Near the Castillo San Cristóbal, a stone fortress overlooking the Atlantic Ocean in San Juan, Puerto Rico, a historic marker describes how the island’s strategic position along colonial-era sailing routes made it vital for commerce between Europe, the Americas, and even Asia. Today, Puerto Rico’s business leaders believe the island’s geographical location as a gateway between North American and Latin American markets, along with its status as an emerging hot spot of entrepreneurship, will usher the U.S. territory into a newly innovative era where homegrown businesses and local STEM graduates drive growth.
Puerto Rico’s economic landscape has undergone a remarkable resurgence in the past decade. Young people are demonstrating an entrepreneurial spirit, and tax incentives and federal investment in startup incubators and accelerators entice businesses to launch or expand to the island. Jonathan Gonzalez, for example, launched his insurance startup Raincoat as a direct response to Hurricane Maria’s impact in 2017. “I would’ve probably never founded Raincoat if it wasn’t for Hurricane Maria and what happened,” Gonzalez says. “It was a pivotal moment, both on an individual level for people, but also collectively.”
Raincoat, Gonzalez adds, specializes in “developing fully automated climate insurance products and then helping those products be successful through technology”—meaning, getting money quickly into the hands of individuals who need it.
AN ENTREPRENEURIAL ECOSYSTEM
Raincoat exists, Gonzalez explains, because of an entrepreneurial ecosystem that has flourished on the island since Puerto Rico Science, Technology & Research Trust started supporting programs, such as startup incubator Parallel18, that nurture innovation and new business on the island. (The trust provides funding, mentorship, networking opportunities, and access to resources to help entrepreneurs develop and scale their ventures.)
Gonzalez personally saw the business environment change in the period from 2013, when he left Puerto Rico for New York—emblematic of the brain drain that has dogged Puerto Rico through its economic troubles—and his return five years later. Today, with $11.5 million in venture capital supporting Raincoat’s growth, the company employs 27 people in the types of jobs that might tempt the diaspora of 5.8 million Puerto Ricans to return.
Over the past 10 years, private funding, local government support, and federal dollars have been funneled to incubators and accelerators, such as Parallel18, which was founded in 2015. (Others, such as Grupo Guayacán, a nonprofit organization dedicated to the education and development of local entrepreneurs, have been in operation since the mid-’90s.) With the support that exists on the island today, Gonzalez believes that entrepreneurs will find an ideal environment in Puerto Rico. “If you have a startup in Puerto Rico, there are so many programs to support you at every single stage,” he says.
The result is an estimated 500 startups on the island of 3 million people and a tightly woven entrepreneurial community that continues to feed its own growth, says Brian Bourgerie, the Innovation, Investment, and Entrepreneurship partner at Invest Puerto Rico, a public-private partnership that promotes Puerto Rico as a business destination. Bourgerie originally came to Puerto Rico from the mainland U.S. as an entrepreneur, attracted in part by tax incentives. “If your portfolio company is set up in Puerto Rico, you could be paying a 1% to 4% corporate tax rate and zero income taxes to the federal government and getting half your R&D expenditures back in [local] tax credits,” he points out. But Bourgerie is quick to add that the network on the island is why he stays. “Tax incentives aside, I am here for the community and the ecosystem more than anything.”
A UNIQUE WORKFORCE
In addition to entrepreneurial efforts, large multinational corporations are also growing in Puerto Rico. Medtronic, headquartered in Dublin, is one of the world’s largest medical device companies and has been operating in Puerto Rico since 1974. Over the past three years, the company has invested $50 million and added 500 permanent jobs in its manufacturing plant in Juncos, bolstering the company’s ranks to more than 5,000 employees on the island. “[It’s] one thing to be able to sustain operations with this level of complexity,” says Manuel Mellado, senior director of operations in Juncos. “[It’s] another to be able to grow an operation with that level of complexity.
“Talent is, of course, a big element,” Mellado continues. “Our unique position of the workforce—being bilingual and culturally fluent—is a great advantage. We have a very robust educational system built on U.S. standards, graduating awesome talent in terms of STEM and engineering careers.”
More than 50% of graduates on the island have a STEM degree—a boon for Medtronic, whose rigorous manufacturing locations require specialized talent in mechanical, chemical, biomedical, and industrial engineering. “[Puerto Rico is] no longer a low-cost region, but we can manage complexity, like high-volume automation, chemistry, electrochemistry, test engineering, system integration, and digitalization,” Mellado explains. “These are competencies that you don’t quite find in other places.”
For a manufacturing operation operating within the same regulatory environment as the mainland U.S., Puerto Rico is an effective distribution point. “In most cases, we’re actually the shorter route point to Africa, Central America, or South America,” Mellado says. This allows Medtronic to reduce its shipping footprint and maritime transportation costs.
Add the island’s physical location to the advantages of its business environment—from tax incentives to an under-the-radar center of entrepreneurship—and the picture becomes clear: This Caribbean island, once again, holds a unique position in the world.