Puerto Rico's Relationship with the United States Essay Sample

đź“ŚCategory: Colonialism, History, History of the United States
đź“ŚWords: 1266
đź“ŚPages: 5
đź“ŚPublished: 21 June 2022

The history of the economic relationship between the US and Puerto Rico is colonial. At the very start of their relationship according to economists at the US Federal Reserve bank of Minneapolis “When Puerto Rico became a U.S. possession in 1898, it had a very small sugar manufacturing industry. After Puerto Rican sugar was allowed into the United States tariff free in the early 1900s, its industry grew rapidly” (Bridgman 1). American corporations exploited Puerto Rician workers with long hours, intense labor, and bad conditions to extract sugar. In the 2000s, America has forced Puerto Rico into a permanent state of economic regression, bankruptcy, and strife. If Puerto Rico became a state, it would be the poorest state and would have the highest debt of any municipality in the entire country. Their government is inefficient, corrupt, and desperately needs intervention. The US has treated Puerto Rico like a colony for 125 years and created laws without care. The causes of Puerto Rico's poverty are multifaceted, but a large chunk of the blame is on America. Puerto Rico is currently in a crisis and needs desperate intervention by the USA. 

If Puerto Rico became a state, it would be the poorest state in the union. The nonprofit organization the Borgen Project has found “In 2019, of Puerto Rico’s 3.2 million people, 43.1% of the total population and 57% of children lived in poverty.” (Borgen Project). It is over double the rate of Mississippi who has the highest poverty out of any state (Backiel). The Puerto Rician people are currently fleeing their homeland due to poverty, and the island has lost over 600,000 people to emigration since 2003(Backiel; US Census Bureau). Most of these people emigrated to the United States mainland. During this same time, the United States population expanded by 90 million people (33% increase vs a 20% decrease) (US Census Bureau). 

Per a US Census report (For Puerto Rico) “Per capita income in past 12 months (in 2019 dollars), 2015-2019 $34,103” (US Census Bureau). Meanwhile, Mississippi has a GDP per capita of 38,967 (US Census Bureau). Their unemployment rate has averaged 14.6% over the last 25 years and currently sits at 7.1% (Borgen Project). If Puerto Rico became a state, it would have a top 3 unemployment rate (Borgen Project). Their HDI and IHDI are lower than every single other US state (Backiel). The HDI measures the quality of education, life expectancy, income, and standard of living. The IHDI adjusts this metric for inequality and Puerto Rico still does the worst compared to any US state.

The reason for Puerto Rico’s poverty is mainly due to US laws regarding Puerto Rico. The major factor in this is the Jones Act that requires US ships to be the only ships to transport between American ports (Frittelli 1). The Puerto Rician government pays an extremely high cost for this as importing things from the US is extremely expensive. A Congressional Research Service report found that “The Jones Act is particularly consequential for Puerto Rico, Hawaii, and Alaska. Puerto Rico has no operating refineries. It imports all of its petroleum products. Island countries surrounding Puerto Rico have become major consumers of gasoline and other products refined on the U.S. Gulf Coast, as has the U.S. Virgin Islands, which is not subject to the Jones Act.” (Frittelli 21). This policy raises the cost of living for the Puerto Rican people and ensures they have a high cost of living. Combined with their low income and it is easy to see why their poverty is so high. Puerto Rico's immense debt is due to US policy on Puerto Rician bonds and lending. As Linda Backiel said in her report on Puerto Rico “Puerto Rico is essentially running on bonds held by U.S.-based banks and corporations, although pension funds and mutual fund investors attracted by triple-exempt, high-yield bonds are also affected” (Backiel). This encouraged Puerto Rico to adopt unstable policies that resulted in them borrowing $70 Billion in total (Lubben 1). States are required to balance their budget and would have never been given this loophole by the federal government. This borrowing is extra dangerous since Puerto Rico cannot get loans from other organizations. Due to U.S law, Puerto Rico cannot get an IMF loan or a loan from a foreign government (Backiel). A comparison to this situation is Detroit, which declared the second-largest bankruptcy of any municipality (Backiel). They got to declare complete bankruptcy and had their debt wiped.

There are drastic consequences of these policies due to the U.S not considering Puerto Rico a state under bankruptcy law. As Stephen Lubben states in his paper “As explained, Puerto Rico's public corporations, including PREPA, are ineligible for relief under chapter 9 because Puerto Rico is expressly excluded from the definition of "State" under the Bankruptcy Code for purposes of chapter 9 eligibility.” (Lubben 11). The island of Puerto Rico could not declare bankruptcy due to this. Instead, they had to negotiate with creditors that they knew they could never pay back (Backiel). Puerto Rico has had to close schools, shut down the government, cut their healthcare spending, and privatize its electric infrastructure. The long-term cause of this was overborrowing, and it led to the worst economic catastrophe the Puerto Rican government has had since the US takeover. Puerto Rico has been in recession for 14 years and has lost 8% of its GDP during that time (Lubben 23). Previously this was not the case as Puerto Rico had a booming economy due to US law. In the 1970s, the U.S government decided to offer a complete tax break for companies that set up pharmaceutical industries in Puerto Rico. There was a 100% tax break for pharmaceutical companies, and it enticed huge offshoring of U.S pharmaceutical manufacturing to Puerto Rico (Caban 6). As Pedro Caban stated in his paper on Puerto Rico, Colonialism in “The government had no option but to attract high technology firms, such as pharmaceuticals, that required relatively little labor. While hundreds of sophisticated technologically based firms and financial service companies came to Puerto Rico, partly drawn by the favorable U.S. Section 936 tax codes, these firms did little to alleviate the high levels of unemployment and glaring inequality.” (Caban 6) After the US revoked this tax credit, pharmaceutical manufacturing abandoned Puerto Rico; with all the jobs that came with it. This decision hampered Puerto Rico’s once-booming manufacturing industry. 

Puerto Rico’s inefficient government and lack of representation resemble a colonial government. Puerto Rico’s government energy company uses fossil fuels; rather than wind, hydroelectric, solar, or any other option that is highly available in Puerto Rico (U.S Energy Information Administration). This is entirely different from how other Caribbean countries generate power and causes reliance on imports of expensive crude oil. The U.S Energy Information Administration has found in their Puerto Rico report “About three-fourths of the energy used in Puerto Rico comes from petroleum products, which are all imported, principally through the ports of San Juan, Guayanilla, and Ponce” (U.S Energy Information Administration) Puerto Rico’s electric cost is over double the US average for commercial, residential, and industrial power (U.S Energy Information Administration). Currently, due to the ongoing budget crisis, they have privatized the state-run energy company. This has caused a crisis as many cities within Puerto Rico lost power, internet, and phone. Puerto Rico’s government is incompetent and underutilizes all of their natural resources (Timber, Agriculture, and energy) (Backiel). They need federal oversight to restructure their energy grid so they don’t have extremely high energy costs. There needs to be a massive fundamental change in their government, finances, and more.

The solution starts with statehood for Puerto Rico. It is unacceptable that US law impacts Puerto Rico with them having zero say in it. Statehood would allow them to declare bankruptcy and start a new leaf. It would allow Puerto Rico to be under the US federal government and empower their local governments under the 10th amendment. It would allow their government to access federal funds that were not previously available to them due to their status as a territory. With the federal aid that comes with being a state, Puerto Rico could revitalize its economy. Puerto Rico needs all of the privileges that a state like Georgia has to survive the current situation.

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