2023 POLICY ROADMAP

In 2023, GDP growth in Puerto Rico was expected to be just under 1%, while unemployment averaged 6% and inflation stood at just under 3%. However, the influx of federal funds helped to support consumer spending, with retail sales up nearly 4% in 2023.

The business permit procedure in Puerto Rico is consistently identified as hindering the entrepreneurial process. In June 2023, the Supreme Court ruled that existing permit regulations were null and void.
The Governor quickly enacted emergency permit regulations and is working towards new ones.

2023 Framework Conditions Review1

The National Entrepreneurial Context Index (NECI), based on assessments shared by national experts, measures the overall entrepreneurial environment of an economy. Puerto Rico’s score has been steadily improving in recent years. In 2019, the score was at 3.2, much less than sufficient, and ranked 53rd of the 54 economies in GEM. By 2023, the score increased to 4.2, still not sufficient but much less so, and ranked 36th of 49 economies.

In 2023, nine of of Puerto Rico’s Entrepreneurial Framework Condition (EFC) scores improved and
just one declined. Most of these changes were small; however, the score for Government Policy: Support and Relevance increased from 2.5 to 3.6, while Entrepreneurial Education Post-School rose from 4.8 to 5.6, reflecting improvements in university entrepreneurial programs. In 2022, just one condition scored as sufficient: Physical Infrastructure. In 2023, it was joined by Entrepreneurial Education Post-School, Ease of Entry: Market Dynamics, and Social and Cultural Norms. Commercial and Professional Infrastructure was the only score that declined and that was only marginally.

In 2022, the Department of Economic Development and Commerce (DDEC) unveiled PRopósito (“purpose”), a strategic framework which includes entrepreneurship as one of five pillars for Puerto

Rico’s economic development. The plan focuses on strategies aimed at the creation of a more competitive entrepreneurial ecosystem by streamlining the permit process, facilitating access to capital programs, incentives and other benefits to drive the creation and growth of local businesses. The framework also includes reforms on tax and employment laws. Puerto Rico is already a more positive environment in which to start and grow a new business than it was just a few years ago. Further improvement is necessary, especially in Entrepreneurial Education at School, to fulfil its entrepreneurial potential.

2023 Entrepreneurial Activity Review

In the GEM Adult Population Survey (APS), one in three adults in Puerto Rico reported that their household income had fallen in 2023, a substantial proportion but a lot lower than the more than one in two reporting the same thing a year earlier.

Entrepreneurship has a reasonably high profile in Puerto Rico, with two in three adults knowing someone who has recently started a business, or who consider themselves to have the skills and experience to start one of their own. Just under two in three adults saw good opportunities to start a business locally, but three out of five of these would be deterred by the fear of failure. Despite this, the business intention rate was high, with more than one in four of those adults not currently doing so expecting to start their own business in the next three years.

The proportion of adults in Puerto Rico who were currently starting or running a new business was just over one in five, slightly up from the previous year, the fourth highest level in Level B and also the 10th highest in GEM 2023. Men were more likely than women to start a business, but the difference was small. The level of Established Business Ownership was a lot lower, at 6%, implying more than three people were starting
or running a new business for every person owning an established one. This may point to obstacles in the entrepreneurial pipeline preventing new business from enduring long enough to become established.

Making a difference in the world was the motivation most agreed among new entrepreneurs, with seven out of 10, followed by to earn a living because jobs are scarce. New entrepreneurs in Puerto Rico look outwards, with one in three having customers beyond their country. Three out of four new entrepreneurs expected to use more digital technology in the next six months, but job expectations were low. Less than one in 10 of these new entrepreneurs expected to employ at least six more people in the next five years.

1 A brief description of the GEM approach is given in the footnote on p. 107 in the GEM Global Report.