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The Washington Post

NPP: Statehood Is The Solution To Island’s Economic Woes

By John Marino

September 4, 2002
Copyright © 2002 The Washington Post. All rights reserved.

SAN JUAN, Puerto Rico -- When Puerto Rico Gov. Sila Calderon announced a $1 billion investment program targeted to the island's poorest communities last month, she said it would continue the "peaceful revolution begun 50 years ago with the creation of [the] commonwealth."

The money is targeted toward nearly 700 communities -- about one-fourth of this island's population -- and includes areas of abysmal poverty.

Much of the money will be used to bring or improve water and electrical service to the communities, build or rehabilitate 20,000 homes and improve roadways. Government spending also will increase to improve health and educational services and social programs. A $15 million job training program is part of the plan.

But the fallout has been anything but peaceful -- already the efforts are quickly getting caught up in Puerto Rico's continuing debate over whether to become the 51st state, with Calderon's opponents attacking her plans as paternalistic big government.

"She's feeding fish to the people instead of teaching them how to fish," said Senate Minority Leader Kenneth McClintock, a member of the opposition pro-statehood New Progressive Party.

The plan is significant because it is one of the first anti-poverty programs in Puerto Rico to use local rather than federal funds. But the plan isn't only about spending. Resident Commissioner Anibal Acevedo Vila, Puerto Rico's sole representative to Congress, said recently that Calderon's pro-commonwealth Popular Democratic Party (PDP) will seek expanded powers from Congress as a way to boost economic development on the island. These include the ability to enter into trade agreements with regional neighbors and exemption from certain federal laws, such as those involving maritime shipping.

But independence supporters note that Congress has been unwilling to grant these expanded freedoms to Puerto Rico and only through complete sovereignty can these powers be granted.

The PDP also is working to achieve parity with states in federally funded programs, such as nutritional assistance and health care, which are currently capped below levels that Puerto Rico would receive as a state.

Statehood proponents, such as McClintock, argue that full integration into the United States is needed to end poverty on the island.

"We have not been able to close the gap with the rest of the nation," McClintock said, adding that as a state Puerto Rico would receive billions more through federal transfers each year.

The island receives about $11 billion from Washington, $6 billion of which is through Social Security and federal worker pensions and salaries.

About 48 percent of Puerto Rico's 3.8 million people live below the federal poverty line, according to the 2000 Census. Despite the advances the island has made through the years, it has a per capita income of $8,185 -- about half that of Mississippi. Unemployment hovers at 13 percent.

Poverty has long been a problem on the island, and efforts to combat it go back to the creation of the commonwealth in 1952. One of the first was "Operation Bootstrap," an industrial program widely credited with transforming Puerto Rico from the "poorhouse" to the "showcase" of the Caribbean.

"In the 1940s and 1950s, the growth was phenomenal, and we drastically reduced extreme poverty," said Miguel Soto Class, executive director of the Center for a New Economy, a local economic think tank. "We made the living conditions of the poor better, but they still have not made their way out of poverty."

Calderon's plan comes as the government tries to diversify the economy to spur growth. The manufacturing sector, created under Operation Bootstrap, still represents about 40 percent of the island economy, but it has been stagnant in recent years, eroded by free-trade pacts and increased competition from low-wage destinations in the era of globalization.

The new program will be financed with a $500 million grant by the commonwealth Government Development Bank and a $500 million long-term bond issue, earmarked to be spent over the next five years in 686 impoverished communities across the island.

Even the plan's proponents say success will come only with job creation. And that means new economic strategies to boost growth rates above the current 2 percent.

What everyone agrees with, however, is that there is no single plan, like the Operation Bootstrap of the 1950s, that will resolve the island's economic problems.

"We need to restructure and do a lot of things at once. It's not a question of picking a winner," Soto Class said. "There is no silver bullet like manufacturing once was. We are never going to see that situation again."

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