Believing in Miracles

"It's the miracle of the Caribbean," proclaimed Kenneth McClintock, the Secretary of State of Puerto Rico, when asked about Gov. Fortuño's handling of the economy. Mr. McClintock made this recent statement at the annual meeting of the National Lieutenant Governor's Association, which was held on the island this year. During this gathering, Gov. Fortuño encouraged the lieutenant governors in attendance to follow in his footsteps and adopt austerity measures as a means to solving the budget problems afflicting the majority of the states on the U.S mainland. The Governor boasted that he has reduced the government's payroll by 17% and underscored the fact that no other state had ever laid-off 23,000 public employees. Most were weary (and rightfully so) of Fortuño's approach though. This would include Yvonne Prettner, the Lieutenant Governor of Minnesota, who hails from a state which just had the U.S' longest government shutdown in a decade.

As Congress wrangles over raising the debt ceiling, and the so-called "great recession" (in Puerto Rico it's officially the "great depression") continues, the fact is that there is no silver bullet which can solve all these economic problems. Gov. Fortuño argues that his fiscal plan has now put the Puerto Rico's economy on the right path, but didn't quite address why the island's unemployment rate remains staggeringly high (it varies between 15% to 17%), and why GDP growth remains negative. This truly can't be what McClintock referred to as the "Caribbean miracle."

Perhaps it is somewhat of a "miracle" that things haven't drastically worsened since the Fortuño administration's implementation of the infamous fiscal emergency law (aka "Ley 7"). Many do agree that the public sector needed to be trimmed down, but it has most certainly come at a great cost. Take, for example, goverment services. It has been estimated that in 2009, the Department of Family was unable to investigate over 27,000 child abuse cases. Officals claim that there aren't enough social workers working at the deparment. Simply said, to call Puerto Rico's economic situation a "miracle" is utterly preposterous.

The "D" Word

While listening to National Public Radio's Planet Money, which recently did a podcast titled "How Much Debt is Too Much?" and analyzed the debt to GDP ratio (the amount of money you owe divided by your annual income) of countries such as Greece, Italy and the U.S, I couldn't help but look up Puerto Rico's figure. As mentioned in the podcast, when a country takes on too much debt, it can stifle economic growth. This would subsequently make the country borrow even more money, and lead to a potentially dire future if no budget changes are implemented in the long run. Turns out that the island's debt to GDP ratio in 2010 was 56.7% (an estimated $14,289 worth of debt per resident in Puerto Rico). In comparison, California, for all its budget problems, the ratio is currently a little over 19% (or roughly $10,009 per resident in the Golden State). As for the U.S, the ratio is almost at 100%. Greece, which has of course made worldwide headlines for its huge economic woes, has a ratio of a whopping 150%.

Historically, according to Harvard economist Ken Rogoff, countries start running into trouble when the debt to GDP ratio goes above 90%. Puerto Rico is certainly not considered to be a Greek tragedy but, if it were a state, the island would have the worst per capita debt in the U.S. In an effort to reign in spending and decrease its debt (as well as improve its standing with credit rating agencies such as Moody's and Standard & Poor's) thousands of government workers have been laid off and certain governmental agencies have even ceased to exist, as they have merged with other departments. In the latest attempt to decrease government debt, and beef-up its coffers, Gov. Fortuño decided to cede the operations of one of the most heavily transited highways on the island to a Goldman Sachs-led consortium. This group had reportedly placed a $1.08 billion bid for this venture. The government is now also hoping to privatize the island's largest airport and is looking for takers. Puerto Rico also has a severly underfunded public pension system, which Moody says is worse than what most states in the U.S mainland are confronting.

On Doing it Better

"Puerto Rico lo hace mejor," ("Puerto Rico does it better") said Gov. Fortuño in closing his recent press conference announcing the extension of Impulso a la Vivienda, a housing incentive program which the government hopes will lead to the monthly selling of at least 500 new homes. It is a phrase that has become increasingly vacuous. The slogan was initially used by the Puerto Rico Tourism Company to promote the island as a vacation destination, but many boricuas often use it as a tongue-in-cheek response to the government's countless shortcomings. Moreover, it also reflects Puerto Rico's general malaise. The latest scandal includes the island's disastrous Medicaid program, Mi Salud, which threatens to leave thousands of people without medical coverage. Many physicians claim they have not been paid for their services, and some have already refused to treat Mi Salud patients. The current system, as it stands, is plagued with inefficiencies and lack of coordination. Ideas on how to improve Mi Salud have already been circulating, some suggest the government adopt the Medicare model in emiting payments to medical insurance companies.

The impending collapse of Mi Salud (in its current form) came as no surprise to many in the health care industry, as was the forced resignation of the Police Superintendent José Figueroa Sancha. His departure is largely due to the steady increase in crime. The murder rate this year is expected to be much worse than the year before. Meanwhile, the Governor has appointed Emilio Díaz Colón, a former commander of the Puerto Rican National Guard, to lead the U.S' second largest police force (the NYPD is the nation's biggest). Many have already written the Major General off, saying he will not be effective in lowering the island's notorious crime rate. So long as the island's judicial system remains weak and feeble, only 7.5% of the island's murders result in a conviction, crime will remain pervasive. To be sure, much work lies ahead in order to put some substance behind the phrase "Puerto Rico lo hace mejor."

Celebrating Independence

With much pomp and circumstance, Puerto Rico celebrated America's 235th birthday complete with fireworks and cultural activities in the Condado section of San Juan. For most on the island, as with their counterparts on the mainland, July 4th is a day to grill and to spend at the beach. Although Puerto Rico is a U.S territory, you'd be hard-pressed to find a flying American flag, with the exception of federal buildings and some federally-funded infrastructure projects. The festivities of the Fourth is in many ways a much politicized event, one which is more widely celebrated in the PNP (the pro-statehood party) circle. For most boricuas, the U.S is mostly viewed as a foreign country. The majority see the island as having closer cultural ties to Spain rather than to the U.S. Needless to say, those who support the PIP (the pro-indpendence party) see the island's July 4th celebrations as outlandish.

As many countries in Latin America (the latest is Venezuela) have been commemorating their bicentennial anniversary of independence from Spain, Puerto Rico is the only place in the region which has been excluded. This is obviously nothing shocking, as the island is not considered to be a sovereign country, but a U.S colony. In a BBC Mundo article titled "Puerto Rico: el país sin bicentenario" (translation: "Puerto Rico: the Country Without a Bicentennial"), it explores the complexities of the status issue. No official date has been set, but Gov. Fortuño and his PNP ilk have been pushing for another referendum vote on the island's political status. President Obama has vowed to support the outcome, whether it be statehood, the status-quo ("commonwealth") or independence. If the past is any indication of the future, and obviously this doesn't always hold true, the island remains very much split on this topic.

One of the predominant reasons for this divisiveness is pure economics. Until Puerto Rico can truly obtain a dynamic economy, and survive without receiving a single penny from the U.S treasury, it will continue to observe the declaration of independence of its colonizer. Imagine an adolescent being thrown out of his parents' home without the financial wherewithal to support himself. This year, the official Fourth of July activities were held at the Condado Lagoon, site of the re-inauguration of the Dos Hermanos Bridge, which was partially built with federal funding. I suppose the venue befits the occasion.