This commentary comes from a discussion panel hosted on Tuesday, September 8, by the Center for Latin American, Caribbean, and Latino Studies (CLACLS) at the Graduate Center, CUNY, featuring the authors of the recent FocaalBlog article “Puerto Rico Is NOT Greece: Notes on the Role of Debt in US Colonialism,” Ismael García-Colón and Harry Franqui-Rivera. The authors were joined by Héctor R. Cordero-Guzmán on the panel moderated by Teresita Levy.
Puerto Rico and Greece face major challenges to resolving their debt. Both Puerto Rico and Greece are beholden to larger and more powerful political entities (the United States and European Union respectively) and therefore cannot determine for themselves how to resolve their crises. Furthermore, the financial institutions that provided the loans in both cases have called on the respective governments to implement austerity measures, asserting that Puerto Rico and Greece are primarily responsible for their economic turmoil. Thousands of public sector workers protested on September 11 in Puerto Rico against the austerity plan, which will freeze collective bargaining agreements and ban new hires and pay raises in order to save $622 million per year by 2020. Equally important will be following collective action responses in both the island and diaspora.
We agree with the CLACLS panelists that a revived interest in Puerto Rico in the US academy is a step in the right direction. As the economic crisis unfolds and the readjustment plan is implemented, it will be important to have more outlets of discussion like the CLACLS panel to displace myths, verify data, and think about possible solutions.
Panelists critiqued the lack of acknowledgement that Puerto Rico’s crisis is rooted in decades of political and economic policies implemented by the United States. Dr. García-Colón noted that it was no accident that Puerto Rico Gov. Alejandro García Padilla’s June 2015 comment that the debt is “not payable” coincided with the Greek referendum and international attention on debt and austerity. While the panel made clear that Puerto Rico is not Greece due to its political status in relation to the Untied States, both Puerto Rico and Greece are part of the world system, in which the hegemony of financial capital crosses borders. The crippling effects of debt, whether owed to Wall Street hedge funds, German banks, or international financial institutions, link both Puerto Rico and Greece and invite a broader critique of capitalist structures of accumulation and the crises endemic to them.
Here are a few highlights from the discussion and response session. A question about whether independence for Puerto Rico is a viable option was met with a consensus among the panelists that independence itself will not necessarily solve the crisis and that the independentistas have not offered a clear economic alternative. However, in objection, a member of the audience commented in Spanish that although the independentista movement is disperse, it has the ability to offer solutions. Similarly, Dr. Cordero-Guzmán suggested that because the Puerto Rican diaspora is atomized rather than unified, diasporic collective mobilizations have not been very effective thus far. Interestingly, before the panel commenced, an audience member circulated a flier announcing a general meeting for the Call to Action on Puerto Rico Committee, a New York–based organization. Since July, shortly after the island’s debt crisis escalated, this group has disseminated educational materials, organized protests against Wall Street hedge fund creditors, and held press conferences.
Although not addressed in detail on the panel, we are interested in further discussion on how people are experiencing the multiple layers of the crisis. The connections between debt, austerity, health, and environment might come to mind here. For example, how will the future bode for Medicaid recipients as the program faces more than $200 million in budget shortages? How does economic crisis and austerity exacerbate environmental events into disasters, such as the severe drought on the island this summer?
In his public address on September 9, García Padilla acknowledged that “our people have been asked to make many sacrifices,” referring to the significant measures taken since the onset of the financial crisis in 2006 to reduce expenses and increase revenues. These “sacrifices” have led to income stagnation, an 11.9 percent unemployment rate1 and increasing outmigration to the United States mainland. Between 2010 and 2013, a total of 144,000 people left the island for the mainland (Cohn et al. 2015). Additionally the most recent US census data shows that 45.4 percent of the population lives below the federal poverty level, which is nearly double the rate for Mississippi, the poorest US state.
The CLACLS panel discussion was timely because it was followed the next day by García Padilla’s speech and the publication of the economic readjustment plan, the Fiscal and Economic Growth Plan (FEGP). Building from the report written by former IMF economists, Puerto Rico – A Way Forward (Krueger et al. 2015), also known as the “Krueger Report,” the governor outlined a new five-year plan to overcome Puerto Rico’s debt crisis. The plan calls for debt restructuring that would require hedge funds and other creditors to voluntarily accept reduced payments. As the discussants noted, this seems unlikely given the reality of Puerto Rico’s colonial status. Unlike US states, the Puerto Rican government cannot restructure its debt under Chapter 9 bankruptcy protection because of the 1901 decision Downes v. Bidwell,2 when the Supreme Court ruled that in matters of revenues and administration the United States Constitution did not apply to newly annexed territories—known as Insular Cases since.
The present-day FEGP makes several recommendations directed to the US Congress, including repealing the Jones Act to reduce maritime transport costs to the island and improve the “ease” of doing business. Dr. Franqui-Rivera noted that the elimination of Article 27 of the Jones Act, known as the cabotage laws, and limiting the transshipment of goods could create up to 50,000 jobs. Additionally, the FEGP seeks to encourage US investment on the island through amending Internal Revenue Code 933A and permitting US-owned businesses based in Puerto Rico to receive a tax credit designed as a “cost-efficient version” of Section 936, which exempted US companies from federal taxes on income earned in Puerto Rico.
In response to the elimination of Section 936 in the mid 1990s, the Puerto Rican government increased its borrowing. Although returning to a similar investment incentive would potentially create employment opportunities, the panelists did not view this as a sustainable solution. Aside from the investors that this measure would potentially benefit, an important question asks how workers will fare in light of FEGP’s recommendations to reduce worker protections. The FEGP framework does not protect the people of Puerto Rico against predatory hedge funds. And more importantly, as echoed by the panelists, while this readjustment strategy may be a catalyst for economic transformation, it does not alter Puerto Rico’s colonial nature.
Lisa Jahn and Sarah Molinari are both third-year PhD students in Anthropology at the Graduate Center, CUNY, developing dissertation research in Puerto Rico.
Cohn, D’Vera, Eileen Patten, and Mark Hugo Lopez. 2014. Puerto Rican population declines on island, grows on U.S. mainland. Pew Research Center, 11 August.
García-Colón, Ismael, and Harry Franqui-Rivera. 2015. “Puerto Rico is NOT Greece: The role of debt in US colonialism.” FocaalBlog, 26 August. www.focaalblog.com/2015/08/26/puerto-rico-is-not-greece-the-role-of-debt-in-us-colonialism.
Krueger, Anne O., Ranjit Teja, and Andrew Wolfe. 2015. Puerto Rico – A way forward. San Juan: Government Development Bank for Puerto Rico.
Cite as: Jahn, Lisa, and Sarah Molinari. 2015. “New developments in Puerto Rican economic readjustment?” FocaalBlog, 1 December. www.focaalblog.com/2015/12/01/lisa-jahn-sarah-molinari-new-developments-in-puerto-rican-economic-readjustment.