Puerto Rico's Fiscal Woes Lead to Protests and Fears of Worsening Financial Fallout
Puerto Rico's Fiscal Woes Lead to Protests and Fears of Worsening Financial Fallout
By RICK LYMAN
SAN JUAN, P.R., May 7 — The Popular Democratic Party occupied Calle Fortaleza late Sunday morning, filling the narrow lane of tottering colonial facades spilling from the front gate of La Fortaleza, the governor's residence.
The party's color is red, and members wear it on shirts, hats, socks, bandannas. Their flag of choice is the Puerto Rican one, and their man, Gov. Aníbal Acevedo-Vilá, was ensconced inside, a captive of the fiscal crisis that has hobbled Puerto Rico for a week.
"Vilá is not alone," they chanted to the clacking of wooden noisemakers and tambourines. He stepped onto the balcony, briefly, to greet them.
The opposition New Progressive Party started an hour later, with an evangelical service on Plaza de Armas and a slow, noisy march across Old San Juan to Calle Fortaleza. Their color is blue, and they carry the United States flag. Their leaders control both the Senate and the Chamber of Representatives, ensconced in the white-domed Capitolio on a seaside bluff a mile away.
"The governor could immediately end this by signing the bills that we have placed before him," said Jorge Santini, the mayor of San Juan and the headliner of the opposition's rally. "He is prolonging this crisis because he hopes to gain a political advantage."
Governor Acevedo-Vilá also blames political calculation from the opposition.
"They think that if there is a crisis, the governor will get the blame," he said in a telephone interview Sunday evening. "But that is not what is happening. People know that the House is the problem now."
In the end, the two sides were less than 10 yards apart on Calle Fortaleza, separated by wooden security barriers, a few dozen stone-faced riot police officers and the aquamarine awnings of a tourist boutique called Tropical Paradise. They sang. They chanted. They made rude gestures and tried to outshout one another. Both sides summoned the Almighty.
"The problem on this island right now is that the last election, in 2004, was too close," said Carlos Lopez, mayor of the resort town of Dorado and a supporter of the governor. "Just a few thousand votes. Power is split. And so now, nothing gets resolved."
The fiscal crisis that has brought turmoil to Puerto Rico for a week has its roots in that razor-close 2004 election. The government has been unable to pass a new budget for two years, meaning that Puerto Rico continues to operate under the old one, even though costs have risen and the size of the government and the population have continued to grow.
The result was that last week, Governor Acevedo-Vilá said the federal government had run out of money, almost two months before the end of the fiscal year on June 30. He ordered a partial government shutdown, furloughing 95,000 civil servants — more than half of them teachers — and closing some 43 agencies, including the largest, the Department of Education, which tossed thousands of students out of school and ended daily school-lunch programs that many of the island's poor families depend upon to feed their children.
The government shutdown has led to dozens of rallies and protest marches, including the ones on Sunday. The leaders of seven unions, including truck drivers and electrical workers, began the day promising to mount a general strike on Tuesday. But by day's end they altered their tune, saying they would aim at "paralyzing the profits of the rich" with a series of unspecified actions aimed at banks, big corporations and major shopping centers.
"This is the first time Puerto Rico has had to operate under such a divided government, and they're not used to it," said Angelo Falcon, president of the Institute for Puerto Rican Policy, based in New York. "This thing is really out of control. And it's getting nasty."
Meanwhile, the man at the reluctant center of the current fuss, Alfredo Salazar, head of the Government Development Bank, had caught an early morning flight to New York where he hoped on Monday to persuade Moody's Investor Service and Standard & Poor's not to downgrade Puerto Rico to junk-bond status.
Although the teachers' next paychecks are not due until May 15, when the crisis will really hit home, business owners say they are worried that skittish consumers will stop buying, and they warn of potential private-sector layoffs. And at the local level, many of Puerto Rico's towns, which depend on federal support, have had to curtail municipal services like garbage collection.
The political parties here do not break down along class lines, or even along liberal-conservative ones. Instead, the central defining issue is Puerto Rico's future status. The opposition party wants it to become the 51st state in the union. Governor Acevedo-Vilá's party favors the status quo, keeping Puerto Rico a territory.
And a much smaller third party — their color is green — wants absolute independence for the island.
Governor Acevedo-Vilá says he needs $531.5 million to get the government to the end of the fiscal year. He wants Mr. Salazar to deliver a loan of that amount, but not until he and the legislature can agree on how to pay for it.
The governor suggests a 7 percent sales tax, an idea that he borrowed from an old platform of the opposition party, which now renounces the idea. The opposition party chief, Pedro Rosello, himself a former governor, has suggested trying a lower sales tax.
In the meantime, the Senate passed a 5.9 percent sales tax bill, which the governor said he would support if it was accompanied by measures like a higher tax on some corporations. The House has not taken action on the compromise.
Jorge Silva, secretary for economic development and commerce, said estimates of economic losses from the crisis thus far ranged from $14 million to $20 million a day, though he said those numbers would inevitably rise if the crisis continued.
And as the governor digs in his heels, opposition leaders claim the actual amount of money needed is around $350 million, much less than Mr. Acevedo-Vilá says he needs. They say they have already passed enough bills to get Puerto Rico through the short-term crisis, partly by borrowing from next year's tax funds.
"I say to the governor, send the people to work again and we will continue discussing this," Mr. Santini said. "All he must do is sign the bills that we have sent to him."
But Governor Acevedo-Vilá says he is determined to find a long-term solution.
"I am insisting on a real solution to the current crisis, so we don't repeat the same crisis next year," he said.
Many of the protesters, though, and others on the street are casting a skeptical eye on the behavior of both parties.
"This is nothing but a big power struggle between the two parties and even among those within the parties," said William Ortiz, vice president of the Teachers Association, which represents 28,000 of those laid off. "And it is the public employees and the schoolchildren who are paying the price."
By RICK LYMAN
SAN JUAN, P.R., May 7 — The Popular Democratic Party occupied Calle Fortaleza late Sunday morning, filling the narrow lane of tottering colonial facades spilling from the front gate of La Fortaleza, the governor's residence.
The party's color is red, and members wear it on shirts, hats, socks, bandannas. Their flag of choice is the Puerto Rican one, and their man, Gov. Aníbal Acevedo-Vilá, was ensconced inside, a captive of the fiscal crisis that has hobbled Puerto Rico for a week.
"Vilá is not alone," they chanted to the clacking of wooden noisemakers and tambourines. He stepped onto the balcony, briefly, to greet them.
The opposition New Progressive Party started an hour later, with an evangelical service on Plaza de Armas and a slow, noisy march across Old San Juan to Calle Fortaleza. Their color is blue, and they carry the United States flag. Their leaders control both the Senate and the Chamber of Representatives, ensconced in the white-domed Capitolio on a seaside bluff a mile away.
"The governor could immediately end this by signing the bills that we have placed before him," said Jorge Santini, the mayor of San Juan and the headliner of the opposition's rally. "He is prolonging this crisis because he hopes to gain a political advantage."
Governor Acevedo-Vilá also blames political calculation from the opposition.
"They think that if there is a crisis, the governor will get the blame," he said in a telephone interview Sunday evening. "But that is not what is happening. People know that the House is the problem now."
In the end, the two sides were less than 10 yards apart on Calle Fortaleza, separated by wooden security barriers, a few dozen stone-faced riot police officers and the aquamarine awnings of a tourist boutique called Tropical Paradise. They sang. They chanted. They made rude gestures and tried to outshout one another. Both sides summoned the Almighty.
"The problem on this island right now is that the last election, in 2004, was too close," said Carlos Lopez, mayor of the resort town of Dorado and a supporter of the governor. "Just a few thousand votes. Power is split. And so now, nothing gets resolved."
The fiscal crisis that has brought turmoil to Puerto Rico for a week has its roots in that razor-close 2004 election. The government has been unable to pass a new budget for two years, meaning that Puerto Rico continues to operate under the old one, even though costs have risen and the size of the government and the population have continued to grow.
The result was that last week, Governor Acevedo-Vilá said the federal government had run out of money, almost two months before the end of the fiscal year on June 30. He ordered a partial government shutdown, furloughing 95,000 civil servants — more than half of them teachers — and closing some 43 agencies, including the largest, the Department of Education, which tossed thousands of students out of school and ended daily school-lunch programs that many of the island's poor families depend upon to feed their children.
The government shutdown has led to dozens of rallies and protest marches, including the ones on Sunday. The leaders of seven unions, including truck drivers and electrical workers, began the day promising to mount a general strike on Tuesday. But by day's end they altered their tune, saying they would aim at "paralyzing the profits of the rich" with a series of unspecified actions aimed at banks, big corporations and major shopping centers.
"This is the first time Puerto Rico has had to operate under such a divided government, and they're not used to it," said Angelo Falcon, president of the Institute for Puerto Rican Policy, based in New York. "This thing is really out of control. And it's getting nasty."
Meanwhile, the man at the reluctant center of the current fuss, Alfredo Salazar, head of the Government Development Bank, had caught an early morning flight to New York where he hoped on Monday to persuade Moody's Investor Service and Standard & Poor's not to downgrade Puerto Rico to junk-bond status.
Although the teachers' next paychecks are not due until May 15, when the crisis will really hit home, business owners say they are worried that skittish consumers will stop buying, and they warn of potential private-sector layoffs. And at the local level, many of Puerto Rico's towns, which depend on federal support, have had to curtail municipal services like garbage collection.
The political parties here do not break down along class lines, or even along liberal-conservative ones. Instead, the central defining issue is Puerto Rico's future status. The opposition party wants it to become the 51st state in the union. Governor Acevedo-Vilá's party favors the status quo, keeping Puerto Rico a territory.
And a much smaller third party — their color is green — wants absolute independence for the island.
Governor Acevedo-Vilá says he needs $531.5 million to get the government to the end of the fiscal year. He wants Mr. Salazar to deliver a loan of that amount, but not until he and the legislature can agree on how to pay for it.
The governor suggests a 7 percent sales tax, an idea that he borrowed from an old platform of the opposition party, which now renounces the idea. The opposition party chief, Pedro Rosello, himself a former governor, has suggested trying a lower sales tax.
In the meantime, the Senate passed a 5.9 percent sales tax bill, which the governor said he would support if it was accompanied by measures like a higher tax on some corporations. The House has not taken action on the compromise.
Jorge Silva, secretary for economic development and commerce, said estimates of economic losses from the crisis thus far ranged from $14 million to $20 million a day, though he said those numbers would inevitably rise if the crisis continued.
And as the governor digs in his heels, opposition leaders claim the actual amount of money needed is around $350 million, much less than Mr. Acevedo-Vilá says he needs. They say they have already passed enough bills to get Puerto Rico through the short-term crisis, partly by borrowing from next year's tax funds.
"I say to the governor, send the people to work again and we will continue discussing this," Mr. Santini said. "All he must do is sign the bills that we have sent to him."
But Governor Acevedo-Vilá says he is determined to find a long-term solution.
"I am insisting on a real solution to the current crisis, so we don't repeat the same crisis next year," he said.
Many of the protesters, though, and others on the street are casting a skeptical eye on the behavior of both parties.
"This is nothing but a big power struggle between the two parties and even among those within the parties," said William Ortiz, vice president of the Teachers Association, which represents 28,000 of those laid off. "And it is the public employees and the schoolchildren who are paying the price."
posted by Carlos T Mock at 7:08 AM
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