Encouraging entrepreneurship and business investment has been a feature of Puerto Rico’s economic development plans over the years, and it is a focus of the legislation introduced by Resident Commissioner Jenniffer Gonzalez-Colon. But how is Puerto Rico doing on that front?
Third party indicators suggest that Puerto Rico is struggling, but making some progress.
The Global Entrepreneurship Monitor (GEM)
The GEM is an academic consortium that conducts international surveys examining all aspects of entrepreneurship. They break Puerto Rico out from the United States, so it’s possible to compare the territory with the States.
They give a single number, the National Entrepreneurship Context Index, which summarizes the degree to which the location supports and welcomes entrepreneurship. Puerto Rico was given a total score of 3.6 out of 10, compared with 5.2 for the United States.
Puerto Rico was above average in two ares: societal and cultural norms supporting entrepreneurship and ease of entry into the marketplace. This means that entrepreneurs can expect community support and that it is fairly easy to start a business.
However, the territory did badly when it comes to governmental factors, including bureaucracy, policies, and support. Infrastructure and education were other areas of weakness, though higher education provided more skills useful for entrepreneurship than K-12 schools.
One positive point is that Puerto Rico has improved from a low of 2.6 in 2016.
The World Bank’s Doing Business Report
The World Bank’s Doing Business Report is a measure of the ease of doing business in a particular economy. Of 190 economies measured in 2020, Puerto Rico came in at #65, while the United States was at #6.
Puerto Rico has actually improved in some areas since 2016, such as enforcing contracts and getting credit. However, getting electricity and registering property have gotten more difficult. Actually starting a business has stayed the same, and is only slightly more difficult than in the United States.
On the ground
Surveys of both entrepreneurs and consumers conducted in Puerto Rico show greater confidence now than in 2020, even though the level of optimism is generally not high. A study produced by Inteligencia Económica reported that 55% of small businesses are in financial trouble. Yet the majority expect to grow this year.
Business incubators are growing up in Puerto Rico and anecdotal evidence suggests that residents are in the mood to start new business and revive those that suffered during the pandemic.
The Resident Commissioner also just introduced, on 6 August, legislation that would help position PR as a domestic hub for the production of medical equipment and medicines. PR has designated “Distressed Zones” and this proposed bill would offer incentives to large companies for job creation and capital investment in those zones. The spin-off should translate into the creation of more small businesses.