Small Businesses in Puerto Rico

The employment rate in Puerto Rico has increased significantly since Hurricane Maria.


source: tradingeconomics.com

Part of this is the need for rebuilding. There will continue to be a need for construction workers and the like for years to come, but this can’t be the basis of Puerto Rico’s new economic growth.

Part of this, unfortunately, is the continuing dwindling of the population. With fewer people, the employment rate can be higher even without significant job growth. Both government jobs and manufacturing jobs have dropped slightly, and economic activity is slightly lower now than it was at this time last year, just before Hurricane Maria devastated the Island.

Small businesses matter

With fewer jobs available in the two major sectors of employment in Puerto Rico, manufacturing and government jobs, small businesses are providing much of the growth in employment in Puerto Rico. This is true particularly in more rural areas. Unfortunately, it appears that about 10% of the small businesses in Puerto Rico closed permanently after the hurricanes.

Nonetheless, 80% of private sector employment in Puerto Rico still relies on small businesses. Walmart, the largest private sector employer in Puerto Rico, employs about 12% of the workforce, or 13,856 people. The next largest private employer on the Island apart from hospitals and hotels is Evertec, employing 1,600. Only four more companies in the top 25 employers in Puerto Rico are not hospitals or hotels. 10 of the top employers are located in San Juan. In short, the other 20% of the jobs in the private sector are very concentrated in specific industries and locations.

This makes small businesses very important for Puerto Rico’s workers.

Small business support

The U.S. Small Business Administration received 10,292 applications from Puerto Rico and the U.S. Virgin Islands for business loans intended to repair and rebuild after Hurricane Maria.  The SBA didn’t separate the two territories, but they say that they approved about 2% of those loan applications and have sent about $91 million to the two territories to help get businesses back on their feet.

The Foundation for Puerto Rico has given out about $500,000 in grants for the same purpose. They’ve recently received $5.6 million from the U.S. Chamber of Commerce, so they will be able to continue supporting entrepreneurs on the Island.

There are also private and nonprofit business incubators starting up in Puerto Rico. The government has established a new online business portal to make it easier for companies and individuals to invest and start businesses in Puerto Rico. The SBA recently held a workshop on how to get HUBZone certification, which helps small businesses get financial incentives. SBA Puerto Rico offers a wide range of training opportunities for entrepreneurs.

Ongoing problems

The disaster loans are being very slow to reach entrepreneurs. Jenniffer Gonzalez-Colon, the Resident Commissioner for Puerto Rico, is working with the SBA to get the funds flowing. Now that electricity has been restored across the Island, one of the main obstacles to business success has been covered, but there are still infrastructure issues.

Puerto Rico’s political status continues to be one of the most significant problems for businesses. As long as Puerto Rico is not integrated into the U.S. economy, economic development will be difficult. Investors hesitate to commit themselves to a territory which could change its status at any time. All previous territories which have become states have experienced increased prosperity soon after their admission.

The unavoidable conclusion is that statehood would encourage entrepreneurship in Puerto Rico. Tell your legislators it’s time for statehood for Puerto Rico.

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