Puerto Rico’s disaster was years in the making

October 18, 2017

Brian Sullivan explains how debt vultures and colonial overlords spent decades weakening parts of Puerto Rico's infrastructure until they were vulnerable to Maria.

ON THE morning of September 29, a 78-year-old retiree named Luis Alberto Ruiz Irizarry, overcome by the despair that has enveloped Puerto Rico in the wake of Hurricane Maria, tried to hang himself in his Caguas backyard.

His daughter found him hanging from a tree behind their home, but with over 70 percent of cell towers down across the island, she couldn't call an ambulance for help. Neighbors helped her pull his body down and rushed him to the local hospital in their own jeep, while his wife pumped his chest in the back seat.

They were lucky that the hospital was among the half on the island that were still open at the time, but it, too, was teetering on the brink. Running dangerously low on water and fuel for its backup generators, hospitals were strictly rationing the use of essential equipment such as dialysis machines, much less air conditioners.

As a result, in the stiflingly hot weeks since Hurricane Maria made landfall, temperatures in hospitals reached unsafe levels. Doctors and nurses have been warning that unless something changes, disaster is imminent.

A child stands in the ruins of his house in Utuado, Puerto Rico
A child stands in the ruins of his house in Utuado, Puerto Rico (Petty Officer 1st Class Jon-Paul Rios | flickr)

How did we get to this point? How could Puerto Rico, a territory of the world's richest country, be so vulnerable to the destruction of Hurricane Maria, and so unequipped to deal with the crisis in the aftermath?

At the root of the current crisis is the debt that has been suffocating the island for years, a debt that has roots in Puerto Rico's history as a disenfranchised colony of the United States.

DURING THE Cold War against the former USSR, the U.S. was threatened by the presence of USSR-aligned Cuba in the Caribbean, which led to a number of efforts to bolster the Puerto Rican economy, from direct investment to massive tax benefits for businesses that invested on the island.

This whole package of programs was called Operation Bootstrap, and while its primary function was to generate tax-free income for corporations on the backs of working-class Puerto Ricans, it did provide some stimulus to the economy.

Section 936 of the tax code, which was passed in the 1970s, played a particularly important role by exempting firms that invested on the island from taxes. This spurred significant investment from the pharmaceutical industry for decades.

With the end of the Cold War, however, the U.S. government's interest in building Puerto Rico's economy waned. One by one, the various direct investments and tax subsidies lapsed or was repealed, which hit the island hard.

The nail in the coffin was the Small Business Job Protection Act of 1996. This law, which passed with support of both Democrats and Republicans, and was signed by Bill Clinton, eliminated Section 936, significantly limiting incentives for U.S. business to invest in Puerto Rico.

The elimination of tax incentives took place over 10 years, and, together with other shifts in the global economy, helped gut the island's economy. The island's gross domestic product began dropping and has continued falling to this day.

Elites in Puerto Rico, working closely with U.S. and international capital, responded to the crisis with a vicious circle of debt, austerity and privatization.

Staring at an economy demolished from a century of looting, no stable tax base and the absence of international aid, Puerto Rico's government stayed afloat by turning to bonds and public debt. This is now destroying Puerto Rico, which is now obligated to repay investors instead of trying to provide essential services.

As in countries like Greece, the elites' "solution" to the mushrooming debt crisis was to slash government spending and sell off public assets. But this is a terrible and unsustainable strategy that virtually guarantees further economic collapse, and benefits the wealthy few at the expense of everyone else.

This long financial crisis led directly to the destruction of infrastructure that could have mitigated the impact of Maria.

ONE OF the clearest examples of this connection is the collapse of Puerto Rico's energy grid, one of the island's biggest problems since Maria. Immediately after the storm, 95 percent of the island was without power, and the chief executive of the Puerto Rico Electrical Power Authority (PREPA) estimated it would take two to three months just to get electricity restored to half of the island.

The frailty of the grid is a direct result of the neoliberal response to the collapse of Puerto Rico's economy. PREPA is a public utility that survived the wave of privatizations that aswept the island in the 1990s, but with massive budget cuts. It's a time-honored neoliberal strategy to starve a public service until it ceases to function, and then use that failure as an excuse to privatize--and that seems to be exactly what was happening with PREPA.

The utility needed an estimated $4 billion to upgrade its crumbling infrastructure before the storm--money the government could not access because it was already so deeply in debt.


The unions that represent PREPA workers--particularly the Unión de Trabajadores de la Industria Eléctrica y Riego (UTIER) that represents linemen--are among the strongest on the island. But it is likely that local elites will try to use the devastation of Maria to bust those unions.

Like the power grid, Puerto Rico's health care system is also a victim of debt and neoliberal policy.

Prior to the 1990s, Puerto Rico had an imperfect but effective public health care system, built around central hospitals and regional clinics, with a high degree of coordination between providers throughout the system.

In 1993, Gov. Pedro Rosselló González set about destroying this system. His plan, known as La Reforma, was designed to contain health care costs and bring market forces to bear. This meant selling off public hospitals and dismantling the system of regional clinics. Instead of public health, the island moved to a managed care system styled on the U.S. model.

La Reforma was a disaster. It weakened the public health system that people on the island relied on--especially poor people. The reforms reduced the working conditions and pay of health care workers, causing many to leave to find better work. Clinics closed and hospitals fell into disrepair. Doctors in particular left for the mainland U.S., where they could earn more and work in better conditions.

La Reforma ensured that the health care system was already fragile before Maria struck. After the storm, it has been completely overwhelmed. Labor flight means there aren't enough doctors, and facilities are either shuttered or poorly maintained. Hospitals are scrambling to keep up with the influx of emergency patients, but the lack of adequate staff, combined with the limited access to electricity, is creating nightmare scenarios for many Puerto Ricans.

ANOTHER FEATURE of Maria has been the total collapse of communication on the island. Only 20 percent of the island's cellular towers are operational, and especially in rural areas, nobody can reach out for help.

This disaster has its roots in another part of Rosselló's neoliberal program: the 1998 privatization of the island's public telephone system, Telefónica de Puerto Rico. The $1.2 billion in revenue from this privatization went into something called the Corpus Account, which was supposed to be spent on major infrastructure improvements.

But while some of that money was spent on major projects, most went into a complex series of financial transactions that were ultimately geared toward ensuring that investors in Puerto Rico's debt get paid off and a bunch of shady investments that will likely do nothing to improve infrastructure on the island.

The plan has been that the big money players who invest in Puerto Rico's debt get paid off, the banks that underwrite the transactions get a slice--and working class Puerto Ricans get nothing.

Money from the Corpus Account was required by law to be spent upgrading the island's water system. Because the money was instead handed over to bondholders, that work went undone. Today, only half of the island's residents have access to clean water. The rest must rely on bottled water handed out as part of the troubled humanitarian aid program.

While the selling off of Puerto Rico's public telephone company was a tragedy, it didn't happen without a fight.

The unions representing Telefónica workers were among the most militant on the island. They called out not only their own members, but thousands of people across the island, in a massive action called the People's Strike, which lasted 41 days and brought some industries to a standstill.

The People's Strike was an inspiring example of how labor can win broad support, not just to fight for better wages and working conditions, but around political demands. Unfortunately, after severe government repression, the strike was defeated, and the sale and austerity went forward.

DEBT AND neoliberal austerity set the stage for the current disaster in Puerto Rico, and it is clear that the U.S. government under Donald Trump will only make things worse. Trump's racist dismissal of the severity of the post-Maria crisis has been among his most shameful acts in office.

But we should be clear that the unelected Fiscal Control Board that currently oversees Puerto Rico's finances will be no better.

Established by the Puerto Rican Oversight, Management and Economic Stability Act (PROMESA) passed in the last year of the Obama administration, the board is supposed to help Puerto Rico restructure its debt. But so far has only encouraged more austerity and helped insure the profits of U.S. capital.

It should be no surprise that the political and economic leaders who have imposed austerity aren't going to help the people of Puerto Rico in their time of crisis, since these are the same people who set the island up for this crisis in the first place.

Real relief will have to come from the forces that fought austerity and privatization when they were first imposed. It will come from people who participated in the People's' Strike, or PREPA linemen who have vowed to do everything in their power to restore electricity to the island.

One of the most inspiring examples has been the work of the Federación de Maestros de Puerto Rico (FMPR), the island's teachers' union. Organized in the crucible of the fight against school closures and for quality public education on the island, the FMPR was ready to offer relief in a way that few other organizations were.

The union's Facebook page features countless stories of members cleaning out damaged homes, providing water and other necessities, and being there for struggling people in their time of need.

Unfortunately, as heroic as the relief efforts of Puerto Rico's teachers and other working class people have been, such efforts cannot solve the larger problems plaguing the island.

Solving the current crisis and making sure nothing similar can ever happen again will require structural changes. Puerto Rico's debt must be forgiven--and the austerity that crippled the island over the past several decades must be reversed.

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