US takes over Puerto Rico's finances: a nudge toward statehood?

Puerto Rico turned over control of its finances on Friday to a seven-person board appointed by the US federal government, inaugurating a period of historic US control over a territory foundering under the burden of nearly $70 billion in public debt.

The board, created by legislation passed by Congress in June, held its first live-streamed meeting in New York on Friday, electing a president and deciding on which of Puerto Rico’s government agencies and institutions would fall under the board’s fiscal direction. The list is long, including the central government, its biggest university, the energy and sewage authorities, a government development bank, and the public pension system, according to the Associated Press.

Four Republicans and three Democrats make up the board. Only four of them are Puerto Rican, and nearly all have experience as financial executives, with some also serving stints in local government, the judiciary, and academia.

In New York on Friday, pro-independence demonstrators gathered in front of the Alexander Hamilton building in protest of what they described as colonialist policies enacted by a “dictatorship”. And on the island, many saw little reason for optimism.

“If this Board acts the way it looks like it will, what’s waiting for us over the next five years is going to be fiscal austerity and, as such, restrictions that will translate into a continual exhausting of Puerto Rico’s economy,” said economist Francisco Catalá in an interview with Metro PR.

Others pointed to the inability of the island’s government to resolve the problems.

“Independent of whether one can be in favor or against the board, it’s positive,” Elías Gutiérrez, a professor at the University of Puerto Rico’s graduate school of urban planning, told El Nuevo Día. “They’re talking about a dictatorship? But here in past years, we’ve destroyed the middle class, the capital bases have been destroyed, [and] the bondholders have been beaten up, affecting their savings.”

The takeover comes amid an unprecedented wave of migration to the mainland as many Puerto Ricans, who are US citizens, seek to escape an ongoing economic crisis. And with the island’s finances out of its hands, some say the takeover could invigorate the debate over its status as an unincorporated territory.

Politics in Puerto Rico are divided largely along the lines of where parties stand on whether the island should become a US state, remain a commonwealth, or declare its independence. But with unemployment at 12 percent and some convinced that the debt load promises further woes, the popularity of the biggest party in support of the status quo, the Popular Democratic Party, have tanked.

"The party has completely fallen apart," Eduardo Villanueva, a pro-independence political analyst, told the Associated Press in June. Congress’ vote to put in place a federal takeover, he added, "was the final blow to the commonwealth status."

Even before the takeover, some members of the PDP argued that the status quo was no longer feasible. In 2015, University of the District of Columbia professor Rafael Cox Alamar, a one-time candidate for resident commissioner with the PDP, wrote an op-ed in the Hill arguing that “as soon as Puerto Rico hits the applicable fiscal and economic growth benchmarks,” that would return control over its finances back to the island’s government, “it should face a stark choice between sovereignty and annexation.” 

“The status quo must be discarded from the outset because it is both the source of the structural crisis besieging the island and a colonial anachronism at odds with the US’s geopolitical interests in the Americas,” he wrote.

If it comes down to the two, statehood might be likely to win out. In a 2012 nonbinding resolution, 61 percent of voters chose it as an alternative to the status quo.

That plebiscite didn’t include a variety of other non-colonial options, Jorge Benitez, a political scientist at the University of Puerto Rico-Rio Piedras, told CNN in the wake of the vote.

"This isn't to say that support for statehood hasn't increased – it has. But the only thing we can decipher with certainty from the vote is that the people of Puerto Rico want a change to the current status.”

"It isn't clear what change we want, but we want change."