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Leading Strategies

Island of Innovation

Puerto Rico’s plan to rise from devastation and become a model of resilience

By Margaret Harrist

Winter 2019

When Ricardo Rosselló was sworn in as governor of Puerto Rico in January 2017, the United States territory was besieged by challenges. The island had not recovered from a recession triggered by the end of federal tax breaks that had attracted investment to the island and boosted the economy. The territory subsequently lost 40% of its manufacturing jobs, which contributed to an increasing exodus; between 2006 and 2016, some 14% of the territory’s population migrated off the island.

Over time the government on every level—the central government; municipalities; and public sector corporations that provide services such as electricity, water, and transportation—had borrowed heavily to sustain operations and pay pensions. More than 40% of the residents of Puerto Rico lived below the federal poverty level, and half of the population was enrolled in the Children’s Health Insurance Program (CHIP) or Medicaid—which is funded by the federal government at a lower level than in the states, adding to the Puerto Rican government’s financial bind.

The growing financial crisis led the US Congress to pass the Puerto Rico Oversight, Management and Economic Stability Act of 2016 (PROMESA), which created the Financial Oversight and Management Board for Puerto Rico to oversee negotiations with creditors and to certify the Puerto Rican government’s fiscal plan going forward. But given its US$74 billion in debt and US$49 billion in pension liabilities, the government filed for the equivalent of bankruptcy protection in May 2017.

Four months later, Hurricane Maria struck the island. Winds blew at 155 miles per hour. Parts of the island were flooded with up to three feet of rain. The territory’s electric grid was virtually destroyed, incapacitating the pumps that supplied running water and leaving city centers without power. More than 80% of the island’s cell phone towers were knocked out, and many roads were heavily damaged. Puerto Rico’s fiscal plans had to be completely revised as a result of the hurricane damage, and Rosselló’s government worked closely with key stakeholders and the Oversight Board to create a new budget consistent with the goals of PROMESA.

The devastation presented opportunities to rethink and restructure the government to better serve the Puerto Rican people—and pave the way for a better economic future. “We’re going to get a lot of resources to rebuild the island, and we don’t want to just put things back together the way they were,” says Rosselló. “We need to innovate. In fact, we want innovators to see Puerto Rico as a platform for testing their ideas—not only on the technology front but also in housing, transportation, and otherwise.”

Profit spoke to Rosselló at La Fortaleza, the official governor’s residence in San Juan, about the challenges and opportunities ahead and why he sees cloud technology as a key component of Puerto Rico’s innovative future.

Profit: You were sworn in as governor of Puerto Rico in January 2017. Describe Puerto Rico at that point.

Rosselló: We call Puerto Rico the island of enchantment. It’s got a lot of natural beauty and great people. Unfortunately, we were marred with many challenges on the fiscal and economic fronts. When I came in as governor, my main objective was to figure out how we could get out of that fiscal and economic situation and certainly use innovation as a key driver toward doing that.

At that point, Puerto Rico was under a fiscal oversight board and still is. We have a significantly large debt burden. But over the last few years, we’ve been able to start to addressing those issues as well as driving our objective to have Puerto Rico be open for business.

Profit: How will those objectives create opportunity for the people of Puerto Rico?

Rosselló: I see Puerto Rico as the home of the human cloud. Every day, jobs become more geographically independent. In that context, people are able to look for places they would rather live. I think Puerto Rico has all the assets necessary, and we’re making changes to the chronic problems we’ve had, to turn them into opportunities—such as energy, education system, labor participation rate, opportunities, and so forth.

Snapshot
Ricardo Rossello, governor of Puerto Rico
The Government of the Commonwealth of Puerto Rico
Headquarters: San Juan, Puerto Rico
Industry: Public sector
Annual budget: Approximately US$25 billion

Ricardo Rosselló, Governor of Puerto Rico
Length of tenure: Two years
Education: BS, biomedical engineering and economics, Massachusetts Institute of Technology; PhD, biomedical engineering, University of Michigan
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The idea is we can attract people to come to Puerto Rico, so our human resources can stay here rather than leaving for other jurisdictions. Some who have left can come back home, and some who might have never imagined they’d see Puerto Rico as a place to live will see that we have the best incentives for exporting services, the best and most competitive tax treatment in certain respects, and we will have resources to rebuild and opportunities to invest in.

Profit: Cloud computing complements the human cloud quite nicely. How will cloud technology help the Puerto Rican government with some of its most pressing challenges?

Rosselló: We are looking at ways to aggregate information, have it secure, and have easy access to it. Cloud technology is critical, and it’s already been helpful. Certainly, everybody was able to see the impact that the hurricanes had in Puerto Rico. Knowing that we had our most critical information and activities stored in safe places was a critical added value for our people.

One of the things we were able to work through during the 2017 storm and its aftermath was the continuous payroll for our government employees. Because of our efforts with Oracle [prior to the hurricane], that process was easily facilitated during that time. If we hadn’t had that system, it would have been another story.

Cloud computing also gives the government new flexibility that allows us to facilitate payments, accurately assess our human resources, [and work within our financial structure]. Having an oversight board and with our fiscal situation, it’s important we have a clear, transparent repository of all the information that’s flowing in. With so many stakeholders involved, cloud computing becomes a tool of choice.

Profit: How did Oracle get involved with the work being done in Puerto Rico?

Rosselló: Oracle has been a great stakeholder with Puerto Rico in the past. We’ve worked together. Their commitment to innovation aligns with our commitment to make Puerto Rico an island of research and development at the cusp of modern technology. Secondly, Oracle executes. Oracle is a very effective partner that gets us results.

Historically, our government structure was very antiquated. Many things were done manually, many things were still done on paper; systems that we had were fragmented and separate and couldn’t communicate with each other.

My view and my vision is a Puerto Rico that’s open for business.

Puerto Rico’s government and policies are undergoing a transformation right now. It’s important to have the backing of a sophisticated stakeholder in technology, so we can be sure that all of the changes we’re making—from human resources reform to tax reform to education reform to transformation of the energy sector—are rationalized someplace. We know we can count on Oracle to be that strong partner throughout this transformation.

Profit: How do you see Puerto Rico in the future? What is your vision?

Rosselló: My view of Puerto Rico is we become the connector of the Americas. Puerto Rico is part of the US, but our culture is connected to all of Latin America, and geographically we’re right in the middle. That makes it the ideal place for people to come and do business, diplomacy, finance, and otherwise. We’re committed to making changes in infrastructure so we can facilitate that path forward.

My view and my vision is a Puerto Rico that’s open for business, and we eliminate obstacles in the way of business today so that it becomes the desired spot to export services all across our region.

I also see Puerto Rico as the island of innovation—and this is where Oracle becomes a critical partner, even more than in the past. If Puerto Rico is to move forward, and if we want to be on a path to progress, we really have to be in the vanguard of innovation and technology.

Puerto Rico can become the center of the world for resiliency and rebuilding after a storm or [other] catastrophic event. I’m very excited about that possibility. It will be an exciting time, and we want to make sure that we make this a dynamic center that’s vibrant, has opportunity for all, and allows folks to stay in the United States.

Puerto Rico is a phenomenal place. We have many of the natural resources we need, great people, a well-trained labor force, and natural beauty all around. But we certainly have had some chronic problems that we need to fix, and we need to change those with the goal of Puerto Rico becoming a dynamo in the Americas.

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Photography by Angel Valentin/Getty Images