Puerto Rico Dug the Hole, and Only She Can Climb Her Way Out
Puerto Rico received three stark reminders of its current situation in the last few weeks, and these incidents foretell a very long road to recovery for the US commonwealth.
In early January, the island territory defaulted once again on some of its debt. While it paid most of its debt, the small portion left unpaid was enough to generate more lawsuits, which will add to its operating costs for the next year, and more importantly, to its costs leading up to its next major debt payments in late spring and early summer.
Meanwhile, major debt restructuring talks between the state-owned Electric Power Authority collapsed after 18 months and multiple extensions. The island is facing the very real possibility of rolling blackouts, as it runs out of the fuel oil needed to run its generators, and with no funds to replenish its supplies.
Ironically, the blackouts are expected to start in the summer, when the next major debt payment is due.
Finally, the island saw the murder of a female prosecutor. This killing was a reminder of why so many people have left the island. “It’s (not just) the economy stupid.” The murder of a prosecutor is rare, even in Puerto Rico. Despite an overall drop in the murder rate, crime is still a widespread problem on the island.
I’ve long held that the island has the capacity to right itself, both fiscally and culturally. However, the current leadership, as well as all current candidates for governor, have failed to come up with any concrete plans to fix things.
Who can blame them? By presenting specific plans, you open yourself up to criticism and may alienate the hundreds of thousands of public employees whose votes you need to win the next election.
The solutions, however, remain the same: cut government by 30 percent; lower and streamline all taxes; reduce regulations; limit employee benefits; and repeal any law that is anti-business. Puerto Rico should also end all unions in the public sector.
Finally, the war on drugs must be brought to an end, and the death penalty must be implemented. The female prosecutor mentioned above wasn’t the only life lost to the brutality of crime on the island.
Many other mothers and fathers, husbands and wives, will never have their loved ones come home again. Their deaths, and the lives they will no longer enjoy, don’t get nearly the media coverage that they should.
The coming year will be a difficult one for Puerto Rico. Yet, as always, the solutions should come from the island, not the US Congress or the investors.