History Economy of Puerto Rico

1 history

1.1 pre-colonialism
1.2 spanish rule
1.3 united states rule
1.4 developments, 2008 2017

history

puerto rico, many other countries, has transitioned agricultural economy industrial one. economy experiencing transformation caused information age, albeit slowly.

pre-colonialism

not known economic history of puerto rico prior arrival of spaniards. little known inhabitants, taíno, economy mixture of hunting , gathering agriculture.

the taíno captured , ate small animals, such mammals, earthworms, lizards, turtles, , birds. manatees speared , fish caught in nets, speared, poisoned, trapped in weirs, or caught hook , line. wild parrots decoyed domesticated birds, , iguanas taken trees , other vegetation. livestock not practiced there no large animals native puerto rico raised in agricultural setting in order produce commodities such food, fiber, or labor.

fields important root crops, such staple yuca, prepared heaping mounds of soil, called conucos. improved soil drainage , fertility delaying erosion, , allowing longer storage of crops in ground. less important crops such corn raised in simple clearings created slash , burn technique. typically, conucos 3 feet high , 9 feet in circumference , arranged in rows. primary root crop yuca/cassava, woody shrub cultivated edible , starchy tuberous root. planted using coa, kind of hoe made wood. women processed poisonous variety of cassava squeezing extract toxic juices. grind roots flour baking bread. batata (sweet potato) next important root crop.

contrary mainland practices, corn not ground flour , baked bread. cooked , eaten off cob. corn bread becomes moldy faster cassava bread in high humidity of west indies. taíno grew squash, beans, peppers, peanuts, , pineapples. tobacco, calabashes (west indian pumpkins) , cotton grown around houses. other fruits , vegetables, such palm nuts, guavas, , zamia roots, collected wild.

spanish rule

the economy of puerto rico transformed drastically upon arrivals of spaniards in 1493 until departure in 1898. economy during period driven slavery of native population, taíno, , slaves brought africa. slaves minimally remunerated or forced work in farms, mines, households, , other aspects. agriculture primary mean of production, livestock imported europe. sugar cane, tobacco, coffee, , minor fruits primary cultivations exported europe and, so, constituted main economy island. mining of gold, silver, , copper occurred well, although not as in other territories during spanish colonization of americas.

united states rule

in 20th century greatest contributor puerto rico s economy agriculture , main crop sugar, displacing other cash crops such tobacco , coffee. in 1935, united states president franklin d. roosevelt launched puerto rican reconstruction administration, provided agricultural development, public works, , electrification of island.

economic conditions have improved dramatically since great depression because of external investment in capital-intensive industries such petrochemicals, pharmaceuticals , technology. starting in late 1940s series of projects called operation bootstrap encouraged, using tax exemptions, establishment of factories. manufacturing replaced agriculture main industry of island. operation bootstrap based on industrialization-first campaign , modernization, focusing puerto rican economy on exports, united states. result, puerto rico classified high income country world bank. though there large gains in employment , per capita income, recessions in united states magnified in country , have repeatedly hampered puerto rican development.

with signing of north american free trade agreement , dominican republic–central america free trade agreement, puerto rico lost trade advantage on latin american countries right duty-free imports u.s. market expanded. puerto rico subject minimum wage laws of united states, gives lower-wage countries such mexico , dominican republic economic advantage in caribbean. once beneficiary of special tax treatment u.s. government, today local industries must compete in more economically depressed parts of world wages not subject u.s. minimum wage legislation. in recent years, u.s. , foreign owned factories have moved lower wage countries in latin america , asia. puerto rico subject u.s. trade laws , restrictions.

also, starting around 1950, there heavy migration puerto rico continental united states, particularly new york city, in search of better economic conditions. puerto rican migration new york displayed average yearly migration of 1,800 years 1930–1940, 31,000 1946–1950, 45,000 1951–1960, , peak of 75,000 in 1953. of 2003, u.s. census bureau estimates more people of puerto rican birth or ancestry live in u.s. in puerto rico.

developments, 2008 2017

on may 1, 2006, puerto rican government faced significant shortages in cash flows, forced closure of local department of education , 42 other government agencies. 1,536 public schools closed, , 95,762 people furloughed in first-ever partial shutdown of government in island s history. on may 10, 2006, budget crisis resolved new tax reform agreement government employees return work. on november 15, 2006, 5.5% sales tax implemented. municipalities required law apply municipal sales tax of 1.5% bringing total sales tax 7%.

the public debt of puerto rico has grown @ faster pace growth of economy, reaching $46.7 billion in 2008. in january 2009, luis fortuño enacted several measures aimed @ eliminating government s $3.3 billion deficit, including laying off 12,505 government employees. puerto rico s unemployment rate 15.9 percent in january 2010. analysts said expect government s layoffs propel rate 17 percent.

in november 2010, gov. fortuño proposed tax reform plan implemented in six-year period, retroactive january 1, 2010. first phase, applicable year 2010, reduces taxes individual taxpayers 7–15%. year 2016, average relief individual taxpayers represent 50% tax cut , 30% cut corporate taxpayers, tax rate lowered 41 30%.

at same time, latest report president task force on puerto rico status recognizes status question , economy intimately linked. many participants in forums conducted task force argued uncertainty status holding puerto rico in economic areas. , although there number of economic actions should taken or in short term, regardless of ultimate outcome of status question, identifying effective means of assisting puerto rican economy depends on resolving ultimate question of status. in short, long-term economic well-being of puerto rico dramatically improved decision on status question.

during fiscal year (fy-2012), consolidated budget archipelago, including both direct transfers federal programs (social security , medicare benefits workers, veteran s benefits, pell grants , student loan s interest subsidies , miscellaneous temporary appropriations -e.g. american recovery , reinvestment act of 2009 grants totalling $2.6 billion-) represented more $28.7 billion, or approximately 30% of gdp, while revenues surpassed $31 billion. in 2010, federal transfers amounted $16.710 billion, while commonwealth s government managed funds of $10.12 billion.

as result of recent reduction of spain s credit rating, puerto rico holds second highest credit rating awarded agency spanish speaking territory in long term (bbb+, stable ).

in june 2013, $300 million medicaid payment puerto rico delayed because puerto rican government had changed nationally sponsored insurance carrier without obtaining approval health , human services department. 1 of several troubling economic developments, including high debt population ratios, have, per forbes magazine, caused consternation in municipal bond market.

puerto rico has been experiencing economic depression 11 consecutive years, starting in 2006 after series of negative cash flows , expiration of section 936 applied puerto rico of u.s. internal revenue code. section critical economy established tax exemptions u.s. corporations settled in puerto rico , allowed subsidiaries operating in island send earnings parent corporation @ time, without paying federal tax on corporate income. government has experienced 17 consecutive negative cash flows since 2000, exacerbating fragile economic situation government forced incur new debt in order pay old one.

puerto rico has, however, surprisingly been able maintain relatively low inflation in past decade. academically, of puerto rico s economic woes stem federal regulations expired, have been repealed, or no longer apply puerto rico; inability become self-sufficient , self-sustainable throughout history; highly politicized public policy tends change whenever political party gains power; highly inefficient local government has accrued public debt equal 66% of gross domestic product throughout time.

by mid january 2017, debt had reached $70 billion or $12,000 per capita in territory 45 percent poverty rate , double digit unemployment more twice mainland u.s. average. essential puerto rico reach restructuring deals creditors avoid bankruptcy-like process under promesa. in late january, federal control board gave government of puerto rico until february 28 present fiscal plan (including negotiations creditors) solve problems. moratorium on lawsuits debtors extended may 31.

governor ricardo rosselló in favor of statehood puerto rico, particularly because of financial benefits offer. these include additional $10 billion per year in federal funds, right vote in presidential elections, higher social security , medicare benefits, , right government agencies , municipalities file bankruptcy. latter prohibited. fifth plebiscite due held on june 11, 2017. 2 options @ time statehood , independence/free association . first referendum not offer choice of commonwealth . regardless of outcome, congress body make final decision on status of puerto rico.

a review of economic situation in may 2017 official monetary , financial institutions forum, independent think tank, led warning planned draconian budget-tightening cut 6% of island’s gnp on next 4 years, leading continuing decline. puerto rico urgently needs international monetary fund-style programme involving debt relief in return commitment far-reaching reforms ... facilitate growth, group concluded.

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