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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 →

Chile

Bachelet’s most tenacious second-term foe? Lofty expectations.

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Michelle Bachelet, Chile’s president between 2006 and 2010, pulled off Sunday what no other Chilean president has done since the return of democracy in the post-Pinochet era — win a second, non-consecutive term.chile

To draw a contrast to the United States, only one president managed to return to the White House after leaving it — Grover Cleveland, who served two non-consecutive terms in the 1880s and the 1890s, though he’s routinely ranked among the more forgettable and inconsequential of US presidents.  Although it’s an inexact analogy (US presidents have never been barred from holding two consecutive terms the way that Chilean presidents are), Bachelet now faces the challenge of becoming one of Chile’s transformational 21st century leaders — in short, her challenge is not to become Chile’s Grover Cleveland.

Her return as president follows a four-year interregnum of government by Chile’s center-right — and in Sebastián Piñera, a president who represented the most moderate tendencies of the Chilean right, largely unsullied by association with the 17-year military regime of Augusto Pinochet.  Piñera’s term has been marked by relatively robust economic growth and sound government, even if Piñera himself hasn’t always been the most effective advocate for his own administration.  That became especially clear as Piñera seemed to lose control of the tussle between his government and student protesters throughout his term in office.

Moreover, the center-right did itself no favors in the process of nominating a candidate to succeed Piñera — the initial resignation of frontrunner Laurence Golborne last spring over private-sector scandal, the subsequent primary fight within the Chilean right between the more moderate Renovación Nacional (RN, National Renewal) and the more conservative Unión Demócrata Independiente (UDI, Independent Democratic Union), the sudden withdrawal of the primary winner Pablo Longueira, and his hasty replacement with former labor minister Evelyn Matthei as the standard-bearer of the fractured center-right Coalición por el Cambio (Coalition for Change) — widely referred to as the Alianza por Chile (Alliance for Chile).

But even in a parallel universe where a united Alianza backed a scandal-free Golborne, Bachelet was always deemed the favorite to win the Chilean presidency.  Furthermore, though Bachelet nearly routed Matthei in the first round (46.70% to 25.03%), she won a nearly two-to-win landslide against Matthei in Sunday’s runoff (62.16% to 37.83%).  But as Bachelet prepares to return to La Moneda, she should fear that the same forces that rendered the Piñera administration so unpopular could also render her second term even more  unpopular, especially after raising such high expectations in her successful second-term presidential campaign.

Part of the problem is that her constituency today covers a wider portion of Chile’s political spectrum than it did in her first victory eight years ago.   Continue reading Bachelet’s most tenacious second-term foe? Lofty expectations. →

Puerto Rico, United States

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

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Washington may be enjoying some well-deserved rest from the brinksmanship of the dual crises over the US federal government shutdown and the possibility that the US Congress might not raise the debt ceiling.USflagPR

Though both crises ended last week, a new crisis may have been gathering steam while the world focused on the global implications of a seemingly dysfunctional American political system.

It’s Puerto Rico, where both finances and the economy seem to be spiraling out of control.

Bondholders are pressuring Puerto Rico

Investment vehicles that buy state and municipal bonds have long loved Puerto Rico’s bonds.  Although the bonds are rated BBB+ (by Standard and Poor’s), they are a tax-exempt hat trick.  Not only are Puerto Rican bonds exempt from all federal taxes (like all state and municipal bonds), and not only are they exempt from applicable Puerto Rican commonwealth and other local taxes (which is generally how most state and municipal bonds are treated in the state or territory of their issuance), Puerto Rican bonds are exempt from state taxes in all 50 US states.  So while Virginian bonds may be taxable under New York state tax, or Californian bonds may be taxable under North Carolina state tax, Puerto Rico’s bonds are exempt from state and local taxes everywhere.

Bondholders have typically shrugged away Puerto Rico’s ‘BBB+’ rating because the yields were sufficiently high enough (around 5%) and the tax advantages so pronounced that Puerto Rican debt looked like an easy way to goose returns for the average fund manager.  So Puerto Rican bonds became predictably popular, and many mutual funds and other investment vehicles are widely exposed to Puerto Rican debt.  Morningstar estimates that 77% of all muni funds hold Puerto Rican bonds to some degree, and they’re all now incredibly itchy about their exposure.

But when yields started climbing over the summer and early autumn to above 8% and even 9%, it spread alarm not only in San Juan, but in New York and other global financial capitals, as investors and analysts started thinking more deeply about the weakest geographic link in the US financial system, a ‘commonwealth’ with a much more fragile economic outlook that shares only some elements in common with the mainstream US economy.  Puerto Rico’s governor, Alejandro Garcia Padilla, and a slew of top officials have spent the rest of October in New York, Washington and elsewhere trying to calm markets and policymakers.

No US state has a debt outlook as poor as Puerto Rico’s, and its ‘BBB+’ rating is just one notch above junk debt status.  If any of the three major ratings agencies downgrade Puerto Rican debt further, it could trigger a number of adverse ‘death spiral’ consequences.  Puerto Rican bonds are already selling on the open market well below par, but if Puerto Rican debt hits ‘junk bond’ status, it would suddenly become much, much worse.

Mutual funds could be forced to sell their entire Puerto Rican portfolios, which would flood the market with bonds that would become almost immediately worthless.  Puerto Rico’s government could be forced to post additional collateral against those bonds, leaving its government even more strapped for cash.  That’s not even taking into account the effects of any credit default swaps related to Puerto Rican debt.

All of which means Puerto Rico is now a lot closer to insolvency than it was a month ago.

But unlike the city of Detroit, which filed for Chapter 9 bankruptcy earlier this summer, Puerto Rico is a sovereign (technically an ‘unincorporated territory’) and cannot file for bankruptcy as a matter of law.  To the extent there was any legal doubt about it, a federal court slammed shut the door in 2012 when it ruled that the pension fund of the commonwealth of the Northern Mariana Islands could not file for bankruptcy.

That leaves US president Barack Obama with the unpalatable option of having to consider a bailout of Puerto Rico — an option that some Puerto Rican officials were already discussing openly earlier this month:

In a meeting with bond analysts in New York on Monday, the president of the Puerto Rican Senate, Eduardo Bhatia, said officials in the United States Treasury and White House had been analyzing the situation carefully, “wondering how they can help Puerto Rico send a very strong signal of stability right now.”

Given that the Republicans who control the US House of Representatives are incredibly anti-debt, the fight to raise the debt ceiling would look like a cakewalk compared to the congressional fight over a potential Puerto Rican bailout.  If House Republicans seem unwilling to move forward on immigration reform, they seem even less likely to approve a bailout for a territory that pays no federal income tax, that elects no members to Congress and that has no electoral votes in the US presidential election.

Is Puerto Rico the Greece of North America?

The real horrorshow element to this is that Puerto Rico could wind up being to the United States what Greece was to the European Union — the canary in the coal mine that exposes wider state-level and municipal exposure.

The immediate possibility of a US debt default through political brinksmanship has now passed, at least until February 2014.  Furthermore, no one expects Puerto Rico to fall out of the ‘dollarzone,’ or face the idiosyncratic problems that the European Union faces, where monetary policy is set at the European level and fiscal policy is still set at the national level.

But if yields remain elevated, Puerto Rico won’t be able to borrow enough to finance its government.  Its leaders say that Puerto Rico is prepared to refrain from further borrowing through June 30 of next year and wait out the current debt scare, but that’s hardly a solution to the crisis.  Even if that estimate is correct, what happens in July 2014 if yields spike again?  What happens the next time bondholders start doubting Puerto Rico’s ability to meet its debt obligations?

Like Greece, Puerto Rico spent the 2000s on a debt spree — its debt load as a percentage of what Puerto Rican GNP increased from around 60% in 2000 to over 100% today.

It now seems clear that Greek debt was mispriced following its entry into the eurozone because debt yields converged among all eurozone countries.  That allowed Greece’s government to borrow throughout the 2000s at rates lower than its fundamental economic and financial performance would otherwise warrant.  Essentially, Greece continued to borrow at Greece-level amounts but with the benefit of German-level rates.

In the same way, investors have potentially mispriced Puerto Rican debt — no one actually treated Puerto Rico’s bonds as if they were one downgrade away from junk status.  That’s partly because the tax incentives were so favorable, but it’s also because no one really thought that the debt of a US territory was actually so risky.

But the debt ceiling fight highlighted the attention of world markets on the precariousness of US debt generally.  So while a run on Puerto Rico’s debt could end with Puerto Rico, it could also make mutual funds and global investors think twice about holding US municipal and state debt, especially in the wake of the debt ceiling fight and Detroit’s municipal bankruptcy.  There’s wide variance among the credit ratings of the 50 US states:

debtratings

According to S&P state-level credit ratings (as of January 31), while many US states have stellar credit ratings of ‘AAA’ (bright green in the map above) or ‘AA+’ (spring green), there are plenty of states with ‘AA’ (yellow) or ‘AA-‘ (orange).

Two of the largest states with a combined population of nearly 51 million have even more precarious ratings — California (rated ‘A’), despite the best efforts of California governor Jerry Brown to transform his state’s finances, and Illinois (rated ‘A-‘).  State debt loads vary considerably on a per-capita basis as well — this chart from the Tax Foundation shows that per-capita state-level debt ranges from $925 in Tennessee to over $11,000 in Massachusetts.

But it’s all worse in Puerto Rico, which has issued about $87 billion in outstanding debt, which comes out to over $23,000 on a per-capita basis.

Puerto Rico’s economy has been struggling for a decade

Meanwhile, no US state has an economy that’s in such poor shape as Puerto Rico does.

Puerto Rico’s unemployment rate is 13.9% (as of August), which is higher than the national average (7.3%) and higher than any other US state or territory.

Like Portugal and Italy, Puerto Rico’s economy was stagnant long before the 2008-09 global financial crisis — since the year 2000 (when it achieved 6.3% GDP growth), the Puerto Rican economy has been in contraction more often than it’s been in expansion.  Here’s a chart of the GDP growth of Puerto Rico against that of the United States between 1999 and 2012 — you can see that Puerto Rico entered a recession in 2005 that ended only last year, when it posted 0.5% growth:

Screen Shot 2013-10-22 at 3.01.14 PM

Puerto Rico’s economy outperformed the US economy only once in the past decade — it didn’t take the sharp hit that the United States suffered in 2008 and 2009.  But even that’s bad news for Puerto Rico, because it shows just how disconnected the island’s economy is from the mainstream US and global economy.

Moreover, Puerto Rico is already starting off far behind the US mainland in just about every economic indicator. Its median income of around $18,000 is far lower than the average income in the United States, and it’s about one-half of the poorest state median income (Mississippi’s median is around $36,000).  Nearly 41% of Puerto Ricans live below the poverty line, compared to just 16% within the United States.  Its regional GDP per capita is around $27,000, about half that of the United States generally.

Also like Portugal and the peripheral economies of Europe, Puerto Rico’s population (around 3.67 million) is in decline.  Its population peaked at just over 3.8 million people in 2004, and it’s dropped more than 4% in the past eight years, partly due to migration to the US mainland and partly due to a declining birthrate.  Just as in the peripheral economies of Europe, population decline means that there are fewer workers to support an increasingly unproductive and aging population.

Continue reading The next debt crisis in the United States may require a Puerto Rico bailout →

Chile

Bachelet enters Chilean presidential race as top contender

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Michelle Bachelet returned to Chile on Wednesday, wasting no time in declaring her much-awaited candidacy for president, with an air of inevitability that makes former U.S. secretary of state Hillary Clinton’s hold on the U.S. presidency in 2016 seem tenuous.chile

Bachelet (pictured above), who previously served as president from 2006 to 2010, and more recently as the United Nations Entity for Gender Equality and the Empowerment of Women, would be the first Chilean president in the post-Pinochet era to win a second term to the presidency.

Under the Chilean constitution, no president may run for reelection, though presidents can return for non-consecutive terms.

She is almost certainly a shoo-in to win the presidential nomination of the Concertación de Partidos por la Democracia (Concert of Parties for Democracy), usually known simply as the Concertación, the coalition of center-left parties that has dominated Chilean politics in the era following the military dictatorship of Augusto Pinochet.

Bachelet is also the favorite to win the general election on November 17 — although incumbent Sebastián Piñera will not be on the ballot, he’s had a turbulent time as president since his election in 2010.  Piñera’s greatest contribution to Chilean democracy may well have been his election — after running a moderate, respectful campaign, his election marked the return of conservatives to power for the first time since Pinochet left office, trumpeting the full normalization of Chilean politics.

But Piñera will leave office relatively unpopular — despite his government’s successful rescue of 33 trapped miners in October 2010, more recent troubles, such as rising poverty, income inequality and massive student protests in 2011 and 2012 in favor of the creation of new public universities, the end of for-profit education, and a new system to facilitate the financing of secondary education, have left his administration unloved and mocked for its numerous hiccups and misfortunes — so-called piñericosas.

The two likely candidates to challenge Bachelet will face off in a June primary among the parties of the Coalición por el Cambio (Coalition for Change), which formed in 2009 to boost Piñera’s campaign as a merger of two parties (and some other smaller parties):

  • The Unión Democrata Independiente (UDI, Independent Democratic Union), a party formed in the early 1980s among civilian supporters of Pinochet’s economic policies and military rule, and which moderated itself in the early 2000s.
  • Renovación Nacional (RN, National Renewal), which broke away from the UDI over the issue of the 1988 plebiscite on Pinochet’s continued rule — although RN ultimately largely supported Pinochet’s reelection, it originally favored an alternative candidate.  Piñera himself comes from the RN leadership, not from the UDI.

The UDI’s has indicated that its candidate will be independent Laurence Golborne, an engineer by training and the former CEO of Cencosud, a Chilean retailer.  He was, until recently, the Chilean minister of public works and before that, the former minister of mining and energy, where he became very popular in the wake of the government’s successful 2010 Copiapó mine rescue.  The RN candidate, Andrés Allamand, until recently, was Chile’s defense minister.

A CEP Chile poll in early January showed 49% favored Bachelet, while 11% supported Golborne and just 5% backed Allamand.  Another late January poll showed Bachelet leading 42% to 15% for Golborne and 5% for Allamand.

That lead will invariably narrow between now and November, however, when the center-right candidate emerges in June.  Despite the highest income inequality in the Organization for Economic Development (note that Chile is the only South American OECD country), Chile’s strong mining industry has powered growth rates of 6% since 2011, its GDP actually growing faster than before a temporary dip during the 2008-09 global financial crisis.

It’s quite incredible to think that the Concertación, which controlled the Chilean presidency from 1990 to 2010, held consecutive power three years longer than the military mostly under Pinochet (17 years).  The Concertación includes four parties: Continue reading Bachelet enters Chilean presidential race as top contender →

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. →