By: Elena Mart

Brian Diaz is the Co-founder and CEO of Pacifico Group, Inc. As a member of the Forbes Business Council, he has actively discussed the gov-tech and disaster recovery industry in Puerto Rico. Brian highlights that the construction industry in Puerto Rico has experienced significant fluctuations over the past two decades. Since the early 2000s, the sector endured a prolonged bear market characterized by declining investments and widespread business closures. Economic downturns, coupled with a lack of sufficient public and private investment, led to a significant contraction in the industry. Many construction firms faced insurmountable challenges, resulting in bankruptcies and closures.

The devastating impact of Hurricanes Irma and Maria in 2017 marked a pivotal turning point. These natural disasters caused extensive damage, necessitating a large-scale reconstruction effort across the island. According to the Puerto Rico’s Reconstruction & Recovery Office’s Portal (COR3), over 80 billion dollars has been assigned to the island, between all declared disaster across multiple reconstruction and emergency programs. The substantial influx of federal reconstruction funds, aimed at rebuilding and modernizing infrastructure, injected new life into the construction industry. 

This financial boost has transformed the sector into a bull market, catalyzing a remarkable recovery. This new wave of investment has not only revitalized existing businesses but also paved the way for a phenomenon known as re-entrepreneurship within the sector.

Re-Entrepreneurship

This shift created a unique scenario where many companies that had previously closed or declared bankruptcy during the late 2000s and early 2010s are now re-emerging. The resurgence in the industry, fueled by federal reconstruction funds, has given rise to what can be termed as “re-entrepreneurship,” a concept introduced by Jorge Espinoza-Benavides and Maribel Guerrero for the Small Business Economics Journal. 

This term refers to entrepreneurs who were once at the helm of their own construction businesses but were forced to settle for full-time jobs at other companies during the industry’s downturn. These individuals are now seizing the opportunity to relaunch their businesses, turning back to their original ventures as their primary source of income and creating new jobs in the process.

According to the Puerto Rico Recovery Transparency Portal, significant funds have been allocated to the two main recovery programs, FEMA Public Assistance and Hazard Mitigation. Specifically, those managed by the Puerto Rico Central Recovery Office (COR3), they have $40.1 billion assigned, with $36.8 billion obligated, yet only $9.8 billion has been disbursed. This discrepancy, encompassing all FEMA categories of work, highlights a substantial amount of unused funds.

This bottleneck in funds utilization signals significant opportunities for re-entrepreneurs to launch and grow their businesses by addressing the challenges and needs within the recovery efforts.

The influx of federal funds has also enabled these re-entrepreneurs to access the capital necessary to restart their operations. Many of these entrepreneurs are utilizing their previous experience and leveraging new technologies and methodologies to enhance their business operations. This has led to increased efficiency, better project management, and a higher quality of construction work across the island.

The High Standards

Federal government reconstruction funds present a promising opportunity, but they require adherence to stringent guidelines. Executing federally funded projects demands high administrative standards across all stakeholders. This includes rigorous compliance standards, administrative protocols, and financial oversight. The federal government imposes strict guidelines to ensure that funds are used appropriately and projects are completed to a high standard.

This intense and rigorous process is prompting both re-entrepreneurs and new entrepreneurs to reassess and enhance their administrative and operational structures comprehensively. For many, this has involved investing in better project management software, hiring skilled administrative personnel, and adopting best practices in financial management. Improving is the key to meet the high standards required for federal projects and to ensure the long-term sustainability of their businesses.

The emphasis on compliance and high standards has also fostered a culture of transparency and accountability within the industry. Construction firms are now more diligent in maintaining detailed records, adhering to safety regulations, and ensuring timely project completion. This shift is beneficial not only for the businesses themselves but also for the overall quality and reliability of construction projects in Puerto Rico.

The Outlook

The evolving landscape is set to foster a new breed of executives and companies that are more resilient and better prepared for market uncertainties. These businesses will possess a solid foundation, enabling them to pivot and reassess strategies effectively when faced with challenges. The rigorous standards imposed by federal funding have effectively raised the bar for the industry, ensuring that only the most competent and efficient firms thrive.

As the industry continues to adapt and grow, this new wave of re-entrepreneurship is expected to drive sustainable development and innovation within Puerto Rico’s construction sector. Companies that have emerged from this process are likely to be more robust and adaptable, capable of weathering future economic storms. This transformation holds promise for a more robust and dynamic construction industry capable of sustaining long-term growth and resilience in the face of future challenges.

Moreover, the skills and experience gained by these re-entrepreneurs in navigating the complex requirements of federal projects will serve them well in future endeavors. They will be better equipped to manage large-scale projects, secure financing, and maintain high standards of quality and efficiency. This new breed of construction executives and companies will be crucial in driving the continued growth and development of Puerto Rico’s infrastructure.

The re-entrepreneurship phenomenon, as defined by Jorge Espinoza-Benavides and Maribel Guerrero, is reshaping the construction industry in Puerto Rico. The combination of federal funds, high standards, and the resurgence of experienced entrepreneurs is creating a more resilient and dynamic sector. The outlook for the industry is positive, with the potential for sustained growth and innovation in the years to come. As we continue to rebuild the Island, the re-entrepreneurs will build and expand their businesses –playing a pivotal role in the economic recovery and ongoing development of Puerto Rico.  

Published by: Nelly Chavez