Puerto Rico debt crisis: product of US capitalism’s colonial rule

BY SETH GALINSKY

President Barack Obama and congressional leaders have reached agreement on a “Puerto Rico Oversight, Management, and Economic Stability Act” that would put control of virtually all of Puerto Rico’s financial decisions in the hands of an appointed board.

The stated purpose of the bill is to “bring lawful order to chaos” in paying the U.S. colony’s estimated $70 billion debt. Ever since June last year, when Gov. Alejandro García said the debt was unpayable, wealthy bondholders and hedge funds have been jockeying to get paid first, to minimize the amount of any “haircut” — debt reduction — they have to accept, and to make sure working people get squeezed to maximize their profits.

The bondholders also want to get paid ahead of the $40 billion in pension liabilities the government owes. The government missed a bond payment of $422 million May 2. Another $2 billion is due July 1.

Under the bipartisan deal, Obama will appoint a seven-member board with extraordinary powers to impose its will on Puerto Rico. The colony’s governor will be a non-voting member.

Like a bankruptcy court, the board would decide which debts get paid first and negotiate the size of any haircut.

Among the board’s powers:

■ authority to force the sale of Puerto Rican government assets and to lay off government workers.

■ authority to overturn any law or regulation that the board decides is “inconsistent” with its mission.

■ enforcing laws that prohibit government employees from going on strike.

■ imposing criminal penalties on anyone who fails to carry out the board’s decisions.

In addition, the bill allows the governor of Puerto Rico to lower the minimum wage for new hires for anyone under 25 years old.

García has stated his administration has an “adjustment plan” that is “similar to what the bill is calling for,” but opposes the appointed board making the decisions.

What it means to be a colony

Since 1898, when U.S. troops wrested control of Puerto Rico from the Spanish crown, the island’s resources and people have been a source of super-profits for U.S. capitalists. To mask that Puerto Rico is a colony, Washington refers to it as a self-governing territory or a “Commonwealth.”

Despite Spanish being the main language of its 3.5 million inhabitants, U.S. federal courts in Puerto Rico conduct their affairs in English. Under the 1920 Jones Act, all maritime cargo to the island has to be carried on U.S.-owned ships. This often means goods sail right past Puerto Rico, are transferred to U.S. ships in a U.S. port, and then sent back to be offloaded there.

The proposed fiscal board “confronts the problems created by colonialism with more colonialism,” María de Lourdes Santiago, the Puerto Rican Independence Party’s candidate for governor in the upcoming election, said March 28. “Puerto Rico does not have the necessary powers to protect its industry, to establish trade pacts with other countries, to apply for international financing deals.”

‘Lack of respect’

The bill “shows a lack of respect,” long-time independence fighter Rafael Cancel Miranda told Telemundo April 26. “The only way that Puerto Ricans can resolve our problems is if we have absolute power over our lives.”

Despite laying off thousands of public workers, raising the retirement age, raising sales taxes and cutting pensions, Puerto Rico’s debt mushroomed over the last decade as the government took out loans and floated bonds, just to pay the interest on previous loans.

Even with the federal minimum wage of $7.25 an hour, workers have a hard time making ends meet, Juan Santana, president of the Independent Union of Airport Workers, told the Militant by phone from Río Piedras, May 23. The union represents 390 workers who prepare food for flights and restaurants at the airport.

Half of the union members make only minimum wage he said, “But the cost of living keeps going up. A large number of our members are between 19 and 26 years old. Lowering the minimum wage would be a blow.”

The debt crisis and fiscal board have become an issue in the U.S. elections.

Democratic Party presidential candidate Bernie Sanders drew thousands to his campaign stops in Puerto Rico May 16. Although prohibited from voting in U.S. presidential elections, Puerto Rican residents can vote in the Democratic and Republican party primaries.

Sanders criticized setting up a fiscal board, saying “vulture funds” should take “a massive discount.” He proposed “an orderly restructuring” under the supervision of a U.S. bankruptcy court.

Sanders also joined the call for freeing Oscar López, a political prisoner and fighter for independence for Puerto Rico, who has been jailed in the U.S. for 35 years. Sanders called for yet another referendum, this time binding, to allow Puerto Rico’s residents to vote between statehood, independence or commonwealth status.

William Clinton campaigned for Hillary Clinton in Puerto Rico the day after Sanders’ visit. Hillary Clinton released a statement backing the control board bill even though she has “serious concerns about several provisions.” She said she would work to ensure that the board “includes members that will act in the best interest of Puerto Ricans.”

Socialist Workers Party candidate for U.S. president Alyson Kennedy, who will testify in support of independence for Puerto Rico at United Nations hearings on decolonization June 20 in New York, told the Militant that the board “is an affront to the country’s sovereignty.

“It puts the brunt of the crisis on the backs of working people in Puerto Rico,” Kennedy said. “Working people in Puerto Rico and the U.S. have everything to gain by fighting together for our common interests and backing the fight for independence.”

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End US colonial rule in Puerto Rico!

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