Global Recession Hits Puerto Rico Hard

The island is paying nearly 10 percent interest on its bonds to attract reluctant investors. And some credit-rating analysts are saying Puerto Rico's bonds may soon get a downgrade. But optimists say they can help solve the island's problems from the bottom up.

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The global recession hit Puerto Rico hard and left its budget in shambles. But some optimists say they can help solve the island's economic problems from the bottom-up.

Tim Fitzsimons reports from San Juan.

TIM FITZSIMONS, BYLINE: In the shadow of Castillo San Cristobal, a massive stone fort built by the Spanish in the 18th century, stands the Capitolio: Puerto Rico's seat of government. And on this December day, public school teachers were protesting on its steps.

(SOUNDBITE OF YELLING)

FITZSIMONS: Why were these teachers protesting? Because Puerto Rico's economy is in the dumps, and the government must reform its teacher pension system to avoid a credit agency downgrade of its municipal debt, which is currently just one level above junk status. Here in Puerto Rico, the situation is dire: the unemployment rate is more than double what it is on the U.S. mainland, and many young, educated people are moving away for better opportunities.

But not everyone on the island is pessimistic. A growing movement of globally minded Puerto Ricans see a silver lining in this crisis and are planning for future growth.

SOFIA STOLBERG: Well, this is Piloto 151, so welcome to our headquarters. We're the first co-working space in San Juan, Puerto Rico - actually, the first in Puerto Rico, to be exact. And...

FITZSIMONS: That's Sofia Stolberg. Back in September, she started Piloto 151, a co-working office for small businesses. From inside a renovated colonial building in old San Juan, aspiring entrepreneurs can set up shop to work on freelance projects, tech startups, or whatever else. Piloto 151 will help them incorporate and take advantage of the island's various tax and business incentives. Her idea is to cultivate businesses that work and think globally.

Stolberg says part of Puerto Rico's economic problem stems from its geographic isolation, what she calls an island mentality.

STOLBERG: We fail, sometimes, as a culture to look beyond our borders and to what the rest of the world is doing, and to what the best practices are. One day, I hope we have companies that do what Skype did for Estonia. All we need is one company to make it really big, and Puerto Rico will be a completely different destination and landscape.

FITZSIMONS: Tackling the task of professionalizing and globalizing the talent that already exists in Puerto Rico is one of the main focuses of an organization across town, in the business district of Hato Rey.

JON BORSCHOW: I'm Jon Borschow, the chairman of the Foundation for Puerto Rico.

FITZSIMONS: Jon is one of Puerto Rico's most successful businessmen. He sold his medical supplies company in 2008 in one of the island's largest-ever business transactions. He made his fortune in the medical supply industry that helped modernize Puerto Rico's economy during its boom in the mid-20th century.

BORSCHOW: So I've actually seen, during the course of my life, the entire trajectory of Puerto Rico, from poverty to First World success. As a consequence of that, I was able to see when the winds began to change

FITZSIMONS: Borschow hopes his organization can act as a catalyst to reorient Puerto Rico from an inward-looking business environment to a more dynamic, global hub.

BORSCHOW: What had really happened is that, in a way the very success that we had, had so insulated us from a lot of the changes that were taking place around the globe - you know, as we call it, globalization and internationalization - to a degree that we were really kind of a little self-contained economy.

FITZSIMONS: Borschow's foundation is supporting the development of a new kind of organization for younger Puerto Ricans. It's called ConPRmetidos. One of its goals is to take the brain-drain problem and turn it into a brain circulation advantage. The organization runs workshops to bring educated and successful Puerto Ricans who have left back to the island to share their skills.

ConPRmetidos co-founder Cristina Sumaza says since Puerto Rico's economic problems are so deep-rooted, focusing on the youth will ensure a brighter future for the island.

CRISTINA SUMAZA: It's a long way to go. Its something won't be able to change, you know, in a year or two years. But I think that little by little, we could tackle that young, millennial generation coming up. They're going to be choosing whether they stay here or whether they go. You close the gap, that opportunity divide, as we call it.

FITZSIMONS: At ConPRmetido's one-year anniversary gala, I spoke to Christian Padilla. After finishing his studies in Puerto Rico, he got an MBA on the mainland and now works for IBM in New York.

CHRISTIAN PADILLA: We need to work for our island. And, in a way, it's a way of creating - we have a word in Spanish that is patria, you know, like, your homeland. So it's a way of creating patria.

FITZSIMONS: These groups have their work cut out to boost the economy and improve Puerto Rico's reputation with investors. The government will have to raise money again in the bond market early in this New Year.

For NPR News, I'm Tim Fitzsimons.

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