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Poverty in Puerto Rico
Puerto Rico is a Caribbean island and United States territory which has struggled with poverty long before the COVID-19 pandemic. In 2019, of Puerto Rico’s 3.2 million people, 43.1% of the total population and 57% of children lived in poverty. For comparison, the U.S. national poverty rate was drastically lower at 13.1%. Poverty in Puerto Rico has become a chronic issue as a long-term recession resulted in massive debt. The island has also endured multiple disasters, the most recent being Hurricane Maria and COVID-19. These hardships have weakened Puerto Rico’s economy, infrastructure and health systems and have left vulnerable groups even more susceptible to poverty. However, Puerto Ricans have demonstrated remarkable resilience and current efforts are helping to improve this situation. Here are three factors perpetuating poverty and COVID-19 in Puerto Rico, and what some are doing to change these circumstances for the better.

Recession

While external factors have exacerbated poverty in Puerto Rico, the current crisis has been building in conjunction with a decade-long recession. Economic growth fell by 10% between 2004 and 2018, with an unemployment rate above 8% and a declining population compounding this deficiency. Some elements such as the encouragement of Puerto Rico’s reliance on U.S. loans to fill federal funding gaps, a 1996 change that mandated Puerto Rican businesses begin paying taxesin contrast to their previous tax-free status under the Internal Revenue Code Section 936and the 2008 financial crisis, which further lowered tax revenues and caused large-scale unemployment, have mainly fueled this debt crisis. These issues have culminated to create massive debt and a chronic recession that has exacerbated poverty within the territory.

The most notable improvement effort occurred with the creation of the 2016 Puerto Rico Oversight, Management and Economic Sustainability Act (PROMESA), which oversees Puerto Rico’s finances and works to restructure its debt. In 2019, PROMESA announced a plan to reduce the island’s debt by one-third to enable it to function under less financial stress and better support people in need.

Hurricane Maria

In addition to this long-term recession, the country’s vulnerability to severe hurricanes has perpetuated poverty in Puerto Rico. The most recent hurricane was also the most destructive in nearly a century. Hurricane Maria struck Puerto Rico on September 20, 2017, and its destruction created lasting consequences. In addition to destroying thousands of homes and causing $94.4 billion in infrastructural damage, Maria wiped out about 80% of the island’s agriculture. Immediately following the hurricane, 100% of the island lost power for months and lacked access to necessary items including water, food, medicine and fuel. Though the U.S. government has promised increased funding to help fix the island’s damaged infrastructure, repairs have been slow and people are advocating for increased disaster relief funding.

Puerto Rico has repaired much of its infrastructure and widely improved living conditions. Meanwhile, the return of tourism has helped boost the economy in the three years following Hurricane Maria. Efforts by nonprofits and citizen groups have also helped bring attention to the issues that remain and attract funding to transform temporary band-aids into long-term solutions.

COVID-19

Three years after Hurricane Maria, Puerto Rico is now facing a daunting new crisis: COVID-19. The declining population, a long-term recession and extensive hurricane damage have left Puerto Rico with a largely poor and elder population, both factors that increase vulnerability to the disease. Following Hurricane Maria, the portion of the population over age 65 increased from 14% in 2008 to 21% in 2018 as many working-age adults sought better employment opportunities in the U.S. mainland.

The high poverty level is affecting the quality of life during quarantine, as Puerto Rico has not rebuilt many homes following Hurricane Maria. Meanwhile, those who previously struggled financially are now jobless.

Due to its status as a territory, the U.S. federal government does not prioritize Puerto Rico in terms of crisis management. Although Puerto Rico receives federal funding to support critical programs such as Medicaid, this funding is insufficient under regular circumstances and does not adapt to meet Puerto Rico’s unique needs. Puerto Rico has received some extra provisions under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, however, including stimulus checks, expanded unemployment benefits and temporarily increased Medicaid funding. However, these funds comprise only a fraction of what states receive. Advocates for Puerto Rico urge policymakers to consider the fact that Puerto Rico entered the pandemic in a more vulnerable position than the U.S. when determining whether to extend funding.

Potential for a Better Future

Puerto Rico’s experience with frequent disasters has taught citizens to be self-sufficient and prepare for when disaster strikes. This silver lining helped the island quickly transition into lockdown in early March 2020, and citizens and organizations quickly acted in times of need to disburse basic necessities and medical supplies around the island to the sick and elderly.

The disasters that Puerto Rico continues to experience ravages the small island and further plunges residents into poverty. However, some are executing significant efforts to improve the territory’s infrastructure, health care systems and general living conditions. To effectively combat the factors perpetuating poverty and COVID-19 in Puerto Rico, plans to reduce debt and boost the economy are on the horizon.

– Angelica Smyrnios
Photo: Flickr

The Human Cost of Puerto Rico's Debt
A humanitarian crisis is marked, among other things, by massive emigration and the failure of public services. These are two criteria already met by the increasingly perilous solvency issues mainly caused by Puerto Rico’s debt. If the U.S. does not respond quickly to this situation, its own citizens may require humanitarian aid.

Recently, Puerto Rico defaulted on a $58 billion debt owed by its Public Finance Corporation. Only $628,000 was attached in payment for what Governor Alejandro Garcia Padilla has called an unpayable debt. Meanwhile, conditions are deteriorating for those who remain on the island. Over 45% of Puerto Ricans live below the poverty line, and with the new Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), things are unlikely to improve in the near future.

One of PROMESA’s provisions will reduce the minimum wage in Puerto Rico to $4.25 for anyone under age 24. Residents paid up to 33% in local taxes even before the crisis and are now looking to the informal economy to supplement their incomes.

“It’s more lucrative to sell drugs than to work in Burger King,” said Ataveyra Hernandez, a former advisor to the governor. “Burger King wages won’t pay for a home.”

However, homes can certainly pay wages. In Puerto Rico’s public housing projects, residents working in the informal sector report zero income in order to gain preferential rents of only $25 per month. Factor in utility allowances from the federal government, $65 per month on average, and one can actually earn $40 per month by living in one of the island’s 54,000 public units.

Nevertheless, PROMESA does have its benefits. The first is a protection clause that stays any legal action by creditors that could disrupt Puerto Rico’s essential services. In August the U.S. District Court for Puerto Rico stayed three different lawsuits from creditors. These cases as well as others will remain frozen until Feb. 15, 2017.

PROMESA also caused the business community in San Juan to think critically about the island’s future. Puerto Rico is the fifth largest manufacturer of pharmaceuticals in the world, representing 12 of the top 20 firms.

This strong source of revenue has motivated airlines such as DHL and United to expand refrigerated transport services to Puerto Rico’s more than 45 pharmaceutical plants. United announced that there will be a six-fold increase in the number of flights from New York to San Juan as of December.

It is this sort of business development that could drive the island’s recovery. Colonial policies such as the 1920 Jones Act — which strictly limits maritime trade to American firms and shipping — may be re-thought after PROMESA.

For now, the U.S. will need to stem the human cost of Puerto Rico’s debt. That may mean loosening business controls on the island or perhaps even a referendum on statehood.

Alfredo Cumerma

Photo: Flickr

Poverty in Puerto Rico
The United States House of Representatives amended the Puerto Rico debt crisis legislation and passed a bill aimed to reduce child poverty in Puerto Rico.

The legislation received support from both parties and passed in a landslide last Thursday. The voice vote approved the bill at 297-127.

The amendment will now move to the U.S. senate, where it is expected to receive a similar level of support.

Representatives David Jolly and Carlos Curbelo (R-FL) were the coauthors of the bill. It is a part of the Puerto Rico Oversight, Management and Economic Stability Act, or PROMESA.

PROMESA is designed to allow the Puerto Rican debt commission to continue its work on a professional survey of the debt plaguing the island.

However, the second part of the amendment requires the territory’s Congressional Task Force on Economic Growth to report any recommended programs or changes to federal law needed to reduce the number of children living in poverty in Puerto Rico.

According to the most recent Community Report of the U.S. Census from 2010, 56 percent of Puerto Rico’s children live below the poverty line. Some estimates are even higher.

The island is also $72 billion in debt. Because of this major debt crisis, the territory has had to close nearly 250 schools and hospitals. The crisis also forced them to lay off many workers.

But it wasn’t just the high poverty rate that motivated this bill. The debt crisis negotiations took on a high level of urgency due to the recent breakout of the mosquito-born virus known as Zika.

The territory may see a significant number of cases of this virus. In addition, the outbreak would likely add to the strain the island is already facing in its public health district. This could lead to an even bigger increase in poverty levels, and it has prompted U.S. policy makers to act.

The executive director of the religious development coalition Jubilee USA, Erin LeCompte, was a strong advocate for the amendment.

He said that it was important to design the language of the bill to create a clear set of targets for child poverty reduction. He labeled the amendment as a “moral imperative.”

“Child poverty in Puerto Rico is its own crisis. I’m grateful for such bipartisan support in the House of Representatives to address the high child poverty rates in Puerto Rico. As we reduce the debt we must reduce the 56% child poverty rate on the island,” LeCompte said.

A number of additional religious groups also supported the child poverty reduction amendment. Some of these include the US Conference of Catholic Bishops, Catholic Charities USA, the United Methodist Church, the Presbyterian Church of USA, the United Church of Christ, the Union of Reform Judaism and the Church of the Brethren.

Katie Grovatt

Photo: Flickr