Economic Storm: The Crisis of Education in Puerto Rico
Stefan Trines, Research Editor, WENR
Surveys conducted in the aftermath of Hurricane Maria in September 2017 showed that more than half of polled Americans were unaware that Puerto Ricans are U.S. citizens. For us at World Education Services this is not entirely surprising – we receive requests to evaluate academic credentials from Puerto Rico as foreign credentials with some frequency. To be fair: Outside of places like New York City, Orlando, or Miami – cities with large Puerto Rican populations – most U.S.-Americans have few interactions with Puerto Rico and probably think of the island more as a remote vacation destination than a U.S. territory. Or perhaps as the place where piña colada was invented or the singer Ricky Martin was born.
Hurricane Maria ferociously thrust Puerto Rico into the U.S. media spotlight for a couple of months before the story faded into the next news cycle. The fact that the island is bankrupt and cannot serve its debts will sooner or later bring it back into the news. In the meantime, we took a closer look at education in Puerto Rico in the wake of the debt crisis and Hurricane Maria.
The island’s education system is in truly dire straits. Puerto Rico is not only facing the closure of a third of its schools, but also the most severe higher education budget cuts in U.S. history. As Nobel Prize-winning economist Joseph E. Stiglitz has put it, Puerto Rico’s public university system is currently being ransacked by “austerity on steroids.”
This article addresses the education crisis, but it goes far beyond that. Given the relative unfamiliarity of many U.S.-Americans with Puerto Rico and its political status, we took this opportunity to provide some broader context and describe the political status of Puerto Rico, the structure of its education system, and explain its current public debt malaise. We will analyze the impact of the crisis on education in greater detail in the latter part of the article. Consider this article a brief political primer on Puerto Rico with an emphasis on education.
Paper Towels for a Perfect Storm
Puerto Rico (PR) has more inhabitants than the U.S. states of Maine, New Hampshire and Montana combined. Hurricane Maria was the most destructive storm to hit the island in 85 years. It leveled the entire electricity grid, destroyed or severely damaged tens of thousands of homes, left more than half of the population without access to drinking water and killed 64 people by official counts (even though independent observers estimate the death count to be possibly higher than 1,000).1 Equally notable, the response to that enormous catastrophe by the U.S. federal government was the most inadequate response to a natural disaster since the Katrina fiasco in 2005.
Detailing the botched federal response to the crisis in PR goes beyond the scope of this article and a fair share of the blame can be cast at mistakes made by local authorities on the island. It is safe to say, however, that the Puerto Rican government received too little help too late. While Texas got virtually instantaneous federal support after Hurricane Harvey savaged Houston just weeks earlier, the far more devastating crisis in PR was handled with less urgency. Three months after the storm, almost half of the Puerto Rican population was still without power – a situation that would be unacceptable and a major political scandal anywhere on the U.S. mainland.
U.S. President Donald Trump paid a brief visit to the island two weeks after the storm. He lauded the “incredible” federal response and tossed rolls of paper towels into a crowd assembled in a church before he put disaster recovery in PR on autopilot in the months ahead. To make matters worse, the recent Republican tax bill, passed in December 2017, treated Puerto Rico as a foreign jurisdiction and slapped the island with additional import tariffs at a time when it needed financial assistance the most. In March 2018, six months after the storm, some 121,000 Puerto Rican residents were still without power.
So, what is the Political Status of Puerto Rico Anyway?
“Toto, I’ve a feeling we’re not in Kansas anymore” wouldn’t be an unfitting observation upon arrival in Puerto Rico. Anyone who ever spent time on the island knows that PR is a different place from, say, Oklahoma City or St. Louis, Missouri. Puerto Rico has a distinct, Latin-influenced society. Like the neighboring Dominican Republic, Cuba, and other Latin American countries, PR historically evolved as an amalgamation of indigenous peoples (Taíno), Spanish colonialists and imported African slaves. Spanish is the predominant language, even though about 19 percent of the population, especially the younger generations, also speak English fluently.
At the same time, there are many U.S.-American influences on the island. Baseball is popular, for instance, and American chain stores have spread to the extent that Puerto Rico is said to have the highest concentration of Walgreens and Walmart stores in the world. Millions of Puerto Ricans have shuttled back and forth between PR and New York City over the past century, resulting in a vibrant cultural cross-pollination that influenced the evolution of Salsa music of world-famous musical styles like Reggaeton.
All of this makes Puerto Rico a unique place. But what exactly is the political status of the Commonwealth of Puerto Rico, as it is officially called? U.S. forces invaded Puerto Rico during the Spanish-American war and Spain ceded the island to the U.S. in 1898 without consent of the population. Thus, some consider Puerto Rico to be “America’s secret Caribbean colony.” José Trías Monge, former Chief Justice of the Supreme Court of Puerto Rico, has called PR the “oldest colony in the world”.
By official U.S. definition, Puerto Rico is an unincorporated “territory” of the United States. Unlike the territories of Alaska and Hawaii, which became states of the U.S. federation in the late 1950s, Puerto Rico was never intended to become part of the USA and remains unincorporated until today.
Most legal scholars, however, do not consider PR a colony in strictly legal terms. The U.S. granted Puerto Ricans U.S. citizenship in 1917 and throughout the 20th century made several changes to the island’s status, most of which gave it greater autonomy. In some aspects at least, Puerto Rico is now a self-governing political entity with its own constitution and elected government. In recognition of these changes and heavy U.S. pressure, the UN General Assembly, voted in 1953 to no longer designate PR as a colony (i.e. a non-self-governing entity), even though the issue of the island’s status continues to be debated until today, and the UN Special Committee on Decolonization has in recent years repeatedly called upon the U.S. to allow Puerto Ricans to exercise their right to self-determination.
Could Puerto Rico Become a U.S. State?
PR is, of course, nowhere near to self-determining its political status. For one, the Puertorriqueños themselves are divided as to what that status should actually be. There are political movements on the island both for independence, as well as for PR joining the U.S. as the 51st state. In the last two public referenda on the status issue, more voters opted for statehood than for independence or maintaining the status quo. In June of 2017, 97 percent voted in favor of Puerto Rico becoming a U.S. state, but due to a boycott by opposition parties, voter turnout was only 23 percent. This low turnout raised doubts about the validity of the plebiscite and made it easy for U.S. Congress to ignore the vote, just as it did in the case of previous referenda.
If a clear-cut majority of Puerto Rican citizens were to vote in favor of U.S. statehood in a binding referendum, U.S. Congress could simply admit PR as the 51st state of the federation. But Congress is neither obligated nor likely to do so, especially in the current political climate. As Illinois Congressman Luis V. Gutiérrez phrased it, “supporters of statehood are selling a fantasy that a Latino, Caribbean nation will be admitted as a state during the era of Donald Trump.” The likelihood that “…states, many of which supported Trump, will accept a Spanish-speaking state that will receive just as many Senators and maybe even more House seats than they currently have” is remote.
For the foreseeable future, Puerto Rico will, therefore, remain in quasi-colonial dependence as an unincorporated U.S. territory, subjugated to U.S. Congress as the “ultimate source of power,” as the U.S. Supreme Court has repeatedly ruled. In concrete terms, this means that PR’s government has a certain degree of local autonomy, but no say in matters like foreign trade relations. The island remains subject to federal laws, and U.S. Congress has the right to repeal each and any local legislation. Congress can act with impunity in PR, as it demonstrated in 2016 when it stripped the government of its fiscal autonomy and placed the island’s finances under the supervision of a federal oversight board.
Crucially, Puerto Ricans are merely “statutory” citizens who are barred from voting in presidential elections and have fewer rights than “constitutional” mainland citizens. PR has a “resident commissioner” in U.S. Congress, but that symbolic representative is just an observer who cannot vote, including on laws that directly affect Puerto Rico. The only real political influence PR can wield in the U.S. body politic, thus, comes from the pressure it can apply on legislators in New York and Florida, states that now host more Puerto Ricans combined than PR itself. As a result, politicians from these two states are among the few voices advancing Puerto Rican interests in the United States.
Is Puerto Rico’s Education System Different from the U.S. System?
Despite some important nuances, Puerto Rico’s education system is very similar to the U.S. system. When the U.S. occupied the island, it reshaped the education system based on the model of its own public education system and tried to use education as a means to “Americanize” the population.
As a result, the education system is structurally virtually identical to the U.S. system. The island has a K-12 school system divided into six years of elementary education, three years of junior high school and three years of senior high school, a design that is comparable to that found in several U.S. states (the length of the elementary and junior high school cycles in the U.S. vary from state to state). Grading scales and academic calendars also follow U.S. patterns. The high school curriculum features mostly the same subjects, including algebra, pre-calculus, geometry, trigonometry, sciences or American history.
However, all efforts by the U.S. government to impose English as the dominant official language and language of instruction in Puerto Rican schools in the 20th century have failed. Spanish is the language of instruction at public schools and studied with much greater intensity than English, which is taught as a foreign language. Curricula may also include subjects not taught in the U.S., such as Puerto Rican history. U.S. universities that receive applications from Puerto Rican high school graduates may encounter academic transcripts issued in Spanish, even though some records are issued in both Spanish and English. The high school diploma is called the “Diploma de Escuela Superior” (High School Diploma).
In higher education, the similarities are clearer. Almost all of Puerto Rico’s major universities and community colleges are regionally accredited by the Middle States Commission on Higher Education and play by the same rules as mainland universities. Several dozens of other smaller colleges are accredited by U.S. accrediting bodies like the Accrediting Commission of Career Schools and Colleges or the Accrediting Council for Independent Colleges and Schools.2
Higher education institutions in PR award the same types of credentials as mainland universities: Two-year associate degrees (awarded mostly by community and junior colleges), four-year baccalaureate degrees, master’s degrees and doctoral degrees. The main difference, again, is the use of Spanish as the medium of instruction. It should be noted, however, that English is more widely used in higher education than in the school system and that the textbooks used at Puerto Rican universities are typically the same as those used by mainland universities and printed in English.
Issues and Problems in Puerto Rican Education
The limited English language abilities of most Puerto Ricans make it more difficult for U.S. companies to do business in PR and hamper the island in advancing in international science and integrating closer into the global knowledge economy. Recent Puerto Rican governments have therefore tried to push the use of English in education. Importantly, the bilingualization of the population would help improve the prospects for U.S. statehood and “make the island more palatable to Congress.” Such attempts at bilingualism, however, are often met with resistance from the population and have not gained much traction until now, making it unlikely that English will become a dominant language on the island in near term. Spanish is a symbol of cultural identity and many Puerto Ricans consider it a shield against U.S. cultural assimilation and becoming “tropical Yankees” (Jose Manuel Navarro).
Aside from the question of bilingualism, Puerto Rico’s education system remains plagued by a number of problems, including low participation and completion rates in education when compared to the U.S. mainland. To put this into historical perspective, contemporary Puerto Rico is a highly educated society, especially when considering the fact that the average household income on the island is less than a third of that in the United States. When the U.S. took over PR in 1898, less than 80 percent of the population was able to read or write. Today, the literacy rate stands at 98.9 percent among 15-to-24 year olds, and 22.5 percent of Puerto Ricans above the age of 25 had a bachelor’s degree or higher in 2012 (UNESCO, Institute of Statistics – UIS).
Despite this enormous transformation, PR keeps trailing the U.S. mainland in a variety of education indicators. Tertiary attainment rates (baccalaureate or higher), for instance, are ten percentage points lower in PR than in the U.S. (UIS). One problem, in particular, is the prevalence of high dropout rates, especially among youths from lower-income households at public schools. The net enrollment rate in secondary education in PR was only 66.6 percent in 2015 compared to 80.5 percent in the U.S. (UIS). Another shortcoming is the poor quality of many Puerto Rican schools – a circumstance that is reflected in persistently low scores in standardized tests, such as the current, government-mandated META test. In 2013, Puerto Rican public eighth-grade students scored fully 23 percent below the national average in standardized tests (National Assessment of Educational Progress – NAEP) The tests demonstrated that 89 percent of Puerto Rican fourth-graders and 95 percent of eighth-graders had mathematics abilities below the “basic level.”
In light of such deficiencies, PR Governor Ricardo Rosselló in February 2018 unveiled a major education reform that, as he promised, would decentralize the education system, establish better accountability mechanisms and introduce modernized bilingual curricula. Core elements of the proposed reforms are the establishment of privately managed charter schools and the introduction of private school vouchers that would allow more parents to send their kids to private schools.
There is little doubt that PR’s top well-funded private schools tend to outperform public schools in Puerto Rico’s poorly funded public system. But promoting private education is also part and parcel of the aggressive privatization strategies pursued by recent administrations in PR. The large-scale privatization of government assets is still a relatively new phenomenon in PR and continues to be vehemently opposed by PR’s trade unions and other critics, who condemn privatization as the sellout of public goods to the benefit of small elites. Until recently, the island had a somewhat more socialist orientation than the United States. More than 27 percent of PR’s workforce, for instance, was still employed by the government in 2013 (compared to 15.6 percent of the U.S. workforce in 2015). About 60 percent of the population received government-funded health care in 2015.
Perhaps indicative of the island’s reliance on government intervention, the percentage of food stamp recipients among the population is more than twice as high as in the U.S. – a fact that caused the Economist to dub PR the “welfare island.” The current economic crisis, however, has made privatization, austerity and the “right-sizing” of the public sector top priorities of the government and the U.S. fiscal oversight board.
The Causes of the Debt Crisis
Once an economic star performer outpacing countries like Singapore in economic growth rates, Puerto Rico has been in recession since 2006. Over the past decade, the island’s economy has shrunk consistently and is now estimated to be 13 percent smaller than in 2005.3 At the same time, unemployment rose from 11.2 percent in 2007 to 16.1 percent in 2010, before dropping back down to 12.3 percent in 2017, most likely due to the rapid outmigration of working-age adults to the U.S. mainland. Strangulated by declining revenues, the government eventually defaulted on its massive debt, which stood at USD $74 billion in bond debt and USD $49 billion in unfunded pension liabilities in 2017.
Unlike the City of Detroit, U.S. states and the unincorporated territory of Puerto Rico cannot file for municipal Chapter 9 bankruptcy. And unlike a sovereign country like Greece, PR cannot ask institutions like the IMF for loans. Instead, U.S. Congress in 2016 passed the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA), a law that places PR’s finances under an oversight board consisting of seven appointed fiscal experts, locally called la junta. Under that law, the oversight board in 2017 took the unprecedented step to file for bankruptcy-like protections for a U.S. territory in federal court, noting that “Puerto Rico can no longer fully pay its debt and pay for government services… [nor] can Puerto Rico refinance its debt — it no longer has access to the capital markets. In short, Puerto Rico’s crisis has reached a breaking point.”
If the case succeeds, these bankruptcy proceedings would be a watershed moment – the largest public insolvency in U.S. history. The plans proposed by la junta would subject PR to at least another decade of harsh austerity measures , but formal bankruptcy proceedings would give Puerto Rico a chance to orderly restructure its debt while protecting it from the mounting lawsuits filed by its creditors.
The causes of the debt crisis are complex. Fiscal mismanagement and corruption in PR are certainly part of the problem. Puerto Rican bonds are “triple tax-exempt,” which means that interest earned on these bonds is not subject to federal, state or local taxes. This made it relatively easy for Puerto Rican administrations to irresponsibly raise money by issuing high-yield bonds, even as the economy was already in full-blown decline. The government piled on ever-increasing debt obligations while enacting austerity measures that increased unemployment without stimulating economic growth. Over the past decade, the government axed 70,000 government workers, reducing the percentage of public employees among the workforce to 20 percent by 2016.
The perhaps most devastating economic blow, however, happened in 2006 when U.S. Congress ended tax breaks for Puerto Rico and other territories (Section 936) that exempted corporations from income taxes on profits generated in PR and had turned the island into an attractive manufacturing base, particularly for U.S. pharmaceutical companies. Designed to boost the industrialization of PR by easing the inflow of foreign capital, these tax incentives allowed U.S. corporations in PR to take advantage of the lowest labor costs in the country while avoiding paying taxes on parts of their profits.4
Puerto Rico still produces more drugs than any U.S. state, including top-selling drugs that are exclusively manufactured in Puerto Rico.5 Other companies, however, have scaled back their presence in PR after the tax incentives expired, even though some observers have noted that the impact of the tax law changes may be less dramatic than commonly assumed. Developments like the creation of NAFTA and increased competition from countries like China are other factors that made it more difficult for PR to retain its position as a low-cost manufacturing location. In this sense, PR’s manufacturing industries face the same post-globalization pressures as manufacturers in the “rust belt” of the United States. The cumulative effect of these factors caused PR’s manufacturing industry, the island’s largest sector, to contract beginning in the mid-2000s, alongside other industries like construction. Puerto Rico’s economic reliance on foreign investments and manufacturing also led to the neglect of sectors like agriculture. Puerto Rico currently imports 85 percent of its food.
The crisis is further compounded by an enormous outmigration of Puerto Ricans to the U.S. mainland. Stories of people leaving their car at the airport to depart for Florida in search of better economic opportunities are legion in PR. Between 2005 and 2015, Puerto Rico lost 446,000 people (11 percent of the population) and experienced a pronounced brain drain of skilled professionals – a trend that only accelerated after Hurricane Maria. And the Puerto Ricans who leave are mainly younger people, so that the continued exodus saps the labor force and hastens the aging of the population, thereby exacerbating the economic crisis.
The Defunding of the Public Education System in the Wake of the Crisis
One controversial step the government took to improve its untenable fiscal situation was to raise the sales tax from 7 percent to 11.5 percent in 2015, effectively making Puerto Rico the jurisdiction with the highest sales tax rate in the country. Austerity measures were also ramped up and quickly targeted the education system. Between 2010 and 2015 the government already closed 150 public schools (more than 10 percent of all schools). In 2017, the government then announced the closure of 184 additional public schools – a move that forced 27,000 pupils to relocate. In January 2018, Governor Rosselló proposed shuttering yet another 305 out of the 1,100 remaining schools – a move that is anticipated to save the government USD $300 million by 2022. The Boston Consulting Group, a private management consulting firm that advises PR on the restructuring of its education system, has recommended the closure of 508 public schools in total until 2020.
To some extent, such cuts are justified by population decline and decreased enrollments – between 2007/8 and 2017, the number of pupils in the school system reportedly declined by 27.7 percent, from 526,565 to 365,000 students. On the other hand, school closures will make it more difficult for many children to get to school and likely increase teacher-to-student ratios, which have already been rising in recent years, despite outmigration. According to data provided by indexmundi, student-teacher ratios between 2010 and 2014 increased from 18 to 20.4 at the lower-secondary level and from 7.7 to 14.7 at the upper-secondary level, respectively.
Until now, school closures did not involve immediate teacher layoffs (the teachers were re-assigned to other schools). But such staff cuts are likely just a question of time. Creditors have demanded the layoff of teachers for years, and the latest government plans call for the attrition of 7,300 teaching staff until 2022.
As noted before, recent reform proposals also strongly advocate the conversion of public schools into charter schools – an objective that was apparently coordinated with the U.S. Department of Education. PR’s government, thus, appears determined to follow the model of New Orleans, where most public schools were converted into charters in the aftermath of Hurricane Katrina.
Puerto Rico’s government has its back against the wall and has few choices. But the debt crisis and chaos caused by Hurricane Maria also offer conservative politicians a golden opportunity to realize neo-liberal pet projects, including the commercialization of education and the privatization of PR’s dysfunctional and debt-ridden public power utility (PREPA).
The current crisis will therefore likely lead to a more privatized, more expensive and unequal school system with fewer yet more overcrowded public schools. As Julian Vasquez Heilig, a Professor of Educational Leadership and Policy Studies at the University of California has argued, politicians in PR “are seeking to solve decades of fiscal mismanagement by adopting the same education reforms that are hurting children and starving school districts in the mainland…. The disaster capitalism coming to the azure waters of Puerto Rico is very similar to the school privatization and private-control education reform causing uproar in Chicago and Detroit.” Both cities are frequently paraded as examples for the shortcomings of privately-managed charter schools by its critics.
The Controversy over Charter Schools
As the Washington Post explains, charter schools “have become a central feature of the school ‘choice’ movement,…a key part of corporate school reform, which seeks to operate public schools as if they were businesses rather than civic institutions. There are now thousands of charters – which are publicly funded but independently operated, sometimes by for-profit companies enrolling a few million students” in the U.S.
Proponents, including like Education Secretary Betsy DeVos, known as Michigan’s “godmother of school choice,” argue that competition amongst charter schools will produce more innovative schools that are more efficiently managed than government-stifled public schools. They also argue that charter schools unchain students in poorer districts from communally assigned public schools and allow them to attend better-resourced schools in other districts. Importantly, charter schools are viewed as a more cost-effective return on public investment.
Critics, on the other hand, contend that charter schools are insulated from public oversight and local democratic governance without delivering better academic results. In this view, charter schools are detached from their surrounding communities and promote social and racial segregation. Charter schools are said to discriminate against special needs students, pay lower salaries to their private teaching staff, and to bring about a corporatized education system in which only the fittest can survive.
Slash and Burn: Public University Budget to Be Cut in Half?
Needless to say, austerity did not stop at the gates of PR’s most important academic institution, the University of Puerto Rico (UPR). Founded in 1903, UPR is Puerto Rico’s largest university – a public university system with eleven campuses, 694 degree programs and 57,820 students as of 2018. UPR has played a crucial role in transforming PR from an agrarian to an industrialized society by providing low-cost education to generations of Puertorriqueños.
As a large public institution that derives 80 percent of its funding directly from PR’s government, UPR was quickly targeted for unparalleled cuts by the federal oversight board. After UPR’s budget had already been slashed by USD $348 million over the previous three fiscal years, la junta in 2017 requested further cuts of USD $450 million, or almost half of the university’s operating budget by 2021. As world-renowned economist Joseph E. Stiglitz noted at the time,” this is a magnitude greater than what any university I’ve ever seen go through… This is slash-and-burn.” Comparing the situation in PR to that in Greece, he noted that “… what the US government is doing to Puerto Rico makes the IMF look like a bleeding heart liberal. This is austerity on steroids.”
CUNY Professor Hector Cordero-Guzmán put the cuts into equally alarming perspective: “It’s a major, major cut, without precedent in any university system in the United States … There’s not a single public university system in the United States that’s been asked to manage a cut of this size and proportion over a period of this time”.
It is presently unclear if UPR will indeed get fleeced of the entire USD $450 million or if some form of compromise can be reached. Governor Rosselló has proposed to reduce the cuts to USD $241 million based on monies raised through cuts in other areas like healthcare benefits or pensions. But UPR is in dire straits, even if the cuts get pared back or phased in on a more moderate timetable. UPR sustained an estimated USD $118 million in damages to its properties from Hurricane Maria and lost more than 5 percent of its student population since 2017 (after student enrollments had previously increased by 7.5 percent between 2013 and 2017).
Further declines in enrollments are anticipated over the coming years, and previous funding cuts already forced the university to increasingly rely on part-time instructors while student-to-teacher ratios worsened. Some UPR campuses have been incapacitated by student strikes throughout 2017.
In March 2018, UPR proposed a fiscal plan for the next five years that includes staff reductions and student fee increases, running the gamut from tuition fees to maintenance fees, lab usage fees or late tuition fines. The cost per undergraduate credit is proposed to increase by 145 percent until 2023 while average annual graduate tuition fees are slated to increase by 61 percent, from USD $3,699 to $5,965.
These sharp spikes in fees notwithstanding, public university tuition in PR remains considerably cheaper than on the U.S. mainland, where tuition fees have also been rising sharply. However, the average household income in PR is less than half of that in the poorest U.S. state (Mississippi) while costs of living are simultaneously 13 percent above the U.S. average.
Puerto Rico’s students, thus, will be among the biggest losers of the austerity measures and bear much of the costs. Many of UPR’s students are from low-income families – 28 percent of undergraduate students are from households with an annual income below USD $10,000 and 70 percent of students are eligible for financial aid (federal PELL grants or local student loans). Increases in tuition fees, thus, will make it more difficult for youths from low-income households to attend university, thereby deepening wealth disparities and impeding the human capital development PR needs to revitalize its economy. As Cordero-Guzmán noted, the “University of Puerto Rico has been for decades the principal vehicle of social and financial mobility for Puerto Ricans…. When you talk about diversity in Puerto Rico, one of the main issues is class…. The university has had … the ability to serve as an equalizer for society there… by extending opportunities for those who are disadvantaged”.
The Impact of Hurricane Maria
The attrition of PR’s education system is primarily caused by the debt crisis, but Hurricane Maria worsened conditions and also made it easier for the government to push through unpopular austerity measures, for example by not re-opening schools that were already shuttered by the storm. Maria also expedited the dwindling of the student population: According to estimates from March 2018, more than 24,000 Puerto Rican students migrated to K-12 schools on the U.S. mainland since the storm. Several hundreds of college students have enrolled in universities stateside, predominantly in Florida. In total, 135,000 Puerto Ricans left the island in the six months after Maria and PR is expected to lose another 300,000 residents until 2019, according to estimates by the Center of Puerto Rican Studies at CUNY’s Hunter College. If these projections should come true, PR would lose 14 percent of its population in just two years.
Estimates on the total economic costs of Hurricane Maria vary greatly. While Moody Analytics has estimated economic losses anywhere between USD $45 billion to $95 billion, the Climate Impact Lab projected “that Maria could lower Puerto Rican incomes by 21 percent over the next 15 years — a cumulative USD $180 billion in lost economic output”. Compared to such dire predictions, the most recent economic projections publicized by PR’s government in 2018 sounded almost rosy and caused prices of Puerto Rican municipal bonds to soar dramatically. According to PR’s government, GDP will decrease by fully -11.2 percent in 2018, but will then actually grow by 7.6 percent in 2019 and 2.4 percent in 2020, due to factors like the inflow of FEMA assistance, insurance payments, and reconstruction projects. But not all observers share this optimistic long-term outlook and the recent bond market rallies certainly do not reflect the sentiments of the Puerto Rican population. Suicide rates on the island have reportedly more than doubled since Hurricane Maria.
Wither Puerto Rico? Of Haircuts, Shipping Laws, and Welfare
Even under macroeconomic best-case-scenarios, the fiscal situation of PR’s government is untenable without a haircut on its crushing debt. In most public bankruptcy cases, be it in Detroit or Greece, creditors (as well as pensioners) took heavy losses. This is a possible outcome in PR as well, in exchange, of course, for PR further dismantling its public sector. Another decade of austerity measures and hardship for the population is all but guaranteed.
As it stands, economic recovery in Puerto Rico will be driven by the privatization of public assets and investors looking for bargains to “buy when there is blood on the streets.” U.S. Congress, however, could easily take a number of steps to stimulate PR’s economy. It could, for instance, exempt PR from the Jones Act – legislation that Senator John McCain has called an “antiquated, protectionist law that has driven up costs and crippled Puerto Rico’s economy.” The law from 1920 seeks to protect the U.S. merchant marine by mandating that goods carried between U.S. ports be transported on ships built in the U.S. and owned by U.S. citizens. It makes shipping goods to PR twice as expensive as to the neighboring Dominican Republic and costs PR’s economy billions of dollars annually. The law also prevents U.S.-bound trade vessels that cross the Panama Canal from stopping in PR to unload part of their cargo on their way to mainland ports. For good reason, the U.S. Virgin Islands have been exempted from the law.
Another idea floated by Puerto Rican politicians and others is to restructure the welfare system and reduce federal social security benefits for Puerto Ricans. According to that argument, welfare disincentives labor participation since average incomes in PR are far below the U.S. average while Puerto Ricans are simultaneously entitled to federal social security disability benefits and food stamps – a fact that makes it uneconomical for some Puerto Ricans to work. Before he became governor, Ricardo Rosselló noted that the “system itself is designed to keep you dependent, to keep you away from … [employment] opportunities”. It stands to reason, however, if reducing welfare benefits is the right step to take at a time when the government is laying off tens of thousands of public employees.
Making it harder for Puerto Ricans to educate themselves by razing education budgets is, at any rate, harmful to PR’s long-term economic recovery. Like most societies, PR is dependent on a skilled and educated labor force for sustained economic growth. In this context, it is important that U.S. higher education institutions assist and collaborate with UPR and other Puerto Rican universities. U.S. institutions like Brown University or NYU have offered generous assistance after Hurricane Maria and allowed displaced students to study tuition-free on their campuses. This relief was intended as a temporary fix for one or two semesters with the expectation that the students would afterwards resume their studies in PR. But such assistance has nevertheless raised concerns that it could unintentionally facilitate brain drain, since some students may continue their education in the U.S. rather than returning to PR. Initiatives that fund research and education directly on the island may, thus, be better for PR. One such example is an initiative supported by Yale University to train local school teachers to incorporate disaster management into science curricula – a project seed-funded with USD $186,000 by the National Science Foundation.
1. The New York Times, the Center for Investigative Journalism and others arrived at this conclusion based on a significant increase in death rates, including among younger age groups, in the months after Maria compared to the same time period in 2016.
3. 2012 was the only year in which cumulative GDP growth remained flat since 2006 (zero growth) instead of declining.
4. A 1992 report of the U.S. General Accounting Office detailed how some companies took advantage of the exemption: “A pharmaceutical company would develop a drug in its U.S. research facilities and transfer the drug patent to its wholly owned subsidiary operating in Puerto Rico. The subsidiary would produce the patented drug and claim the income obtained from the drug sales as tax-free income.”