Puerto Rico Case Study Essay

“Greece of the Caribbean,” as many people like to call Puerto Rico, is spot on for the circumstances they are currently in. Puerto Rico’s economy has been quite the topic for discussion lately, with their debt climbing to unpayable amounts and their economy slowly crashing. Puerto Rico has accumulated their debt many ways; the main one being borrowing municipal bonds over the years, and has led to their growing $73 billion dollar debt. The debt has gotten so out of control that former Puerto Rican governor, Alejandro Garcia Padilla, has declared it unpayable.

Over the years I’ve seen my island slowly deteriorating-businesses slowly closing, roads becoming almost undrivable, and unkept land with grass almost as tall as a human. If I were a tourist, I would think I stepped into a third world country. All of these problems are mainly caused by insufficient funds. The island’s commonwealth status to the United States could potentially be holding the island back from doing much about the debt. Becoming a commonwealth state limited what Puerto Rico could do to solve their issue, such as not being able to file for bankruptcy.

Puerto Rico tried to fix this issue by installing the Recovery Act, which planned to pay that debt back without filing for bankruptcy, but to no avail. However, the Puerto Rican economy doesn’t just affect Puerto Rico, it affects the United States’ economy as well. Could changing the commonwealth status of the island help alleviate that debt? The political parties in Puerto Rico consist of three major ones: the Popular Democratic Party (PDP), who support the commonwealth status, the New Progressive Party (PNP) who support statehood, and the Puerto Rican Independence Party (PIP) who support complete independence from the United States.

Being a commonwealth was essentially “transition step” to later becoming a state, as the US Council for Puerto Rico Statehood put it. Keeping Puerto Rico as a commonwealth has not alleviated the island’s problems, and changing their status would benefit both Puerto Rico and the United States. Puerto Rico’s official name is the “Constitution of the Commonwealth of Puerto Rico,” given to the island in 1952. A commonwealth is described as being an associated free statethe association in this case being with the United States.

According to Merriam-Webster, the definition of a commonwealth is “a group of countries or states that have political or economic connections with one another,” or in this case more specifically, “a political unit that is like a U. S. state but that pays no federal taxes and has only a representative in Congress who does not vote. ” Puerto Rico is not the only U. S. territory, islands like Guam and the US Virgin islands are also. But Puerto Rico is the only commonwealth, none of the other are. Commonwealths have a more “developed” relationship to the mainland in terms of economy and representation.

All of the U. S. territory citizens hold American citizenship, though. Puerto Rico’s economy has been one of the biggest concerns of Puerto Ricans and Americans alike. At $73 billion dollars and counting, as Walsh and Moyer point out in their article “How Puerto Rico Debt Is Grappling With a Debt Crisis,” the Puerto Rican government has issued it to be unpayable. With an unemployment rate standing at around 12. 1% according to Trading Economics, the island is slowly starting to look less and less industrialized.

The US Council for Puerto Rico Statehood mentions that on average, the United States spends about $9. 7 billion dollars a year holding Puerto Rico as a US territory. So by default, Puerto Rico’s commonwealth status is already costing the US some hefty bucks. Puerto Rico also does not pay federal taxes, and many businesses moved to the island years ago to set up because they would receive corporate tax breaks. Unfortunately, that expired early in the 2000’s and businesses started laying people off because they couldn’t afford to maintain them.

This severely hurt the island’s tax revenue. Puerto Rico pays an 11. 5% sales tax, which is more than any other state in the United States. Originally put in place to help pay the debt, residents have had a harder time paying for common necessities and the debt is still there, untouched. Not to mention, the Puerto Rican government is known for taking money for themselves. But, eliminating that commonwealth territory status could potentially help take away that sales tax and put in place taxes that would benefit both the island and the United States.

The political parties are mainly divided by how they would want Puerto Rico to be held as, either an independent country, a US state, or as a commonwealth. Let’s consider what would happen if it were to be independent. Independence would completely cut off the United States, leaving Puerto Rico on its own. US citizenship would be revoked, causing problems with millions of Puerto Ricans already living in the United States and serving in the military. What would happen to the currency? Puerto Rico uses the US dollar, so a change to independence might call for a change of currency.

Holding on to a broken economy, it would be impossible to add a completely new economy. There are far too many problems to consider if Puerto Rico would change to an independent state, and none would benefit the economy. Statehood has been considered the answer to most of the island’s troubles, and approximately 61% of voters in Puerto Rico agreed as Hilltop Views reported Adding Puerto Rico as a state would cut the annual cost of $9. 7 billion to about $5. 2 billion (as reported by Jose A. Hernandez Mayoral in his article “The high cost of Puerto Rico statehood), saving the United States $4. billion.

Mayoral argues that the price isn’t worth the addition, but he didn’t take into account how much the Unites States was already paying into Puerto Rico. The US Council for Puerto Rico Statehood states most of that money goes into paying welfare, veterans benefits, federal grants-in-aid, of which the US gets no revenue from. Puerto Ricans do not pay federal or income taxes to the United States because it is a commonwealth. Those reasons alone should be enough to convince the United States to add the island as the next state.

The current sales tax which stands at 11. 5%, and is higher than any U. S. state, would be significantly reduced since it was put into place to pay the debt. Politically it would be a smart move for Puerto Rico; currently it has one representative in Washington DC who cannot vote. Adding it as a state would add seven house representatives, two senators, and nine electoral votes. Puerto Rico would finally get the representation it deserves politically; sending troops off in war without getting to vote doesn’t sound like a good deal.

As a state, Puerto Rico could also be an open market and trade with other countries, which it is not allowed right now because of the lones Act that was put into place when the US acquired the territory. The island is known for their coffee and rum which many countries seek. The GDP would be helped by an increase in exports. Many of the cons related to being a state are linked to the assimilation of Puerto Rican culture with the American culture. Puerto Rican culture and history is rich and deeply integrated within the community and it isn’t something the Puerto Ricans want to lose.

Being added as a state would cost Puerto Rico their representation in things like the Olympics and Miss Universe. But for the benefit of both the United States and Puerto Rico, being added as a state would the best choice. The governments of both the United States and Puerto Rico are doing the island wrong by not fighting more adamantly for statehood. The island looks less developed everyday, and it is heartbreaking to watch this once prosperous island take steps backwards every single day. With the debt growing uncontrollably, something has to be done soon in order to help maintain Puerto Rico.

The effects of the economy are taking a toll on residents across the island, leaving many without a salary because the island cannot afford to pay them. With the PNP party win in November, statehood seems to be closer than ever. Although in the past the PNP hasn’t had the best luck to bringing home a star-spangled banner, there is hope that the island’s situation could help convince the United States to make a decision. Nothing is certain as to what statehood would bring, but many people are optimistic that it is the right choice.