Corruption in Puerto Rico—Gasp!

https://www.wsj.com/articles/corruption-in-puerto-ricogasp-11563744090

Corruption in Puerto Rico—Gasp!

Federal permission to declare bankruptcy emboldens the political class

Opinion: Puerto Rico Protests are a Reaction to Corruption

Opinion: Puerto Rico Protests are a Reaction to Corruption
Protests have rocked the island of Puerto Rico after leaked messages involving Governor Rosselló were released, which targeted both political adversaries and allies. Image: Getty

Puerto Rico Gov. Ricardo Rosselló is fighting for his political life after private messages he sent as part of a group chat were made public earlier this month.

Some of the texts, targeting both political adversaries and allies—and even making light of Hurricane Maria fatalities—were crude and disrespectful, and left the governor looking sophomoric at best.

The bigger problem for Mr. Rosselló is that “chatgate” lends credence to allegations that the commonwealth government is deeply corrupt.

Public opinion is solidly against Mr. Rosselló in the matter and in Old San Juan last week there were large daily demonstrations that reportedly cut across political divides. Most of the protesters were peaceful, but violence broke out on several occasions at night and police used tear gas and rubber bullets to restore order.

A demonstration against Gov. Ricardo Rosselló in San Juan, Puerto Rico, July 17. Photo: eric rojas/Agence France-Presse/Getty Images

A key question now is whether the commonwealth will follow the rule of law in dealing with its unpopular governor or whether a lynch mob will run him out of town.

Having violated its own constitution by defaulting on the commonwealth debt in 2017—with encouragement from President Obama and House Speaker Paul Ryan —the road to a lawless resolution of the crisis is wide open. But if Puerto Rico wants to save itself from full-blown descent into a banana republic, it will use this moment to recommit itself to its constitution.

Mr. Rosselló says that because he did nothing illegal, he need not step down. The institutional path, in that case, is either impeachment by the Legislature or for him to limp through the last 18 months of his term. He said Sunday he won’t run for re-election and will resign as head of the New Progressive Party.

Politically he appears to be finished. He was a Hillary Clinton delegate in the 2008 nominating convention and a delegate for Mr. Obama in 2012. But he is not far left enough for the extremists on his side of the aisle. This includes the radicalized mayor of San Juan, whom he mocked in the chats. Needless to say, the schadenfreude from his left flank is off the charts. And even in the big tent of his pro-statehood party, no one is rushing to his defense.

All of this is happening in the midst of a fiscal mess that Washington has made worse by blessing an illegal default.

Puerto Rico’s Constitution explicitly states that the government must pay general-obligation bondholders before using its resources for any other spending item in the budget. Mr. Rosselló ran on a commitment to follow the law. Once elected, he reversed course.

In 2016 Congress passed the Puerto Rico Oversight, Management and Economic Stability Act, or Promesa. It created an oversight board with a mandate to help Puerto Rico deliver a viable fiscal plan and restore access to the capital markets.

In May 2017, some five months after Mr. Rosselló took office, Puerto Rico nonetheless declared bankruptcy, in violation of the constitution, with full-throated cheers from Washington.

More than two years into bankruptcy, there is still no agreement on the budget and no access to capital markets. On July 3 the oversight board sued the governor in federal court over his decision to allow municipalities to transfer some $330 million in pension and health-insurance costs to the bankrupt commonwealth.

The governor shared his sentiment about the board in the chat thread when he wrote: “Dear OB, Go f— yourself. Sincerely, R2.” The words were followed by six middle-finger emojis.

That attitude may be popular on the island, where the board has been branded a colonialist tool robbing Puerto Rico of its sovereignty. But he can’t blame corruption inside his own government on the mainlanders.

On July 10, before the full 889 pages of chats went public, federal agents arrested Mr. Rosselló’s former secretary of education and former executive director of health administration on charges of fraud and theft of government funds.

On Wednesday the Puerto Rican online news site Noticel reported that the Center for Investigative Journalism has unearthed evidence that the Rosselló administration engaged in influence peddling and doled out illegal sweetheart deals to friends and close confidants. The center’s “investigation included interviews with more than twenty people with direct knowledge of the facts, the review of documents and databases of contracts and corporate records. The analysis and testimonies of the sources suggest that the practice spread to many of the public agencies,” according to Noticel.

This alleged “pillage of public funds,” Noticel wrote, happened “in the midst of the worst fiscal crisis in [the island’s] modern history.” It was also while Puerto Ricans suffered through Hurricane Maria and its aftermath.

It wasn’t hard to foresee that giving the creditors a haircut would turn out to be nothing more than a blank check for the political class to continue business-as-usual graft and patronage. Sure enough Mr. Rosselló liked the part of Promesa that allowed Puerto Rico not to pay its creditors; the part about fiscal restraint and cleaning up Tammany Hall, not so much.

Write to O’Grady@wsj.com.

Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the July 22, 2019, print edition.

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From the comments:

Octavio Lima

What is missing from our recognition is that corruption in Puerto Rico is fostered by an overreaching government infrastructure. When the government grows, any government, at any level, corruption inevitably follows.

Marguerite Willis
Firstly, the people must vote to approve a petition for statehood but twice that has been rejected in the voting booth because statehood comes with federal income tax.
George E Wilfong

It appears that Trump’s criticism of Puerto Rico’s corruption and incompetence was right on.
Carlos Lumpuy
If Puerto Rico were a state, it’d be number one in voter turn out where up to 70% of registered voters show up every election.
The declining population of 3 million on the island, most Democrats, have sadly chosen to vote for a living, instead of working for one.
$72 billion in debt, Puerto Ricans are now voting with their feet.
Many years ago, business took me to San Juan, where I had a savory meal with a very proud senior Puerto Rican.
He wore this elegant pleated shirt, a bright white linen Guayabera with elaborate embroidery even on the sleeves and cuffs.
He explained how had I been with his father enjoying a meal in another time; he’d boast that everything we were eating and drinking came from Puerto Rican soil.
But he lamented that the ingredients of our meal together, every scrap, even the cream, had come from off the island, all of it.
He lamented how a once hard-working, self-reliant Puerto Rican populace had so drastically changed in his lifetime, in just two generations…
How he, one of the island’s largest employers, had not so hard a time competing with his mercantile competitors, as competing with a government paying people not to work, not to be productive,
Thus not to provide for themselves and their own, with policies disincentives to industry, productivity, to work itself.
–How all manner of unearned handouts, mostly from Washington, together with remittances from mainland American relatives, had transformed his Puerto Rican island culture to one so alien,
From one once so industrious and proudly self-reliant of high morals and strong families,
To one of self-loathing sloth, idle dependency, and broken families where few even want to work but to game the system made corrupt by excessive government intervention in all manner of life and social engineering.
Financially and morally bankrupt, this once peaceful “Island of Enchantment,” is now crime ridden with residents fleeing the island by tens of thousands to live in Orlando and New York City.
Jim McCreary

Frederick Law Olmstead described a society much like this in his mid-1850s book about the Old South, The Cotton Kingdom.

Societies in which much of the population is paid to not work wind up looking a lot like societies in which much of the population is made to work without pay. In both cases, the market price of an hour of free labor is ZERO, so nobody has any meaningful incentive to work, so nobody does.

By that simple transitive logic, socialism = slavery.

 

Joe Nussbaum

Puerto Rico is the most accurate model of what Democratic Socialism would ultimately become in the USA. PR is protected by the USA , has economic ties to the USA, and has democracy like the USA. They voted themselves generous social welfare benefits, and they didn’t pay much attention to deficit spending.
Want Democratic Socialism? Take a good look at Puerto Rico.

Norman Martin

I have worked on PR and like the place and most of the people. Heck… I thought about retiring there. However, the infection of lefty group think has killed that plan.

PR could easily be as lush and wealthy as Hawaii. Don’t know if they can pull it off. Sad or tragic or both.

Roger Rotherberger

I worked on a heavy construction public project in Puerto Rico in the late 1990’s. Puerto Rico was clearly corrupt then and it is clearly corrupt now; no surprise. I have also worked elsewhere around the world and in New York City. Puerto Rico was far more corrupt but corruption was more of a political sport and part of that class of people.

When someone goes bankrupt banks no longer will lend to them; the US government should stop giving them money.

Dick Wolven

Beautiful!!

This is what Trump meant when he said these places were “s.h.s”. He meant that the people in charge are not only corrupt, but absolutely corrupt; not caring a bit about the people, just about THEIR power.

Also, what he meant when he told AOC that she could go down there and FIX those problems.

Also, what he meant when he said he would CLEAN the SWAMP. Washington is as corrupt as Ms O’Grady describes, not only PR, but all the corrupt countries about which she writes.

It used to be noble to “tell it is as it is”, but, now, NOT if you threaten the status quo of the fat-cats.

Doug Bohrer

Puerto Rico has been destroyed by a minimum wage set to be the same as the mainland, welfare payments, and the Jones Act, which requires all shipping between any two US ports to be carried by very expensive US flagged ships. The minimum wage level should be lowered for Puerto Rico, welfare payments should be cut and the Jones Act should be repealed.

Dante Marciani

I visited PR in 1964 and as I recall, the US was paying for medical care, education, food for schools, etc. The idea was that PR will with some help stand on its two feet. Well that assumption was wrong and apparently they are worst not better.

Tom Bewley

I suggest raising the PR minimum wage to $25/hr. That will fix everything!!!

More seriously, the people of PR, and especially the Political Class, regard the US Taxpayers as suckers to be taken advantage of at every opportunity.
Corruption on every level of society is endemic.
The Politicians want a socialist state paid for by Mainland Tax Payers, with all $$ disbursed by themselves.

Dan Wozjik

The Dems Socialist movement loves PR. It is a poor welfare island. No wonder the MSM and the left attacked Trump for calling out the PR corruption after the hurricane.

David Thompson

One can look at the modern history of states that were once colonies of Spain, such as PR and most of Latin America, and see that poverty, graft, and corruption are inherent in their society. Ex-colonies of the British seem to have managed to avoid the worst of that trap, while the colonies of the various European powers, especially in Africa, follow the graft, poverty and corruption model. Cultural differences matter.

We should declare PR independent and let them find their own way, somewhere between Cuba and Venezuela.

C.I Mothershead

“He was a Hillary Clinton delegate in the 2008 nominating convention and a delegate for Mr. Obama in 2012.”

Funny, this information is NEVER mentioned by the MSM.

Has anyone heard them describe him as another corrupt democrat?

Not me.

Eric Hasselberg

Don’t kid yourself. We US taxpayers and some bond holders are going to end up with the bill for PR incompetence…just wait for progressives to take over in 2020. PR will become a state. DC will become a state. Then let the federal dole begin. The end here is so predictable.

Mark Verhyden

This is a classic example of the vestiges of colonialism that still hang around the necks of many countries. Doesn’t matter if they are good, bad, or indifferent, the reasons are all wrong.

Just like the concept that welfare for the people, welfare for countries very rarely work. And actually encourages the very problems that their proponents claim they are supposed to solve.

Jim McCreary

Brava! It’s refreshing to see somebody in the mainstream press shining the spotlight of Truth on this sorry cesspool.

There’s a very simple solution, readily available: give them independence!

When they get their long-sought-after independence, they will have to pay their own bills, and manage their own corruption.

In pure cash-flow value terms, PR has been a value consumer for decades. Time to cut off the subsidies and make them live on their own earnings, such as they are.

Stephen Brosseau

Statehood? No!
Martin’s suggestion is like advising a woman to marry a loser in hopes of straightening him out. It’s a recipe for strife and suffering… and a miserable divorce.

 

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