Demographic decline imposes changes

Constant economic challenges and the aftermath of Hurricane Maria in 2017 have caused a significant decrease in Puerto Rico’s population, which in turn has presented additional challenges to the business sector in terms of attracting new customers and employees.

According to investigative economist and former executive director of the Puerto Rico Institute of Statistics (IEPR, for its Spanish acronym) Mario Marazzi, the passage of the hurricane five years ago drastically increased the island’s migratory pattern, which has not recovered yet and has worsened with the drop in the natality.

According to Marazzi, between 2020 and 2021 about 31,000 people died, a figure that significantly exceeds the reported 19,000 births, thus leaving the balance of 12,000 more people deceased than the number of births.

“There are already 12,000 more people dying than being born in a year, and it is projected that deaths will continue [to raise] to 17,000 by the year 2022. We will continue to see how this trend of more deaths than births expands and, as long as there are more deaths than births, only a massive immigration input could stop Puerto Rico’s decrease in population,” said Marazzi.

Also, available statistics seem to corroborate Puerto Rico’s migration outlook is just as discouraging as it was at the beginning of the pandemic. Although Marazzi mentioned the arrival of people in search of the tax benefits that Puerto Rico offers, he pointed out that it has not been enough to balance-out the declining population.

In fiscal year 2022, more people left —about 44,000— than those who arrived to the island. According to the 2021 census, Puerto Rico has just over 3.2 million inhabitants.

“No one knows how long the effects of the pandemic will last, but even taking all those factors [into consideration], this population decrease that we are seeing is very difficult. We are going to continue to see this reduction… And those 44,000 people that I mentioned represent 1.5% of the population of Puerto Rico,” added Marazzi.

The statistician warned entrepreneurs must direct business strategies to population sectors that are growing, or export products so that they remain in the country’s commercial ecosystem.

“Local consumers’ market is going to continue to shrink. Under these conditions, what can an entrepreneur do? There are small niches or groups where there can be growth, but the alternative is to export. That has to be the focus, to export services and products,” Marazzi emphasized.

Aging citizenry

For his part, José R. Acarón, Puerto Rico state director of the American Association of Retired Persons (AARP), a non-profit entity that provides services to people over 50 years of age, coincided that Puerto Rico is facing a change in its population composition, becoming the eleventh aging country in the world.

Acarón characterized the island’s economy as the “economy of longevity,” because most of Puerto Rico’s consumption is being made by people over 50 years of age.

“61% of what is consumed in Puerto Rico is consumed by the segment of 50 years or older. This is the economy of longevity,” said Acarón.

According to the U.S. Census Bureau most recent annual population estimates, by age and sex, for the municipalities of Puerto Rico, the population under 18 years of age decreased from 567,614 in 2020, to 545,790 in 2021, or a 3.4% decrease. Meanwhile, the number of people 65 years or older, increased by 2.4%, or a total of 740,489 people.

However, the AARP state director pointed that companies do not prioritize the population 60 and over, but direct business plans to people between 18 and 49 years old. Acarón urges companies to take into consideration the increasing older population.

“When we make business plans we have to include all ages, we must speak to everyone and we must do it in an inclusive way,” Acarón said.

Meanwhile, Elisa Pacheco, president of the Society for Human Resources Management (SHRM) said companies will notice a change in the workforce in the coming years, with an increase in workers from the ‘baby boom’ generation –people who were born between 1946 and 1964– applying for work.

“The ‘boomerangs’ are back. Just last week, I interviewed [for a job] someone who had retired in 2018,” Pacheco said.

“That is the talent that we need, people with experiences, with knowledge and context, and who know how to make changes in organizations,” she added.

She recommended that, in order to attract the younger generations, companies must offer work experiences, future professional development, create a participatory community and generate work colleague alliances.

Exportation as a solution

Even though it has worsened over time, for economist and COO for ABEXUS Analytics Eduardo Burgos, the diminishing population issue is nothing new.

“I think that the last three years have been a period for learning. We experienced a pandemic, and many businesses had to go digital. And even though that may have been the subject of some resistance then, at this moment digitalization is the door to markets abroad at the lowest possible cost,” Burgos said.

The economist recalled that some 30 years ago if an entrepreneur decided to export its goods or services the only resources available to him were the traditional ones. But the process of digitalization experienced by most businesses in the island have unequivocally moved them into transitioning into a digital market. “This in turn allows them to tackle some markets that had not been initially considered in their plans,” he said.

For Burgos, the key to reinvigorating the economy is to start exporting goods and services. Keeping a locally based approach to business “is absurd.”

Also, he does not consider broadening the consumer’s profile, to include or attract older adults, to be a viable alternative. Aside from considering whether the products and services being provided appeal to that demographic segment, the fact that income tends to become fixed as people go into retirement, must also be considered.

“The fact that there are retired people returning to the labor market points more to their need of supplementing their income in order to meet their regular needs, than to having extra income for goods and services they don’t regularly use,” said Burgos.

“Puerto Rico’s economy continues to shrink, despite the federal transfers improving current figures a little. But, what is going to happen five years from now?,” he asked.

Burgos pointed to the lack a policy to attract new and younger population to the island that could promote economic development.

“Businesses will not have any alternative but to look into international markets and start exporting goods and services,” Burgos argued, while highlighting the possibilities Latin American markets present.

According to Burgos, the greatest opportunity is for the economic sectors that specialize in developing contacts between markets. “As we have seen the development of globalization in several specific processes, we know there are many businesses wanting to get into the North American markets.” The economist cited as an example the field of education.

“I’m convinced there are a lot of people in Latin America wanting to have an education accredited by an American university. Puerto Rico has all the conditions to offer those services at a lower cost, just for being in the [political, geographical] position it is in,” Burgos contended. The economist further argued this wouldn’t need of any new or special incentives to start happening.