Puerto Rico should choose Capitalist policies not Socialist policies

Singapore is a much better model than Venezuela.


Monday, 6 March 2017

What we can Learn about Economics from Scandinavia

Lately there has been a lot of talk online about how successful the Scandinavian countries are, and their success has been put down to Democratic Socialist policies like a large welfare state, high taxes, and high public spending. We are encouraged to view the example set by Denmark and Sweden as a model for our nation, and indeed there is a lot to learn about economics from the examples they have set. The nature of those lessons, however, may come to many as a surprise.

The Scandinavian countries are successful, but not for the reasons most people think they are. Each of them were already wealthy, egalitarian, equitable and successful nations long before they adopted any socialist policies whatsoever. For most of the 20th century they had more free market economies than the other countries in Europe; and because they largely stayed out the two World Wars they didn’t have to waste huge sums of money on weapons, paying forces, and then replacing destroyed infrastructure in the aftermath.

In many ways the Scandinavian nations are still far more free market than the USA, Britain or France are. Their economies are far less regulated, they do not demand occupational licenses to practice in hundreds of professions that require them in some states of The US (in Finland you don’t even need a license to practice law, yet people manage to hire competent lawyers and the cost is far lower), it’s easier to start a business, to hire people – and fire them, and there is a lot less red tape and forms to fill in. We have certainly not been asked to heed the example of the Nordic countries in these respects, in fact these policies have been fervently opposed by the champions of The Scandinavian Model in Europe and America.

What’s more, the Scandinavian countries were all far more successful before they adopted any socialist policies at all. Sweden enjoyed the highest per-capita income growth in the entire world from 1870 to 1950. It was from the 1970s onward that the Scandinavian nations began their experiments in Democratic Socialism and they remained somewhat successful during this period but less so than previously. These nations built their welfare states on the wealth created by free markets; and in so doing began to reverse their success.

All the Scandinavian countries are market economies. Danish Prime Minister Lars Løkke Rasmussen finally got so tired of media claims to the contrary that he exclaimed: “I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy.” Sweden, however, did attempt the experiment of centrally planning their economy like The Soviet Union – and with disastrous consequences.

Image result for sweden and denmark

The Case of Sweden

Socialism nearly destroyed Sweden. Swedish government spending rose from a relatively modest 20% of GDP to 50% between 1950 and 1975. Taxes, public debt, and the number of government employees all expanded massively. By the 1980s the destructive effects of the Swedish experiment with socialism was completely apparent to everyone and the government had to attempt to jump-start the economy with a massive expansion of credit which resulted in economic chaos: stock market and real estate bubbles burst, and interest rates were pushed up to 500 percent by the Swedish central bank. By 1990 Sweden had fallen from the fourth place in international income comparisons to twentieth. The decline led to a revolt against the socialist regime. More economically liberal politicians sharply reduced income tax rates, abolished currency controls, deregulated bank lending, privatized several government enterprises, deregulated the retail, telecommunications and airline industries; and implemented deep government spending cuts. Sweden began to recover and is doing a lot better now (as I am sure you have all heard.) But Sweden’s recovery was all thanks to free markets – and no thanks to socialism.

Despite Sweden’s economic recovery after the mid-1990s it is still poorer than Mississippi, the lowest income state in the USA. A 2009 study by the Swedish Economic Association discovered that the Swedish economy had failed to create any new jobs in the private sector on net between 1950 and 2005. The actual unemployment rate in Sweden is still probably at least three times higher than the official government figures because many Swedes live off government sick benefit and early retirement and are not counted. Thousands of Swedes are paid by the government to participate in “labor market political activities” whose only purpose is to reduce the official unemployment rate. To speed along their recovery, Sweden has been privitising portions of it’s healthcare, social security, and education sectors in an effort to heal them up from the incentives entailed in public ownership which always destroys the quality of services while ratcheting up the cost of provision. Private health insurance is booming in Sweden because of the inevitable rationing, shortages and long wait times which their highly socialised healthcare system has lead to. It may seem shocking but in Sweden the government instructed doctors to “prioritize” patients according to their status as future taxpayers. The elderly are at the bottom of that list since they are mostly retired and paying relatively little in taxes while receiving large shares of government services. It’s a distressingly callous approach that can only make cool sense from the perspective of planners seeking to minimize expenses out of the public purse which different interests are all angling for. (So much for socialism doing away with competition.)

Sweden’s experiment with socialism also destroyed its history of innovation. The great companies that came out of Sweden such Lidl, H&M, Volvo, Saab,  AstraZeneca, Electrolux and Ericsson were all founded in Sweden’s free market period. After 1970, the establishment of new firms dropped significantly and many enterprises now survive purely on government contracts out of the public pocket rather than by indication that they are producing what consumers actually want. It was during the free market period when Sweden produced Alfred Nobel, inventor of dynamite, Sven Wingquist inventor of the self-aligning ball bearing, Gustaf Dalen who founded the gas company AGA, and Baltazar von Platen, who invented the gas-absorption refrigerator.

The Case of Denmark

Denmark, like the other Scandinavian nations, may have a large welfare state and public sector, but it also has a far freer economy than the US and many other western nations as I have mentioned. Denmark is only one place below America on the Economic Freedom Index and was previously one rank above it. It is the most free market of all the Scandinavian countries.

This does not mean Denmark has found the right balance, having “the best of both worlds” though.

The large welfare state and heaving public sector has lead to poor social consequences in Denmark, not good ones. Only the nation’s relatively free market economy has compensating for the fact, as evidenced by the fact that similar policies have worked nowhere outside of Scandinavian countries: neither in Greece, nor France, nor Spain nor anywhere else. This is partly down to the culture of a hard work ethic that the Scandinavian countries have inherited from their history which required their people to survive the harsh climate. Unfortunately, as generations wear on these welfarist policies are warping the very culture that allowed them to work in the short term.

In Denmark more than a quarter of the working-age population (aged 18-66) is on the government dole; for every one hundred persons employed full time, there are about sixty working age on welfare. In many regions less than half of people are employed.  More than 1.5 million people live full-time on taxpayer-funded handouts; the other 4 million people in the country have to pay a marginal income tax rate of 55.6% (on incomes of 55,000$ and above), a 25% national sales tax, and a wide variety of other taxes. Danish economist Per Henrik Hansen estimated taxes in Denmark approach 70% of income when all is considered. It has been claimed that Denmark has a more regressive tax system than the US where a far higher percentage of the taxes fall on the rich.

It might come to a surprise to many on the left who are championing the Danish model (such as Bernie Sanders and his supporters) to discover out that many Danish voters are turning out to vote for more free market politicians, and even the Democratic Socialist Party and those further to the left are in agreement that this is a problem. The classic liberal (free market) Venstre Party was in power in a coalition with the Conservative People’s Party from 2001 to 2011 and was elected on its own in 2015. They have gained massive support in making free market reforms to the welfare state and are carrying them out right now! The platform has cross-party support.

Denmark is following the example that Sweden has been laying out since the 1990s. They are undergoing massive welfare reforms because they acknowledge their huge welfare state has created massive dependency and started to shift their culture away from personal responsibility and the ancient hard work ethic they had inherited. This calls the final death knell of empiricism for Socialism as an ideology – but how long before the left will heed the sound?

The Real Economic Lesson to be taken from Scandinavia

The real lesson to be taken from Scandinavia is that socialism wrecks economies and culture. It erodes the work ethic of a nation over generations and it takes a long time for free markets to restore them to prosperity afterwards. In Scandinavia, these policies have been a disaster only mitigated by having economies that are relatively unregulated compared to Europe and America.

New Zealand also flirted with all the policies that Bernie Sanders and supporters want to copy from Scandinavia up until the 1990s as well. It didn’t do much for them at all. Since the 1990s New Zealand liberalised their economy and have been far more prosperous; Australia are following suit. Hong Kong was poorer than most countries in Africa and has become one of the richest countries in the world per head in a generation thanks to free market policies. Singapore has also proven itself to be a modern economic miracle. None of the countries which adopted socialism, nor any of the highly statist economies in the developing world, have had results that compare to those of Hong Kong or Singapore in the same period – and many of them remain devastated.

Free markets have helped the poor more than anyone else as they take people out of the most abject poverty and dependency at once, giving them control over their own destiny rather than having to rely on unreliable government to hand them alms. Markets also create the wealth necessary to look after those who remain poor, which is why most of the world’s poor would rather be poor in a market economy than a highly socialised one with big government.

We can learn from Sweden and Denmark, yes. We can learn that we don’t need miles of regulations or occupational licensing in up to 800 professions which drive up the price of services and stop young people from getting jobs. We can learn that when it’s easier to start a business, hire and fire people, and to cut through red tape that brings prosperity. We can learn that high taxes and high spending stunt rather than grow an economy. We can learn that well-intentioned welfarist policies do more to foster dependency than to help the poor in the long term. That is the hardest pill to swallow.

What we can learn from Scandinavia is what Sweden and Denmark have already learned from their experiments with socialism. Hopefully we will learn from them without repeating their mistakes.

The main sources for this article are Debunking Utopia by Dr. Nima Sanandaji, and The Problem With Socialism by Tom DiLorenzo, you can get these two books if you want to learn more.
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Venezuela’s Default Disaster

Puerto Rico would be in a similar situation if not for the USA Federal Government bailing them out.


Venezuela’s Default Disaster

Tags Global EconomyMoney and BanksMoney and Banking


Socialism always promises heaven and gives hell.

In the early hours of Thursday, November 2, the Maduro regime certified its latest failure with what they promised would never happen: technical default. With his usual arrogance, Maduro issued a “decree” demanding “the refinancing and restructuring of the debt as of November 3.” That is, default.

The bad news for investors or high-yield hunters is that the likelihood of being swindled again is almost 100%.

Chavez once said “put me oil at zero and Venezuela will not suffer,” and Maduro stated that “a revolutionary government with economic power as the one I preside has plans to surpass any situation arising from any price of oil.” Reality has now kicked in.

Venezuela was not destroyed by low oil prices, but by high socialism.

Socialism has led Venezuela to an unparalleled economic disaster . No, it’s not “the price of oil.” Venezuela is the only OPEC country that has fallen into default, depression, and hyperinflation. It’s not oil, it’s socialism.

The management disaster is spectacular and the greatest example of the devastating effect of socialism is the state-owned oil company. PdVSA, the national oil company, has gone from being one of the most efficient and profitable twenty years ago, to end up importing oil.

Although Venezuela has the largest reserves of crude oil in the world — 296 billion barrels — the country began importing oil last year. Its production is less than 2.7 million barrels per day, a drop of 20% in less than two decades, while the Chavez.Maduro regime multiplied its workforce by five, to 175,000 “workers”.

Brutal cost increases, spectacular worsening of production, collapse in margins and plundering of the cash to pay for subsidies led the company from being one of the most profitable and with the best balance sheet in the world to borrow more than 43 billion US dollars.

During the presidency of Maduro, the regime has led the country to hyperinflation, which already exceeds 2000% and a shortage of more than 80% in goods, while foreign currency reserves have plummeted 64%, the worst level in forty years.

This disaster is not because of low oil prices, it is a reflection of the reality of what socialism does. No oil producing country shows such atrocious figures, not even close.

In fact, if anything can be said about the fall in oil prices is that the vast majority of producing countries have managed it admirably, with GDP drops that ended being much lower than feared, keeping their reserves in foreign currency at comfortable levels, and adapting to the new reality quickly and efficiently. Almost all, except Venezuela.

The True Economic War in Venezuela: the Chavez-Maduro Regime Against the People

Venezuela had 12,700 private companies when Chávez took power, according to Conindustria. Today there is less than one-third of that figure. To the economic destruction, the regime added the assault on private property with expropriations of more than 690 companies in twelve years. Today, those expropriated companies are technically bankrupt and those that survive are zombies producing less than half of the figures prior to the confiscation.

As always happens in socialism, the first thing was to deny reality. “Investors should not worry about the debt repayments of 2017 and 2018,” said Rafael Ramírez. And indeed, they should not have worried. They should have panicked. One of the largest investment banks in the world, which bought $ 2.8 billion of bonds is now facing the false “restructuring” decreed by Maduro.

Maduro “decrees” restructuring as if it were a miracle. But it is another nail in the coffin of the regime. Economic destruction is not only not changing, it is getting worse.

The restructuring simply has no solution. Correa, in Ecuador, has already experienced the “success” of default.

Ecuador, the “example” that populists used on how to “confront the IMF” and encourage default, has doubled its debt, mortgaged the country with China at much higher rates than those of the IMF and finally had to ask for help to… the IMF. This is “success.”

Correa in Ecuador defaulted on 3.2 billion US dollars to finish depending on China at a much higher cost (7.5%) and shorter maturities (8 years). And Ecuador now discovers that its real debt is more than 41.8 billion dollars instead of the 27.8 billion that Correa left as “official”. That hole will cost billions in adjustments. This is the reality of default and re-structuring. Things get worse.

But Ecuador at least had an economy with growth possibilities. Maduro now seeks to refinance with … what? He has devastated the country. Between 1999 and 2014, Venezuela received 960.5 billion US dollars of oil revenues, 56.5 billion annually for 17 years, five times more than the average annual real income of previous governments between 1993 and 1998, according to the BBC quoting Ecoanalítica.

That huge oil revenue was squandered and at the same time the economy was destroyed by assaulting legal security and investment initiative with savage expropriations. Who is going to lend to such disastrous managers, even at higher rates and different terms? Now the string of litigation and complaints about breach of contracts will begin. And the credit tap closes.

This restructuring is not going to be a relief nor the beginning of the solution. It is the verification of an absolute failure of the Venezuelan government and it will cost a lot, as always, to the poorest citizens. Because there has never been a story of default that is accompanied by higher real public spending. Never .

The lesson of this new example of socialist failure is that it is a system based on lies that ignores the most basic principles of the economy and destroys even the richest country.

In the end, the socialist promise of free money is very expensive for all. Let’s learn the lesson.

Daniel Lacalle has a PhD in Economics and is author of Escape from the Central Bank Trap, Life In The Financial Markets and The Energy World Is Flat.

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Venezuela Goes Bust. How is this different than Puerto Rico running out of money, long before the hurricanes hit PR?

You should read the comments at the end as well.


Venezuela Goes Bust

Another lesson in the price of lending to a socialist regime.

Venezuela's President Nicolás Maduro in Caracas, Venezuela, Nov. 12.
Venezuela’s President Nicolás Maduro in Caracas, Venezuela, Nov. 12. Photo: Miraflores Palace/Handout via REUTERS

Milton Friedman once joked that if you put the government in charge of the Sahara Desert in five years there would be a shortage of sand. He could have been talking about Venezuela and its oil wealth. But it is no joke.

On Monday Caracas missed interest payments due on two government bonds and one bond issued by the state-owned oil monopoly known by its Spanish initials PdVSA. Venezuela owed creditors $280 million, which it couldn’t manage even after a 30-day grace period.

Venezuela is broke, which takes some doing. For much of the second half of the 20th century, a gusher of oil exports made dollars abundant in Venezuela and the country imported the finest of everything. There were rough patches in the 1980s and 1990s, but by 2001 Venezuela was the richest country in South America.

Then in 2005 the socialist Hugo Chávez declared that the central bank had “excessive reserves.” He mandated that the executive take the excess from the bank without compensation. Today the central bank has at best $1 billion in reserves.

Falling oil prices are partly to blame, but the main problem is that chavismo has strangled entrepreneurship. Faced with expropriation, hyperinflation, price controls and rampant corruption, human and monetary capital has fled Venezuela.

As of Tuesday evening, the Investment Swaps and Derivatives Association still had not declared Venezuela in default. That matters because this will trigger the insurance obligations inherent in the credit default swaps. But S&P Global Ratings declared the country in default Monday. On Tuesday morning the Luxembourg Stock Exchange issued a suspension notice for the bonds with missed payments.

President Nicolás Maduro has formed a commission to restructure up to $150 billion of the debt and put Vice President Tareck El Aissami —who is under U.S. sanctions for drug trafficking—in charge. Mr. El Aissami called a meeting of creditors on Monday in Caracas, which most bondholders did not attend. Press reports said Mr. El Aissami delivered a monologue on Venezuela’s intention to pay and took no questions. He argued that Trump Administration sanctions make it difficult for the dictatorship to arrange refinancing.

The real problem is that restructuring assumes the country can grow again. That’s nearly impossible without a change in policy that will free the economy.

If Caracas doesn’t find a way to settle with bondholders, they will soon ask authorities to seize Venezuelan assets such as oil shipments at sea and Citgo facilities in the U.S. Such are the wages socialism.

Appeared in the November 15, 2017, print edition.


From the comments:

Frank Dickof
It is a disgrace that in 2017 a country so blessed as Venezuela in oil and mineral wealth is in this state. Yet somehow we now have young people in the USA who believe Socialism and Communism are good options to take as a government model. It is amazing that brainwashing on such a massive scale can occur. Scary stuff.

Rafael Fernandez
This is Exhibit One on why socialism does not work, or why socialism is great until you run out of other people’s money.

Henry Newbold
What a perfect opportunity for the Clinton Foundation to go in there and feed the Venezueleans!

Just like they saved Haiti!
Oh wait…..


John Campbell
It sounds like a great idea as long as all of it is on U.S. or Canadian soil, or both. Venezuela communists have a nasty habit of seizing anything on their soil and throwing out the legitimate owners. Thus the reason why no one will deal with them.

@james Isaacs @William Wahl Now now we all know TRUE socialism has never been tried- any campus Marxist can tell you that. I’m sure only a few hundred million more people need to die and they’ll eventually get it right.

Richard Krauland
Any high school, college, or university that isn’t examining the Venezuelan collapse, in its economic classes, is practicing malfeasance. This has happened everywhere that socialism has gained sway. I’d like to hear Bernie Sanders’ explanation for these developments.

james Isaacs
@Richard Krauland Richard — dead on correct. The natural place where Socialism ends is coercion, force, absence of freedom and complete societal breakdown.

Scott Horsburgh
The typical liberal response is that they didn’t practice socialism properly. The correct retort is they did!

Patrick McGoldrick
@Richard Krauland I don’t want to hear Bernie’s take on anything.

Ernest Miller
Too bad our intrepid news media can’t find the word socialism in their lexicon when speaking about Venezuela.
There is no excuse whatsoever, except for willful ignorance on the part of our mainstream media for their continued support for socialism.

Richard Krauland
And let’s not forget our high schools, colleges, and universities; which ignore the realities of socialism in all of their economic classes.

The media and our public education system are the two greatest failures in our society.

Patrick McGoldrick
@Richard Krauland Do not be naive. They are not failures. They are frighteningly effective at doing what those who have subverted them want to do.

Gary Parsons
“The trouble with liberalism is that eventually, you run out of other people’s money.”
Unfortunately, Venezuela is learning that the hard way…

Octavio Lima
What is so sad is that just before the Bolivarian revolution, Venezuela was one of the richest countries in South America. Now it is one of the poorest, just two decades removed from that fateful date.

Henry Newbold
Fine analysis, as far as it goes, but it leaves out something very important. The editorial manages to say NOTHING about the widespread misery that Chavez’s socialism has caused to ordinary Venezuelans. Surely that is at least as relevant for US foreign policy, and for Journal readers as human beings. The financial big picture is crucial, but so are the actual conditions on the ground. Drudge has covered the Venezuelan crisis by linking to news reports of formerly middle-class families eating their pets to stay alive. The Journal focuses on the impending bond default, without sparing even a single word for the ordinary folk affected by it.
Just one more example of how and why Donald Trump defeated the conservative establishment last year.

regina margot
“The Journal focuses on the impending bond default, without sparing even a single word for the ordinary folk affected by it.”
That’s not fair – the Journal has tirelessly reported on the misery of everyday people in Venezuela. Over the past two years there have been numerous in-depth articles, including the one today about “the class of 1994” – fleeing the country as fast as they can to feed their children


While the human suffering in Venezuela is not mentioned in this editorial, it has been covered in some depth in many other articles and editorials published by the WSJ.

And I’m not sure how not mentioning conditions in Venezuela in this particular editorial is an “example of how and why Donald Trump defeated the conservative establishment”. Would you care to help me see the logic behind this statement?


Yes, the Journal has done great Venezuela reporting on its news pages, as it usually does. But the editorial board should see it as their highest responsibility to draw explicit connections between macroeconomic issues and everyday life. That’s what’s missing here.


Because… Venezuelans themselves ARE NOT INNOCENT… Like Russel Crow tells DiCaprio on the movie Body of Lies: “there is no body innocent on this sh… hole”

@ADAM PRUZAN — Argument from “whataboutary”? Does the Journal also have to talk about environmental destruction of the forests there? How about endangered species? There is nothing better as a predictor of human misery than the general economy. If the economy goes down the hole, there will be incredible suffering. This is obvious to all. Trying to “humanize” an article on the economy – you will neither get those gut wrenching stories you desire so badly, nor will you get the root cause of their suffering. Useless-useless.

Bob Russell
These liberal do-gooders like Bill Gates and Warren Buffett who give billions of dollars to African socialist nations is like pouring water down a rat hole. The result is that more people live to have more babies who also can’t take care of themselves. The best thing we can do for poor people or anyone else is make them free and self sufficient.

Didn’t I see a sign in State and National parks asking that we please not feed the bears because it will make them dependent on handouts? It’s the same for humans.

William Cnossen
Socialism is always wishful thinking on the part of those who consider themselves the elite. Capitalism is the reality that works.

Bob Russell
It would be nice if the Socialist college professors would be forced to explain to the students why Socialism doesn’t work. It doesn’t work because there is no incentive to produce when everyone ends up with the same slice of the pie.

@Bob Russell — Also no incentive to work when the state grabs the fruits of your labor. Also no incentive to work when “from each according to their abilities – to each according to their needs”.

William Cnossen
And here we see the problems with the socialist/dictatorship/strong central government model. The few are often wrong about what needs to happen and what should be spent to help the many. The truth is that the many can take care of themselves if government (the few) gets out of the way.

To have a free people requires a responsible people. If you cannot expect people to take care of themselves you do not have a free society, you have a top down model.

Government help always results in more people dependent, more people in poverty, than when government leaves them alone.

Michael Gretchen
I hope Sean Penn and Jimmy Carter bought some of those bonds. If so, maybe they’ll come around to see that the worker’s paradise they’ve touted for so many years now wasn’t all they thought it would be.

John Segal
The problem is not socialism; it is total incompetence so bad not only are they running out of other people’s money, they are running out of their own money.

@John Segal
“The problem is not socialism”

Socialism is always a problem.

John Segal
@JAY WRIGHT @John Segal yes, Socialism is always a problem. However, even a capitalist economy run as corruptly as Venezuela would be in tatters

@John Segal @JAY WRIGHT
“…even a capitalist economy run as corruptly as Venezuela would be in tatters”

A true capitalist economy (which doesn’t exist) would not have a big, powerful government structure that could be corrupted. Socialism, by definition, always has a big, powerful government.

Stephen Martin
@John Segal Missing the key learning from history. Corruption at the top is always bad, but under socialism the leaders have the actual ability to take any property, capital or person and do with them as they will. Without regard for economic feasibility, morality or the law, as they are the law.
Corrupt capitalists in a free market society can disrupt a section of the economy for a while, but it rarely causes long term catastrophe.
A corrupt government with few and very limited powers is unable to create the havoc that is always associated with Socialism. By definition.
The moment you put the government in charge of what markets prosper and which do not you hurl yourself into the abyss.

Mark Dobbins
@John Segal ” The problem is not socialism; it is total incompetence…”

Socialism seems to be a synonym for incompetence.

Kevin Kilty
@Mark Dobbins @John Segal Socialism is incompetence by design.

Pat Kinghorn
What dumba$$ would lend money to this place? It’s been almost 20 years now. I can’t wait to learn my government somehow lent my money to them, in my name, and my debt will jump from 20 trillion to whatever this adds. And people are fighting for the swamp to stay the same.

Aki Korhonen

Development banks, bond funds, your 401k, etc etc. Some of it may be insured or otherwise guaranteed by the feds, but I’d expect most of it to be private or non-US.


Posted in culture and cycle of dependency, Puerto Rico > Venezuela > Socialism | Tagged , , , , , , , , , , , , , , , , , , , , , , , , | 2 Comments

Puerto Rico needs an IMF-style economic plan



Posted in analysis and opinion, Puerto Rico economic crisis, Puerto Rico necessary improvements | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

In Florida, all eyes on Puerto Rican voters after Maria

Read also, this opinion article, why Democrats want Puerto Rico to fail, to encourage more Puerto Ricans to move to the states, and to vote for Democrats.




In Florida, all eyes on Puerto Rican voters after Maria

Associated Press
1 / 2
In this photo taken Wednesday, Nov. 8 2017, Javier Gonzalez talks to a reporter in Hialeah, Fla. Gonzalez has joined the tens of thousands of Puerto Ricans moving to Florida after Hurricane Maria, grateful for a place to start over but not without resentment over how his island was treated in the disaster. (AP Photo/Alan Diaz)

MIAMI (AP) — Javier Gonzalez has joined a human tide of more than 130,000 U.S. citizens arriving in Florida since Hurricane Maria wrecked Puerto Rico, grateful for a place to start over but resenting how their island has been treated since the disaster.

More than a million Puerto Ricans — about 5 percent of Florida’s population — already call the state home, and given the outrage many feel over President Donald Trump’s handling of the storm, political observers say this voting bloc could loosen the Republican Party’s hold on this battleground state.

Gonzalez, 38, saw the storm destroy the restaurant he opened with his father five years ago. Without power or reliable water, he became violently ill from food poisoning for three weeks. Finally, he packed his bags, determined to make his future in Miami instead.

“There is resentment, and we feel abandoned compared to Texas and Florida,” Gonzalez said. “We were desperate for help.”

Like any Puerto Rican, Gonzalez can vote in all elections now that he’s moved to the mainland. He doesn’t plan to register for any party, but he follows the news and understands their platforms. He’s aware of Trump’s tweets.

“It’s not right that we’ve fought from World War I, to Vietnam and Afghanistan and that the first thing the president says is: ‘You have a large debt, big problems and have cost us millions,'” Gonzalez added.

Puerto Ricans are not the gift to the Republican Party that the anti-Castro Cuban diaspora has been historically. They’ve tended to favor Democrats, given their support for public education and social services. Around 70 percent of Florida’s non-Cuban Latinos voted for Hillary Clinton.

Both parties are courting the new arrivals to Florida, which Trump won last year by just 112,000 votes out of 9.6 million cast.

There is an intent to grab those who are coming,” said Rep. Robert Asencio, a Democrat of Puerto Rican descent who represents Miami in the Florida House and leads the Miami-Dade Committee for Hurricane Maria Relief.

“A lot of my colleagues say they are not politicizing this, but there is an effort to bring people either to the Democratic or the Republican side,” Asencio said.

Newcomers must register by next July 30 to vote in 2018 for a new governor to replace term-limited Republican Gov. Rick Scott and choose Florida’s congressional delegation, now 11 Democrats and 16 Republicans. Democratic U.S. Senator Bill Nelson also defends his seat next year, and Scott, who has been applauded for helping evacuees, is expected to challenge him in what could be a close race.

Scott set up three disaster relief centers to help arrivals with driver’s licenses, job searches, and disaster aid applications. Scott also asked education officials to waive public school enrollment rules for evacuated islanders, and to give college-bound evacuees the same tuition breaks state residents get.

Asencio calls Scott’s actions “damage control,” given the multimillionaire governor’s close relationship with Trump, who offended Puerto Ricans by tweeting they wanted “everything to be done for them” rather than taking responsibility for their own recovery. They also resent Trump’s rating of his own disaster response as a “10 out of 10,” blaming his administration for delays that exposed their families to illness and misery.

The island still faces a lengthy and painful recovery after the storm took down the entire electrical grid, leaving hospitals in the dark and closing schools for several weeks. Initial projections that 95 percent of the people will have power restored by year’s end now look optimistic.

Maria’s evacuees are following waves of people frustrated by Puerto Rico’s unemployment and debt crisis who settled in Central Florida, shifting from New York, the favored destination of previous generations. Of the more than 140,000 islanders estimated to have left since the storm, more than 130,000 went to Florida, where Puerto Ricans may soon displace Cubans as the largest Latino group.

State Rep. Rene Plasencia, a Republican from Orlando, predicts that Scott’s warm welcome will leave a bigger impression on the newcomers than any Trump tweets.

“For whatever people think of the president, you have to take into consideration the actions of Governor Scott,” said Plasencia, whose mother and wife are from Puerto Rico. “People aren’t making decisions out of a sequence of tweets … It makes good news, but it doesn’t make political shifts.”

Billionaires Charles and David Koch also are involved, funding the Libre Initiative, which welcomed hundreds of evacuees on the first cruise ship to arrive from San Juan.

Cesar Grajales, who lobbies for Libre, says they’re helping evacuees learn English and connect with community and business leaders.

Democrats hope Colombian-American Annette Taddeo’s recent underdog state Senate victory against a well-funded Republican in South Florida shows her anti-Trump message will keep resonating.

“It is a strong indication that voters are paying attention, and they are angry,” said Cristobal Alex, president of the Latino Victory Project. “We wouldn’t have the devastation and abandonment of Puerto Rico without Donald Trump. People will look at that.”

On the island, Puerto Rico’s lack of statehood means they can’t vote in general presidential elections, and can only send a non-voting representative to Congress. On the mainland, they’ll have more power.

“I know for a fact that we are well educated and we are going to come here to work,” Gonzalez said. “And yes, we are going to make a voice. We are going to make a bigger voice than before.”

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Puerto Rico’s leaders don’t know who has power. Most Puerto Ricans STILL don’t have power, 50 days after Hurricane Maria!

42% power generation in PR as of 11-8-17 does little good when less than 5% of Puerto Ricans have electricity, even 50 days after Hurricane Maria. Upper right box shows the government-owned monopoly’s power generation at Status.PR.


The discrepancy is that just because power plants have restored their facilities to generate power, the overhead lines also need to be repaired so that the electricity can reach homes and businesses.


San Juan's unlit skyline, a month after Hurricane Maria.


Puerto Rico’s leaders don’t know who has power. We tried to find out

By Leyla Santiago, Khushbu Shah and Rachel Clarke, CNN

Updated 7:06 AM ET, Mon November 6, 2017

San Juan, Puerto Rico (CNN) — Towns and communities across Puerto Rico are entirely without power, more than six weeks after Hurricane Maria.

The island’s leadership is touting restoration figures that show nearly 40% of electricity generation has resumed — but it doesn’t say how much of that power is actually reaching homes, schools and hospitals.

Officials from the government and the Puerto Rico Electric Power Authority (PREPA) don’t even know how many people have power for lights, air conditioners, refrigerators and other basic necessities.

So, while some power plants can generate power, the ability to transmit it to homes may not be possible in some areas.

One of the union leaders for PREPA employees, Evans Castro Aponte, was hearing things were so bad he estimated just 5% of customers have electricity. That would leave 95% of the 3.4 million Americans on the island without any power unless they can run costly and loud generators that have become difficult to find on the island.

With no reliable government information, CNN tried to contact each of the 78 municipalities in Puerto Rico, which are coordinating their own recoveries.

Most calls simply did not go through. Along with so much here, communication is intermittent at best.

Some 42 of the municipalities could not be contacted.

Of the 36 towns we did reach, 10 said they had 0% power restoration. Others estimated 1, 2, 10, perhaps 20% of homes, businesses and amenities had electricity. Just four regions reported that they were more than half back on line — Ponce and Guayanilla with 60% of residents with power; San Germán, where 75% of buildings have electricity; and Culebra — an island off Puerto Rico that’s home to just fewer than 2,000 people, where the mayor said 90% had power.

Humacao, an area where almost 54,000 live, has no power. Las Piedras, home to nearly 40,000, has no power. The same story for Loiza, where 30,000 live. And the list goes on and on, six weeks after the blackout.

Fernando Padilla, director of the project management office for PREPA, insisted to CNN they were on target with work, having exceeded the goal of 33% power generation by the end of October.

“The amount of generation restored is not directly coordinated to amount of clients, but what I can say is that the main metropolitan cities have all or most of their critical loads on,” he said.

He agreed that focusing on generation, not customers with power, could be confusing, but said it was currently the most accurate measurement of progress.

Pressed on whether PREPA knows how many people on the island have electricity, he said: “At this moment, we wouldn’t have a reliable amount.”

He did not dispute that some communities would have “very close to zero” power, but said he remained optimistic of meeting Gov. Ricardo Rosselló’s goal of 95% with power by December 15 on the way to 100% restoration.

“It’s been an extreme challenge based on the devastation that Hurricane Maria brought.”

San Juan’s unlit skyline, a month after Hurricane Maria.

San Juan’s unlit skyline, a month after Hurricane Maria.

The massive, long-term outages are affecting every part of life. In the capital, San Juan, many apartment blocks are still black at night apart from candles flickering in windows. Generators hum constantly, but sometimes they fail, even at fancy hotels. Restaurants and businesses remain closed.

A barber in the Condado neighborhood cuts hair outside, as he has no light or power in his shop. Even this week, CNN was unable to reach officials in this city to get their estimate on how many people have power.

Out of the city, in San Germán in the southwest, the mayor said the irony was that they’d been able to reopen some schools, but that the schools did not have power.

Orlando Cintron, spokesman in the Humacao mayor’s office, said the municipality was using about 15 generators for essential services.

In Juncos, east of Puerto Rico, Mayor Alfredo Carrión said he was desperate because two major companies — Amgen, a pharmaceutical company, and Medtronic, a medical device company — that employ 4,000 local people don’t have power.

Medtronic spokesman Fernando Vivanco said his company had been using generators at its five facilities on the island for several weeks as it worked to resume pre-hurricane operations.

Ediel Rivera, right, with his cousin and grandmother, says sometimes there is nothing to do but stare at each other.

Ediel Rivera, right, with his cousin and grandmother, says sometimes there is nothing to do but stare at each other.

For ordinary people, the lack of power — especially for those without a generator or the ability to run one — is one long, relentless grind.

“I had no idea it would last this long,” said Luis Rivera, at home in Manati, west of San Juan.

He is surviving with what looks like a light from a Christmas tree, powered by a car battery.

“It’s not easy to live like this,” said Rivera, who also doesn’t have running water at home.

He and his wife have moved their bed to an open window to catch nighttime breezes. “I can’t run a fan. It’s really hot.”

How a month of hurricane nightmares changed Puerto Rico — and me

His nephew, Ediel Rivera, 11, said their evenings were simple, and boring.

“We stare at each others’ faces or play on our cell phones if they’re charged.”

For some, the outage is now heading towards its third month. Hurricane Irma skirted Puerto Rico on September 6 but still knocked out some power that did not come back before Hurricane Maria smashed the island on September 20.

And there just seems to be no end in sight, no light at the end of a very long tunnel.

The power grid was old and dilapidated and in desperate need of repair even before this September’s hurricanes shut it down completely.

Hurricame Maria smashed Puerto Rico’s transmission network, including this power tower near Guayama.

Hurricame Maria smashed Puerto Rico’s transmission network, including this power tower near Guayama.

Help took time to arrive.

Unlike when storms are heading for Florida or the Gulf or anywhere in the mainland United States, power crews were not able to wait just out of the path of the storm, to swoop in and start repairing downed lines as soon as possible.

Workers are dangling from helicopters to fix Puerto Rico’s power lines

Related Article: Workers are dangling from helicopters to fix Puerto Rico’s power lines

And then some of the first crews that were brought in to fix things were linked to multimillion-dollar contracts that caused political and financial controversy. But earlier this week, Puerto Rico’s governor announced that the deal would be voided.

Rosselló has now called on his counterparts in New York and Florida to send power workers. And FEMA has tasked the US Army Corps of Engineers to rebuild Puerto Rico’s infrastructure.

By now, many people just want to have light at the flick of a switch, and a place to keep food cool, whichever teams of workers makes it happen.

And perhaps watch a movie, a video game or a soap opera on TV to take their minds off their problems for a while.

This story has been updated with information from Medtronic.

CNN’s Leyla Santiago and Khushbu Shah reported from San Juan, Puerto Rico, and Rachel Clarke wrote in Atlanta. CNN’s Flora Charner and Natalie Gallón, and journalist Karisa Cruz, contributed to this report.


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The heightened risk that Puerto Rico will become a new base for Mexican cartels



The heightened risk that Puerto Rico will become a new base for Mexican cartels

The heightened risk that Puerto Rico will become a new base for Mexican cartels
© Getty Images

Puerto Rico’s wrecked infrastructure and dysfunctional finances and politics make it a target for Mexico’s drug trafficking organizations (“narcotraficantes” or “narcos”) looking to diversify their transport channels to North America.

And if the narcos succeed, they will put the RICO into Puerto Rico.

Hurricane Maria hit Puerto Rico on Sept. 20, 2017. Its 100 mile-per-hour winds and heavy rainfall and flooding destroyed the island’s power grid, leaving all 3.4 million residents without electricity, and wiped out 80 percent of the territory’s crop value. Communications were cut off as most of the cellphone, landline, and Internet service was lost. Highways and bridges suffered extensive damage, hampering the distribution of relief supplies. The territory’s Governor estimates storm damage at $90 billion.

Some members of the island’s political class didn’t respond with distinction. The mayor of San Juan spent her time in front of news cameras instead of at disaster recovery meetings, and other mayors hoarded relief supplies for their political supporters. One engineering firm providing pro bono assistance refuses to work with local officials.


An isolated location with low-grade infrastructure, high unemployment (10 percent before Hurricane Maria), a long coastline and venal public officials are attractive to the narcos as the situation resembles the ungoverned spaces in familiar places such as the Mexican province of Sinaloa.

In August 2107, “Junior Cápsula,” the most powerful narco in Puerto Rico and the Dominican Republic was sentenced to 30 years in prison. With Junior off the board, and the region’s trafficking volume surging (it tripled between 2009 and 2014), and the economy prostrate, the region faces a leadership vacuum when its public institutions are vulnerable to corruption. Into it may step organizations with cash and experienced people to compete or cooperate with the local traffickers.

The Caribbean was the prime drugs pathway to North America when Colombia’s Medellin and Cali cartels controlled the cocaine trade, but is not now favored by the Mexican cartels which prefer to go through, under, and over the Southwest border of the U.S. Now, the combination of local economic necessity and good transport facilities may earn the territory a second look from the cartels.

The government-owned Puerto Rico Ports Authority is responsible for developing, operating, and overseeing nine seaports and 10 airports (there are 16 airports total). Most of the seaports are located near airports, a feature that appeals to any transporter, licit or illicit. The airports range from small private fields to the international airport servicing the capital city, San Juan, the main entrepot for flights to North America. Passengers and cargo arriving in the U.S. are proven vector for smuggling, and cargo ships and containers to the U.S. get less screening. The port of San Juan has eight passenger piers, with accommodation for twelve ships, and eight cargo piers which handle containers and bulk cargo.

Before Hurricane Maria, Puerto Rico was best known for its $73 billion debt, an unfunded pension liability of $49 billion, and a dismal bond rating. How did that happen?

There’s a lot of blame to go around: weak local governance, corrupt politicians, the phasing out of federal tax credits that helped channel investment to the island, the inability of Puerto Rico to restructure its debt in bankruptcy court, and the island’s tax-exempt bond status, for starters.

The Puerto Rico Ports Authority earns revenue and lease income, but auditors have found numerous weaknesses in its financial management system putting funds and property at risk for theft or diversion. A sharp drop in revenue from airports and seaports as commerce and tourism slow may lead to layoffs, forcing redundant staff into the arms of the narcos, who will offer plata o plomo. If some facilities are forced to close, that’s no problem for the narcos: a closed airport that meets Federal Aviation Administration standards is better than any of the thousands of clandestine airfields used to launch their wares to North America.

Puerto Rico’s banks are part of the U.S. banking system and will be vulnerable to exploitation for money laundering as money spent on reconstruction provides cover for narcotics proceeds. Once the money is in the U.S. system it can be exported with minimal interference.

The narcos have options. They can build or bolster a relationship with the existing Puerto Rican traffickers, and cement it with their own “reconstruction assistance.” Ships and aircraft that deliver reconstruction material to the island can return large drug shipments to the mainland. Corrupt airport employees have been useful since the late 1990s and may be again despite recent arrests. Accommodating politicos can provide early warning of criminal investigations and impede efforts to make the system less opaque, and transport employees under financial pressure may cooperate with traffickers.

The 10 percent of Americans who regularly use illicit drugs probably won’t stop, so neither will the narcos.

James D. Durso (@James_Durso) is the managing director at consultancy firm Corsair LLC. He was a professional staff member at the 2005 Defense Base Closure and Realignment Commission and the Commission on Wartime Contracting in Iraq and Afghanistan, and served as a U.S. Navy officer for 20 years specializing in logistics and security assistance. His overseas military postings were in Kuwait and Saudi Arabia, and he served in Iraq as a civilian transport advisor with the Coalition Provisional Authority. He served afloat as supply officer of the submarine USS SKATE (SSN 578).

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