Puerto Rico’s Economic and Fiscal Crisis: Manufactured by the U.S.

Puerto Rico’s Economic and Fiscal Crisis: Manufactured by the U.S.

Why Puerto Rico can’t push itself out of the fiscal and economic malaise…

Victor M. Rodriguez, Professor, California State University, Long Beach. He is the author of Latino Politics: Race, Class, Ethnicity and Gender in the Mexican American and Puerto Rican Experience (Kendall Hunt, 2012).

On Tuesday June 23, the Special Decolonization Committee of the United Nations heard 30 petitioners who came to denounce from various perspectives the colonial situation of Puerto Rico. For the 34^th time the UN committee approved a resolution requesting that the United States allow Puerto Rico to exercise its right to self-determination and independence. In 1953, the U.S. and colonial administrators lied to the U.N. in order to get Puerto Rico off the list of territories which still had not achieved self-determination. They told the UN that Puerto Rico in 1952 had drafted a constitution and now was exercising self-determination. This despite the fact, as Jose Trias Monge who was the Attorney General of Puerto Rico from 1953 and 1957 and a central actor in the colonial government, revealed in his book Puerto Rico the Trials of the Oldest Colony in the World (1997) that the government of the United States, through the state department and the department of the interior said “Puerto Rico should still be considered a territory.”  Through political pressure in a smaller United Nations, the US petition to remove Puerto Rico from the list was approved with 26-16 and eighteen abstentions.

Despite the vote and since then, Puerto Ricans, increasingly from various political perspectives have trekked to the U.N. demanding that the U.S. fulfill international law with respect to the island. In recent years the number of United Nation members supporting Puerto Rico’s request has grown from the time when Cuba and the Soviet Union and its allies where the only ones supporting Puerto Rico’s efforts. Now, with the political and economic changes that have taken place in Latin America and the partial diplomatic retrenchment of the U.S. in Latin America, the issue has received broad support from Ecuador, Nicaragua, Venezuela, Bolivia and other nations who before were on the margins on efforts to denounce Puerto Rico’s colonial status. In the recent Summit of the Americas in Panama last April, attended by President Obama and President Raul Castro, expression of support for Puerto Rico were again expressed broadly.

But, the increasing fiscal and economic crisis ailing the island has brought more attention to Puerto Rico’s colonial situation. Already some stocks have experienced a decline especially those related to municipal bonds, or insurers of municipal bonds. The recent comments by Gov. Alejandro Garcia Padilla of the Popular Democratic Party (supporter of the commonwealth status) that Puerto Rico would not be able to pay its $73 billion debt caused strong reaction in the capital markets. That lack of liquidity because of lower tax revenues may even cause a government shutdown like in 2006. In addition, a possible default could take place in September 2015 and will hit Wall Street investors who have played casino with Puerto Rican bonds which are not subject to local or federal taxes. But, also, Puerto Rican elites have served as intermediaries for the financial predators from Wall Street engaging in corruption and enabling predatory lending policies. A recent report commissioned by the government by Anne Krueger and two other former International Monetary Fund directors provided prescriptions that will be worse than the disease which ails the economy. One of the problems the colonial government faces is that its tax revenues continue to shrink as the economy stagnates and large numbers of Puerto Ricans, including professionals emigrate. One of the suggestions was to reduce the minimum wage which will have a deleterious impact on poverty and the capacity of the working population to pay taxes. In sum, the report places the weight of the economic crisis on the backs of the working people of Puerto Rico.

In addition some political sectors, especially the conservative pro-statehood groups are trying to leverage influence to get congress to consider statehood for Puerto Rico. In order to gain support from members of congress they have allied themselves with the most conservative members of congress who attend fundraisers for their political campaigns despite the fact Puerto Ricans can’t vote for congress or the president of the U.S.  Recently in June Sen. Don Young Republican from Alaska chaired the Natural Resources Committee where he heard petitioners on the issue of Puerto Rico’s political status.  A few days before he had participated in a fund-raiser in San Juan, Puerto Rico hosted by a Pro-Statehood Organization, Igualdad. The timing of the fund-raiser and the hearing was critiqued by many, Sen. Young has raised close to $147,000 from island donors in the last two decades. As before no positive steps came out of that hearing.

But visits to the United Nations while important to keep the world’s attention to Puerto Rico’s colonial plight have not produced changes in U.S. policy. Ironically, 60 years of no diplomatic relations with Cuba is beginning to change, including the re-opening of embassies but the stalemate in Puerto Rico continues. The efforts of political parties of the left and of civic organizations have become repetitive rituals that have not led to solving the 117 years colonial relationship between the United States and Puerto Rico. This issue becomes more pressing given the chaotic economic situation of this island of more than 3.5 million inhabitants who, as defined by the Supreme Court inhabit a special legal space as an “unincorporated territory” of the United States. In layman’s terms Puerto Rico “belongs to but it is not part” of the United States. This new legal space was created, the “unincorporated territory” to facilitate the acquisition of territories if the United States so desired without having to grant statehood. The court members during most of the insular cases where almost the same justice which handed down the Plessey vs Ferguson decision which legalized segregation in the United States in 1896. The consequences of these decisions were that an unincorporated territory “could be kept in subordination indefinitely without the prospect of future statehood.” (1)

The Supreme Court decisions called the Insular Cases are the legal structure that has legitimated the subordination of Puerto Rico for the last 117 years and served as the genealogy of the economic, social crisis that Puerto Rico faces today. With a public debt of $73 billion, which is 96 per cent of Puerto Rico’s Gross National Product, just to service the debt the island has to use 44% of its revenue, unemployment is rampant (14.4% 2014), labor participation rate is among the lowest in the world (40.6% ), poverty is 46% (higher than any other state). This critical economic situation is worsened by the fact that Puerto Rico is totally dependent on the U.S. merchant marine, the most expensive in the world. The Jones Act, enacted in 1920 prohibits the island, which imports 85% of its food, from utilizing any other cheaper shipping alternative which according to one study increases the cost of living for the residents by about $200 million. (2) 

                       

While there have been comparisons between Greece and Puerto Rico the reality is that they are totally distinct situations. Greece has sovereignty, Puerto Rico does not. Puerto Rico is unable to declare bankruptcy, cannot devalue its currency and cannot go to international financial institutions under the present colonial system. In fact one of the solutions offered in the United States to solve the chaotic economic crisis is to place the entire island in receivership. In other words to go back to an even more rigid colonial system so that the bonds market can protect their investment.  It seems that the sentiment expressed by Simeon Baldwin in an analysis of the constitutional questions related to the acquisition of territories in the Harvard Law Review in1899 are still dominant  “it would be unwise to give … the ignorant and lawless brigands that infest Puerto Rico … the benefit of the constitution.”  The belief in the inferiority of Puerto Ricans to be provided their powers to find solutions was stated since the beginning by President Taft in 1909, this was in the midst of another economic conflict when the Puerto Rican legislature in an act of resistance against the colonial system refused to approve the colonial budget. President Taft said in a message to “congress that Puerto Ricans were given too much power than it was good for them.” (3). It seems that the culture and attitudes about Puerto Rico have not changed.

Footnotes

1. Gerald Newman “Introduction” in Reconsidering the Insular Cases: The Past and Present of the American Empire, Harvard University Press, 2015. 

2. Puerto Rican Senator Rossana López presided a commission of the Puerto Rican legislature which approved a resolution and a report (Senate Resolution #237), which finds that cabotage law (Jones Act) cost Puerto Rico $200 and increases the cost of living by 40%.

3. Juan R. Torruella “The Insular Cases: A Declaration of their Bankruptcy and My Harvard Pronouncement” in Reconsidering the Insular Cases: The Past and Present of the American Empire, Harvard University Press, 2015.