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Where Does Puerto Rico’s Money Go?

By: Frank Worley-Lopez - Jul 10, 2015, 7:20 pm

A look at Puerto Rico’s finances can be a scary, if not frustrating thing. How does a US commonwealth with 3.5 million residents, US$22 billion a year from the federal government, $9-10 billion of its own tax revenues, and over $100 billion GDP get itself into a $73 billion hole?

Seriously, you’ve got to work at it.

The Libertarian Party of Puerto Rico (LPPR) shared a small sample of this nonsense by offering a sneak peak at professional-services contracts offered by the current administration. Granted, this covers only about a billion dollars worth of spending, but it indicates what is going on.

PR contracts picture
(Libertarian Party of Puerto Rico)

You’ll notice on this list a $47 million contract with America Aponte. The LPPR says the company is owned by the family of Puerto Rico independent gubernatorial candidate Alexandra Lugaro. Interesting.

There are lots of others: AMAR Educational Services gets $122 million, Action to Build Changes Corp. gets $11 million, Institucion Educativa Nets gets $147 million, GF Solutions gets $25 million, and on it goes.

Published reports have documented that Lugaro was a consultant for the Popular Democratic Party — the same one the current governor is affiliated with — before resigning and deciding to launch an independent campaign. This might give the impression that she is an “independent-minded” candidate, but is she really?

In Puerto Rico’s current economic climate, how can the island’s government justify these kinds of expenditures? In a normal world, having consultant contracts may be just part of doing government business. But when you are $73 billion in debt, does it make sense?

Two other problems compound the tendency towards profligate spending. One is clientelism or political patronage, the habit that winning parties have of handing out public-sector jobs like candy to supporters. These go hand in hand with juicy government contracts for their “closest supporters,” who in turn usually aren’t shy about fundraising — not that I’m pointing any fingers.

I have gotta tell you, I’m in the wrong business.

Hey Alejandro (Governor García Padilla)! I think you need a communications consultant to help you sort out this mess; my fee is only $47 million (wink, wink).

The other problem is corruption. As if the above doesn’t sound like corruption already, the FBI recently conducted raids on a number of businesses (including one owned by Lugaro) for fraudulent use of federal education funds. The raid on her business came just days after she announced her candidacy.

Lugaro has denied any wrongdoing, and no charges have been filed against her or her company as of this writing. Education funding, however, has long been a source of official corruption schemes in Puerto Rico, just ask Victor Fajardo. The former education secretary spent years in prison for taking bribes while serving in the Rossello administration. So this is not isolated to one party or one political movement.

I suspect that an in-depth look at all the island’s agencies would reveal similar contracts and schemes. Finding a way to balance Puerto Rico’s budget wouldn’t actually be that hard. Finding the will … well, that may be another story.

Wanna play “find the contracts“? Just click on that link, and go to the Puerto Rico Controller’s search engine and start digging yourself!