The state of Puerto Rico, economic state, that is

For some thirty years, under Section 936 of the US tax code, the economy of Puerto Rico had benefited substantially from the influx of US corporations. While the US Congress would repeal Section 936 in August 1996, corporations would be granted a ‘breather’, a continuance of tax benefits for another ten years, expiring in 2005. That repeal of Section 936 was encouraged by the Commonwealth’s then Governor Rossello in the mistaken belief that the US Congress would promptly grant the dependency statehood.

The expiration of Section 936 would see the prompt flight of the corporations from the island to more lucrative destinations.

This chart from World Bank data shows the trajectory of the economy from 1990, where there would be a peak in the per capita GDP ($PPP) in 2005. Ironically, on 29 June 2005, Venezuela would launch its PetroCaribe initiative to assist its petroleum-dependent neighbours weather the economic storm of price rises; and Puerto Rico (and its power company) is dependent on petroleum.

Combine that with a debt of some US$73b, that the government admits being unable to service, and the gravity of the island’s plight starts to become apparent.

Official unemployment rate is some 14%, a clear understatement. A look at the labour participation rate and the fact that the island’s plight should only recently be noticed (and no action taken) in the US should explain the importance of an island sinking in the Caribbean sea to the US political establishment. In contrast, for the US economy the labour force participation rate has been at some 62%, representing a steady decline from 67% in 1990.

Of course, it should not be difficult to find ‘speeches’ of those US Presidential candidates who land in the place for the obligatory verbal assault on the Spanish language with some, ‘Buenas diaz!’ and some idiotic attempt at dancing, with the expectation that such tomfoolery would be sufficient to gull voters there and, more importantly, the Latins in the US to vote for such a parody of democracy.

The tragedy is that emigration would increase more rapidly, emigration of the young and the skilled, to a US, where economic opportunities are scarce and wages stubbornly low. The Guardian reports a likely ‘depopulation’ of the island, Economic exodus means two-thirds of Puerto Ricans may soon live in US. Thus, opportunity to alleviate the situation of family members on the island through remittances may well be overwhelmed by the demands of survival in a country that favours its corporate and financial class.

More lucidly, Paul Krugman at the NYT (10 freebies, then paywall) would touch on the economic and geographic challenges that face the island.

For further depth and some comparison with Greece, Tim Taylor weaves into his analysis the study by Anne O Krueger, Ranjit Teja, and Andrew Wolfe, a study commissioned by the Commonwealth’s Government Development Bank.

West Side Story – Redux. ‘I like to live in Ameriiica’?

Colonialism of malign neglect, writ large.


Tags: , , , ,