Puerto Rico Case Study

“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 García 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
A commonwealth is described as being an associated free state- the 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,
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