To access the full report authored by Martín Guzman and Daniel Santamaria-Ots, in its English version, click here.
Excerpt from Espacios Abiertos Policy Report: Overview of Puerto Rico’s Recent Fiscal, Debt, and Growth Policies
“Puerto Rico’s main challenge is finding a way to finally escape from a destabilizing economic dynamic that has featured a long-lasting economic decline and a crisis of population outmigration. The unsustainable debt burdens had contributed to that dynamic. The debt restructurings were based on controversial assumptions about the effects of fiscal policies and structural reforms on GNP growth and about the global economic environment; some, if not all, of these assumptions, are already obsolete. While debt will surely merit more attention soon, the most pressing urgency is articulating a growth strategy that delivers a chance for prosperity, consistent with the financing constraints that the Island faces. The role
of the state will be critical. The question of what fiscal consolidation is consistent with a prosperous economy and what set of fiscal and productive policies should be adopted to achieve such a consolidation remains open.
So far, the FOMB’s growth strategy for Puerto Rico can be characterized as a risky bet—with a large downside, as the losses from cutting investments in knowledge and from disinvesting in state capacities are real, while the gains from structural reforms are dubious at best.
In sum, Puerto Rico’s growth strategy must be at the center of the public debate.”