Puerto Rico after María
Perceptions from Former Governor Luis Fortuño
Written by Zeke Gutierrez SFS'19
The Center for Latin American Studies and the Latin America Leadership Program welcomed Former Governor Luis Fortuño to the Hilltop. Mr. Fortuño shared his perspectives on the current and future challenges the island faces, particularly in light of the catastrophic damages caused by Hurricane Maria in October of 2017.
New Fiscal Plan for Puerto Rico
On March 15, Mr. Fortuño traced the history and root causes for Puerto Rico’s underperforming economy before Hurricane Maria. Due to its status as a territory, the budget in Puerto Rico had to comply to the directives of the Financial Oversight and Management Board. Fortuño points to the frequent policy changes and lack of economic planning as a source for economic decline. Unchecked fiscal deficits between 2001-2008 led to a recurrent practice of deficit financing, resulting in a 131% growth in public debt. The increase in expenditures and public debt therein led to a consistent decline in the islands credit ratings and lost it in 2014. Fortuño stated that, “When you lose your credit rating, it’s like losing your steering wheel. When you lose your steering wheel, you lose control of your future.” When Hurricane Maria hit, these were the underlying economic problems Puerto Rico faced.
Fortuño pointed towards reforms which could improve the islands financial future. First, moving away from being an oil dependent state towards one with renewable energy followed by massive deregulations to generate a more competitive environment. After 2014, opening a small business became lengthy and costly, making it nearly impossible and forcing many to become indebted. The rules of the game for every business in Puerto Rico changed after the island lost its credit rating. The level of equity that institutions require are so onerous because banks have to respond to the regulators, further highlighting the consequences of past actions. Due to the many layers of government bureaucracy, many small businesses are pulling out of Puerto Rico. Fortuño further pointed towards a need for tax reforms, incentives to increase labor participation, and infrastructural improvements.
There is a false sense of normalcy in San Juan, but once individuals leave the area, there are still remnants of the devastation. The Puerto Rican diaspora helped from the mainland after Hurricane Maria hit and provided aid, but this was only addressing a specific need in that moment. The current estimated damage of private and public property are upwards of $40 billion, not including factors such as forgone economic activity and effects on the psyche. The U.S. is planning on giving Puerto Rico $30-40 billion within the next couple of years, which will go into reconstructing the city. Fortuño along with many others agree that while, “Puerto Rico is looking North for solutions, solutions should be coming from Puerto Rico.”