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The Key to Puerto Rico’s Transformation

Man at a fruit stand
In the city of Ponce, Puerto Rico, a man stands next to newspapers displaying stories about the country’s credit rating downgrade in February 2014. © Alvin Baez/Newscom

We are living in difficult times. Puerto Rico is beset by drought. The unemployment rate is over 12 percent; only 40 percent of our labor force works in the formal economy. Migration off the island in the last decade has accelerated dramatically.

And then there’s the financial crisis. The commonwealth’s total public debt is over $72 billion, exceeding the current gross national product of $70 billion. As it stands now, one out of every six dollars will go to debt service this fiscal year. 

The government’s General Obligation Bonds are guaranteed with the full faith and credit of the Puerto Rican government—and prioritized in our constitution before payroll payments to government employees and other debts. The situation is complicated by the fact that Puerto Rico lacks the mechanisms for an orderly debt-restructuring plan. Public corporations and municipalities are unable to use the Chapter 9 bankruptcy process due to an obscure amendment made by the U.S. Congress in 1984.

Puerto Rico’s finance team has yet to announce its plan to address these challenges, and a meeting it had this month with the island’s creditors only reaffirmed the fact there is no quick fix to the island’s economic problems. 

For a long time, the government paid operating expenses with long-term loans that should have been earmarked for investment in infrastructure, health, education, and other public goods. Median household income stands at about $19,000, approximately one-third of the U.S. average. Forty-five percent of Puerto Rico’s population lives below the federal poverty line, three times more than in the United States. Income inequality is acute and educational achievement is far from ideal: only 27 percent of the population obtained a high school degree or equivalent, while 17 percent has less than a ninth-grade education. Our mounting debt makes it all the more difficult to address our lagging income, health, and educational problems. 

Two major issues are key to our current woes.

First, Puerto Rico has an unresolved political issue that the U.S. Congress continues to ignore. The island is an unincorporated territory that is neither a state nor an independent country, and the ambiguous “commonwealth” status has proved to be one of the main obstacles to effectively addressing the dire economic straits we are in.

The lack of government accountability is also a major factor in this messy equation. With few reliable statistics and inefficient oversight mechanisms, government has traditionally been opaque. There has been no fiscal discipline, and political favoritism is rampant. Puerto Rico’s inability to repay its public debts, combined with proposed austerity measures, such as tax increases and deeper cuts in government services, have made urgent the need for independent nongovernmental organizations to conduct better oversight.

Espacios Abiertos [Spanish site], created in 2014 as part of the Open Society Foundations’ Open Places Initiative, seeks to improve government accountability by increasing the capacity of civil society organizations and individuals to effectively monitor and influence government decisions. Government accountability contributes to the development of strong, modern economies, and helps promote social welfare. Without access to clear and accurate information, citizens cannot evaluate and measure the performance or abuse of power by government authorities.

Yet access to information alone will not generate the necessary changes. Active participation by the population is required to request and enforce the changes that we all know are urgent.

As part of this effort, Espacios Abiertos recently helped organize an alliance of more than 140 nongovernmental organizations on the island to halt proposed cuts in the budget. Short-term austerity is no substitute for long-term economic planning and changes in governance and accountability. Both need to be crafted and monitored by Puerto Rico’s civil society sector, which needs to become stronger in order to demand and achieve change.

Espacios Abiertos aims to play a catalytic role on these fronts and at the same time consistently remind policymakers that the real objective of fiscal and economic reforms is to protect the well-being of all Puerto Ricans, especially the most vulnerable in our society.

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