|by Alan Gomez, USA TODAY|
SAN JUAN — When Alejandro García Padilla took office as governor of
The unemployment rate of 14.6% exceeded that of any U.S. state. Public worker pensions were strangling the budget. Murders had soared to record numbers as the drug trade overwhelmed the island.
What's more, the island of just 3.7 million residents owed a staggering
"I would say, 'I should ask for a recount,' " García Padilla, 42, said of his first days in office.
Global debt markets are concerned about default. The problem is particularly acute in the U.S. mutual funds industry, where many Americans have their retirement savings.
"All of a sudden … the guy who usually spends his time playing golf is saying, 'Hey, do I have some of that?' and their broker is saying, 'Yes, you do,' " said
"I would have to stop paying salaries, or close the department of health, education, police, everything before we went into default," García Padilla said.
Its only remaining options are to cut spending and raise taxes, beg
Many factors have contributed to the island's fiscal crisis. But economists generally pin the blame on its inability to develop an economy independent of
The government began creating more public jobs to give work to the unemployed in the 1970s, when factories were closing down due to skyrocketing oil prices. That job creation never stopped. Today,
With people losing jobs and tax revenue falling,
The island found that Puerto Rican bonds were an especially attractive item to investors. Municipal bonds are generally exempt from state and local taxes for those who buy them in the state or city they live in. But Puerto Rican munis are exempt from federal as well as state and local taxes, no matter what state the purchaser is from.
That "triple-tax-free" status made the territory's bonds popular.
Then the real estate collapse hit
The only part of the economy that thrived was the illegal drug trade.
Meanwhile, the lack of financial opportunities is driving the young and educated — the very people
Since 2000, the island has seen a net loss of 144,000 residents, mostly to
Giovanni Villafañe, a 22-year-old senior at the
"I've had professors who tell us, 'You've got to stay, you've got to help
Colon sees the food stamps and other forms of federal aid as a "shock absorber" for people struggling. But some on the island feel the welfare has also created a sense of dependence among Puerto Ricans that makes it difficult for them to spur their own economic revitalization.
"Many Puerto Ricans came up believing the government is responsible for this or that. So it's very logical that if they live on welfare that they would feel they need help to start a business," said
They opened the tea room, called the
Despite their success, they're making a point of doing everything — from the renovations to painting to replacing the damaged floor — themselves.
"I don't have
NOT AN ISLAND UNTO ITSELF
It has increased the retirement age for government workers to 67. It has raised taxes, water rates and highway tolls.
But like European nations struggling with long-standing underfunded pensions and bloated payrolls, the reforms in
Some complain that García Padilla's focus on reducing the debt (highlighted by an estimated
"The fact that the economy hasn't grown in seven years, that's really the underlying problem," Marxuach said. "Increasing taxes by that much in the middle of a recession will probably make that recession more acute."
TOURISM STILL PILLAR OF ECONOMY
When asked why the island's tourism industry isn't performing well, Gov.
"There's a plan for that," he says, pointing around the map as he explains a
He also wants to expand
And he won't back down on paying the island's bills, he says.
"This cellphone isn't paid by the Puerto Rican government," he says, holding up his iPhone. "I'm the first governor … who uses a used car."
Those are the kinds of steps, however small, that he believes will get
"For many years, the government of
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