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Puerto Rico economy

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Early last month, a debt restructuring plan was imposed on Puerto Rico by the unelected Fiscal Control Board (La Junta) and approved by an American judge, but this Fiscal Control Board also went so far as to say that Puerto Rico’s status problem cannot be resolved until these debt and fiscal issues are dealt with first. While the members of the Fiscal Control Board and other U.S. media outlets celebrate and sugarcoat this “success”, actual Puerto Rican experts and organizations (whose voices are usually ignored) have strongly opposed this “debt restructuring plan” yet have been disregarded time and again by the Fiscal Control Board.

The Fiscal Control Board not only refused to audit Puerto Rico’s public debt (which is a crass irresponsibility), but also declined to consider the legal doctrine of “odious debt”, particularly when one reasons that a non-sovereign colonial territory like Puerto Rico does not have authority to emit debt in its own name (because it’s not sovereign), thus any and all public debt emitted by Puerto Rico is actually American public debt.

Of course, even though the U.S. government has repeated asserted that Puerto Rico is not sovereign, it is apparently “sovereign enough” to emit its own SEC-approved debt, violate its own constitutional debt limits, and then fall victim to vulture funds who bought Puerto Rican bonds knowing full well that Puerto Rico could not realistically pay it back. The Fiscal Control Board never audited the debt and refused to consider the doctrine of “odious debt”.

With Sovereignty Puerto Rico could have a strong and diverse economy, not be under the thumb of an appointed, unelected Fiscal Control Board.

Americans also need to know that the Fiscal Control Board is detested in Puerto Rico because most Puerto Ricans consider its members merely appointed foreigners who are out to impoverish Puerto Rico with severe austerity measures for decades to come in order to placate bondholders who made bad investing decisions. The U.S. Congress, through PROMESA, even forces Puerto Rican taxpayers (who are already struggling to get by) to fund the Fiscal Control Board and pay their exorbitant millionaire salaries.

In regard to Puerto Rico’s future, saying that Puerto Rico has to “wait” to resolve its status problem until the fiscal situation improves is disingenuous when one considers the ugly reality that most of Puerto Rico’s political, economic, and fiscal problems are the direct result of colonialism and the nefarious policies that not only limit Puerto Rico’s voice and political power, but also its economic development. The problematic “elephant in the room” that American officials and politicians refuse to acknowledge is colonialism (euphemistically called “having territories”) and nothing will change in Puerto Rico until that is addressed. It’s like waiting for a slave to miraculously become a millionaire as a precondition to grant him/her their freedom.

Puerto Rico, as the last 124 years have shown, cannot and will not progress economically if it continues under colonial rule and federal regulations that strangle our economy. Puerto Rico’s economy is out of Puerto Rican hands, yet Puerto Ricans are expected to forge a healthy economy when they don’t have the authority nor tools to do that since Puerto Rico’s economy is actually administered and controlled by the United States. The Fiscal Control Board, created by Congress, boasts about “getting Puerto Rico’s financial house in order”, but how can we as Puerto Ricans accomplish such economic growth and development ourselves if “we don’t control our own economy” due to colonial rule?

Behind the celebration and the champagne glasses at the Fiscal Control Board offices, one must understand that this debt restructuring plan was designed by unelected outsiders and approved by an appointed judge that were watching out for the financial interests of others, not the interests nor economic future of Puerto Rico. Puerto Ricans are not happy with this debt restructuring plan that imposes austerity and suffering on future generations, - all the while Puerto Rico remains powerless and voiceless in a colonial relationship where it is told to be quiet, don’t complain, and pay up. Puerto Ricans are not being “quiet” and are currently organizing and mobilizing strikes and protests to challenge this debt plan.

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What the Fiscal Control Board and most American politicians fail to understand is that to truly help Puerto Rico progress, the country needs to be free, not chained and imprisoned in a 124-year-old colonial cage. You cannot expect an enslaved person to become rich and prosper if he/she remains in chains locked away in the political basement known as colonialism. Freedom is a precondition for any chance of prosperity and economic development. Thus, one cannot have a true and lasting debt restructuring plan without decolonization first. Now, with only 27% of all registered voters supporting statehood in 2020 and 67% of the people not voting for the pro-statehood governor, there certainly is no mandate whatsoever for Puerto Rico statehood and the U.S. Congress understands this. 

In 2014, the U.S. Congress’ Government Accountability Office (GAO) published a report that explained how statehood would negatively impact both the Puerto Rican and U.S. economies. According to this report, the increased federal tax burdens of statehood, up to $11.6 billion alone, would decimate the Puerto Rican economy, consolidate welfare dependency on federal funds, and push American companies, along with thousands of Puerto Rican professionals, to leave Puerto Rico, which would further exacerbate Puerto Rico’s economic debacle. Realizing that both the Commonwealth and Statehood options promote dependency and poverty in Puerto Rico, the only viable option is Sovereignty, either via Independence or Free Association - a dignified political relationship whereby Puerto Rico would become a sovereign nation, yet associated with the United States as an ally and economic partner.

Currently, Free Association is the status option with the largest growth margin of support in modern Puerto Rico, going from 0.29% of the vote in the 1998 plebiscite to 33.3% of the vote in the 2012 plebiscite. In the 2012 plebiscite, both sovereignty options together garnered almost 40% of the vote – not too bad when one considers that pro-sovereignty advocates have been persecuted by the colonial regime and statehooders for over a century.

According to estimates discussed in my recently published book, “Puerto Rico: The Economic Case for Sovereignty”, a sovereign Puerto Rico with only a robust customs system at all of our ports of entry and a competitive 15% tax on multinational corporations (a tax rate defended by the United States) would be able to generate $17.6 billion in revenues, which is $8.6 billion more than Puerto Rico’s current operating budget of $9 billion. As you can see, sovereignty is the option of real economic growth and development. In fact, a sovereign Puerto Rico could finally audit the debt and implement a real debt restructuring plan that doesn’t compromise Puerto Rico’s economic and fiscal viability.

A sovereign Puerto Rico would prioritize specific strategic sectors that the government would incentivize, such as industry, tourism, technology, pharmaceutical, aerospace, and scientific sectors, among others. American and foreign companies would benefit since they would be able to invest in these priority sectors as well, furthering our economic development goals.

While statehood supporters boast about bringing in more American taxpayer funds for more food stamps; sovereignty, on the other hand, would generate wealth and finally open Puerto Rico to the world and many more economic opportunities.

With Sovereignty, Puerto Rico would be able to establish a strong and diversified economy, not be under the thumb of an appointed and unelected Fiscal Control Board that believes “it knows what’s best” for Puerto Ricans by forcing austerity measures that experts say will destroy Puerto Rico and bring upon another bankruptcy in 10-15 years.

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Puerto Rico’s future needs to be in Puerto Rico’s hands and Sovereignty would allow that.

Javier A. Hernandez