Puerto Rican Marshall Plan must be tailored to island’s needs

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Recently, in a column published in the Hill, Lee Saunders, president of the American Federation of State, County and Municipal Employees, argued that Puerto Rico needs a Marshall Plan.

As a Puerto Rican, I appreciate the support since we badly need the help. On the other hand, a Marshall Plan for Puerto Rico needs to significantly depart from the main thrust of the vaunted post-WWII policy.

{mosads}There is certainly the need for quick action. In the case of Europe, the specter of communism was threatening. Initial aid was concentrated on the immediate needs of the population, such as foodstuffs and fuel.


In the case of Puerto Rico, delayed action results in permanent damage to the Puerto Rico economy. This situation is contrary to the policy objectives of the United States and down the road, would require additional aid to the U.S. citizens left residing on the island.

Business closings and emigration are difficult to reverse once they happen. During the fortnight after the hurricane, half of the island’s hospitals were closed due to lack of diesel. Some areas of Puerto Rico are not projected to get electricity until six months after the hurricane. 

The Marshall Plan provided financial resources to some of the richest countries in the world that had been ravaged by war. They lacked capital but had skilled labor, entrepreneurs and top companies. Competitiveness could be quickly achieved by currency devaluations. Like an injured athlete, the objective was to get these countries back to health.

The problem with Puerto Rico is that it was unhealthy before the hurricane, with an economy contracting or stagnant for 12 straight years and with emigration hitting close to 2 percent of the population during the last couple of years. The population drain is similar to Detroit’s at its worse. Getting Puerto Rico to where it was before the hurricane is not enough. 

While the Marshall Plan involved some structural policy changes, such as a move toward more open markets by the European countries and a concern for fiscal stability, the emphasis was on getting the aid that would stabilize and jumpstart these economies. Any successful plan for Puerto Rico would also have to target structural policy issues. 

As the U.S. Congress looks into an aid package for Puerto Rico, right after financial resources to rebuild the infrastructure and keep the government operating, there is the need for an Earned Income Tax Credit program. Given that devaluation of the currency is not a practical possibility, this is a way of helping Puerto Ricans to help themselves. 

Next is the exemption from the Jones Act. This law from 1920 forces Puerto Rico to use U.S. ships and U.S. crews, which act as a tax on Puerto Rico’s maritime trade. The U.S. Virgin Islands are exempt from the Jones Act. Cruise ships are exempt from the Jones Act, resulting in Puerto Rico being a major hub for tourism cruise ships.

In addition, it would be futile if the aid provided by the U.S. becomes a covert bailout of Puerto Rico creditors. Language should be included in any aid package that debt service cannot increase as a result of this financial support and that the sustainability of the Puerto Rico economy must be taken into account by the PROMESA bankruptcy procedures.

Thus, debt service to the creditors of the Puerto Rico Electric Power Authority should not lead to high electricity prices that would impinge on the competitiveness of businesses operating on the island.

Parallel to the U.S. support, there needs to be appropriate Puerto Rico economic policies. The country that received the most Marshall Plan aid was the United Kingdom. However, it was West Germany that had the better economic performance. 

Thus, for example, as the Puerto Rico young population has emigrated, the elderly population needs to do its part. For the last half-century, Puerto Rico social programs have defined the elderly as someone who is at least 60 years old.

This figure must rise. Retirees in Puerto Rico receive tax benefits unavailable in the United States, such as that the first $15,000 in pension benefits and social security income are both tax exempt. 

Puerto Rico is not like an injured athlete but more like someone who just had a heart attack. Immediate resuscitation efforts are imperative. However, there needs to be additional measures from medications to lifestyle changes.

As in the case of the Marshall Plan, implementation of a Puerto Rico aid package would be positive not only for the U.S. citizens residing in Puerto Rico, but would also advance the interests and policy objectives of the United States in the region.

Vicente Feliciano is founder and president of Advantage Business Consulting, a leading economics consulting firm in Puerto Rico. The firm clients include the Puerto Rican government, major local and international financial institutions and Puerto Rico private sector trade groups.

Tags Economy of Puerto Rico Government of Puerto Rico Hurricane Maria Marshall Plan PROMESA

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