Dr. Shapiro and I have op-eds running in English and Spanish now on Fusion/Univision on the future of Puerto Rico. The english version can be found here, and below. And the Spanish version here. The op-eds are derived from Rob's recent paper on teh subject which you can find here.
To Restore Prosperity, Puerto Rico Should Look to Ireland
How much longer will the people of Puerto Rico have to live with failed economic policies? It must be clear by now that the Commonwealth reliance on U.S. corporate tax preferences for U.S. companies locating operations there ran its course many years ago. Low tax rates matter to foreign investors, but it’s time for Puerto Rico to expand its horizons well beyond the United States. Rather, the Island should consider the example of Ireland, which a generation ago was the poorest member of the European Union (EU) – and became one of its most prosperous members by 2006.
In the late 1980s, Irish policy planners recognized that the fastest way to modernize their economy and turbo-charge productivity and growth was large-scale foreign direct investment (FDI). They also knew that with scores of middle-income countries vying for FDI, Ireland needed a comparative advantage. So they offered up Ireland as a low-wage, low-cost platform for multinationals from everywhere but Europe to enter the huge EU market. But they also had to make Ireland the most attractive place in the region for foreign investment. So in addition to the tax breaks that countries offered, the Irish government ramped up its public investments in modern infrastructure, they created 10 "enterprise zones" for foreign investors and equipped each zone with a new institution for advanced training and education, and they rolled out an array of special services and subsidies for foreign multinationals. The program even included helping foreign companies find the best locations and workers to meet their needs and providing relief from selected regulations and taxes for individual companies.
From 1987 to 2006, more than 1,000 multinational companies established new facilities in Ireland, including Microsoft, Dell, and Citicorp. The country’s real GDP grew at an average annual rate of 6.9 percent over that period, unemployment fell from 17 percent to 4 percent, the brain-drain of highly-educated young Irish was reversed, and the government’s debt as a share of GDP declined from 112 percent to 33 percent.
Like Ireland and the E.U., Puerto Rico and the mainland United States share a common currency, and virtually everything made in the Commonwealth enters U.S. markets without cumbersome customs and other import regulation. In short, Puerto Rico has a real opportunity to attract large-scale FDI from around the world by offering itself as a low-wage, low-cost platform for multinationals from Latin American, Asia and Europe to sell into the huge American market.
To succeed as Ireland did, Puerto Rico will have to undertake a comparable commitment to undertake difficult spending and tax reform, including targeted increases in public investments in education and infrastructure while still bringing down budget deficits. The Commonwealth government also must repair its tattered image with large foreign investors. To restore their confidence, Puerto Rico must step back from a possible debt default and from proposed changes in its bankruptcy laws to word off technical defaults by its public utilities. In this context, Puerto Rico also can ill-afford widely-publicized controversies that cast doubt on the Government’s commitment to keeps its word, such as current efforts by the Commonwealth Treasurer to negate its legal agreement to provide tax credits for tax over-payments to one of the Island’s major financial institutions, the Doral Financial Corporation.
The alternative is that the future for Puerto Ricans will look much like their present and recent past. After nearly a decade of stagnation and recession, the economy is 13 percent smaller than it was in 2004 – compared to Puerto Rico’s 13 Caribbean neighbors, which have averaged 2 percent annual GDP growth over the same period. That’s unsurprising. Business investment has grown in Puerto Rico at half the rate as elsewhere in the Caribbean. Capital flight has accelerated: foreign financial flows have been negative since 2006; and more recently, FDI flows turned negative as well. Unemployment is double the rate of the U.S. and nearly percent among the young, and the labor participation rate is the lowest in the Western Hemisphere. Moreover, public debt has soared from 66 percent of GNP to 96 percent, and both Moody’s and Standard & Poors rate the Commonwealth’s bonds as junk.
Here’s what ought to be the bottom line: While the per capita income of the Irish people increased from 60 percent of the EU average in 1987 to 136 percent of the average in 2003, per capita income in Puerto Rico today is seven percent less than it was in 2006. The choice – a hard road to long-term prosperity or the easy road to further decline – is Puerto Rico’s.
Dr. Robert Shapiro, former Under Secretary of Commerce for Economic Affairs in the Clinton administration is chairman of Sonecon, LLC, an economic advisory firm in Washington D.C. He is also an advisor to the Doral Financial Corporation and the International Monetary Fund.
Simon Rosenberg is president of NDN, a Washington-based think tank, which works on US-Latin America policy issues.
Next Tuesday, 9/23, I will take part in a panel to discuss on the role of the Latino Vote in the midterm elections. I will join representatives from the Center for American Progress, the National Council of La Raza, the Heritage Foundation, and Libre Initiative.
The panel will touch on the role of the Latino electorate in American politics thus far, including how it played a pivotol role in President Obama's 2012 re-election effort. We will also discuss how the growing electorate will impact the midterms and the what issues the Latino community is most concerned about in 2014.
The event is on September 23rd at 7 PM at the GWU Marvin Center's 3rd Floor Amphitheather. For more information, please contact firstname.lastname@example.org
NDN and its "21st Century Border Initiative" are pleased to invite you to an important today by Deputy Secretary of the U.S. Department of Homeland Security, Alejandro Mayorkas.
Deputy Secretary Mayorkas will discuss the Obama Administration's border security strategy and comprehensive response to the influx of unaccompanied minors in the Southwest border. Over the summer, the Administration engaged in an aggressive response to stem the flow of Central American migrants. In July and August, we have seen a dramatic drop in the number of migrants attempting to cross the southwest border.
The event will take place today Tuesday, September 16th in the First Amendment Lounge at the National Press Club, 529 14th Street NW, 13th Floor. Please arrive by 9:50 am, so the event can begin promptly at 10 am.
Today, NDN has released a new paper from Dr. Rob Shapiro: “To Reclaim Prosperity, Puerto Rico Should Adapt Ireland’s Model for Modernization And Focus on Attracting Investors from Around the World.” You will be able to find the full paper below in pdf form.
In this thoughtful prescription for Puerto Rico’s future, Dr. Shapiro writes:
“Puerto Rico’s current and long-standing program for economic growth has clearly failed, and the Commonwealth government and the people it serves need a new approach. For nearly two generations, the Island’s economic policy has focused on preserving U.S. corporate tax preferences for American firms that locate operations in the Commonwealth. The record shows that this singular focus has produced economic decline. Instead, Puerto Rico should adopt a version of Ireland’s economic approach, which used targeted public investments, tax preferences, and the country’s low-cost access to markets in the European Union (E.U.), in order attract large scale foreign direct investments (FDI). In the process, Ireland transformed itself over one generation from the poorest country in the E.U. to one of its most prosperous members.”
“NDN is proud to release this new paper which we hope will become an important part of the debate about Puerto Rico’s future,” said Simon Rosenberg, President of NDN, a DC based think tank. “The commonwealth's economic course is unsustainable. Dr. Shapiro offers a powerful vision for how Puerto Rico can regain control over its own destiny, and stride confidently into the far more competitive world of the 21st century.”
Started in 2005, NDN and its sister educational arm, the New Policy Institute, are well established thought leaders on US-Latin American Relations, the US-Mexico partnership and Latino issues in domestic US politics. Dr. Rob Shapiro, former Under Secretary of Commerce for Economic Affairs, Chairs NDN’s Globalization Initiative.
Today’s decision to delay is a pragmatic recognition that given the election, and a very crowded Presidential agenda, the Administration will be more likely to successfully sell whatever action they take to the public after the election than before. Am sure this was a tough decision but I think it is was the right one.
Immigration advocates should be careful to temper their reaction. At the end of the day we are talking about a six week delay on an issue of enormous consequence. It is more important that it get done right than fast.
In discussing deportations, it is also important to consider how much the President has already done. The 2011, DHS’s “Morton Memos” made it official government policy to end deportation of undocumented immigrants without criminal records. Just a few years into this new policy, in 2013, we saw the results of this new strategy – all but 10,000 of the 370,000 deported either had a criminal record or were caught entering the country without permission; and the total number of people deported from the interior of the US had plummeted. The practical effect of these changes is the threat of deportation has already been lifted for the vast majority of undocumented immigrants living in the United States. The assertion by some that delay means tens of thousands more “innocent” immigrants will be deported are at best exaggerating the short term impact of today’s decision.
There are many interesting takeaways from the new Pew Hispanic report on the undocumented immigrant population in the US, but one to draw attention to is that the undocumented immigrant population under President Obama has not grown, and is now almost a million less than in the latter years of the Bush Presidency. The report can be found here.
As we wrote in a recent report, that there has been no increase in the undocumented population during the Obama Presidency has to taken as a sign of the success of the Administration’s management of the border and immigration system in the US. In the Clinton era Presidency the nation gained on average over 600,000 undocumented immigrants each year. Under Bush is was over 400,000 a year. Under Obama, it has been on zero. It is a sea change.
While the slower economy of this era is certainly a factor in this decline, our report argues that changes in Mexico and tougher enforcement at the border has contributed to the plummeting of flow of undocumented immigrants into the US. Remember, the unemployment rate has dropped almost 4 entire percentage points during the Obama Presidency. So while the economy is in far better shape and producing far many more jobs than during the Great Recession, there has been no parallel uptick in the undocumented population. From a statistical standpoint this means of course there are other factors at play. The two we dwell on is the enhanced deterrent effect of the prioritization of apprehending illegal entrants in the Obama era, and improving socio-economic circumstances in Mexico itself.
The Aspen Idea Blog published a new piece that has a take from four fellows on how to address the Central American Migrant Crisis in both the short and long term. I wrote from the US perspective on how the Obama Administration has already addressed aspects of the crisis and how we can do more morving forward.
4 Perspectives Addressing the Central American Child Migrant Crisis in the US
The causes of the Central American migrant crisis are not simple, nor will be our nation’s response if it is to be successful.
A lot has contributed to the crisis: expanding regional influence of the Mexican cartels and transnational organized crime, weak regional civil society and legal authority, lack of economic opportunity for people in the region, and holes in the American immigration system, which have been relentlessly exploited by human traffickers and other criminal actors. So far the Obama Administration’s whole of government response has been smart: providing support to the three countries producing the migrants, unprecedented cooperation with Mexico in addressing the crisis, adherence to existing American laws for the processing of the children and families apprehended, and rapid deportation of those not qualified to remain in the US. The flow of child migrants is slowing, regional cooperation is on the rise, and a degree of order is being restored.
But over the long haul the US will have to develop and then implement a much more robust regional strategy to create regional economic opportunity, strengthen civil society and citizen security, and modernize and improve our own immigration laws. Perhaps drawing from other successful initiatives like the Marshall Plan or Plan Colombia, the US needs a new and far better sustained strategy to improve the lives of our neighbors to the South. This effort will also have to include discussions about our own lax gun laws, which have helped arm criminal elements in the region, and our own insatiable desire for illegal drugs, which is helping create the breeding ground from which the increasingly powerful transnational organized crime syndicates have spawned.
To read the full feature, and the insights of three other Aspen fellows, visit here. In order to read some of our other work this summer on the Central American Migrant Crisis, see here.
The team at NDN/NPI has been on point for the last few months on one of the top issues on the domestic agenda – the Central American migrant crisis. We’ve done dozens of press interviews and private briefings, conferred with the Senate, House and through the Administration, and produced early, impactful analysis of the crisis. The issues debated these last few months will also be central to the upcoming fall debate as Congress will have to tackle the crisis after its failure last week and the President is expected to take executive action to help eliviate the crisis and improve other parts of the immigration system. We send along some of the hightlights of our work for your review and beach reaching this August.
Most Anti-Hispanic House of Representatives Ever, 8/1/14: Simon's piece that covers the many anti-Hispanic acts of the GOP controlled House of Representatives. Just two years after claiming they were reaching out to the Hispanic Community, the House has moved even further to the right.
"On Immigration, the House GOP has only one answer: Deport the Kids", 7/16/14: Written originally for MSNBC.com, Simon predicts that GOP policy on immigration can be properly defined as: "Deport the Kids." Simon writes about how 2006 was a pivotal moment for the relationship between the Hispanic Community and party politics. He goes onto discuss to outline how the GOP's response to the Central American Migrant Crisis and failure to pass Comprehensive Immigration Reform will impact the party for years to come.
"Forward, or Backward?", 10/25/12: A prescient article written for Les Letras Libres (a Mexico-City based Spanish language Journal) in 2012, Simon wonders whether the Republican Party will move forward and adopt new policies that appeal to the Hispanic electorate or turn its back on them. Though the piece was written almost two years ago, it holds up well and provides excellent context to how long the GOP has been grappling with this issue. For more information on what we've been up to, feel free to check out NDN.org or follow us on Twitter @NDN_NPI.
Last year it was conventional wisdom that the existential threat posed by the fleeing of Hispanics from the Republican Party would produce moderation on immigration reform and other matters in this Congress. What is remarkable is that the exact opposite has happened. Consider what the House has done or is proposing to do in this Congress:
• Denied legalization and a path to citizenship to 12m undocumented immigrants, despite overwhelming public, Republican Party and right of center constituency support for Comprehensive Immigration Reform. This will be the second time in the past decade that a GOP House refused to take up a bi-partisan Senate immigration reform bill.
• Passed dozens of bills designed to strip health insurance from millions and even perhaps tens of millions of Hispanics through repeal of the ACA. No group in America is going to be benefit more from the ACA more than the Hispanic community.
• Paul Ryan’s budget framework guarantees dramatic cuts in public school spending, schools Hispanics rely on for their pursuit of the American Dream.
• By passing the “King Amendment” in 2013, the House went on record for stripping legal status and work permits for over 500,000 DACA recipients, and once again making them eligible for immediate deportation. I think this is the first time the Republicans advanced policies that would take existing legal status from a group legally resident and working in the US and advocate their removal from the country.
• The King Amendment would also revoke an Obama Administration policy that specifies that law-abiding undocumented immigrants were no longer priorities for deportation. The King Amendment would restore the threat of imminent deportation to every undocumented immigrant in the country.
• Block efforts to increase the minimum wage, something which would be particularly beneficial to the Hispanic immigrant community.
• End existing legal protections for Central American minors (and only Central American minors) apprehended at the border, denying them internationally negotiated and sanctioned opportunities to apply for asylum and other waivers which would allow them to remain in the US. These rights would remain for European and Asian children, for example.
• Deny funds requested by the Administration for swifter adjudication of the unaccompanied minors at the border, humane detention facilities for the kids here, and a humane repatriation process that would ensure the kids were not sent to violent and potentially lethal circumstances.
These are just the things I came up with this morning. Am sure there are more.
Taken together, it is hard to imagine an agenda more hostile to the interests of Hispanics in the US than what the House GOP has done this Congress. Rather than embracing this critical emerging part of our fast changing country, the House Republicans seem to be doubling down on a politics incredibly hostile to their presence here.
The question is why? What is the motivation here? I offered some thoughts in a major magazine piece on this subject two years ago, but it is a question well worth asking in the months ahead.
And be sure to read my recent MSNBC op-ed, "On Immigration, the House GOP has only one answer: Deport the Kids."
I sent this letter to friends of ours in the immigration reform community last Thursday, July 24th. It had been passed on to several reporters who have called me about it so I decided to make it available to the public.
Right now in the House of Representatives, the most powerful legislative body in the history of the world, there is a serious debate going on about immigration reform or the first time in nine years. With Granger’s proposal, the House Republicans have now proposed or passed measures on border and interior enforcement, the legal status of over 1m undocumented immigrations and are even enormous and consequential changes to another law, Wilberforce, while taking modest steps on the supplemental the President requested. The point is that they have through their own actions expanded this debate into terrain far beyond the supplemental, terrain that looks much more like traditional immigration reform. We also know from news reports that it looks like Boehner will need Democratic votes to pass anything this summer.
Thus, it is my recommendation that far more resources of this community be focused now on the House. We need to push the Democrats to go big and demand that CIR be part of any potential deal with the Republicans, and force a full and robust debate about the need to fix our broken immigration system. Even Jeb Bush took the House Rs to task for not stepping up on CIR in a WSJ oped today. We also know that in the Senate it is unlikely that any supplemental will make it without changes to Wilberforce – thus once again the Rs are blocking progress, and focusing on deporting children.
Simply put the Rs must pay a serious price for this politics and cannot get away without significant damage to their brand. We need to put pressure on them to deal, and to get as much out of this process as we can, perhaps even CIR itself. There is a huge opportunity emerging here, and I hope as many of you will step up and do things like protest outside McConnell and Boehner’s offices the way many have been protesting outside the White House. I am convinced that one of the reasons the Republicans have not moved on CIR this year is that they see Obama and the Democrats getting attacked by their allies. Why mess with that?
Bottom line – we are in the midst in the one of the most important public debates about immigration the US has seen in the last ten years. Time to stand and be counted.