Billions of dollars are being sucked from the island to service Puerto Rico’s soaring debts to bondholders abroad. Industrial jobs tumbled from 160,000 to 75,000 between 1996 and 2013, with a 30 percent decline over the past seven years.
With an official unemployment rate of 14.2 percent — more than double U.S. figures — Puerto Ricans, both workers and middle-class professionals, are fleeing the island in increasing numbers, the largest emigration since the 1950s when 470,000 people moved to the U.S.
Conditions of life for those who remain are deteriorating, from broken highway lighting to schools without computers, air conditioning or copy machines.
Standard & Poor’s lowered its rating of Puerto Rico debt to “junk” Feb. 4, rapidly followed by Moody’s. As a result, the interest owed on Puerto Rico’s $70 billion debt is increasing and Gov. Alejandro García Padilla will have to come up with $940 million in payments ahead of schedule. Interest on the bonds has reached 10 percent.
The debt of Puerto Rico, a U.S. colony since 1898, is greater than the value of the country’s gross annual production. Debt-service payments equal about 15 percent of the government’s budget.
In essence, the government keeps borrowing more just to pay off what it has already borrowed.
The roughly $4.5 billion in debt service is double Puerto Rico’s annual capital works budget. That means billions leaves the island “to pay bondholders and creditors without creating a single job or contributing a dime to economic development,” notes Caribbean Business weekly in its Feb. 13 issue.
Since taking over last year, García Padilla has sought to “stabilize” the economy on the backs of workers. He cut pensions for government workers, reduced the size of the government workforce, raised the retirement age, raised water rates by 60 percent and increased sales and gasoline taxes. At the same time, he has offered special tax exemptions to capitalists who decide to make the island their home.
“We don’t have enough personnel even to monitor the electric metering for big commercial customers,” Roberto García Cooper, an electrician for the state-run electric company, said by phone from Guaynabo Feb. 18. “When people retire, the company doesn’t replace them. But the constitution says that the bondholders get paid first before anyone else.”
‘Root of problem is colonialism’“The root of the problem is colonialism,” longtime independence leader Rafael Cancel Miranda told the Militant by phone Feb. 17. “It’s a cancer. You can’t solve it by treating the symptoms.”
“U.S. imperialism wiped out our agriculture. We used to produce 75 percent of what we consumed, now we have to import 85 percent,” Cancel Miranda said.
He was referring to Operation Bootstrap, a U.S.-promoted “development plan” that combined tax breaks and other incentives for U.S. bosses to expand clothing and pharmaceutical plants, drawing workers off the land. As a result, the island’s agricultural workforce fell from 36 percent in 1950 to 4.8 percent in 1980. Thousands of acres of prime farming land were left idle.
Today those policies, combined with the worldwide capitalist economic crisis, have made one-third of the island’s population dependent on food stamps, used to pay for food imported from the U.S. The island’s real gross national product has declined every year since 2006 except for a 0.1 percent increase in 2012.
According to the Puerto Rico Institute of Statistics, the island has had a net loss of 54,000 people a year in 2011 and 2012. There are now more Puerto Ricans living in the United States than on the island.
Nearly 320,000 homes on the island were vacant in 2012, according to the Wall Street Journal, up from 186,000 in 2005.
Even as the social crisis in Puerto Rico gets worse, some bondholders see greater opportunity for speculative investment, betting that no matter how high interest rates go, Puerto Rico will pay. By U.S. law the island can’t declare bankruptcy.
“I have not seen this level of enthusiasm for Puerto Rico’s paper in years,” Financial Times reporter John Dizard wrote Feb. 14. “The prospects for the issue’s success look very good … since it will be priced and sized to fly off the shelves.” To get in on the action, all you need is a minimum $50 million to invest.
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