Puerto Rico’s urgent and growing economic and financial crisis has been the subject of editorials and analysis in the U.S. news media in recent weeks. With a debt of $73 billion — four times greater than that of Detroit — and the real possibility of default to Wall Street creditors, Puerto Rico has become a rather “hot” topic.
On Oct. 22, the U.S. Senate Committee on Natural Resources and Energy held hearings on Puerto Rico’s economic and fiscal condition. Almost a month earlier, on Sept. 29, the U.S. Senate Committee on Finance held other hearings.
And on Oct. 21, the day before the latest hearings, President Barack Obama finally broke his long silence on the Puerto Rican crisis. He issued a statement recommending that the U.S. Congress approve the extension of the federal bankruptcy law to Puerto Rico. The island currently has no access to this protection, which would allow Puerto Rico to restructure its debt.
It shouldn’t surprise anyone that the presidential statement would not respond to the real needs of the Puerto Rican people, but instead to the urgency of ensuring the Puerto Rican vote for the Democratic Party. The Puerto Rican community in the United States now exceeds 5 million.
On Oct. 13 and 14, Puerto Rican political leaders, agency directors and other personalities in the Puerto Rican diaspora aligned with the Democratic Party held a conference in Orlando, Fla. This city hosts 1 million new Puerto Rican immigrants. Under the title “United for Puerto Rico,” conference organizers tried to exert pressure so that both the Obama administration and Congress would approve the bankruptcy law for PR and grant the necessary financial support to get the island out of this huge crisis.
Who is supporting whom?
This article addresses an aspect of the crisis that is little understood in the United States. It is the issue of “federal assistance.” Much more is said than known about the “immense help” that the U.S. government is allegedly giving the island. Those who want to blame Puerto Rico for the crisis use words like “mantengo” (a pejorative term for economic support) and spread the idea that we Puerto Ricans — and I include myself because I am Puerto Rican — are lazy and do not want to work.
Now that Obama has finally raised the issue, it is important to clarify this notion, as many U.S. citizens are wondering why this aid should be available to Puerto Rico when there are so many needs here.
First, it is essential to make clear the nature of Puerto Rico: It is a U.S. colony! In a nutshell, this means that Puerto Rico has no sovereignty — neither economical, nor social, nor territorial, nor even legal. Any law that the Puerto Rican legislature approves may be revoked by the United States. The most recent example was the Creole Bankruptcy Act that Puerto Rico’s Gov. Alejandro García Padilla — himself a lackey of Yankee imperialism — tried to secure to restructure the debt of the state agencies. It was overturned in federal courts.
Many economists in Puerto Rico have addressed the debt situation. The majority of those who are not in the service of imperialism and its voracious multinationals conclude that the transfer of money from Puerto Rico to the USA is much larger than that flowing in the other direction.
Rosario Rivera, an economist and professor at the University of Puerto Rico, has lectured widely on this. See a video with a clear explanation in Spanish at Telemundo (tinyurl.com/oafx7hx).
Rivera states that transfers from the U.S. to Puerto Rico vary year to year between $13 billion and $16 billion. This includes two categories. “Unilaterals” are awarded as grants, food stamps and other assistance, amounting to $1.9 billion to $2 billion a year. In addition, workers in Puerto Rico pay taxes to the U.S. and receive “vested” benefits such as unemployment, Social Security and Medicare payments. Note that the same percentage is subtracted for Medicare and Social Security benefits from Puerto Rican workers’ wages as in the United States, although the benefits they receive are less.
Transfers from Puerto Rico to the United States amount to about $58 billion — much more than the $13 billion to $16 billion received.
Rivera divided this $58 billion in transfers into three categories.
One is for imports from the United States. Remember that the U.S. has been destroying Puerto Rican agriculture and manufacturing since it invaded the island in 1898. More than 85 percent of food products are imported, mainly from the United States. Almost everything consumed on the island, including raw materials, is imported. This represents $22 billion to $25 billion annually.
A second, even greater figure is the $34 billion in annual profits generated in Puerto Rico for U.S. firms. Megastores like Walmart and Home Depot have a wide margin of profit, considering the paltry tax rate the colonial government grants them.
Rivera describes all these transfers as a “revolving door,” through which whatever money that comes from the U.S. goes right back to it. The corporate profits fly to the home office; they do not stay in Puerto Rico.
Puerto Rico’s government also subsidizes U.S. agriculture, and not Puerto Rico’s. Consider coffee. Although Puerto Rico’s coffee is of especially high quality, the government subsidizes PR Coffee Roasters, which belongs to Coca Cola. This multinational bought up the brand names of the most popular coffees grown on the island, including Yaucono, Rico and Crema. Even worse, the beans used are not necessarily grown in Puerto Rico, but imported and at best mixed with lesser-quality beans grown on the island. Puerto Rican coffee growers have had to lay off workers because their costs have increased, and coffee is very expensive to produce.
The last category that Rivera includes is the estimated cost of the shipping laws know as “Cabotaje.” These require that all products transported between Puerto Rico and the U.S. are sent only in U.S. ships with U.S. personnel, the most expensive in the world. This represents $800 million to $1.5 billion.
Rivera proves conclusively that Puerto Rico’s workers are subsidizing the U.S. capitalist economy, not the other way around.