[Editorial] Lee Kuan Quién?
“I am no Lee Kuan Yew and Puerto Rico is no Singapore.” With that phrase, Financial Oversight & Management Board Chairman José Carrión III responded to a question regarding Puerto Rico’s lack of economic development during a conference held in Washington, D.C.
Implicit in his response—that he is not the former Prime Minister of Singapore who oversaw the rise of the Asian Tiger economy—was a skepticism that betrayed the oversight board’s recently held conference on economic development as nothing but a pro forma ruse.
Just ask how much time the oversight board has spent analyzing debt restructuring versus job creation—something like bad cholesterol versus good cholesterol, the levels will be in the dangerously askew level of five to one.
How ironic that there was a time when Singapore’s brain trust and scores more officials from around the globe descended on Puerto Rico to observe and replicate a model of industrialization.
Yes, under Operation Bootstrap, Puerto Rico went from being a backwater to a model of industrialization touted worldwide. It took continuity under Puerto Rico’s first elected governor, Luis Muñoz Marín, to chart a course for industrial development and stick to it. Despite a meager start at the outset, the Muñoz Marín administration stuck to a plan developed by New Deal economists who worked in lockstep with the governor. It helped to have an army of promoters in offices worldwide selling Puerto Rico as a solid investment location. Everyone worked together with a mantra of Puerto Rico first.
What started with a mere 1,000 jobs in its first four years soared to 59,700 jobs over the next five (1949-1953). By the end of his fourth term as governor, annual per capita income, at $740, was more than double that when he took office in 1948. The long line of factories in Puerto Rico reached 160 in 1961 alone, raising the total number of Bootstrap plants to 1,030. Importantly, migration to the U.S. mainland, which had been as high as 75,000 in 1953, had come down to 4,800.
Sadly, Section 936 of the Internal Revenue Code—a sterling tax incentive for U.S. manufacturing companies operating in Puerto Rico—was targeted for a 10-year phaseout by a Republican-led U.S. Congress in 1996 because the program had the stench of corporate welfare. Critics of the tax code claimed it benefited big pharma but failed to create enough jobs to match the huge tax breaks these corporations were receiving. So we threw out the baby with the bathwater. In effect, a depth charge was dropped that would eventually blow this economy to smithereens because we had nothing to replace the tax incentive. As former Fomento administrator Amadeo Francis once told this newspaper, we opened the door to that attack “by giving and giving, and getting not enough in return.”
Francis was right. A recent story in NCM News reports that from 1972 to 2016, subsidiaries of stateside corporations have repatriated $716 billion to the mainland. Forty-six percent of those riches have been taken out of Puerto Rico over the past decade. That is a disturbing trend. This newspaper does not know of any other jurisdictions that have thriving economies when companies are allowed to take the money and run rather than invest in the local economy. Así no se puede.
We are still looking to the U.S. Treasury and Congress for help. Congressional sources tied to the GOP have told this newspaper that the Republicans on the Hill are “not inclined to give Puerto Rico tax breaks or anything that looks different and special.” We are going to have to pull ourselves up by the bootstraps again.
The Public-Private Partnership Summit that kicked off today is a small but good start—a baby step in a Sisyphus climb. Bring capital back to Puerto Rico and focus on desperately needed job creation again.