Parasitic Capitalism: The debt in Puerto Rico

Author’s Note: “The African People’s Socialist Party defines colonialism as the foreign domination of a nation or people at the social, political and economic expense of the dominated nation or people.”

Puerto Rico’s government officials recently announced that the country will not be able to concurrently provide necessary social services and satisfy its $2-billion-dollar debt payment due on July 1, 2016

The Puerto Rican government is currently contending with a $70-billion-dollar debt crisis while also experiencing an intractable 10-year economic slump.

Between 2005 and 2015, Puerto Rico’s gross national product (GNP)—the total value of all goods and services produced by Puerto Rican-owned firms—decreased by 14 percent as its debt rose to over 100 percent of GNP.

This means that the country’s debt is greater than its income.

In comparison to residents in other U.S. states, the people of Puerto Rico, on average, pay the highest electricity and sales tax rates in the United States.

The island is also grappling with the highest crime and unemployment rates, relative to U.S. states, and a labor force participation rate hovering around 43 percent.

The labor force participation rate indicates the percent of the working-age population that is actively working or seeking employment.

Puerto Rico’s low participation rate is largely a result of many people opting not to seek out work due to a lack of employment opportunities.

In some areas, criminal activity is the only viable source of income.

As a result, the government has been forced to take out more debt to pay for public services and has already privatized/leased out its airport, two toll roads, and the operation of its capital city San Juan’s public busing system.

The U.S. will have complete control over the Island’s finances

Puerto Rico is calling on the U.S. government to help it restructure its debt.

The House Committee on Natural Resources approved the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA), which seeks to create a seven-member oversight board to oversee a newly proposed bankruptcy process for the island.

Appointed members of the board would be chosen by U.S. president Obama, of which two members will be selected from a list of individuals submitted by the Speaker of the House, where one of the two should have primary residence or a primary place of business in the Commonwealth of Puerto Rico; two from a list submitted by the Majority Speaker of the Senate; one from a list submitted by the Minority Leader of the House; and one from a list submitted by the Minority Speaker of the Senate.

The bill specifically states that no appointed member shall be “an officer, elected official, or employee of the territorial government or a candidate for elected office of the territorial government”; meaning that no person appointed to the Oversight Board will be accountable to the people of Puerto Rico.

Only the governor of Puerto Rico Alejandro Garcia Padilla, or someone he selects to fill his place, will serve on the board as an ex-officio member with no voting power.

The Oversight Board will have the power to overrule any fiscal decisions made by the Puerto Rican government and can impose mandatory cuts to its budget.

The island’s economic troubles are rooted in its colonial relationship with the U.S

Puerto Rico officially became a U.S. colony in 1898 after Spain—its first colonial master—turned over the island to the United States through ratification of the Treaty of Paris following the Spanish-American War.

Since then, the U.S. maintains control over the island.

In 1901, a series of Supreme Court opinions on six cases, known as the “insular cases,” resolved that full constitutional rights were not extended to the inhabitants of the island and that the people were subjected to U.S. congressional legislative power.

Puerto Ricans were not granted U.S. citizenship until 1917 with the enactment of the Jones Act.

The Jones Act also established shipping restrictions which require all the island’s imported and exported goods to be carried by U.S.-constructed, owned, and manned ships.

Today, these shipping restrictions cost Puerto Rico as much as $567 million per year.

In 2015, The PR government enacted a law allowing for it to declare Chapter 9 bankruptcy but that was effectively struck down in a U.S. Court of Appeals for the First Circuit because of a 1984 amendment to the U.S. bankruptcy law put forward by then South Carolina Senator Strom Thurmond, who was an outright white nationalist.

Judge Juan Torruella, who is a Puerto Rican Judge on the First Circuit U.S. Court of Appeals and an authority on Puerto Rican legal history, later issued a stinging criticism of the United States’ financial control over the commonwealth, saying that it further evinces the island’s “colonial relationship” with the U.S.

U.S. colonial law forced Puerto Rico into ruin

In 1976, Puerto Rico accounted for 40 percent of all U.S. profits in “Latin America” and ranked first amongst all Latin American countries in U.S. direct investment.

Moreover, numerous multinational corporations reported that 25 percent of all their global profit came from the island.

Corporations established subsidiaries or daughter companies in Puerto Rico whose revenue was tax exempt so long as it was paid to the parent company in the form of dividends, or profits paid to shareholders.

This tremendous wealth was extracted from the labor and productivity of 4,000 of Puerto Rico’s workers.

Nearly twenty years later, in 1994, the North American Free Trade Agreement (NAFTA) went into effect, thus re-opening colonial markets for corporations to set up shop and exploit globally oppressed peoples.

In 1996, then U.S president Bill Clinton entered a deal with Newt Gingrich and House Republicans which allowed for the minimum wage to be raised and partially paid for by the phasing out of the particular section of the U.S. tax code governing the aforementioned corporate tax exemptions over the next 10 years.

By 2006, corporations were scrambling to leave the island as this tax exemption neared expiration, finding other working class peoples to exploit in various parts of the world. 

Facing economic hardship, the PR government resorted to selling public bonds in order to pay for essential public services.

Puerto Rico’s debt becomes an attractive profit-making ploy for parasitic capitalists

Numerous U.S. financial management firms entered into the business of securing Puerto Rican- issued public bonds.

Puerto Rican bonds are triple-tax-exempt, which means that bondholders do not pay federal, state, and local taxes on repayments and interest, and have high interest rates.

These bonds are particularly attractive to creditors because many bonds are insured and therefore guarantee returns on principal and interest, regardless of whether or not Puerto Rico is able to satisfy its payments. 

So, financial institutions purchased Puerto Rican bonds with the understanding that no matter the case they would still profit from the island going further into debt as a result of 118 years of U.S. colonial domination.

Unsurprisingly, migration is a major issue for Puerto Rico.

It is estimated that 50,000 people are migrating from the island per year; roughly 1,000 people leaving per week.

As Chairman Omali Yeshitela reminds us, colonized peoples leave their native lands for their imperial oppressor nations because they are chasing their stolen resources.

For over a century stolen labor, land, and resources from the people of Puerto Rico produced enormous wealth for the United States.

The people of Puerto Rico, many of whom are African, should join InPDUM’s Africans Charge Genocide Campaign and demand the U.S. government pay reparations to Africans colonized within U.S. borders.

Puerto Rico’s African working class should build the African Socialist International (ASI) and join the fight for self-determination!

Death to Colonialism!

Death to Imperialism!

Join the African People’s Socialist Party!

 

 

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