Data, debt and disaster - and a fight for independence - in Puerto Rico

Puerto Rico storm damage

Puerto Rico is in bad shape. Its government is burdened by a debt of $70 billion, while two ferocious storms in September are estimated to have caused up to $95 billion in damage, deepening the island’s economic woes and upending daily life for many of its inhabitants. Residents could therefore be forgiven for caring little about the fate of the Puerto Rico Institute of Statistics (PRIS), whose executive director, Mario Marazzi, is engaged in a legal fight to secure its independence.

But for Marazzi, it is a battle worth waging – not in spite of the island’s hardships, but because of them. In a statement to the United States Congress last summer, he argued that quality statistics, independent of political interests, must be part of any solution to Puerto Rico’s financial troubles. To Marazzi, that independence is now at risk.

Interest free

PRIS was formed in 2007, at which time Puerto Rico – a semi-independent US territory – was already two years into a period of economic depression that continues to this day and which has exacted a heavy toll on the government’s accounts. In 2016, the US Congress imposed a debt restructuring plan and appointed an oversight board for the island.

Government mismanagement is often cited as the main culprit, but the origins of Puerto Rico’s debt crisis lie partly in bad data, says Marazzi. Problems including lack of skills and funding meant that, for years, inflation and tax revenues were overestimated, while a significant decline in the island’s population was overlooked.

Ten years ago, Marazzi was brought in to help fix some of these problems as director of PRIS. As he told Congress, PRIS has authority over the statistical policy of Puerto Rico’s public entities, and the institute works “to ensure universal and timely access to comprehensive and reliable statistics”.

PRIS was established “with the greatest amount of autonomy and independence from the government of Puerto Rico as was allowable under law”, making it free of the “very strong economic and political interests in Puerto Rico that didn’t want to see reality”, explained Marazzi, in a recent interview with Significance. “There was a need for an independent statistical agency, with a sufficiently autonomous leadership, who could say, ‘Hey, the population is falling,’ even when it is counter to local interests.”

When Marazzi was invited to take part in a Congressional roundtable last July to discuss the future of Puerto Rico’s economy, he used the opportunity to explain how a lack of reliable data on the island’s government leaves creditors in the dark; how the absence of annual data on agriculture means a five-year wait to find out how the farming sector is doing; and how limited data on housing may have impaired the ability of policymakers “to determine where and how quickly the Zika virus would spread” in Puerto Rico in 2015–16.

   
   

Before leading the Puerto Rico Institute of Statistics, Mario Marazzi was an economist working for the Board of Governors of the Federal Reserve System in Washington, DC. He has a bachelor’s degree in economics from Harvard University and a PhD in economics from Cornell University.

Marazzi (pictured) also recounted some of the institute’s achievements in its first 10 years, such as eliminating an upward bias in Puerto Rico’s consumer price index which was overestimating the rate of inflation, and providing training to “several hundred” government statisticians in the use of software for database management and statistical analysis.

And yet, in the same statement, Marazzi noted that PRIS had received, on average, only about a quarter of the $5 million annual budget approved in the institute’s charter law. He wrote that: “While the current state of affairs allows us to continue this important work, the truth is that PRIS continues to receive appropriations that are far less than needed to complete its mission in a timely fashion, and it continues to face challenges to its operation as a public entity that is independent [of] other political and economic interests.”

Safeguarding independence

Marazzi’s concerns for PRIS’s independence worsened almost as soon as he returned from Washington to Puerto Rico, where Governor Ricardo Rosselló used newly granted powers to fire four members of the institute’s board – all of them statistical experts. Rosselló’s handpicked replacements included, as chair, Maria Gordillo, who also serves as president of the Puerto Rico Planning Board, a key body appointed by the Governor to oversee economic planning. In Marazzi’s eyes, this was a clear breach of the independence granted to PRIS when it was set up.

The Governor’s office said, in a press release, that the separation of PRIS from the Planning Board had been a mistake, which the Governor was now seeking to fix. But Marazzi is challenging the Governor’s decision in court. “If the PRIS board had to operate solely based on political loyalties that change every four years, then there’s no way the work of PRIS would be useful, relevant or add value,” Marazzi said.

He sees the independence of PRIS as “critical” to Puerto Rico’s long-term recovery, and attempts by politicians to compromise its independence as “myopic”.

Lisa LaVange, president of the American Statistical Association, said: “We’re very concerned to hear the reports about the PRIS budget and threats to its independence. Given the immense challenges faced now by Puerto Rico and its residents, objective and timely statistics are especially critical. The ASA will work with its partners in Puerto Rico to see the situation addressed.”

PRIS also has the support of Nydia Velázquez, a Puerto Rican-born Democrat member of Congress. Velázquez hosted last year’s roundtable event and wrote of her concern after the PRIS board sackings were announced. In 2016, she was a member of a bipartisan congressional task force which recommended that “the government of Puerto Rico consider appropriating a level of funding to the Puerto Rico Institute of Statistics that is commensurate with its important responsibilities” and that PRIS should “continue to protect its independence”.

At the time of publication, the Governor’s office had not responded to requests for comment. In January, it announced several new proposals that would affect the operation of PRIS. These include the consolidation of all government statistical functions into PRIS, the temporary transfer of PRIS to the Puerto Rico Department of Economic Development, and the eventual outsourcing of PRIS’s functions to the private sector.

Marazzi said: “PRIS was already created as an independent public entity by law. PRIS should be allowed to undertake its important work under its legal mandate. At the same time, PRIS should continue to seek to secure alternative sources of funding that do not depend on the Government of Puerto Rico.”

As Puerto Rico looks to rebuild after disasters both natural and economic, ensuring the quality and independence of official statistics might seem like low-level priorities. But Marazzi is in little doubt of their importance, what with economic growth and reform being high on the island’s agenda. As he told Congress last July: “At the end of the day, low-quality statistics mean that all stakeholders face greater uncertainty about the fundamentals of Puerto Rico’s economy, making it difficult to make informed policy and investment decisions, thereby generating less growth than potential.”


Notes

This article is republished from our upcoming February 2018 print edition. Subscribe here.

The ASA has created a petition, calling on Governor Rosselló to "Put the facts first: Preserve the autonomy and impartiality of the PR Institute of Statistics".


About the author

Robert Langkjær-Bain is a freelance journalist, based in the UK, and a regular contributor to Significance. He was previously editor of Lux magazine and deputy editor of Research magazine.