Vol. 79/No. 25      July 20, 2015

“The parallels between Greece’s full-blown debt crisis and Puerto Rico’s burgeoning one are striking,” the Economist wrote June 30.

García urged bondholders to negotiate stretching out the amount of time to get paid back.

But the main target of the propertied rulers is working people.

García repeatedly lauded a report his government commissioned by former International Monetary Fund official Anne Krueger titled “Puerto Rico: A Way Forward.” Released earlier that day, it prioritizes removing “disincentives for firms to hire workers and for workers to accept jobs.”

While the cost of living in Puerto Rico is on average 14 percent higher than in the U.S. and per capita income is half that of Mississippi — the poorest of the 50 states — the report says the federal minimum wage of $7.25 per hour “is too high relative to local incomes and regional competitors.”

The report argues that “generous” welfare benefits can exceed what a minimum wage earner receives, taking away incentives to work.

The solution? Eliminate the minimum wage, or at least slash it by two-thirds. Eliminate year-end bonuses. Reduce paid vacation days. Only pay overtime after 40 hours, like in most of the U.S., instead of after an eight-hour day. Extend probation for new employees from three months to one-to-two years. Make it easier to lay people off. And reduce welfare benefits.

The report also calls for privatizing much of the island’s electrical generation. It calls for exempting the island from the federal Jones Act that requires all maritime cargo between Puerto Rico and the U.S. be carried on ships under U.S. flag, doubling shipping costs.

García said that he supported most of the report’s proposals but opposed reducing the minimum wage.

“We cannot pretend to pull Puerto Rico out of its stagnant economic growth by sunbathing on the beach,” he said a few days later, attacking the 12 paid sick days and 15 vacation days many workers on the island receive by law.

Crisis magnified by colonialism

For 25 years Puerto Rico has been mired in economic stagnation, fueling reliance by successive colonial governments on loan after loan and growing indebtedness to U.S. investors. Today interest payments alone are the equivalent of $200 per island resident a month.

Things have gotten worse since the 2008-2009 recession. Puerto Rico’s gross national product has dropped 14 percent since 2006. Commercial bank assets have fallen by 30 percent since 2005. The labor participation rate — those working or actively looking for work — dropped from just under 50 percent in 2006 to 40 percent. Some 40 percent of the population is dependent on government aid, from food stamps to disability payments and Medicaid.

Over the last five years the government has laid off some 30,000 workers, slashed pensions, raised the retirement age and cut social spending.

“Before the layoffs there were 6,500 workers at the electrical company,” Angel Figueroa Jaramillo, president of the Union of Electrical Workers (UTIER), told the Militant by phone from San Juan July 2. “Now there’s 3,700. What is the result? The number of injuries on the job has gone up dramatically. Last year three compañeros died on the job.”

“The government wants to privatize energy, water, roads and the ports,” he said. “This would impoverish the country even more and subject it to the greed of the private sector.”

“They offer all kinds of incentives to so-called investors who are really just usurers,” William Hernández, a pharmaceutical worker in Guayama, said by phone July 6, pointing to the tax breaks the government gives to capitalists who move to Puerto Rico. “Then they impose austerity on working people.”

In the latest move to make workers pay for the crisis, the government hiked the sales tax to 11.5 percent, making it higher than any U.S. state.

Puerto Ricans are leaving the island for the U.S. in droves. From 2010 to 2014 the population dropped 5 percent to 3.5 million.

As a U.S. colony, Puerto Rico, unlike U.S. municipalities, is barred from declaring bankruptcy. So far efforts by Puerto Rican officials, backed by the New York Times and others, to change federal law to allow government-owned enterprises on the island to use Chapter 9 bankruptcy to restructure debts have gone nowhere.

Capitalist speculators so far don’t seem too worried about García’s request to negotiate debt terms. The government-owned Electric Power Authority made a $415 million debt payment July 1. In return, capitalist lenders agreed to buy $128 million in new bonds to be paid in full by December and extended another payment deadline to Sept. 15.
 
 
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