The Self-Inflicted Dimensions of Puerto Rico’s Fiscal Crisis

• Published date: 01 May 2020
• DOI: 10.1177/0094582X20913602
• Author: Ian J. Seda-Irizarry,Argeo T. Quiñones-Pérez
• Date: 01 May 2020
• Subject Matter: Articles

https://doi.org/10.1177/0094582X20913602

LATIN AMERICAN PERSPECTIVES, Issue 232, Vol. 47 No. 3, May 2020, 87–102

DOI: 10.1177/0094582X20913602

© 2020 Latin American Perspectives

87

The Self-Inflicted Dimensions of Puerto Rico’s

Fiscal Crisis

by

Argeo T. Quiñones-Pérez and Ian J. Seda-Irizarry

The fiscal crisis in Puerto Rico, which constrains the ways in which the government

can try to tackle the economic depression, is in important ways self-inflicted—the product

of economic policies undertaken at the local level. When the crisis is approached in this

way, the resolution of the island’s colonial situation can be seen as a necessary but not

sufficient condition for solving the problems of the depression’s victims.

La crisis fiscal en Puerto Rico, que limita las formas en que el gobierno puede poten-

cialmente tratar de hacer frente a la depresión económica, es autoinfligida de manera

importante: el producto de las políticas económicas implementadas a nivel local. Cuando

se aborda la crisis de esta manera, la resolución de la situación colonial de la isla puede

verse como una condición necesaria pero no suficiente para resolver los problemas de las

víctimas de la depresión.

Keywords: Puerto Rico, Fiscal crisis, Austerity

The 14-year-long socioeconomic depression through which Puerto Rico is

passing has caught international attention, with characterizations such as “the

biggest default in U.S. municipal bonds market history” and “the Greece of the

Caribbean” feeding the imaginations of those who seek to understand it. Local

and foreign bondholders, a pro-austerity government, and a fiscal control

board have all become protagonists in a story of social decay in a nation once

considered a model of capitalist industrial development and social welfare.

For many in Puerto Rico, past concerns and fears associated with achieving

political independence from the United States, fed in large part by decades of

Cold War propaganda, have become very real. The poverty level is three times

that of the United States, the island is among the most unequal nations in the

world, and the waves of emigration have surpassed those of the 1950s, to the

point that the island is being depopulated. The unhindered mobility of the “fac-

tors of production,” capital and labor, that for decades has characterized the

business environment in the island has not produced the dynamic and long-

term economic growth or convergence with the metropolis that some economic

theories and models would have predicted.1

Argeo T. Quiñones-Pérez is a professor in the Department of Economics of the University of

Puerto Rico, Río Piedras Campus. Ian J. Seda-Irizarry is an assistant professor in the Department

of Economics at John Jay College, City University of New York. They thank Jean Díaz, Emelio

Betances, and the participants in conferences in Havana, San Juan, New York City, and

Massachusetts, where earlier versions of this paper were presented in 2017 and 2018.

913602LAPXXX10.1177/0094582X20913602Latin American PerspectivesQuiñones-Pérez and Seda-Irizarry / Puerto Rico’s Fiscal Crisis

research-article2020

88 LATIN AMERICAN PERSPECTIVES

Not surprisingly, many explanations of the crisis in Puerto Rico have been

put forward. Some have focused on the expiration in 2006 of a federal tax break

for corporate income that had attracted foreign multinational firms since the

mid-1970s, while others point to incompetent administrations. Still, it is the

colonial relationship with the United States that has taken center stage. Many

point as evidence to the fact that the crisis began in March of 2006, two years

prior to the global economic crisis. The lack of application of Chapter 9 of the

bankruptcy law to Puerto Rico, the cabotage laws, Congress’s acceptance of the

colonial relationship, and the lack of monetary policy combine to give credence

to the idea that the depression is due exclusively to the limits imposed by the

U.S. government (Backiel, 2015).

One cannot simply turn a blind eye to the colonial status of the island, but

we part ways with the many analyses of Puerto Rico solely from a nation-state

perspective, using as an entry point the politico-juridical dimensions of the

colonial situation. What worries us in these accounts is that politics is reduced

to the relationship between the United States and Puerto Rico, a perspective

from which the island and its population are conceived simply as victims of the

metropolis without differentiating groups within the island’s population. This

macro view of the situation, which uses nations as the unit of analysis, obscures

the power relations within the class structure of the island, relations that shape

and are shaped by the nation-state-level analysis. We believe that this is a mis-

take that has led to absolute silence on fundamental issues that have direct

political consequences for potential solutions to the crisis.

To start remedying this problem, we want to complement the analysis of the

colonial situation with a class analysis, examining the production, appropria-

tion, and distribution of wealth from a political economic perspective. An

important methodological and political step in this direction is to distinguish

the crisis of the colonial regime of the Commonwealth of Puerto Rico from the

crisis of its economic model, while recognizing that they are intertwined. This

clears the way for adding protagonists to the story of social decay whose pres-

ence is obscured by the eternal discussions of the island’s colonial status. A

serious approach needs to examine the role of local groups in looting the public

coffers, biasing economic outcomes in their favor through public policy, and

facilitating the extraction of wealth from the colony. We join other social theo-

rists in recognizing that no external attempt at exploiting a country and its

population would be successful if it were not partly “rooted in coincidences of

interest between local dominant classes and international ones” (Cardoso and

Faletto, 1979: xvi).

In the case of Puerto Rico, these classes have benefited from the relative

autonomy that the government has had in implementing fiscal policies and

from the perpetuation of the failed dependent economic model that has been

in place since the 1940s. When looking at Puerto Rico as a colony of the United

States, one cannot forget the control that the various administrations have had

in altering and applying the tax system and deciding how public funds would

be used. Because of the motives and outcomes of these choices and the room

for maneuver within the colonial relationship of those who made these deci-

sions, we claim that the crisis can be understood, in important ways, to have

been self-inflicted. In our analysis we place this recognition in the context of the