Unraveling Puerto Rico’s Economic Challenges

Against all odds, Puerto Rico has a history of civic success.
Puerto Rico has faced a number of economic challenges in recent years. As a result, the agencies Moody’s, Fitch, and Standard & Poor’s recently downgraded Puerto Rico’s credit rating to “junk.” Espacios Abiertos is a collaborative in Puerto Rico working for social change and increased civic capacity. I spoke with economist Sergio Marxuach and program manager Mari Mari Narváez about the crisis.

What are some of the economic and social effects of the recent downgrade of Puerto Rico’s government bonds?

Sergio Marxuach: If the Puerto Rican government is unable to borrow at reasonable rates from private lenders or from the public capital markets, we would expect severe cuts in government services and programs because the Puerto Rico Constitution gives priority to debt service payments.

Among other things, we may see cuts in the budget for public education, including the public university; the government health care insurance program may be forced to cut back coverage; public safety and police expenditures may have to be significantly reduced; and the government may fail to honor payroll increases already negotiated in existing collective bargaining agreements and, perhaps, may carry out significant layoffs and/or forced furloughs for government employees.

These cuts would lead to lower economic activity, which in turn would adversely affect the private sector. Thus we may see an increase in unemployment, poverty, crime, and migration to the United States.

How will Espacios Abiertos help Puerto Rico at this critical juncture?

Mari Mari Narváez: Because this is a systemic crisis, Puerto Rico cannot aspire to survive it only with fiscal measures. Our economy has been contracting for the last eight years; our democratic system, for the last 40. We have to grow the economy. But, can you do that in an opaque society? No.

This is a country with a long history of government dependence, political clientelism, suppression, and surveillance of political organizations by both U.S. and local agencies, and excessive use of force by the police to repress First Amendment rights and to persecute low-income, black, immigrant communities.

Espacios Abiertos [part of the Open Society Foundations' Open Places Initiative] is here to increase transparency, access to justice, and spur socioeconomic development. Our goal is to make this a truly open society, where individuals and organizations have the tools and autonomy to challenge existing economic, political, and sociocultural power structures; curtail the social inequalities generated by those power structures, and become agents of change to achieve a responsive, ethical, accountable, and transparent government.

What helps you remain hopeful?

Mari: We are a diverse group and each of us might be moved by different things. But we all see that, in spite of a difficult reality, the limitations, and a political and social context that does indeed seem very somber, there is also a strong, heartfelt enthusiasm, especially in the nongovernmental sector.

Puerto Rico has a history of civic success in very specific, important, and defining issues such as the ousting of the U.S. Navy and its live ammunition practices from the island of Vieques and the halt of a gas pipeline project that was going to destruct areas of high ecological value in the country. There’s a strong spirit and desire for social rebirth in many spheres of the country. If the spirit and desire is there, how can we not cultivate it, commit to it, help make it happen?

Why does this matter to folks on the mainland?

Marxuach: Puerto Rico has been a U.S. colony since 1898. At a minimum, the United States government and its people have a moral obligation towards Puerto Rico. To the extent that Puerto Rico becomes an international embarrassment for the United States, it diminishes American influence and standing with the international community. Furthermore, the gross deterioration of socioeconomic conditions here provides ammunition to adversaries to attack the United States for its failure towards 3.6 million American citizens that live in its territorial possession in the Caribbean.

As the country’s economic crisis deepened in the last decade, more than half a million people—many of them educated or trained—have migrated, mostly to the U.S. mainland. That might seem like an asset for the United States, but it diminishes our population and erodes our bank of talent in the short term.

When fewer people contribute to the country’s treasury, poverty increases as does the need for public assistance, which is a cost that the U.S. federal government partially assumes. Puerto Rico’s poverty does have an economic cost on the average American family pocket.

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Uncontrolled capitalism is ruining the USA. I think the poor
and unemployed should have a plan B, like land to grow their own food, independent of government. It seems that everywhere the US goes, it leaves a legacy of gangsters. the price of belonging to the USA is too much.

It seems like the USA has become the big bully that forces itself on every other country. Along with the big banks, or should I say the big parasites.
As years go by, we get uglier, and uglier. Citizens have lost all control.

Puerto Rico is a USA territory and not a country. In addition, its down fall in the last three decades has been the fault of it own Puerto Rican political leaders and not the USA. Puerto Ricans need to start accepting responsibilities for the leaders they choose and the political status that they choose to stay in! The resent down grade of Puerto Ricos bonds to junk was a direct consequence of the government in turn. For one year they ignored their financial obligations and were dedicated to dispersing the budget in local contracts that did not bring any fruit. When confronted by the accrediting companies the governor in turn, Alejandro Garcia Padilla, said “ me vale.” Which means “I don’t care!” the lack of leadership, and greed of the Puerto Rican government is what created a 70billion debt in the island. The ignorant Puerto Rican public who still support this governors fanatically are to blame as well. So stop blaming the USA for your own incompetency’s.

Puerto Rico is a colony. it is, therefore, by definition not a part of the USA without full political and economic rights of the integrated parts of the U.S., i.e. states. The alleviation of the colonial status is key to devising strategies to alleviate the economic crisis.

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