Economic development is a top priority for Puerto Rico. Often discussions of economic development in Puerto Rico focus on tax incentives designed to lure multinational corporations and major U.S. mainland companies to open a facility in Puerto Rico.
Another possibility is to support local small businesses and start ups on the Island.
Small business in Puerto Rico
Forbes recently reported that just 10% of businesses opening in Puerto Rico in 2017 survived the year. “The others were hamstrung by a maze of thorny regulations and/or a lack of institutional funding to cover their startup costs,” according to Forbes. A major hurricane made 2017 a bad year to start a business in Puerto Rico. Still, NBC News reported that 36,000 of the Island’s 44,000 small businesses were able to remain open or to reopen within one year.
99.7% of all businesses in Puerto Rico are classified as small. More than 99% of all U.S. businesses fall into this range, too. Nearly half of Americans work for small businesses, and these companies are responsible for a third of U.S. exports and 45%of GDP in the U.S. at large. Puerto Rico’s numbers are similar.
The Bureau of Labor Statistics tells us that in the United States as a whole, 80% of new businesses survive their first year, half make it through their fifth year, and about 30% survive over the long run — 10 years or more. It appears that small businesses in Puerto Rico are just as important to the economy but less likely to survive than those in the States.
Forbes has at least one specific example of a business obstacle. The article claims that it can take 200 days to gain a construction permit. Local businesses point to the uncertainty of electricity, internet, and logistics for businesses too small to provide their own infrastructure solutions.
“Recent events should be a wakeup call for business leaders and investors to evolve from a model where business growth is wholly dependent on federal aid or ‘political’ initiatives,” Forbes quoted bank director Rogelio Cardozo as saying.
Support for entrepreneurs in Puerto Rico
Jenniffer Gonzalez-Colon has worked with the Small Business Association to support businesses in Puerto Rico. There are also business incubators, accelerators, and other entrepreneurship supporters funded by grants. Google, Operation Hope, and other organizations are investing in local small businesses.
CodeforAmerica claims that disorganization and lack of visibility of resources keeps local businesses from taking advantage of available resources. But local business organizations point out that it would be easier for Puerto Rico to support many small businesses than to bring in even a few more companies the size of Lufthansa. A stronger focus on educating and helping entrepreneurs to find resources, with Buy Local campaigns and emphasis on e-commerce, could transform small businesses in Puerto Rico.
Investments in roads, the electric grid, water, and telecommunications can be expected to encourage outside investment as well as supporting small businesses.