Governor Garcia Padilla: Disregarding the Credibility and Quality of Life of the Puerto Rican People

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Elías Gutiérrez, Ph.D.

(Published today in the Orlando Sentinel http://www.orlandosentinel.com/opinion/os-ed-puerto-rico-governor-padilla-102515-20151023-story.html)

The Orlando region is home to hundreds of thousands of my fellow Puerto Ricans. Many left the island not only in search of a new beginning but also to escape the damaging consequences of a dysfunctional government that has robbed its citizens of economic opportunity.

Now, in a cruel twist for many of these Puerto Ricans, the island’s financial troubles have followed them to the mainland.

The government of Governor Alejandro Garcia Padilla is defaulting on its debt to thousands of investors who bought Puerto Rico bonds believing the government would honor its commitments.

So who are these investors? The governor would like people to believe that they are just banks and other faceless institutions that he can conveniently cast as bogeymen to justify not paying the island’s debts. But the reality is that thousands of investors are average Puerto Ricans living on the island and on the mainland in places like Orlando. They are retirees, sanitation workers, police officers, firefighters, teachers and others who invested their life savings.

And the signs are becoming increasingly dire for us. In August, the government defaulted on a bond payment for the first time in over a century, causing panic amongst small bondholders, no matter if they lived on the Island or here in Orlando, where Puerto Rican leaders from across the country will gather this week to consider solutions to the island’s crisis, among other matters.

For Puerto Ricans, the path the government has chosen is a brazen act of betrayal. My own story is typical of the experience of many Puerto Rican bondholders. Over the years, I invested a good portion of my savings in Puerto Rico. As an economist at the University of Puerto Rico, and in light of the island’s history of paying its debts, I concluded that this was a relatively secure investment, particularly since some bonds were backed by the full faith and credit of Puerto Rico, others were backed by tax revenues and still others were backed by budget authorizations. Moreover, the moral imperative was stronger as a guarantee than any collateral.

More than that, though, I was moved by patriotic duty. I invested in the strong belief that the government would put my family’s money to good use and make Puerto Rico a better place.

I could not imagine that the government would recklessly squander our savings – and then turn around and disregard the constitutional rights of bondholders and its own moral obligations. But looking back on it, I must confess that there were troubling signs along the way.

Over the years, Puerto Rico’s government has amassed debt to the tune of $72 billion. That’s on top of approximately $30 billion of unfunded pension liabilities. This debt – caused largely by runaway deficit spending driven by weak oversight, waste and politics – has driven Puerto Rico into its current economic crisis..

And how has the government responded? Rather than implementing the reforms to place the island on a sound footing, Governor Garcia Padilla is seeking an easy-fix that compounds the crisis further. He has proposed a five-year plan that rests on a violation of the Constitution. The plan calls for defaulting on Constitutionally-protected debt.

In other words, the government is planning on stiffing those who invested in the island in good faith.

This strategy is a mistake. It not only violates the confidence that individuals placed in the government. It also undermines Puerto Rico’s credibility before the investment community, whose support is critical to the island’s future success. In fact, credibility is our most valuable asset.

The plan is so indefensible, in fact, that Governor Garcia Padilla recently suggested that he would not go to Washington to face questions from skeptical members of Congress later this month.

I cannot help but wonder what historians will write about Puerto Rico years from now. Will the chapter on the debt crisis describe a time when Puerto Rico’s leaders irreparably shattered the island’s credibility? Will textbooks use Puerto Rico to illustrate the effects of government incompetence? Will the books say the government, driven by short-term politics, took the easy route and abandoned its own people? Will future generations suffer the consequences of all this?

I hope not.

I hope, instead, that we will be remembered as a people whose leaders were courageous enough to make tough but sound decisions in the face of crisis and political pressure. I hope our government will be remembered for decisions that put Puerto Rico back on the path to economic prosperity — and preserved our credibility before the world.

If, however, our government does not confront this crisis with the integrity and moral strength befitting our people, I fear that will not be the case.

 

About Elías Gutiérrez

Profesor de la Escuela Graduada de Planificación de la Universidad de Puerto Rico desde 1966. Nació el 3 de julio de 1942 en la ciudad de Nueva York. En 1945 se traslado a Puerto Rico. En 1964 y 1965, respectivamente, obtuvo grados de Bachillerato y Maestría en Economía de la Universidad de Puerto Rico. En 1966, cursó estudios postgraduados en Planificación Económica en el Instituto de Estudios Sociales de La Haya, Holanda. Más tarde, en 1969 y 1973, respectivamente, obtuvo grados de Maestría y Doctorado en Economía y en Planificación Urbana y Regional de la Universidad de Cornell.
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3 Responses to Governor Garcia Padilla: Disregarding the Credibility and Quality of Life of the Puerto Rican People

  1. Keith Constantine says:

    I just read your opinion piece in the Orlando Sentinel, dated 10/25/15. I also went to your blog and saw in 2012, you did a correct outline on the current situation. So, it all comes to me now, and I will sing, “don’t cry to (for) me (Argentinians) Puerto Ricans,” you saw it coming.
    Why did you elect the same crooks? You knew the pensions were underfunded.
    As an economist, why did you not tell the local people to withdraw their funds?
    As bad as the Gov. Scott is here in Florida, he cut one billion dollars from education among other similar cuts that were directed at the poor. (Shame on him.) Your governors instead borrowed to fill your deficit.
    Footnote, on Friday, I heard Nelson Denis speak in Orlando and his conclusion: you elected your governors and congress (NPPs and PNPs) so they represent your future. You get what you pay (vote) for!

  2. emilio j. arsuaga says:

    Mr. Gutierrez, I can not agree more on your o pinion and facts about this unnecessary crisis in Puerto Rico.
    The biggest hurdle yet is what are the millions of children,youth,adolescents, and young adults going to do to have a future. They can not trust in fellow puertorican leaders and politicians to run the country and provide future opportuni- ties. They depend now in God and hope that their parents are intelligent folks that will be come immigrants in another country and US, if they can and are prepared.
    Now, more than ever, is time to look up to Jesus the source of life and Saviour for salvation & total dependance from Him.
    There is no other way.No material possesion or money will carry nobody to safety and well being in these end times for humanity. Only Jesus can!
    GBY

  3. realfactchecker says:

    Watching the hearing of the Senate committee last week, I thought the same thing.
    The governor and the committee acted as if the only parties that would be given a “haircut” on their bond portfolios would be the greedy Wall Street vultures.
    Not true.
    Small investors like you have already had the “haircut” to their life’s savings – cut by as much as 70%.

    I also laughed at the exchange between Senator Sanders and the governor on alternative energy sources, when the governor announced that six mega-watt alternatives were coming online.

    Surely the governor is aware that the PR government has been holding up permits of private companies to do this for longer than seven years – all to placate the union at PREPA.

    When politicians say one thing and do another, just to secure the votes necessary to maintain their positions of power at the expense of the governed, it leaves the voters with no choice but to vote with their feet.

    Shameful.

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