Undaunted by hurricanes, pandemic and earthquakes, Puerto Rico is ready for its tech moment

By Jon Swartz

Puerto Rico is gaining momentum with a growing tech scene, after decades of success as a manufacturing hub

Hurricanes, a pandemic and an earthquake can't stop a swelling tech movement in Puerto Rico. They might have even spurred the movement.

A devastating confluence of Hurricane Maria in late 2017, COVID-19 and a rash of earthquakes that wreaked havoc on infrastructure have steeled the resolve of entrepreneurs here.

"We are a resilient economy," said Christian Gonzalez, chief executive of Wovenware, the AI/machine-learning arm of a major U.S. space technology company.

The journey has been fraught with obstacles, both natural and man-made, but Puerto Rico is slowly gaining momentum as a place to be for tech after decades of success as a manufacturing hub for multinational companies.

In late October, the Biden administration named Puerto Rico a biotech hub for biopharmaceutical and medical-device manufacturing, making it one of 31 designated tech hubs across 32 states and U.S. territories.

Amazon.com Inc. (AMZN), Microsoft Corp. (MSFT), Oracle Corp. (ORCL) and Meta Platforms Inc. (META) have also increased their presence on the island, approximately 1,000 miles southeast of Miami, as a midpoint for operations between Latin America and the U.S.

"If entrepreneurs can make it here, they can make it anywhere," Laura Cantero, executive director of non-profit Grupo Guayacan, said in an interview. "You will hear this word a lot, but it is resilience," she added.

"It is a hub to manage the Caribbean, with the largest economy and a very interesting pool of bilingual talent," Gerardo Martinez, regional head of Amazon's AWS for North Latin America, which includes Puerto Rico, said in an interview.

Hector Jirau, executive director of Parallel 18, an innovation hub based in San Juan, added: "It is a very soft landing pad with a bilingual workforce."

The small Caribbean island and unincorporated U.S. territory of 3.2 million people is considered one of the top 100 tech hubs in the world, with startup success stories that include antivirus firm Polyswarm and private-messaging medical platform BrainHi. When measured against Latin America countries, Puerto Rico offers the second-best AI economy and is home to Evertec Inc. (EVTC), the No. 1 payment-processing provider in the Caribbean, with annual sales of $600 million.

"It is one of the happiest places on earth. Just look at the brilliant blue sky and ocean," Lauren Cascio, founder of fintech startup Gulp Data, said in an interview. "The island's personality is open-minded, family-oriented, with a lack of violence and mix of cultures," said the Miami native, who transplanted a decade ago to Puerto Rico, where she has raised three daughters.

The island boasts rich engineering talent, a largely bilingual workforce, U.S. currency, tax incentives and a regulated banking system, though infrastructure issues such as daily power outages and pot-holed roads are hindrances. Oh, and there is hurricane season in the summer and early fall, as well as the occasional earthquake and spasms of political corruption.

"I consider Puerto Rico a 21st-century frontier," Brian Bourgerie, head of innovation and entrepreneurship at Invest in Puerto Rico, said in an interview. "People willing to relocate to an island have a high risk tolerance."

"I don't think there's any better R&D place," said Bourgerie, who came to Puerto Rico in 2017 after stints in Minnesota, North Dakota, California, Uruguay and Utah. He points to lower corporate tax rates (1% to 4%), tax credits and favorable patent protection.

"If you ask me, over the last 10 years, not much was happening until the U.S. Commerce initiatives to tap into potential with R&D focus," Jirau said. "Hurricane Maria, COVID and the great earthquake of 2020 have made the ecosystem more resilient."

Hurricane Maria and COVID

Ask anyone in Puerto Rico about life- and work-defining moments, and they invariably point to to Hurricane Maria in September 2017 and the pandemic as epochs that resonate to this day.

The twin calamities either prompted younger workers to decamp to the U.S. or take action.

BrainHi CEO Emmanuel Oquendo and Jonathan Gonzalez, CEO of Raincoat, an online insurance company focused around climate-related disasters in the U.S., Puerto Rico and elsewhere, created companies in the wake of Maria.

Oquendo's company developed an AI voice assistant named Lara for missed calls to hospitals. "Our mission is to improve communication between the patient, doctor's office and the pharmacy. We are the receptionist," he said, adding that scheduling appointments is the most common task.

Raincoat came about when Gonzalez spent 500 days in vain pursuing a claim to repair a ramp at his mother's home following the hurricane. His claim was denied.

Both startup companies were shepherded by Parallel 18, the entrepreneurship pillar program of the Puerto Rico Science, Technology and Research Trust that has helped launch hundreds of companies in less than a decade.

When longtime HP Inc. (HPQ) executive Lucy Crespo helped establish Parallel 18 in 2015, there were a handful of startups and literally no venture funding. Now, there are more than 600 companies employing 22,000 people and a fledgling VC community.

Gonzalez sums up the tech market simply: "The start is trust. There is before Lucy and after Lucy."

"It's been a very interesting journey," Crespo said in an interview. Among her long-term objectives are tech IPOs. "My dream is for it to happen," she said.

The shining success of Puerto Rico's fledgling tech economy, Evertec, is the only one to go public so far. The 1,400-person company occupies four massive buildings housing a data center of 4,000 servers, a battalion of security guards, a vault for the federal reserve and a gigantic water tank to help keep the data center cool.

Paola Perez Surillo, Evertec's executive vice president, believes the market will only get larger as manufacturing mainstays in pharmaceuticals and aerospace make their own digital transformations. "Cooper Vision continues to expand, as does Honeywell (HON) and Lufthansa (XE:LHA)," she said. "The biggest challenge is talent."

To that end, Invest Puerto Rico plans a marketing campaign blitz next year to retain STEM talent as well as attract engineering talent back from the U.S.

"We are in a very unique point in time. We are a hidden gem that is well positioned to be an innovation hub," says Ella Woger-Nieves, CEO of Invest Puerto Rico. "Made in Puerto Rico is made in the USA."

Indeed, that has been the case here for decades for conglomerates like Honeywell, Lufthansa, CooperVision Inc., Johnson & Johnson (JNJ), and Roche (UK:0QOK).

Unique federal tax benefits and the territory's strategic location between the continental U.S. and Latin America have proved to be enduring magnets, according to Satish Rao, chief product officer at Newlab, a platform for deep-tech startups. The question now is whether tech will fill a major need as those companies adopt AI and machine learning.

"What is missing is one clear local [tech] unicorn, and I believe that unicorn exists but has not manifested," Gonzalez said. "Back to 2010, there was no environment for startups. No incubator. Just small groups on Facebook."

-Jon Swartz

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11-21-23 0805ET

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