As the U.S. government’s shutdown stretches into its second week, local economies everywhere are suffering—but perhaps none as acutely as Puerto Rico.
The Island of Enchantment, which is home to nearly four million people, is slogging through its seventh straight year of recession with an economy that has already contracted 5.4 percent since August 2012. And the shutdown is making it difficult for the U.S. territory to overcome the economic difficulties that have plagued it for the better part of the decade.
Though Puerto Rico’s average per capita income is half that of Mississippi’s— the poorest state in the union—consumer prices on the island are sky high. On average, electricity costs on the island are double those on the mainland, and the cost of importing 85 percent of Puerto Rico’s food is often passed onto the consumers.
The result: nearly half the population lives under the poverty line, and Puerto Ricans are abandoning the island at a record pace due to high costs, a wobbly economy and high unemployment. The government shutdown that began on October 1 will only exacerbate Puerto Rico’s already fragile economy.
The island is burdened by $69 billion in public debt and relies on federal funding for 39.6 percent of the money it spends, compared to the average of 26.2 percent for U.S. states. While less than $6.6 billion of the funding the island receives from the federal government is considered discretionary, the unintended side effects of the shutdown will ripple through various industries and could bring the unstable economy to a grinding halt.
With Puerto Rico’s unemployment rate at a staggering 13.9 percent—the highest in the country—the federal shutdown means the continued loss of what little employment is available on the island. Federal employees, already suffering with furloughs due to sequestration, number about 10,000 on the island; about half of those are considered non-essential and affected by the shutdown. The longer Congress fails to pass a resolution, the more likely it is to increase the unemployment rate in Puerto Rico where workforce participation is just 40 percent and there are fewer than 900,000 jobs.
But the shutdown also threatens to affect the other main source of income on the island: tourism.
In 2011 alone, tourism contributed over $6 million to the GDP and supported 59,500 jobs across sectors. The lost revenue from the closure of some of the island’s main tourist attractions, including Fort San Felipe del Morro and Fort San Cristobal in Old San Juan, as well as El Yunque National Park— the only tropical rainforest in the U.S. National Forest System —will also have a negative impact on local businesses that depend on tourism.
The negative consequences go further still. Besides decreasing the revenue from the island’s most popular industry, the shutdown affects more than just vacationers and tourist destinations. Perhaps the most dangerous consequence of the shutdown will be the reduced resources to combat violent drug crime.
With a per capita murder rate six times that of the U.S. mainland, more than 70 percent of homicides in Puerto Rico were related to the drug trade in 2012. Up until recently, the federal government paid little attention to what was happening on the island. By 2012, Puerto Rico had received just $260 million to combat drug-related crime—compared to the $1.6 billion that the U.S. initially pledged to Mexico as part of the Mérida initiative.
This all changed with Operation Caribbean Resilience, which began in July 2012—one year after murders in Puerto Rico surged to a record 1,117 per year. While the drug trade began to thrive on the island in the 1980s, it saw a dramatic spike in drug violence 2009, when tighter security at the U.S.-Mexico border closed off traditional drug trafficking routes.
While the federal government has sent 30 additional Homeland Security investigation agents to Puerto Rico and the Coast Guard has increased patrols of the Caribbean smuggling routes, the shutdown affects federal agencies on the island that are already chronically understaffed. Even the U.S. District Court for the District of Puerto Rico halted new judicial activities as of October 1.
With more than 43,000 pounds of narcotics seized in 2012 alone, it is clear that the U.S. can’t afford to neglect nearly 4 million citizens affected by the drug war due to partisan politics.
On the day of the shutdown, the FBI announced that it had dismantled a powerful drug organization in Puerto Rico that had generated over $100 million in revenue since 2005. I applaud that success and the new U.S. interest in the Caribbean—and recognize that federal agencies such as the FBI and Coast Guard are not currently affected by the shutdown.
Yet with chronically understaffed federal offices—even when the government is functioning at its full capacity—the shutdown seems poised to stifle the progress that has been made to reduce crime on the island.
