The recent election results in Argentina reminded me that several years ago, when I began my chairmanship of the Fiscal Oversight Board, I was summoned by a member of a local think tank to have a dialogue with Martin Guzman, a leftist economist and disciple of the Board's renowned critic, Nobel laureate Joseph Stiglitz.
During my tenure, I was always open to different perspectives, considering them part of my duty. Guzman argued that Puerto Rico should not pay its debt. While I was familiar with this position, I knew that complex debt negotiations would require time and judgment on a case-by-case basis. What I really needed to understand was, from Guzman's perspective, what Puerto Rico could do to avoid another bankruptcy in the future. His answer was revealing, advising us to do "nothing" so as not to cause "more harm than good." This puzzled me.
Later, Guzman became Argentina's Minister of Economy, between 2019 and 2022, and the consequences of his ideology and that of his peers became evident. Today, Argentina is the main debtor of the International Monetary Fund (IMF), repeatedly defaulting on its commitments. Successive leftist governments increased state intervention in the economy without the necessary fiscal discipline, leading to uncontrolled inflation, currency devaluation, closure of credit markets and a significant budget deficit.
Will we endorse significant structural reforms defined by the European Union as those that remove barriers to growth, liberalize markets and promote employment and productivity?, asks José B. Carrión III (El Nuevo Día).
Puerto Rico should watch and learn from Argentina. Traditionally, our politics has been shaped more by "status" than by a left-right spectrum. But reality shows that when it is crucial, our political class, regardless of ideology, tends to lean toward left populist policies. Time and time again, whenever an opportunity arose to add hurdles to the permitting process, increase regulations and tax burdens, and encourage government growth, our politicians succumbed to the populist left. Puerto Rico knows where this has gotten us.
Puerto Rico insists on inaction in terms of structural reforms, living on federal transfers, following the advice "a la Guzman", to do nothing. If we continue this way, we risk another default. Federal aid does not last forever and in Washington the Puerto Rican situation is wearing thin.
We are at a turning point: will we endorse meaningful structural reforms, defined by the European Union as those that remove barriers to growth, liberalize markets and promote employment and productivity, or will Puerto Rico persist with its old policy? The current indications are not promising, and the emerging political trend is toward radical leftism. Looking ahead to 2024, will Puerto Rico opt for an anti-capitalist leftist alternative, or will it take a different course? We shall see.
This article was originally published in Spanish in El Nuevo Dia.