridco Executive Director William Riefkohl is dusting off some tried and true ideas in order to jump-start manufacturing promotion on the island

By Marialba Martinez

August 16, 2001
Copyright © 2001 CARIBBEAN BUSINESS. All Rights Reserved.

A plan for action: New Pridco chief William Riefkohl wants to help local companies first

As newly installed executive director of the Puerto Rico Industrial Development Co. (Pridco), William Riefkohl is not setting out to reinvent the wheels of industrial promotion, he just plans to put them to work effectively again.

Since the agency’s inception in 1942, Pridco--formerly the Economic Development Administration, better known as Fomento--has been the spearhead of Puerto Rico’s economic development program. Its primary mission has been to promote and help establish stateside and foreign manufacturing companies on the island, and to encourage growth and expansion of local industry.

For more than half a century, Riefkohl’s predecessors–a distinguished list of names befitting the legacy of Fomento architect Teodoro Moscoso, for years considered the cream of Puerto Rico’s public service crop–have tried just about every idea under the sun.

Riefkohl knows which ideas work and which don’t. Since the mid 1970s, his lanky 6-foot-2-inch frame, quick, broad smile, and gentlemanly behavior have cut a familiar form in Puerto Rico’s manufacturing industry. This former University of Puerto Rico professor, former Fomento European office chief in Madrid, former assistant Fomento administrator, former Puerto Rico Manufacturing Association executive vice president and former Pridco deputy executive director in charge of Puerto Rico industries has been around almost as long as Puerto Rico’s manufacturing promotions program.

Five weeks ago, following the Senate’s pocket rejection of nominee Ramon Cantero Frau, who already serves as umbrella Department of Economic Development & Commerce (DDEC) secretary, Gov. Sila Calderon appointed Riefkohl to the post he seems to have been preparing for throughout his public service career.

At the core of his plan is an all out effort to help local manufacturing companies and use them as promotional tools to attract stateside and foreign industry to the island.

While Riefkohl’s plan is not made up of radical new ideas, it is a return to the basics of proven manufacturing promotion. A study of Pridco’s history finds the most effective Fomento administrators were those who sought to provide local businesses with tools that enabled them to compete globally.

"Puerto Rico’s manufacturing industry has often taken a back seat in efforts to promote the island’s manufacturing sector, even relegated to a minor concern. This has historically been the case and I don’t pretend to be able to reverse that trend entirely. But I want to bring it to the forefront of the discussion. I intend to strengthen local manufacturing and the only way it can expand is by promoting its exports to stateside and foreign markets," said Riefkohl.

Since before his PRMA tenure, Riefkohl saw how local business owners sometimes preferred to operate within the confines of Puerto Rico’s geography, instead of expanding to foreign markets. Actually, some manufacturers are satisfied when their products become a dominant local brand.

Yet this sort of thinking breeds complacency and potential export stagnation.

Riefkohl proposes a three-pronged approach to help local companies achieve their potential.

"First, we are going to require Puerto Rico manufacturers applying for Pridco incentives to come up with a foreign export marketing plan [as part of their product’s proposal]. In addition to determining what the local production facility should be like or what sort of financing they will need, business owners need to start thinking about which stateside and foreign markets they can sell their products to.

"Some businesses may be able to do this on their own, but others will need help. So I am going to organize a joint effort made up of government agencies and private industry to assist them. It will include the Inter American University’s Small Business Development Center, the PRMA, Procomp, Promoexport, the U.S. Department of Commerce, the U.S. Small Business Administration, and private banks that manage international portfolios."

According to Riefkohl, "This effort will benefit business owners as they envision exporting as an important component of their goals. They may not start exporting immediately, but it will be part of their business structure, and it will be place when they are ready to do so."

The second part of Riefkohl’s plan for Puerto Rico’s native manufacturing industry is to expand local vendors' opportunities for selling their products to multinational retail chains established on the island. As part of this effort, next month Riefkohl will have a bill prepared to submit to the legislature to create a special tax incentive for retail stores that purchase local goods and export them to mainland U.S. branches.

Riefkohl’s reasoning is that companies such as Wal-Mart, K-Mart, Sam’s, or Home Depot have access to hundreds of stores in the U.S., a market that local businesses are familiar with and can compete in. By providing incentives to major retail chains to buy locally manufactured products, Pridco would facilitate new sales outlets to strengthen the local industry.

"Some local companies are already selling their products to chain stores in Puerto Rico, which re-sell the products locally. If Puerto Rico’s manufacturers position themselves effectively and meet these chain stores’ quality and production requirements, hundreds of stores who belong to the chain become an export vehicle for local companies."

Riefkohl acknowledges that most local businesses have little knowledge about international marketing, aspects such as product placement and shelving. By removing this obstacle for local companies, they would only have to worry about meeting quality and production requirements.

"If chain stores do what they do best, which is marketing, advertising, and product placement, we open up new opportunities for the local industry. I truly believe we could run out of manufacturing spaces in Puerto Rico to fulfill production aimed at these multinational companies!"

Who benefits from this plan? Anyone whose product is now in the marketplace–or who plans to make a product for the marketplace. They could be local manufacturers of foodstuffs such as Brazo Gitano and baked goods companies. Perhaps manufacturers of consumer products such as cosmetics and perfumes. Or construction material makers of paint, cement, sealer, and PVC pipe. The list of possible product vendors is endless, given the ingenuity of Puerto Rico’s manufacturing industry.

The third element in Riefkohl’s plan is to add more modular buildings as part of Pridco’s new construction in industrial parks. Modular buildings accommodate several tenants within one structure, a key need for start-up entrepreneurs who do not need the entire capacity of the typical industrial building, which is about 23,000 square feet.

"Small businesses expand quickly in Puerto Rico. Those who start out in a 5,000-square-foot modular unit eventually ask for the unit next to them. We are now faced with an inventory of large buildings and not enough units for small businesses.

"I intend for Pridco to enforce the use of modular units for small businesses to the fullest. If they need more space, I’ll find a way to help them move to a larger unit rather than use up a space meant for new businesses."

The devil’s in the follow-up

Riefkohl will continue creating strategic programs to attract new manufacturing companies to Puerto Rico. But as part of his approach, he will reinforce Pridco’s assistance to companies already established on the island.

"Pridco has consistently and successfully enticed companies to come to Puerto Rico by offering competitive incentives and infrastructure, only to ignore them after they begin operations. We only hear from a company when it has a problem!

"I propose that we contact these companies to find out what they need to improve their operations in Puerto Rico. Maybe it’s extra training for personnel. Pridco can contact the nearest educational institution and establish a program where the company trains the teacher so they in turn train the company’s employees.

"Or maybe there is a special component sent from Korea, adding cost to the company’s local operation. Why not identify a local supplier and offer them incentives to manufacture the part in Puerto Rico? The manufacturing company would be reducing its operational costs."

Pridco is also encouraging the creation of industry-specific clusters that could take over this task in the future. In May, DDEC Secretary Cantero Frau announced the department’s support of a private initiative called the Puerto Rico TechnoEconomic Corridor Inc., or PR-Tec. (CB 6/21)

A revamp of the Rossello administration’s Technological Corridor of the West–part of its Science & Technology Initiative–PR-Tec is made up of members from the high-technology manufacturing sector, academia, and government. They are organized in clusters and operated by the private sector according to industrial segments, such as pharmaceuticals, electronics, medical devices, etc.

Riefkohl has identified 10 manufacturing clusters that will make up the initial platform for Pridco’s promotional efforts. The clusters are: pharmaceuticals; biotechnology; consumer products (cleaning & personal hygiene); medical devices; high-end electronics; information technology; optics; aviation & aerospace; analytical instrumentation, and plastics & packaging.

"These are the clusters that will be promoted initially to stateside and foreign investors. Why? Because these clusters bring a lot of technology and value-added services to the country, are resistant to global economic changes, and have a large multiplier effect.

"Even though not that many jobs are created in relation to investments made–for example, an $800 million investment in a manufacturing plant may create only 200 jobs–the indirect effect is large in areas such as subassembly personnel; and [food, transportation, and other] services," said Riefkohl.

Pridco’s promotional efforts will continue to be spent in outpost offices in New York and California, collectively known as the Continental Operations Office, and a Madrid, Spain office, in charge of all international promotional efforts.

Two weeks ago, Neil Watlington Armstrong, the former project manager of AES Corporation’s cogeneration project in Guayama, was tapped to head the U.S. operation. Watlington Armstrong is gearing up to continue promoting Puerto Rico’s manufacturing industry to Fortune 500 corporations.

Meanwhile, Lisa Ortiz has been Pridco’s office director in Madrid for the past five months. Her office is concentrating its promotional efforts in the United Kingdom, given that British investment in Puerto Rico has surpassed the $1 billion mark.

Pridco--along with its satellite promotional offices--will continue to emphasize the competitive advantages that Puerto Rico’s companies specializing in contract manufacturing represent as a potential alternative.

"Local contract manufacturing companies will continue being promoted by Pridco. We need to highlight the potential of contract manufacturing among those companies that do not want to get involved in the manufacturing operation per se, or those that don’t have the means to produce their own products. Puerto Rican companies have proven to be excellent manufacturing instruments for technology-based corporations," said Riefkohl.

One thing is for sure, there are few people with Riefkohl’s length and depth of experience–and it should bring results.

This Caribbean Business article appears courtesy of Casiano Communications.
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