Puerto Rico′s ignored debt crisis fuels statehood proponents | Americas| North and South American news impacting on Europe | DW | 18.07.2015
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Puerto Rico's ignored debt crisis fuels statehood proponents

The Standard & Poor's ratings agency cut Puerto Rico's credit rating down to junk status this week. Can an initiative to make the US territory the 51st state save its economy, or will the island become the next Greece?

Puerto Rico's economy appears to be in deep trouble. The US territory continues to struggle in refinancing its $73 billion (67 billion euros) in outstanding government debts, keeping the island in economic and political deadlock. Initial defaults this week have set the scene for what might perhaps turn into the biggest rescue talks since Greece.

Puerto Rico's arrears may only be about a fifth the size of Greece's, but with a higher population density the island territory presently appears to boast about two-thirds of Greece's per capita debt levels. In a televised address, Puerto Rico Governor Alejandro Garcia Padilla recently hinted that the debt pile per capita will likely have doubled by 2025, potentially threatening to outshine Greece which is still threatened with a eurozone exit.

Alejandro Garcia Padilla, Governor of Puerto Rico

Governor Alejandro Garcia Padilla expects $40,000 (37,000 euros) of debt per capita by 2025

Because of Puerto Rico's status as a US territory, not a state, there are no Chapter 9 bankruptcy protections applicable to insolvent municipalities on the island, as have been applied to cities like Detroit during the recession.

Furthermore, the White House has ruled out an all-out bailout program, though politicians in Washington are beginning to campaign for legislation to make Puerto Rico eligible for Chapter 9 protections.

Statehood as solution

With Puerto Rico's economic woes closely tied to the limitations imposed on the island as a US territory, Francisco Carambot, Puerto Rico's former small business ombudsman, thinks that solutions to the island's fiscal crisis rather lie in giving it full recognition as a state.

"If we were a state, the federal government would long have noticed this development and rushed to the rescue before it was too late. That's why we want recognition as a state, so we're not left in the dark like this again," said Carambot, explaining that it may now be too late to change anything to work in the best interest of Puerto Rico's creditors.

Homeless person in Puerto Rico

About half of Puerto Rico's population lives under the poverty line, with homelessness becoming a growing concern

When asked of Puerto Rico's prospects of being given statehood, Carambot appeared cautiously optimistic.

"We are gaining momentum. People are noticing us. But at the current rate, we'd be the poorest state in the union so it'll probably take a while for anything tangible to happen.

"Nothing will happen ahead of the 2016 presidential elections, anyway. We're the last thing on the minds of many campaigning candidates right now," he told DW.

'Second-class US-citizens'

Since Puerto Rico is not an independent nation it cannot expect any help from the International Monetary Fund (IMF), leaving the US territory with few options to explore while defaulting on its creditors.

"Puerto Rico is limited when it comes to negotiating with other countries and government bodies, and yet we don't get to enjoy the same benefits as the mainland US either. We are unable to file for bankruptcy. We get limited federal help. Basically, we are second-class American citizens," Carambot explained.

With a population of 3.5 million and a migration rate of well over 50,000 per year, the island is also beginning to suffer a rapid brain drain, further halting its ability to regenerate the economy. Kenneth McClintock, Puerto Rico's former secretary of state from 2009 to 2013, said that this is one of the biggest challenges in successfully governing the ailing territory.

Puerto Rican politician Kenneth McClintock

McClintock compares Puerto Rico's emigration rates to those of war zones, calling the trend "crippling"

"This mass exodus is crippling. The rate at which people are leaving Puerto Rico is the same that you would normally only witness in a war zone. And there's no incentive we can offer to young people to stay in Puerto Rico," McClintock told DW.

"It breaks families apart. It destroys infrastructures. People have to wait for weeks to see medical specialists because most specialized doctors have left Puerto Rico and have settled in Florida or Texas."

As a veteran politician, who has also served as the president of Puerto Rico's Senate, McClintock is passionate about leading a nationwide debate about the island's future in the face of the current financial crisis.

"Balancing the books isn't enough. The only way out is creating economic growth. But this isn't only a question about economics. It is, above all, a political question. The political status of Puerto Rico can't be put aside when you look at our economics, for it is the biggest solution to our problem," he explained.

"If Puerto Rico became a state, it would be the most powerful message the US could send about the integration of Hispanics and other minorities. But as long as we do not have representation, what does it say about our value to the federal government?"

Dissenting voices

Both McClintock and Carambot stress the fact that Puerto Rico suffers because Puerto Ricans don't appear to be sufficiently valued as equal citizens, at least not in practice. But others differ from that position. Many have left the island's sunny shores and settled on the mainland, not only in hope of a better life but in search of that notion of acceptance.

Glenda Gonzalez is one of 5 million Puerto Ricans who live in the continental United States. Gonzalez grew up in New York but has settled in Austin, Texas. Even though she has gone back to visit the island many times, there's no question about where she feels at home.

Beach in Puerto Rico

Puerto Rico's tourism industry remains strong, but some argue that beaches are all the island has left to offer

"Puerto Rico is a huge part of my identity; it has the best of both worlds. It's American and it's Hispanic. And I love my people, but God knows they can be a lazy bunch," she told DW.

"They got themselves into a pickle, and now they expect others to bail them out. Listen, I grew up in the Bronx, I know what it looks like when people work hard. I'm sorry, but I don't see them trying hard enough," Gonzalez said, adding that she would never move back to Puerto Rico.

Fighting to survive

Francisco Carambot may likely disagree with those views. He describes daily life in Puerto Rico as a tough kind of existence, where many events lie outside of many people's realm of control.

"A lot of people live on minimum wage. Half the country lives below the poverty line. And the cost of living in Puerto Rico is very expensive. If you treated the island as a city, it would be the fourth most expensive place in the US.

"We have to have everything imported, so we have to pay for port taxes, transportation costs and so on. That's the economic reality we're dealing with," he said, adding that small businesses have been drowning in recent tax reforms designed to actually give the island a lifeline.

Glenda Gonzalez, meanwhile, remains convinced that there's nothing to gain in trying to rescue Puerto Rico, calling it a beautiful place for a vacation but a lost cause.

"I don't know what the politicians are fighting over with all this talk of statehood. I'll tell you something about fighting: I'm grateful for the opportunities that the US military has given me for the past 30 years," she said. "Now, those opportunities are open to anyone. So what's holding those Puerto Ricans back from coming here and joining the military, if there's nothing else they can do?"

Coincidentally, it happens to be that very idea of military strength - which seems to epitomize much of America's foreign policy today - that Francisco Carambot criticizes as the wrong approach towards creating any viable future for Puerto Rico.

"We all know that America likes to export democracy all over the place," he said. "As this supposed pillar of democracy in the world, we have to practice what we preach at home first before we invade other countries. There are many ways to serve your country, and practicing equality, especially at home, with your own people, seems to be the hardest."

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