How Puerto Rico Can Recover
After nearly a decade of recession, Puerto Rico may finally get the debt restructuring it needs to put its economy back on a sustainable path. But there is little hope of restoring growth if the US government persists in its neo-colonial approach to the island.
NEW YORK – Puerto Rico’s economy has been contracting for nearly a decade – one of the worst recessions in recent history among economies not experiencing domestic conflict. Indeed, its slump has far outlasted that experienced by, say, the Baltic states, which also endured sharp contractions in the aftermath of the 2008 global financial crisis. Why hasn’t Puerto Rico’s economy rebounded?
The situation in the US commonwealth certainly looks dire. Puerto Rico is second only to Greece in terms of the rate at which GNP is contracting (14% from 2006 to 2015). Investment has fallen by more than 30% since 2006, and employment by more than 20%. Faced with few job opportunities, about 1% of the island’s population is migrating to the US mainland every year.
One key difference between Puerto Rico’s crisis and those of Greece and the Baltic states is that it began before the global financial crisis. In fact, the economy had not experienced strong growth since the mid-1970s, at which point per capita income still amounted to only one-third of that in the United States. The subsequent economic slowdown caused the income gap to widen. In a sense, Puerto Rico is an early example of an economy that got stuck in the so-called middle-income trap.