The Debt Before the Storm by Lance Selfa + Puerto Rico Devastated By Hurricanes, Colonialism by Berta Joubert-Ceci

The Debt Before the Storm

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by Lance Selfa
Socialist Worker, Sept. 26, 2017
September 30, 2017

THE SOCIALIST German playwright Bertolt Brecht once wrote that “famines do not simply occur; they are organized by the grain trade.”

A similar observation could be made about Puerto Rico today. Replace “famine” with “natural disaster,” and the “grain trade” with “U.S. colonialism,” and you have a succinct summation of the human disaster that is unfolding on the island today.

Puerto Rico is reeling in the aftermath of landfalls by two huge hurricanes, Irma and Maria, in the space of a few weeks. As this article was being written, most of the island remained without electricity, and 70,000 residents could be in danger if the damaged Guajataca Dam failed. People all over the island are contending with flooding and food shortages–malnutrition and outbreaks of disease are real possibilities.

Any area that suffered the blows of two powerful hurricanes in succession would face major challenges.

But Puerto Rico isn’t just any area. It is a colony of the United States–its oldest, in fact.

Over the last two decades, Puerto Rico’s economy has been systematically degraded while Wall Street and European capital loaded up its public sector with more than $70 billion of unpayable debt.

As a result, the basic infrastructure of the island–its health care, water and power systems–were already in the grips of a desperate crisis before the hurricanes hit. For ordinary Puerto Ricans, life under successive austerity regimes had become increasingly intolerable–and it will only become more so now.

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WHAT DOES the colonial relationship between the U.S. and Puerto Rico have to do with all this? Start with the basic fact that Puerto Ricans have no say in the biggest economic and political decisions that affect their lives.

Since 1917, Puerto Ricans have been U.S. citizens. But their rights have always been curtailed. They cannot vote in federal elections while living on the island, for instance. And while they can vote for a local governor and assembly, the U.S. government can overrule any decision those elected officials make. Puerto Rico is ruled now by a seven-member unelected Fiscal Control Board created by the U.S. Congress in 2016.

One pillar of the colonial economic relationship, the 1920 Jones Act, requires all commerce shipped to the island to be on U.S.-flagged ships departing from a U.S. port. So international cargo destined for Puerto Rico has to first be unloaded in the U.S., then reloaded on a U.S. ship. As a consequence of this, ordinary consumer goods, from food to cars, are more expensive in Puerto Rico than they are in the U.S.–and in many other island nations in the Caribbean.

As Nelson Denis, author of War Against All Puerto Ricans: Revolution and Terror in America’s Colony, put it, the Jones Act “makes as much sense as digging a hole and filling it up again. Any foreign registry vessel that enters directly into Puerto Rico must pay extreme tariffs, quotas, fees and taxes, which, again, are passed onto the Puerto Rican consumer. This is not a ‘business.’ It is a shakedown, a Mafia protection racket.”

Since it conquered Puerto Rico from Spain in 1898, the U.S. has always treated it as a laboratory for economic experimentation and a military outpost to project U.S. power into Latin America and the Caribbean.

The U.S.-sponsored “Operation Bootstrap” of the 1940s and 1950s helped to transform Puerto Rico from a predominantly agricultural country. It was based on creating export processing zones on the island, akin to maquiladoras that took root in Mexico, particularly after the North American Free Trade Agreement went into effect.

In 1976, the U.S. Congress created section 936 of the U.S. tax code, which offered huge corporate tax breaks for manufacturers that set up in Puerto Rico. This led many multinationals, particularly pharmaceutical companies, to locate operations on the island.

While this helped to sustain a manufacturing sector in Puerto Rico, the capital-intensive nature of the industry meant that unemployment remained above 10 percent, even in good years.

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WHEN THE Cold War ended, the U.S. had less use for Puerto Rico as a showcase for Latin America, wrote José Nicolás Medina Fuentes in a June article about Puerto Rico’s debt crisis.

Congress repealed section 936, phasing it out over the next decade, and then signed free trade agreements with countries throughout Latin American and the Caribbean. The Puerto Rican economy thus lost its “comparative advantage” over other countries in the region. Its economy contracted by more than 10 percent. Medina Fuentes summarized what happened:

Since 2006, the following processes began: depression/recession for 11 years, the departure from the country of 500,000 Puerto Ricans, a decline in tax revenue, the degradation of the territory’s credit, cuts in contributions to and payouts from retirement plans, and the loss of more than 200,000 jobs. The island’s government, with federal approval, was forced to take out loans at triple the normal rate of interest, just to cover current spending, and to refinance and pay the debt.

The public debt grew to $24 billion by the end of 2000…Between then and 2014, the public debt increased 195 percent–that is to say $48 billion in only 14 years, for an unpayable total of $72 billion.

Throughout this period, Puerto Rico’s neoliberal governments–whether under the Popular Democratic Party (PPD), which has links to the Democratic Party in the U.S., or the New Progressive Party (PNP), which is connected to the Republicans–had one answer to the crisis: austerity.

Anyone familiar with International Monetary Fund program of “structural adjustments” will recognize the menu of policies pursued by Puerto Rico’s political class: privatization of public assets, like the international airport; increases in fees for utilities and sales taxes; mass layoffs of public-sector workers; restrictions on labor and union rights; and cuts to public services, from the health service to the University of Puerto Rico.

The PROMESA Financial Control Board wants to go even further–ordering cuts to federal standards in the minimum wage, Medicaid and Temporary Assistance to Needy Families to further lower labor costs on the island.

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WHILE PUERTO Rican workers are paying for the economic crisis with layoffs, cuts in social spending and a collapse of basic systems, the Wall Street hedge funds that own more than half of the debt are making out like bandits.

The U.S.-based and international financial industry pressed successive Puerto Rican local governments to take on greater amounts of debt, and hedge funds snapped it up.

In most situations of bankruptcy, courts can impose “haircuts” on creditors–forcing them to accept less than what they’re owed–to allow an insolvent entity to get back on its feet.

But such is the political imbalance between Puerto Rico and its Washington overlords that the 2016 PROMESA–for “Puerto Rico Oversight, Management and Economic Stability Act,” whose acronym means “promise” in Spanish–establishing the financial control board assures that the biggest losers will be ordinary Puerto Ricans, not irresponsible lenders.

In fact, key members of the financial control board are financiers whose policies helped push Puerto Rico to the brink. The story of the “Corpus Account” for infrastructure investment reads like the 21st century equivalent of the metropolitan looting of wealth from the colonies.

The 1998 privatization of the national telephone company–an act which prompted a massive, but unfortunately defeated, popular uprising known as the “Peoples’ Strike”–produced almost $1.2 billion in proceeds that was supposed to be invested in plans to upgrade the country’s water and power infrastructure.

However, Carlos M. Garcia, president of the Government Development Bank under the right-wing government of Luís Fortuño (2009-13), used most of that money to service a complex series of financial transactions.

These benefited his former employer, the Spanish-based Banco Santander–and left Puerto Rico holding long-term bonds that it’s obligated to pay until 2043. As the financial watchdog website wrote:

[T]he bulk of proceeds from the privatization of a profitable, publicly owned telephone company, earmarked for crucial Puerto Rican water projects, has been turned into paper dust. The Corpus Account no longer funds infrastructure development, but consists of bond notes due in 2043 that are obligations of COFINA and ultimately, the Puerto Rican sales and use taxpayers.

This scandal of how financial and government elites looted Puerto Rico’s infrastructure fund took on greater significance as thousands fled from the area of the Guajataca Dam. And not coincidentally, Garcia is one of seven members of the current financial control board under PROMESA.

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PUBLIC HEALTH officials had already warned–more than a year before Hurricanes Irma and Maria–that the country’s disinvestment in its water and sewer systems was already making Puerto Ricans more susceptible to infection from the mosquito-borne Zika virus.

Austerity also took its toll on investments needed to upgrade the country’s almost five-decade-old electric grid.

The system had declared bankruptcy in July 2017 after years of austerity had done nothing to reduce its debt. Instead, its managers focused on reducing staff, with 30 percent of the workforce–including its most skilled workers–leaving the utility through retirement, buyouts or migration since 2012, according to the Washington Post’s Steven Mufson.

When the hurricanes hit, the Puerto Rican Electric Power Authority (PREPA) was operating on a cash-only basis, which led to deferred maintenance and frequent power outages. Despite the fact that ordinary Puerto Ricans pay, on average, double the rate of electric bills that people in the U.S. do, PREPA has struggled to maintain basic services.

“A lot of the reason power has gone out is that PREPA has not been trimming the trees on the power line,” Miguel A. Soto-Class, president of the Centro para una Nueva Economía (Center for a New Economy, or CNE) think tank, told Mufson.

When Irma took out part of the power grid in August, unionized utility workers, members of the Union of Electrical Industry and Irrigation (UTIER) union, worked heroically to restore power.

Meanwhile, two privately owned utilities, EcoEléctrica and AES, shut down to protect their machinery. They only reopened after the hobbled public utility came back online. “If it had been up to EcoEléctrica and AES, Puerto Rico would still be on its knees,” wrote Carlos Fortuño Candelas in the socialist newspaper Bandera Roja.

That’s worth remembering because the Financial Control Board, the hedge funds and local elites are pushing various schemes to “save” PREPA by privatizing it.

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ORDINARY PUERTO Ricans living on the island face a terrible situation.

The longer the island goes without power to support hospitals, sewage treatment and clean drinking water, the greater the chances for mass outbreaks of diseases. “Hysteria is starting to spread,” Mayor Jose Sánchez González of Manati, crying, told a meeting of mayors in the capital of San Juan. “The hospital is about to collapse. It’s at capacity. We need someone to help us immediately.”

Given that Puerto Rico imports up to 85 percent of its food–another aspect of the colonial relationship with the U.S.–shortages will develop if a massive relief effort isn’t mounted.

In the U.S., we need to press federal agencies to move quickly to avert a humanitarian catastrophe that is unfolding for the island’s 3.4 million residents. And while it’s necessary to help Puerto Ricans to rebuild their houses, schools, hospitals, workplaces and other parts of ordinary life, just restoring the status quo is no solution.

Those who want to organize solidarity for Puerto Rico in the U.S. should demand the repeal of the Jones Act, a moratorium on Puerto Rico’s debt, and a repeal of PROMESA, with the liquidation of the Financial Control Board. Only measures like these can help to provide some relief to millions of Puerto Ricans.

Observing that the current austerity measures seek to “privatize gains” while “socializing losses,” the CNE’s Sergio M. Marxuach noted that:

the responsibility for these socialized losses usually falls on the poor and the middle class, precisely those least prepared to absorb them. This pressure on the poorest sectors eventually produces a social explosion when the cuts to pensions, to health care and public education, along with the increase in unemployment, poverty and inequality, reaches intolerable levels.

In Puerto Rico, that pressure has been dissipated through migration to the U.S. But the possibility of a social crisis can’t be disregarded.

Puerto Ricans have a great tradition of struggle, from movements for national independence to the 1930s “huelga en la caña” of sugar workers and strikes of dock workers; to protests against induction of Puerto Ricans into the U.S. military during the Vietnam War; to the 1998 “Peoples’ Strike;” to the successful struggle to kick the U.S. Navy out of Vieques; to strikes and occupations at the University of Puerto Rico.

It’s in this tradition–where Puerto Ricans have demanded a right to determine their own fate–that hope for the future lies.

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Puerto Rico devastated by hurricanes, colonialism

by Berta Joubert-Ceci
Workers World
Sept. 26, 2017

As of Sept. 25, two weeks after Hurricane Irma and five days after yet another deadly storm, Hurricane Maria, hit the archipelago of Puerto Rico, the total damages inflicted on this U.S. territory-colony are still not known.

Images shared on social media show vast devastation: collapsed houses, rooftops gone, trees and electricity poles downed, vegetation gone, as if a fire had engulfed the previously lush foliage. The pictures of entire neighborhoods flooded remind us of the terrible scenes showing Hurricane Katrina’s effect on New Orleans: Some neighborhoods have just been wiped out. The impact on the mountain regions is still not accounted for. No area has been spared, as shown in aerial views presented on some news websites.

Bridges, roads and other infrastructure were destroyed, further complicating the isolation of entire cities that have not been able to communicate with the rest of the country. The whole country has been without electricity for days. There’s no safe water, either, due to the need for electricity to power the pumps. Telecommunication is almost nonexistent. Only a few radio stations can broadcast, most of them AM.

Cellphones are mostly useless now, since only a few spots have a signal. For example, cars line up on the Teodoro Moscoso Bridge in the San Juan area in order to access the limited signal available there.

Even the government cannot communicate with its own agencies throughout the country. The now-privatized mobile network depends on electricity. Most of its facilities do not have backup generators, which the formerly public PR Telephone Co. used to have. This, together with fallen towers, has caused a communications desert at a very critical time. Amateur radio aficionados and satellite phone users are trying to compensate for this lack of connection.

The desperation of families not knowing about the fate of their loved ones is relieved by a spontaneous network of social media — particularly through Facebook — and the available radio stations, which together operate as a connecting link, passing information between Puerto Ricans in Puerto Rico and those in the diaspora.

The lack of electric power and also of vital medical supplies has shut down small hospitals and health facilities. After the Medical Center in Rio Piedras got its electricity back, it was set up as the main health service hub.

Crisis aggravated by colonial status

Electricity is a major problem in Puerto Rico. For years, several bourgeois government administrations have tried to privatize this vital state industry. Only the people’s struggle, particularly the fightback of the workers in the UTIER union, have prevented complete privatization.

However, the PR Electric Power Authority (AEE in Spanish) has reduced its workforce by half in the last few years and has failed to maintain the infrastructure, letting it deteriorate in order to make the people accept its privatization as the only way to prevent repeated power outages and higher electricity bills.

This cost cutting is in order to “repay” a $9 billion “debt” in municipal bonds, which is AEE’s share of the more than $73 billion of illegitimate “public” debt the government is expected to pay to Wall Street bondholders.

In addition to payments on the bonds issued, recent policies imposed on the AEE by the U.S. through the consultant firm Alix Partners have reduced the inventory of materials needed for the generation of electricity, without taking into consideration the fact that, in extreme weather, AEE would be unable to receive these materials via shipping.

Because Puerto Rico is a three-island colony that used to be self-sufficient in agriculture but whose economy has been destroyed and instead developed to satisfy its master’s hunger for profits, it depends on shipping, mostly from the U.S., to receive 85 percent of its food and supplies. Being a colony, it is subject to criminal U.S. impositions like the Jones Act, which requires all shipping to Puerto Rico be in U.S. vessels, with U.S. personnel, making it the most expensive in the world.

As a consequence, Puerto Rico cannot receive aid from other countries that have offered crucial help, like Cuba and Venezuela.

Only the people can save the people

Before any government help arrived in many communities, neighbors were reported to be helping themselves in an organized way.

One message that appears in many reports, both in regular commercial media as well as from individuals using social networks, has been the extraordinary capacity of resilience and cooperative work shown by the people. In photos, even small children can be seen clearing fallen tree branches from the roads.

The overall sentiment expressed is that even though they lost their material possessions, the people feel lucky they are alive, describing the hurricane experience as something apocalyptic. In fact, it is the worst hurricane to hit Puerto Rico since 1928.

Message after message has been an uplifting “Puerto Rico will be stronger.” This is a very welcomed statement at a time when the criminal Fiscal Control Board appointed by the U.S. Congress to pay the wealthy bondholders has been imposing austerity measures that are suffocating the population with layoffs, increased taxes, cuts in health and education, and attempts to privatize the energy sector.

The important step now is for this effort of unity in action to be translated into political action for the liberation of the Puerto Rican nation.

As a recent leaflet distributed by Puerto Rican activists in Philadelphia, titled “What help do we need from the United States? REPARATIONS AND INDEPENDENCE,” reads:

“IT IS TIME TO PAY. What we need now is for the U.S. to repair the damage it has done to us. Here are some examples: for the forced sterilization of our women; for the contamination of waters, air and soil by petrochemicals, coal, pharmaceutical and military plants; for the destruction of Vieques and Culebra by the U.S. Navy; for the death of thousands of young people in wars with which Puerto Rico had nothing to do; for the imposition of a merchant marine that does not let us trade with other countries. For these and many other reasons we demand: Cancel the odious debt! REPARATIONS NOW! Sovereignty with Independence! No criminal Fiscal Control Board!”

Joubert-Ceci is a Puerto Rican woman from the southern city of Ponce who, as of the writing of this article on Sept. 25, has not yet been able to communicate with her relatives on the island.

Articles copyright 1995-2017 Workers World. Verbatim copying and distribution of this entire article is permitted in any medium without royalty provided this notice is preserved.


Report from Puerto Rico: Death Toll Higher Than Reported amid Water Shortage & Health Crisis

Democracy Now! on Sep 29, 2017 – Good news or fake news? Acting Homeland Security Secretary Elaine Duke and the Trump administration defend their response to the unfolding humanitarian crisis in Puerto Rico, where many of the 3.5 million residents remain without electricity and are desperate for fresh water, food and other supplies. We speak with Laura Moscoso, a data journalist at the Puerto Rico-based Center for Investigative Journalism. She says the death toll is much higher than the government reports, noting, “Our phones have been ringing with many testimonies.”

Trump Sees Devastated Puerto Rico as Captive Market

TheRealNews on Sep 27, 2017

Refusing to waive shipping restrictions and stressing Wall Street debt obligations, President Trump continues a colonial legacy that hampers Puerto Rico’s recovery, says scholar Marisol LeBrón.


Puerto Rico’s Recovery is a Battle Against Austerity

TheRealNews on Sep 30, 2017

As the Trump administration touts its relief effort in Puerto Rico as a ‘good news story’ and threatens more austerity, writer Ed Morales argues the island’s devastation is a wake-up call against neoliberal excess.


See also:

Red Cross grabs disaster money, fails to serve By Chris Fry

Banks keep Puerto Rico in the dark By Jerry Goldberg

Puerto Rico Needs Massive Emergency Aid Now—and an End to Austerity by Ed Morales

How You Can Help Hurricane Victims in Puerto Rico-Consumer Reports

from the archives:

Hurricane Irma’s Devastation: Nothing “Natural” About It by Deirdre Griswold + Video Reports

Abby Martin: Puerto Rico’s Debt to its Oppressors

3 thoughts on “The Debt Before the Storm by Lance Selfa + Puerto Rico Devastated By Hurricanes, Colonialism by Berta Joubert-Ceci

  1. Pingback: Puerto Rico Rises Up by Jason Cohen + Corruption, Mismanagement, and Disrespect Fuel Puerto Rico Protests – Dandelion Salad

  2. Pingback: From Myanmar, to Whitehall, to Washington – Politics Festering Nadir by Felicity Arbuthnot – Dandelion Salad

  3. The one good thing about Maria and Trump’s stupid statement is that it focuses attention on the basic dishonesty of US financial institutions, not to mention its government which is bought and paid for.

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