Giuliani Bullish about Puerto Rico’s Road to Recovery
SAN JUAN – Former New York City Mayor Rudolph Giuliani was on hand in Puerto Rico to deliver a speech at the 2016 Puerto Rico Investment Summit on Friday, where he talked mostly about the strategies he employed during his mayoral incumbency to drive down crime in New York City. Immediately after his speech, Giuliani sat down with Caribbean Business to answer questions about how he would address the difficulties the commonwealth is going through on the fiscal side.
Caribbean Business (CB): In Puerto Rico, many problems come from the two main political parties being at an impasse. What would be your advice to get out of this stuck phase in our economy and the constant change in policies every four years?
Rudolph Giuliani (RG): I had a city council that was mostly made up of Democrats, so I know a lot about how to run a divided government. First of all, the two political parties have to compromise with each other. The art of governing and of democracy is compromise. You can’t get your own way completely. I am reflecting to you the problem the U.S. has, and I’m a Republican. You have two parties, and by and large they both refuse to see each other in the middle, because they both see it as being unprincipled. “If I don’t get my whole program through, I failed,” they say, instead of figuring out how to accomplish something that both sides can agree on.
CB: Wasn’t that what President Reagan said back in the day?
RG: He used to say “my 80% friend is not my 20% enemy,” and in fact he would say that if he got 50% of what he wanted, he had a good deal; if he could get 60% it was a great deal; but if he got 70%, no reason to get the rest because you only make the other side angry [laughs]. You’ve got to compromise, so the situation you are in should promote that kind of spirit for the good of Puerto Rico. Both parties should sit down and come up with a common program that they can both support as a way out of your difficulties. Although there’s some disagreement in the U.S., there’s at least a bipartisan willingness to help Puerto Rico.
CB: No one is willing to provide access to Chapter 9 [of the U.S. Bankruptcy Code] in Congress, though.
RG: Sometimes you don’t need Chapter 9; you only need the threat of Chapter 9. I was a Chapter 11 trustee of a coal company, and I kept two or three other companies out of bankruptcy with the threat of bankruptcy because the debtor understands that sometimes you can make a better deal if you help keep me out of bankruptcy than if you let me go into bankruptcy.
There might be a chance to put together some kind of committee that would sit down with the debtors and see if they can reach some number that’s a percentage they feel is better than they would get with bankruptcy. That’s a strategy that has been utilized and it’s worked, like in the case of Argentina, which is trying it and has finally had some success with some hedge funds. Honestly, [Argentina President Mauricio] Macri has a bigger problem than you do, they got a much bigger number, and he has a country that businesses don’t trust because a lot of companies got nationalized.
CB: In your speech, you said you don’t believe in across-the-board cuts. Is raising taxes the alternative to balancing the books then?
RG: Although I don’t believe in across-the-board cuts, I do believe in cuts. I cut spending in New York City by 15% to 20%, but it wasn’t uniform, I cut some agencies 20%, others 10%, the police, I didn’t cut at all. If you spend more than you’re taking in, you have to be willing to cut. But across-the-board cuts, it’s kind of the coward’s way out. If I cut the bureau in New York City that collects taxes, that would be stupid; you’d lose money if you do that.
But there are other places that could be cut, like in my case the city’s hospitals. There were 20,000 to 30,000 more workers than we needed compared to private hospitals, and they were there for political reasons, because congressmen put them there 10 years ago. They didn’t know much about medicine. Usually, in politics there’s a party that wants to make cuts and a party that wants to raise taxes; my advice is to find a compromise and find a way to do some of both. So if you feel that some taxes have to be raised, and I’m generally against raising taxes, but if there’s an area where taxes need to be raised, there should be some cuts to go along with that. You have to be willing to do both.
CB: In your opinion, how effective do you think is the administration’s strategy to bring offshore capital to the island through tax incentives?
RG: I think it’s a very good strategy and at the right time, because as of now, Puerto Rico has good points and bad points. The right time is not necessarily when everything is good, because then it turns too expensive. You got an economic crisis that says to a lot of businesspeople that they can get a nice price; one wouldn’t want to buy high. On the other hand, there are indications of progress. The economic crisis has had relatively no impact on tourism, for example. In reality, your safety and health situation is not only improving, but may be better than most other places in Latin America, so anybody thinking of Latin America as either an investment destination, a place to live or a vacation home. I think Puerto Rico is in a good spot right now.