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Puerto Rico, United States

Four reasons why Puerto Rico won’t become a state anytime soon

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For all the comparisons to Greece’s debt crisis, there’s one simple solution that many Puerto Ricans and mainland policymakers are prescribing to solve the commonwealth’s own financial crisis — and it’s not available to Greece or any other eurozone members. PR

Puerto Rico could simply become the 51st American state.

For the past 63 years, it’s been an estado libre asociado — a self-governing commonwealth that lies uncomfortably between a state and a territory, with bespoke elements unique to Puerto Rico, both good and bad.

Republican presidential contender and former Florida governor Jeb Bush supports statehood and in 2012, both US president Barack Obama and his rival, former Massachusetts governor Mitt Romney said they would support it if a clear majority of Puerto Ricans want statehood — Puerto Rico held a status referendum in the same election year. Pedro Pierluisi, Puerto Rico’s Democratic-affiliated non-voting delegate to the US  House of Representatives, made the case for it in an op-ed in The New York Times earlier this month.

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RELATED: The next debt crisis in the United States may
require a Puerto Rico bailout

RELATED: Could Puerto Rico really become the 51st US state?

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It’s true that both the Greek and Puerto Rican crises share much in common. Both governments are tethered to monetary policies that aren’t necessarily optimal. Functionally, that means neither Athens nor San Juan have a currency that they can depreciate to spur exports. Neither the European Central Bank nor the Federal Reserve can realistically be expected to tailor monetary policies to local needs. That, in turn, has exacerbated the effects from the economic forces of the past decade — the 2008-09 subprime crisis in the United States and the 2009-10 sovereign debt crisis in Europe, along with the economic pain of a nearly decade-long recession, rounds of tax increases and spending cuts, and accompanying rises in unemployment and downward pressure on wages. Lower growth, of course, means lower revenues and higher budget deficits — and more borrowing means higher yields that are now sucking Puerto Rico into a downward spiral. Alejandro García Padilla, its governor, made clear in late June that he believes the island’s $72 billion in debt is unsustainable.

In both scenarios, Greeks (through the Schengen zone) and Puerto Ricans (through the universal grant of US citizenship made in 1917 to allow Puerto Ricans to fight in World War I) can relocate to more economically prosperous European and American regions with ease. Migration means that fewer Puerto Ricans are left to service the growing debt — or build businesses and communities that can provide the revenues to fund schools and infrastructure. The island’s population is creeping downward; from a peak of 3.83 million in 2004, it was down to just 3.55 million last year. The pace of emigration is rising — to about 50,000 annually.

There are key differences as well between Greece and Puerto Rico.

Puerto Rico’s status is a relic of the late colonial era, and the United States acquired the island in 1898 as a result of its war against Spain (in Cuba, the Philippines and elsewhere). From the beginning, full-fledged independence has never been a popular option among Puerto Ricans. But nationalist sentiment rose so strongly by 1950 that two pro-sovereignty activists, Oscar Collazo and Griselio Torresola, attempted to assassinate US president Harry Truman.

The US policy response, Operation Bootstrap, adopted throughout the following decade to industrialize the island, transformed Puerto Rico into a more modern, urban place, even as American businesses consolidated the island’s farmland. But it never whisked Puerto Rico into a miraculous Caribbean Singapore, and it decimated small-scale agriculture.

Puerto Rico also suffers from the classic ‘island effect’ that economists sometimes describe of countries where dependence on imports and higher transport costs artificially increase the cost of living — a condition that’s often found throughout the Caribbean and islands, but that also affects Israel, a country surrounded by hostile Arab states with virtually no cross-border trade.

Most important of all, there’s no real talk of ‘PRexit,’ because no one believes that Puerto Rico could just abandon the ‘dollarzone.’ There’s no plan sitting in US treasury secretary Jack Lew’s desk that outlines the potential steps because it’s so much more implausible than a ‘Grexit.’

García Padilla is right that the crisis, decades in the making, is due to political factors as well as economic. Default may come soon — the Puerto Rican government says it doesn’t have enough cash to make a scheduled August 1 payment of nearly $170 million. That could launch a messy years-long default process, with the island trying to force haircuts on its bondholders. If San Juan can’t demand debt relief, protracted litigation might result in court rulings forcing Puerto Rico’s government to prioritize creditors over the salaries of public servants — galvanizing so much economic suffering that it would draw international condemnation over America’s neocolonial version of Greece.

There’s no effective Chapter 9 process for Puerto Rico, unlike for US municipalities, so the alternative of an orderly Detroit-style restructuring, isn’t available. The Obama administration, moreover, has made it clear that it doesn’t support a bailout — and it’s not clear that Republicans in Congress would be willing to provide the funds for any bailout.

So calls for statehood, in both Puerto Rico and on the mainland, and on the left and right, are on the rise, and predictably so. But as genuine as those calls might be, it’s a very, very unlikely result– and that will likely be true for a long time.

Here’s why. Continue reading Four reasons why Puerto Rico won’t become a state anytime soon →

Puerto Rico, United States

Could Puerto Rico really become the 51st U.S. state?

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In addition to the defeat of Puerto Rico’s budget-cutting governor Luis Fortuño in yesterday’s gubernatorial election, Puerto Ricans have also voted in a two-question referendum in opposition to its current commonwealth status, marking the worst result for the status quo in four such referenda in half a century. 

That doesn’t mean Puerto Rico is exactly on the fast track to become the 51st state of the United States.

There are reasons to believe that the path to statehood would encounter obstacles both from U.S. legislators in Washington, D.C. as well as difficulties in San Juan — not least of which due to the fact that Puerto Rico’s newly elected governor, Alejandro García Padilla, opposes Puerto Rican statehood and is likely to prioritize creating jobs and reducing crime over constitutional status issues.

The island is currently a U.S. territory, and since 1952, its constitutional status has been as a ‘commonwealth’ of the United States.  More on that below.

Tuesday’s referendum

First, let’s examine the actual referendum and the result.

The referendum itself was a complex two-question vote.  Puerto Ricans were first asked whether the commonwealth should continue to have its present form of territorial status.  Puerto Ricans were also asked which non-territorial option they prefer among three options: becoming a U.S. state, becoming independent, or becoming a ‘free associated state’ — think of the latter option as ‘independence light‘ akin to the relationship that Palau and the Marshall Islands have to the United States or like the relationship the Cook Islands have with New Zealand.

See the second prong of the ballot question:

Puerto Ricans could vote on the second question regardless of their position on the first question, so voters who support the current commonwealth status could nonetheless vote for their preferred non-commonwealth status as well.

Around 1.82 million voters participated in the referendum.  On the first question, 53.99% of voters voted that Puerto Rico should not continue to have its present form of territorial status, and 46.01% supported the current status.  In four referenda since 1967, that’s clearly the strongest vote against Puerto Rico’s commonwealth status.

On the second question, though, the headline statistic that most U.S. media are reporting is that 61.15% of Puerto Rican voters supported statehood (with 33.31% supporting a ‘free associated state’ and just 5.53% supporting full independence).

But that overstates the case, because over 486,000 voters cast either invalid or blank votes on the second question.  When you take those into consideration, statehood won just 44.62% of total votes, blank and invalid votes ‘won’ 27.04%, the ‘free associated state’ option won 24.31%, and full independence won 4.04%.

So while statehood seems to be the preferred alternative, not even a majority of the voters who took part in the referendum actually cast a vote for statehood.  Furthermore, we don’t know how ‘yes’ and ‘no’ voters actually voted on the second question, so there’s no way to know, what the anti-commonwealth voters, as a group, actually prefer.

Accordingly, the result isn’t a clear victory for much of anything, let alone statehood.  That may be fine — it’s just a non-binding referendum anyway.  As noted above, García Padilla and his Partido Popular Democrático de Puerto Rico (the PPD, Popular Democratic Party of Puerto Rico) is opposed to statehood, so it seems less likely that Puerto Rico will aggressively pursue statehood than if the incumbent, Luis Fortuño of the pro-statehood Partido Nuevo Progresista de Puerto Rico (the PNP, New Progressive Party of Puerto Rico) had won reelection.

Notably, however, Puerto Rico’s ‘resident commissioner,’ its non-voting representative to the U.S. House of Representatives, has the chief responsibility of introducing legislation to admit Puerto Rico as the 51st state. Puerto Rico’s resident commissioner, Pedro Pierluisi — who was only narrowly reelected on Tuesday with a 1% margin — belongs to the pro-statehood PNP.  Pierluisi, indeed, has indicated that he favors introducing such legislation.  We’ll find out, I guess.

Proponents of statehood chafe at the idea that Puerto Rico is somehow less equal, that it’s a colonial remnant from the imperial era.  Other supporters believe that full statehood would help lift Puerto Rico’s economic status by creating more links to the mainstream U.S. economy — the island’s GDP per capita of just $24,000 is almost half of GDP per capita on the mainland, the island has been stuck in a recession for the past six years and poverty, crime and unemployment are much higher there than on the mainland.

Opponents argue that statehood would not deliver many more benefits than Puerto Ricans currently enjoy, while subjecting it to less autonomy and more responsibility for U.S. federal taxes.  Furthermore, opponents worry that statehood could endanger the unique ‘boricua’ culture of the predominantly Spanish-speaking territory.  Needless to say, if you’ve ever been to San Juan, you realize quickly that it’s a world away from even heavily Latino U.S. cities like Miami, Los Angeles or New York. Nonetheless, Puerto Ricans are already well assimilated into U.S. culture and life — indeed, there are more mainland citizens of Puerto Rican descent in United States than on the island, and Puerto Ricans on the U.S. mainland share a rich cultural heritage, especially within the ‘Nuyorican’ diaspora that emerged in New York in the 20th century.

Since 1952, independence has remained a fairly unpopular option, although if Puerto Rico were a sovereign nation, it would be the Caribbean’s fourth most-populous country, after Cuba, Haiti and the Dominican Republic.  Its $96.26 billion economy would become the largest economy in the Caribbean, dwarfing not just the Cuban ($60.8 billion) or Dominican ($55.6 billion) economies, but also Central American ones, such as Panamá’s ($30.7 billion) and Costa Rica’s ($41.0 billion).

Puerto Rico’s status in context

Tuesday’s vote was the just the most recent of four increasingly complex referenda on Puerto Rico’s status since becoming a commonwealth in 1952.  Continue reading Could Puerto Rico really become the 51st U.S. state? →

Puerto Rico, United States

Who is Alejandro García Padilla?

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Although voters in the United States chose to retain a Republican House of Representatives, a Democratic Senate and a Democratic president in Barack Obama, it wasn’t as good a night for incumbents in the Commonwealth of Puerto Rico.

Alejandro García Padilla (pictured above), a Puerto Rican senator, narrowly defeated Puerto Rico’s governor Luis Fortuño in Tuesday’s Puerto Rican gubernatorial election and Fortuño conceded the race earlier this afternoon — with over 96% of the votes counted, García Padilla leads with 47.85% to just 47.04% for Fortuño.

The result will cap what was generally a good night for García Padilla’s Partido Popular Democrático de Puerto Rico (the PPD, Popular Democratic Party of Puerto Rico), which also took back control of Puerto Rico’s Asamblea Legislativa (Legislative Assembly) from Fortuño’s Partido Nuevo Progresista de Puerto Rico (the PNP, New Progressive Party of Puerto Rico), and which also won the mayoral race in San Juan, Puerto Rico’s capital and largest city.

So who is García Padilla? And how will García Padilla will his administration differ from Fortuño’s?

García Padilla, age 41, an attorney and former law professor, was elected to Puerto Rico’s Senate in 2008 as the PPD’s most popular vote-winner.  He previously served as the secretary of consumer affairs under former PPD governor Aníbal Acevedo Vilá from 2005 to 2008.

García Padilla’s victory first and foremost likely means an end to the austerity policies of his predecessor.

As governor, Fortuño has essentially eliminated Puerto Rico’s $2 billion budget deficit, but he’s done so by cutting public sector jobs and reducing spending on higher education, even while he reduced taxes 50% for individuals and 30% for business.  The implementation of his economic program has drawn considerable attention in the United States, and Fortuño himself is somewhat of a star within the Republican Party — he and his wife had primetime speaking roles during the Republican National Convention in August.  If Mitt Romney had won Tuesday’s U.S. presidential election, it seemed likely that Fortuño could even be elevated to a cabinet position in a Romney administration.

Fortuño, already on the ropes after losing two referenda earlier in the summer to reduce the number of legislators in Puerto Rico’s legislative assembly and to give judges the right to deny bail in certain murder cases (Puerto Rico, uniquely, entitles everyone to bail regardless of the crime), was never quite a favorite for reelection.

García Padilla ran a stinging campaign against the harshness of Fortuño’s austerity measures in the face of an economic climate even more troubling than on the U.S. mainland — the economy has been in recession for six years, unemployment remains relatively high at 13.6% and the poverty level has reached a staggering 45.6%.  Meanwhile, crime is rising steadily, with over 1,000 murders in 2011 alone.  Puerto Rico’s GDP per capita of just around $24,000, about half that of the United States, makes it already much less prosperous than the mainland.  Continue reading Who is Alejandro García Padilla? →

Puerto Rico, United States

Who is Luis Fortuño? A primer on Puerto Rico and the Republican Party’s favorite boricua.

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Tonight, at the U.S. Republican National Convention in Tampa, Florida, the list of primetime speakers will feature the governor of the Commonwealth of Puerto Rico, Luis Fortuño.

Although Suffragio doesn’t normally wade into U.S. politics, Puerto Rican politics lies fairly far afield from mainstream American politics, notwithstanding the plum role that Fortuño will fill tonight at the convention in his support for U.S. presidential candidate Mitt Romney.

Fortuño was elected governor of Puerto Rico in 2009, winning 52.8% of the vote to just 41.3% for the incumbent, Aníbal Acevedo Vilá, who had been implicated in a corruption scandal.  As governor, Fortuño immediately embarked upon a relatively unpopular program of cutting $2 billion from Puerto Rico’s budget, resulting in over 12,000 layoffs of state employees.  Fortuño also passed and implemented Law 154, which imposed a temporary excise tax on certain overseas sales, while also cutting taxes 50% for individuals and 30% for businesses.  Ultimately, Fortuño brought the budget deficit from $2 billion in 2009-10 to just $333 million in 2012-13 — his zeal for cutting budgets and for lowering taxes has attracted a significant amount of regard from Republicans on the U.S. mainland, and he was even mentioned as a potential vice presidential candidate for Romney.

Political parties in Puerto Rico, however, aren’t organized along the same ideological lines as on the U.S. mainland — Fortuño belongs to the Partido Nuevo Progresista de Puerto Rico (the PNP, New Progressive Party of Puerto Rico), which is first and foremost a proponent of full statehood for Puerto Rico.  In contrast, the Partido Popular Democrático de Puerto Rico (the PPD, Popular Democratic Party of Puerto Rico) favors Puerto Rico’s current status as a commonwealth.  A smaller third party, Partido Independentista Puertorriqueño (Puerto Rico Independence Party) favors Puerto Rico’s full independence — it looks and feels much like a traditional Latin American populist/leftist party, and it has attracted the support of the likes of high-profile Latin American figures, including author Gabriel García Márquez.

Continue reading Who is Luis Fortuño? A primer on Puerto Rico and the Republican Party’s favorite boricua. →