Statehood Seen as an Even Bet to Win in Puerto Rico Sunday : Governor would petition U.S. Congress for admission. But that would surely set off emotional national debate.

The American flag hasn’t been redesigned since 1959, when Alaska and Hawaii entered the union and the number of stars on Old Glory went from 48 to 50. But get ready, say a growing number of Puerto Ricans, to squeeze in “estrella” No. 51.

Voters on this predominantly Spanish-speaking island go to the polls Sunday to choose between three distinct visions of the future: statehood, independence or remaining a U.S. commonwealth. And after what many see as 500 years of uninterrupted colonialism, statehood is considered an even bet to win.

If statehood is the voters’ choice in the plebiscite, Gov. Pedro J. Rossello promises immediately to petition the U.S. Congress to admit this Caribbean island to the union, an act sure to touch off an emotional, wide-ranging national debate on the nature of America.

“Puerto Rico is the oldest and largest colony in the world, and it’s a shameful situation,” says Rossello. “This is a historical challenge.”

Redesigning the American flag is among the least of the problems actual statehood for Puerto Rico would bring:

* With a population of 3.6 million, the island would be the 25th-largest state in the union, entitled to two U.S. senators and at least six U.S. representatives. Under current laws, with House membership fixed at 435, that would cause smaller states to lose representation.

* Federal payments to the state of Puerto Rico, where six of every 10 people receive some form of government assistance, would rise dramatically. One congressional study shows the added cost of statehood would be $3.4 billion a year.

* As much of 40% of Puerto Rico’s economy is based on a special exemption that allows U.S. manufacturers to avoid paying any federal tax on profits here. As a state, it could lose that exemption, touching off what many fear would be a collapse of the local economy.

To supporters of commonwealth, the idea of statehood is unthinkable.

“How are we going to pay our way?” asks the Popular Democratic Party counsel in Washington, Jose Roberto Martinez. “We would become a welfare paradise in the Caribbean. And cultural identity: We are Puerto Ricans first, second and third, tied by blood and language to Latin America. We are not going to melt into the melting pot.”

Nonetheless, for the first time since this island was granted commonwealth status in 1952, many believe statehood will pull a plurality of Sunday’s vote, if not an outright majority.

“I don’t know what the span will be, but I am confident we will win,” says Rossello, a 49-year-old pediatric surgeon educated at Notre Dame, Yale and Harvard. He adds: “We’re hoping that by 1996 we will be electing our senators and congressmen.”

The last time Puerto Ricans took the measure of their own desires was 1967, when commonwealth polled 60% of the votes and statehood got less than 39%. Independence--then as now--is favored by only a small minority of voters.

But times, and sentiments, have changed, thanks in part to a stagnant economy, a growing dissatisfaction with what many see as their second-class citizenship and the popularity of Rossello, a personable reformist who led his New Progressive Party to control of the Legislature last November while handing the pro-commonwealth Popular Democratic Party the worst election defeat in its 52-year history.

On the island, and even among those 2.5 million Puerto Ricans who live on the U.S. mainland, the plebiscite and the campaign have brought an outpouring of ethnic pride, historical review and soul-searching about what it means to be Puerto Rican.

“It’s a tough choice,” says Carlos Rivera, a historian who lives in Ponce, Puerto Rico’s second-largest city. “This vote goes beyond politics, and affects me, Puerto Rico and future generations. Frankly, I haven’t decided yet.”

Seized by the United States in 1898 during the Spanish-American War, this island of spectacular beaches and lush green mountains lies 1,000 miles southeast of Miami. Christopher Columbus claimed it for Spain 500 years ago this month, and Puerto Rico remained a Spanish colony for more than 400 years before falling into American hands.

Just 100 miles long by 35 miles wide, Puerto Rico is one of the most densely populated pieces of land on Earth, and also one of the most conflicted by regulations. Although Puerto Ricans have been U.S. citizens since 1917, they pay no federal taxes, cannot vote in national presidential elections and lack full representation in the U.S. Congress. However, islanders do vote in national primary elections, and pay local taxes at rates higher than the federal schedule.

Although Rossello has re-established English as one of two official languages here, Spanish predominates, and the traditions, in food, art, dance and custom, are closer to Madrid than to Minneapolis. Still, mainland American culture is pervasive. It arrives via cable television and the historic air bridge between the island and New York (American Airlines alone flies 11 daily round-trips between San Juan and the New York area).

Recent polls have statehood and commonwealth running neck-and-neck. But a vote for statehood here would only set the stage for a battle in Congress.

The problems are enormous. Although its population would rank Puerto Rico ahead of such states as South Carolina, Colorado or Connecticut in Congress, the island would be the poorest state. Its per capita income of about $6,600 a year is less than half that of Mississippi. Unemployment is running at about 18%, and more than 40% of residents receive food stamps. Both crime and AIDS, chiefly related to drugs, are rampant.

“Think of it,” says outspoken political analyst Juan Manuel Garcia Passalacqua. “Three million Spanish-speaking mulatto poor. Congress will never go for it.”

Many Puerto Ricans see statehood as a pocketbook issue. “Personally, statehood would cost me about $6,000 a year in taxes, and what am I going to get for it?” asks Charles Gonzalez, 52, who runs a struggling souvenir shop across the street from Ft. San Cristobal in Old San Juan. “Nothing. It’s a nightmare.”

President Clinton has said he will support the Puerto Ricans’ decision, as have the black and Hispanic caucuses in Congress. Sen. Paul Simon (D-Ill.) has promised to introduce legislation to start the statehood process.

But statehood opponents say Rossello and his supporters are dreamers.

“The statehood argument,” says Alex W. Maldonado, a journalist whose political column runs in the San Juan Star, “begins and ends with politics. They say, ‘Puerto Ricans are second-class citizens.’ OK, that’s irrefutable. But statehood would mean a total rebuilding of the Puerto Rican economy. And that is impossible.”

The Puerto Rican economy now rests squarely on the largess of Section 936 of the U.S. Internal Revenue Code, which allows American companies to operate on the island without paying federal taxes on earned income. That tax incentive has made manufacturing 41% of the island’s $34-billion gross domestic product. Puerto Rico is a world leader in the production of pharmaceuticals, chemicals, textiles and electronic equipment, with a standard of living higher than its Caribbean neighbors.

Says Maldonado: “In the last 30 years, there must have been 100 studies on the effects of statehood on Puerto Rico, and all of them come up with the same thing: the loss of tax exemption will bring about economic free fall. Some show that the number of people on food stamps will go from 40% to 70%.”

Yet Rossello insists the time for change is here. During an interview in La Forteleza, the 16th Century governor’s mansion atop a bluff overlooking San Juan Bay, the governor agreed the strongest case for statehood is the emotional appeal for the right of self-determination.

“We are 3.6 million American citizens who have the right to full citizenship,” he said. “How can the U.S. stand before the world, in Eastern Europe, for example, and be a leader for democracy and participation and have in its own back yard an island territory where its citizens are not being heard?”

Researcher Anna M. Virtue contributed to this story.