How the Bankers and U.S. Government Set Up Puerto Rico for Disaster

Oct 2, 2017

Two big hurricanes, Irma and Maria, that hit Puerto Rico ravaged the island, destroying its electrical grid and leaving most of the population desperately short of food, clean water and fuel. Governor Ricardo Rosello warned that recovery of basic services, like electricity, could take four to six months.

But much of Puerto Rico’s infrastructure had already been greatly weakened and destroyed long before those hurricanes hit.

More than a half century ago, Puerto Rico, which is a territory of the U.S., appeared to be an economic success story. In the 1970s, the U.S. Congress passed a law saying that businesses operating in Puerto Rico did not have to pay any federal taxes. This attracted some multinationals and industries, which moved from the mainland to Puerto Rico, boosting employment somewhat. But starting in 1996, the U.S. Congress progressively suppressed the tax exemption, and U.S. companies gradually left Puerto Rico, leaving the economy in a shambles, unemployment skyrocketing and almost half the population living below the poverty line.

To keep afloat, the Puerto Rican government borrowed increasing amounts of money. To big banks, speculators and hedge funds, this debt was highly attractive because of the high interest payments that the Puerto Rican government was forced to make, and the fact that those interest payments were completely tax deductible. Pretty soon, the government was borrowing money to make payments on the debt. Debt fed on itself.

Last year, Puerto Rico had a total debt of 73 billion dollars, the biggest debt of any local authority in the U.S. This debt included 20 billion dollars for the three big municipal utilities that provide power, water, sewer and transportation. The payments on this enormous debt bled the economy dry, causing blackouts and shutdowns of the water system and public transit–not to speak of a collapsing public healthcare system and a collapsing education system, making life on the island impossible for hundreds of thousands of families who then fled to the mainland.

But that economic and social disaster didn’t stop the U.S. Congress from trying to squeeze out even more money for the speculators and bankers that hold the Puerto Rican debt. Last year, Congress created the Financial Oversight Board, called “Promesa,” made up of bankers and former government officials, to which Congress gave the ultimate control over Puerto Rico’s finances.

What is most shocking today is the lack of help or support from the U.S. government, despite its enormous resources, including thousands of planes, ships, helicopters. A week after Hurricane Maria hit, none of the bare necessities had made it to most of the population in dire need–little or no food, water, gas, medicine, and no tarps to throw over houses without roofs. “Nothing. Nothing. They haven’t brought anything here,” one resident told the New York Times.

But that is consistent with the policy of the government, and the bankers and speculators who it serves, that is geared to only make a profit ... no matter the cost in human life.