There is always a big question that many people ask themselves. How much is sent in Federal Funds to Puerto Rico every year?
Answering that question in just a specific dollar amount without understanding completely what all of that would be irresponsible. Even worst when people continue to repeat that federal aid to Puerto Rico is very high without understanding the flow of money.
As we get close to the date where some of my fellow islanders get delusional in celebrating freedom, I found the image above floating around Facebook.
The infographic seems to explain some reasons why Puerto Rico continues to be a colony and the many disadvantages that face the island. (See my latest post on my thoughts of the Oversight Board)
I have always heard from people up North (U.S.) saying Puerto Rico depends on and benefits heavily from the United States. Serving in the Military and relying on my experiences, I can say I feel like those number above might be representing what I have seen.
Searching for the Source
The infographic above depicts how Money Flows from Puerto Rico to the US and vice-versa. When I created the first draft of this post, I wanted to make sure that we had the source of these numbers thanks to @Lucymfel (biz and life partner) I was able to find this video in Spanish which Rosario Rivera ( @econrivera ) explains where these numbers come from.
The infographic confirms that we depend heavily on the U.S., but the real benefits are for those up north, not the other way around.
If you look closely on the Federal Funds to Puerto Rico you can quickly the reasons and sources of those funds. It would be unfair to call those Federal Funds just Federal Aid.
Translation – Federal Funds to Puerto Rico
- The United States → Net Gain – 44.6 Billion
- Puerto Rico → Net Loss – 44.6 Billion
From the United States to Puerto Rico (13.53 Billion)
- Federal disbursements to Local Government Agencies (2.7 Billion)
- Payments sent to individuals such as (1.9 Billion)
- PAN (SNAP in the U.S.)
- Disbursements made earned by individuals (8.9 Billion)
- Social Security
From the Puerto Rico to United States (58.1 Billion)
- Imports on Registered Merchandise (22.6 Billion)
- Capital Gains (34 Billion)
- From Large Companies and Manufacturing
- Cabotage Law (1.5 Billion)
- Fees for transporting imported merchandise on U.S. ships
The Other Side of The History of Federal Funds to Puerto Rico
As I searched for more information, Lucy also pointed out a Google+ post shared by one of the most brilliant individuals I know living on the Island Mr. Marcos Polanco.
Marco’s Post on Google +
Intellectuals have a responsibility to educate the public. However, @EconRivera does the exact opposite in the chart she shares, attached, purporting to show how the US capitalist imperialists are taking money from Puerto Rico.
I have no argument with the numbers used on the government transfer from the United States to Puerto Rico, which is the top half. I have not done the numbers myself, so I cannot tell you whether they are right or wrong, but I have no issue with it.
The entire 2nd half is composed of blatant lies.
“Importaciones de Mercancia” refers to $22.6B in purchases that Puerto Ricans make with their income. Commerce is trade…you are exchanging your money for some good, such as computers, software, chickens, rice…whatever. You cannot use that in the same mathematical column as the stuff that is in the 1st half of the chart. A Pell grant check does not trade. The federal government is giving you a check so you can buy stuff, education in this case. Section 8 is not a trade. The federal government is giving you a check so you can buy stuff, housing in that case. And so on. What the chart tries to do is lull you into thinking that the money you use to purchase is being taken from you. This is false.
Let’s move on. The “Rendimientos de Capital” mixes two very different numbers: One are “megatiendas”, such as Wal-Mart, and the profits they make here. Shouldn’t that be in the “Importaciones” category already? It probably is…I can only assume this is a mistake, but a small one. It does not matter. The real stunner is “fabricas”, or the manufacturing plants, mostly in this case biopharmaceutical plants. $34B of extracted capital! Wow! Now, where does that money come from. It is the magic of transfer pricing, and I’ll try to make this simple:
If you are taxed at 35% in the US mainland and 4% in Puerto Rico, you will try to move all your profits to Puerto Rico, where they will remain largely untaxed. That is exactly what companies do…many times they will assign the patents for biopharmaceutical products to Puerto Rico, and as the patent holder the Puerto Rico corporations have a right to a significant share of profits. Thus a pill that costs only $1 to make by, say, Pfizer in Puerto Rico could easily be sold by Pfizer Puerto Rico to Argentina for $50. Huge profits! Then Pfizer will move that money out of Puerto Rico for productive use worldwide. You see, those $49 did not come from your or my wallets as Puerto Rico residents. They are a result of an international tax strategy, all perfectly legal, that multinationals use to concentrate their profits in low-tax jurisdictions. Yet @EconRivera implies, and later explicitly tells me in a tweet, that this money comes out of our pockets. THIS IS A LIE.
Finally, she outlines $1.5B due to cabotage laws. OK, fine. Rounding error.
Incidentally, nowhere in this analysis does @EconRivera include the operating costs of the United States Postal Service, or the Coast Guard, or the fact that Puerto Ricans have access to the vast capital pools that create cheap FHA mortgage loans, etc. She also does not include the salaries paid to Puerto Ricans (over 80,000 jobs, down from twice that many a decade back) by multinational manufacturers. The list goes on.
Note that I am not defending Puerto Rico’s political relationship with the United States. There is plenty wrong in that relationship and even more broken policies in Puerto Rico’s economics, much of which depends on federal policies. What I refuse to condone or allow is perverting the facts and misinforming the public. We have enough ignorance floating around…it is unacceptable for purported intellectuals and professionals to spread more of it. ~Marcos Polanco
Having an accounting background and working many years as an Auditor, I can only say that numbers and stats can be played with. I am not saying that the information above on Federal Funds to Puerto Rico is wrong or right. My heart wants a simple explanation as to why our Island does not move forward, but I have to approach this by validating the info on Federal Funds to Puerto Rico in many ways logically. The Infographic seems to be a small piece to a puzzle but to confirm each and every point we would need to have more information.
As for my little Island right now, we continue to import more and leave critical pieces like destroying our agricultural systems to build solutions that will cause us more problems in the future.
As politicians don’t do much to improve the well-being of those that voted for them, I will make sure not give them my vote. I see a lot of uncertainty of the overall well being of the Island, but I have no choice but to focus on my small world to see if I can change the bigger eco-system around me.
What are your thoughts? Can anyone validate the information above?
What solutions can we bring to the table to fix the above issues?