Though mostly unknown by the American public, the Azores have long served as a strategic fueling point and military base for the US and Europe throughout the 19th and 20th centuries [1]. Today, they are mainly known by travel bloggers as Europe’s "hidden treasure,” a “paradise,” or as Conde Nast travel magazine puts it, an “eden” [2]. The lesser-known truth is that the Azores have undergone a remarkable developmental transformation to become the idyllic tourist destination they are today. Less than 50 years ago, this impoverished archipelago that once closed its doors to tourists was considered undesirable even for sailors. This struggle is not unique to the Azores, however, and many colonized islands have experienced similar economic struggles. Puerto Rico suffered under a colonial government, largely due to their lack of economic freedom. Under a similar governmental structure, Puerto Rico could mirror the Azores’ economic transformation and solve many of the economic issues that have persisted for decades.

Background

The Azorian archipelago was initially colonized by Portugal in the early 15th century. Situated 760 miles off Portugal’s coast, the islands struggled economically and developmentally on the fringes of Portuguese society [3]. It was not until the Carnation Revolution on mainland Portugal in 1974 that things began to change for Azorian citizens. The overthrow of the previous dictatorship introduced a new constitution and a wave of decolonization [4]. The new constitution formalized the Azores’ status as an autonomous region with self-governing institutions and an independent constitution derived from the Portuguese constitution. 

The United States formally colonized Puerto Rico following the end of the Spanish-American War in 1898. The Foraker Act of 1900 established the island’s status as a US territory and implemented the civilian government and a nonvoting congressional representative. Unlike the Azores’ autonomous status, the US Constitution grants Congress the power to govern “territories” and subject citizens to federal laws despite their lack of voting representation [5]. In 1952, Puerto Rico adopted a “commonwealth status,” defined as a state “which is free of superior authority in the management of its own local affairs but which is linked to the United States of America” and “does not have an independent existence” [6]. Essentially, Puerto Rico has the ability to create local laws, but is also subject to federal law and any governmental intervention Congress sees fit. This last caveat becomes especially important when investigating Puerto Rico’s lack of economic progress.

Economic Development

Under the autonomous constitution, the Azores experienced an immense economic transition that has boosted their economy on the global stage and catalyzed their development. In the 1970s, less than half of Azorian inhabitants had electricity, running water, or sewers [3]. They also had very little economic opportunity on the island. The main economic sector was in agriculture, yet there was no consistent land work, and the island averaged less than ninety days of work per year [7]. Today, the poverty level is 24 percent, and while agriculture remains an important part of the economy, it has diversified significantly [8]. The largest sectors today are services, including public administration, wholesale and retail trade, and transportation. Finally, tourism is a growing sector, and modernization efforts through technology have proven effective to give the region competitive advantages [9]. The Azores’ GDP has grown by 2 billion euros ($2.31 billion USD) in eight years, demonstrating how economic improvements have persisted in the region [10]. 

While the Azores continue to demonstrate an upward economic pattern, Puerto Rico has suffered from economic stagnation. While the poverty level has dropped from 63 percent in the 1970s to 37 percent today, it is still double that of Louisiana, the most impoverished state on the mainland [11, 12]. The Puerto Rican economy suffered from a prolonged recession. Between 2006 and 2017, the recession contracted the island’s economy, increased unemployment, and worsened its debt crisis, which peaked at $70 billion USD in 2021 [5]. The root of this debt crisis dates back to the 1898 colonial era legislation that encouraged debt reliance to fill funding gaps. Furthermore, Congress phased out corporate income tax incentives and later denied Puerto Rican municipalities access to bankruptcy protection, encouraging debt accumulation in an economy that has long struggled to grow [13]. Congressional actions have also encouraged welfare reliance in response to the poverty on the island, which serves to discourage employment and economic growth [11].

Legislative decisions limited the growth of Puerto Rico's economy. The phase-out of corporate tax incentives significantly shrank the manufacturing sector. The phase-out started in the 1990s and was completed in 2006, which marked the beginning of the Puerto Rican recession [14]. The economic downturn worsened during the Great Recession of 2008, leading to a pause in investment, lower tax revenue, and layoffs. The Jones Act of 1920 prevents Puerto Rico from expanding trade as it requires goods transported from the mainland to Puerto Rico to be transported by US-owned, built, and operated vessels. This, in turn, increases prices on the island. If this was repealed, it would pump over $1 billion into their economy and create over 13,000 jobs [5].

Advantages of Autonomous Status

Evidently, the Azores and Puerto Rico are in starkly different economic positions today. The legal framework that the Azores operated under over the past 50 years provided them the ability and tools necessary to implement their own economic development, whereas  Puerto Rico's commonwealth status inhibited it from doing the same thing. A key way the Azores’ economic autonomy benefits the islands is by granting them the ability to collect their own taxes. This power gives them the ability to start local projects funded by these local tax revenues to boost their economy. For example, the Açores 2030 Programme seeks to address several of the challenges facing the island, including education and economic development. The Azorian government has adopted plans in coordination with national institutions to implement island-specific solutions before 2030 [15]. 

Comparatively, Puerto Rico is reliant on Congress for 25 to 50 percent of its funding, and consistently does not receive enough to serve its population [16]. This contributes to the island’s high poverty rates, debt crisis, low GNI, and lack of economic diversity [17]. In the event of fiscal cliffs and government shutdowns, Puerto Rico is particularly vulnerable because of its overreliance on federal funding. Moreover, unlike the Azores, which are able to adapt at the local level to unforeseen circumstances, Puerto Rico is reliant on federal funding to remediate events such as natural disasters or the pandemic [16].

Puerto Rico’s Solution

Evidenced by its economic challenges, Puerto Rico’s colonial dependence and tax structure are not sustainable forever. However, the little-known structure adopted by the Azores and Portugal could provide a solution. Unlike the Puerto Rican independence movement, restructuring Puerto Rico into an autonomous region will continue to benefit US interests while improving the economy of Puerto Rico. Giving it autonomy will allow it to diversify its economy, collect taxes as needed, expand maritime and other industries, lower the cost of imported goods, and increase exports. It would allow them to adapt to local problems, exemplified by the Azores, as they restructure various parts of society to adapt to emigration or climate disasters, a challenge the islands have in common. Furthermore, increased economic freedom would enable a 2.5 to 4 percent GDP increase per year, which would not only help their debt crisis but also mitigate high unemployment and poverty [18].

Furthermore, granting Puerto Rico local autonomy would benefit the US. Puerto Rico strains the US with its debt load and benefits from the mainland tax system. In 2020, the Supreme Court ruled that Puerto Ricans have a constitutional right to certain Social Security benefits and Medicare while not paying the same federal taxes as non-territorial US citizens [19]. Autonomy would expedite processes like resolving their debt crisis, which took the island and Congress over six years to agree on a restructuring [20]. 

The main barrier to helping Puerto Ricans is the lack of attention surrounding the island’s economic struggles. Allocating resources, media attention, and time on the congressional floor to Puerto Rico would help the US’s financial position and help millions of Puerto Ricans out of poverty. Adjusting the Puerto Rican constitution to grant them autonomous status would be simple, evidenced by the two lines in the Portuguese constitution that grant the status to the Azores, while still protecting US interests in the Caribbean [21]. Though mobilizing Congress to make a change in Puerto Rico would be difficult, a solution is possible.