Could Puerto Rico Develop an Information Technology Economy?

Puerto Rico’s economy depends heavily on manufacturing, as shown in the chart below. However, the largest part of the workforce is employed in service industries (29.9%) and the government (23.7%).  Fewer than 10% of Puerto Rico’s workers are employed in manufacturing. With an unemployment rate of 15.5%, there is a clear gap between the wealth produced for the multinational manufacturing companies and the wealth produced by those companies for the people of Puerto Rico.

600px-Puerto-rico-gdp-by-sector

As changes in tax laws affect multinational corporations and Puerto Rico’s economy continues to falter, the government of Puerto Rico is looking to tourism, now included in the services area of the pie chart above.

Current efforts include renovations of coastal towns, public relations campaigns, and attempts to woo wealthy individual investors to take a plunge in Puerto Rico’s tourism industry. On the other hand, rampant crime and Puerto Rico’s own population exodus hamper attempts to increase tourism, and the jobs brought by increasing tourism tend in any case to be low-paying service sector jobs.

By itself, a focus on the tourism industry may not be enough.

An alternative proposal is to build Puerto Rico into a high-tech hub. Other rural areas with an educated population and a low cost of living have found that information technology can bring well-paid jobs in without sending local people out.

Proponents of this option support both local entrepreneurs and outsourcing opportunities. Alberto Bacó-Bagué, Secretary of the Department of Economic Development and Commerce in the Government of Puerto Rico, told Forbes, “We want Puerto Rico to be as well known for innovative entrepreneurship as it is for outstanding Caribbean rum and picturesque beaches.” Organizations such as the Puerto Rico Information Technology Cluster point out — in addition to the points mentioned above — that it is easier for U.S. companies to hire Puerto Ricans for remote work, since they are U.S. citizens.  A 2005 economic growth proposal recommended IT as a focus for Puerto Rico for much the same reasons discussed here, and they are no less relevant now.

It appears that the interest is high among Puerto Rico’s techies, too: the recent TEDx San Juan received more than 1,000 requests to join, though it had room for only one tenth of those people. Wovenware, a Puerto Rico-based IT company, produced an open letter to the tech community encouraging its competitors and potential competitors to “be relentless” in their pursuit of a high tech vision of the future for Puerto Rico.

And yet there is a basic problem. Electricity in Puerto Rico is expensive, and not always reliable. Broadband is not universally available. Intermittent service, dropped connections, slow connections, and damaged computers will inevitably interfere with Puerto Rico’s prospects in the IT industry. Low labor costs may be offset by high energy costs.

Connect Puerto Rico reports that almost 90% of Puerto Ricans have access to broadband — but only if we include speeds as low as 3 Mbps download. This is fast enough for a daily email check, but far too slow for professional use. What’s more, availability does not mean real access. The most recent figures available show that fewer than one third of households in Puerto Rico actually have broadband; the high cost is one of the most common reasons for not subscribing.

While both electricity and broadband internet are available, the higher cost and lower speed of available internet service plus the additional costs of protecting computer equipment from sporadic electricity issues will unquestionably increase the barriers to entry for individuals and start ups alike.

“Both issues,” says Carlos M. Meléndez, COO of Wovenware, “are easily managed by tech entrepreneurs by having backup broadband providers and backup generator in the office. Almost all office buildings already have a backup generator and there are sufficient broadband providers to have an inexpensive backup internet connection available.”

Nonetheless, an investment in the infrastructure might make all the difference for the high tech dream — and that might make all the difference for Puerto Rico’s economy.

2 Comments

Natalia Santana

I believe that it would a great idea to develope the IT industry on the island. Everyone should be tech savvy because this is the way we communicate in today’s society. Also, computers should be in every school so that the students can learn the basic skills they need to navigate the web and to complete assignments. In addition, if the price of electricity is preventing the development of the IT Hub, the government should look for other companies for better prices. Lastly, tourism should be at the top of the list to generate income for the island . Young adults should be targeted because they love to travel. Moreover, college sports teams should be contacted to see if they would be interested in playing some exhibiton games on the island. This would help the economy as well.

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