Why Is Puerto Rico Billions of Dollars in Debt?

Puerto Rico is drowning in $72 billion of debt. Over the last few years, an accelerating fiscal crisis has brought an unusual amount of attention to the U.S. territory and the unique issues it faces. News media has been calling it the “Greece of the Caribbean.” But for those that aren’t experts in municipal finance, it can be all a little abstract. How did Puerto Rico rack up such a huge bill, and how is it affecting life on the island?

Latino USA answers that question, with help from a few experts: Robert Smith of NPR’s Planet Money, economist Rosario Rivera from the University of Puerto Rico and Hector Cordero-Guzman of Baruch College.

The Battle for Puerto Rico on Capitol Hill

As the debt crisis carries on in Puerto Rico, Congress debates on how to address the issue. Democrats are pushing to grant the island access to bankruptcy protection, which it lost after a 1984 amendment to U.S. bankruptcy code left Puerto Rico out. Republicans —and the financial industry— are not in favor of bankruptcy, and have offered other solutions, including a fiscal control board that would be appointed to manage Puerto Rico’s finances.

Regardless of the approach, everybody agrees something must be done. House Republicans have pledged to bring a bill to the floor by the end of March, and it appears that there is an appetite for compromise between the demands of both parties.

Making matters more complicated are the one million Puerto Ricans in the Orlando area with the potential to swing Florida in the 2016 presidential election. They may vote based on what federal government does —or fails to do— for Puerto Rico.

Latino USA took a visit to Washington to learn into the politics surrounding this issue. We spoke with Congressman Luis Gutiérrez (D-Illinois) and Pedro Pierluisi, Puerto Rico’s lone non-voting member of Congress.

Featured image: (Kevin McCoy/Wikimedia Commons)

Puerto Rico’s Political Status Dealt Another Blow in Supreme Court

Originally published at LatinoRebels.com by Juan Antonio Ocasio Rivera

Puerto Rico’s political status has been thrust into the spotlight once again, this time in dramatic fashion.

Last Wednesday, the Supreme Court heard arguments for Commonwealth of Puerto Rico v. Luis M. Sanchez Valle, et. al., a case that considers the constitutional issue of double jeopardy, or in other words, whether states can charge persons for a crime that they have already been charged with at the federal level.

Normally, the courts consider that only “separate sovereigns” can charge a person for the same crime, and because the states of Union are considered by the U.S. Constitution as “sovereigns” as well as the federal government, then both as separate jurisdictions can process persons for the same charges separately. However, in this specific case, the entity seeking to process someone for gun charges after federal prosecutors have already done so is the Commonwealth of Puerto Rico, bringing to the fore the age-old debate over power and sovereignty, and of course, the island’s political status.

The island’s lawyers argued that they are in fact “sovereign” and can charge the person for the crime. They stated that in 1952 the island’s political status changed from that of being a classic colony and territory of the United States to a “Commonwealth” that enjoys political autonomy including the passage of criminal law, and that this fact makes them a “sovereign” with the power to process crimes already prosecuted in federal courts. They claimed that Puerto Rico, upon instituting its own Constitution, enjoys the powers of sovereignty in this context.

However, lawyers for the defendant were joined by lawyers from the Obama administration in arguing, for the first time in a Supreme Court setting since the famous “insular cases” (which held that Puerto Rico, as an unincorporated territory, belongs to, but does not form a part of, the United States), that the archipelago is merely a territory of the United States subject to the authority of the U.S. Congress and as such is not a “sovereign” and has no power to process these charges. Their argument holds that since Congress authorized the Commonwealth status and reviewed and authorized Puerto Rico’s Constitution (and even eliminated sections of it), that the ultimate wielders of power over the island are not its residents but the U.S. Congress.

At one point in the proceedings, Justice Stephen Breyer directly stated that the outcome of this ruling has “enormous implications” because if the Court rules that Puerto Rico has sovereignty or if the Court rules that the island has none and is simply a powerless territory of the U.S., then it will lead to enormous debates within the United States, Puerto Rico and international arenas such as the United Nations—which was told in 1953 that the island was no longer a colony and removed the island from its list of non-self-governing territories allowing the U.S. to cease annually reporting on the progress of their colony.

As Justice Breyer puts it, “How did we tell the UN it wasn’t a colony? Why are we not reporting on this colony every year?”

The exchanges, which featured arguments from the Obama administration saying that the Commonwealth status of Puerto Rico could be changed unilaterally by an act of Congress and reiterating that Puerto Rico is basically a territory of the United States subject to the authority of Congress, provoked an eruption of heated debate and rhetoric on the island.

Read more at Latino Rebels

In New Supreme Court Amicus Brief, Obama Administration Questions Puerto Rico’s Commonwealth Status

While the mainstream English-language press continues to shed more light on Puerto Rico’s current economic crisis (see yet another New York Times editorial), a new Supreme Court amicus brief filed last week by the Obama administration has revisited the decades-long questions about the island’s current political relationship with the United States. In 1952, Puerto Rico officially became the Commonwealth of Puerto Rico, an entity with its own local constitution that is neither a state of the Union nor an independent nation. With the Supreme Court expected to hear January 13 oral arguments for Puerto Rico v. Sanchez Valle —a case which asks “whether the Commonwealth of Puerto Rico and the federal government are separate sovereigns for purposes of the Double Jeopardy Clause of the United States Constitution”— the Obama amicus brief repeats the long-held stances from previous administrations, arguing that Puerto Rico has never been separately sovereign and that Congress controls the fate of the island territory, home to about 3.5 million American citizens.

Here are some excerpts from the latest Supreme Court brief filed by the federal government:

What the Federal Government Says About Puerto Rico’s Current Political Status

Puerto Rico’s transition to local self-government was a significant development in its relationship with the United States, and it has yielded many benefits for Puerto Rico and the United States in a relationship of mutual respect. Congress has evinced no intention to revoke the local autonomy it has vested in the government of Puerto Rico. But as a constitutional matter, Puerto Rico remains a territory subject to Congress’s authority under the Territory Clause….Residents of Puerto Rico have voted several times on whether to seek a change in Puerto Rico’s constitutional status but have not sought statehood or independence from the United States.

The events of 1950-1952 did not transform Puerto Rico into a sovereign. Before 1950, Congress had progressively authorized self-government in Puerto Rico. As a further step, in 1950 Congress permitted the people of Puerto Rico to adopt a constitution, which Congress approved with revisions in 1952. Those events were of profound significance for the relationship between the United States and Puerto 8 Rico, but they did not alter Puerto Rico’s constitutional status as a U.S. territory. The United States did not cede its sovereignty over Puerto Rico by admitting it as a State or granting it independence. Rather, Congress authorized Puerto Rico to exercise governance over local affairs. That arrangement can be revised by Congress, and federal and Puerto Rico officials understood that Puerto Rico’s adoption of a constitution did not change its constitutional status. The ultimate source of sovereign power in Puerto Rico thus remains the United States.

Congress did not enter into an irrevocable “compact” with Puerto Rico, and as a constitutional matter, Congress cannot irrevocably cede sovereignty to Puerto Rico while it remains a U.S. territory. The designation of Puerto Rico as a “commonwealth” reflects Puerto Rico’s significant powers of self-government, but it does not denote a constitutional status. Puerto Rico’s autonomy over local affairs does not itself make Puerto Rico a sovereign.

Puerto Rico exercises significant local autonomy, with great benefit to its people and to the United States. But it remains a territory under the sovereignty of the United States and subject to the plenary authority of Congress.

1898 Military map of Puerto Rico (Wikimedia Commons)
1898 Military map of Puerto Rico (Wikimedia Commons)

Puerto Rico is a United States territory. It has been since 1898, when Spain ceded it to the United States…. Although Puerto Rico had significant autonomy before it became part of the United States, it was a Spanish colony, “under Spanish sovereignty….” And Puerto Rico did not become a sovereign when it came under United States jurisdiction, because it did so as a territory, not as a State…. (“The civil rights and political status of the native inhabitants of” Puerto Rico “shall be determined by the Congress.”). As a territory, Puerto Rico is subject to the “paramount” authority of Congress under the Territory Clause.

Puerto Rico’s transition to self-government did not change its constitutional status as a U.S. territory. The United States did not cede its sovereignty over Puerto Rico, and Puerto Rico did not become a State or an independent nation…. Rather, Congress, in an exercise of its authority under the Territory Clause, authorized Puerto Rico to pursue self-government, under which local officials would exercise power under a framework approved by Congress. Although Public Law 600 granted the people of Puerto Rico an unprecedented amount of control over internal affairs, it did not change Puerto Rico’s status under the U.S. Constitution.

Puerto Rico’s authority to issue its constitution emanated from Congress, and the constitution could not become effective without congressional approval….Congress did not accept the constitution as drafted. Instead, it deleted Section 20 of Article II of the proposed constitution (which included rights to obtain work; to food, clothing, housing and medical care; and to protection in sickness, old age or disability) and it prevented Puerto Rico from restoring those provisions later…. (requiring language specifying that any amendment or revision of the constitution must be consistent with, inter alia, Congress’s approving resolution); Congress’s oversight of Puerto Rico’s transition to local self-government is consistent with Puerto Rico’s status as a territory; it is not consistent with sovereignty.

Federal and Puerto Rico officials understood that Puerto Rico’s adoption of a constitution would not change its status under the federal Constitution.

Old San Juan (Via Flickr)
Old San Juan (Via Flickr)

How the Federal Government Views Puerto Rico’s Territorial Status

United States territories are not sovereigns. The Constitution affords no independent political status to territories but instead confirms that they are under the sovereignty of the United States and subject to the plenary authority of Congress.

This Court has consistently recognized that although Puerto Rico is locally self-governing, it remains a U.S. territory under the Constitution. For example, because Puerto Rico is a territory, it has “no sovereign authority” that could justify a border search under the Fourth Amendment…

The Executive Branch has recognized that Puerto Rico remains a U.S. territory subject to Congress’s authority. A 1994 Office of Legal Counsel opinion explained that Congress may not create a sovereign territory consistent with the Constitution, and since then, the Department of Justice has repeatedly stated the same view to Congress in connection with proposed legislation about Puerto Rico. Presidential task force reports in 2005, 2007, and 2011 have likewise confirmed that Puerto Rico is not a sovereign and that it could become one only if it were to attain statehood or become an independent nation. Those principles confirm that Puerto Rico is not a separate sovereign for purposes of the Double Jeopardy Clause.

Within the territory of the United States, the Constitution contemplates three sovereigns—the States, the United States, and the Indian Tribes. The Court has appropriately treated those entities, and only those entities, as domestic sovereigns under the Double Jeopardy Clause.

The Constitution neither recognizes nor affords independent sovereignty to territories but instead grants plenary authority to the United States: “The Congress shall have Power to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States….” As a constitutional matter, “[a]ll territory within the jurisdiction of the United States not included in any State must necessarily be governed by or under the authority of Congress” because territories are “political subdivisions of the outlying dominion of the United States.”

More fundamentally, Congress cannot irrevocably cede sovereignty to Puerto Rico while it remains a U.S. territory.

Petitioner observes…that Congress could irrevocably cede authority over Puerto Rico by allowing it to become a State or gain independence. That is true. But Congress cannot cede sovereignty while Puerto Rico remains a U.S. territory. While nothing suggests that Congress intends to revoke its authorization of self-government in Puerto Rico, its power to do so is incompatible with Puerto Rico’s characterization of itself as a sovereign.

In a series of reports issued over two decades, the Executive Branch has rejected the view that Puerto Rico is, or could become, a sovereign territory. A 1994 Office of Legal Counsel opinion concluded that Congress may not cede sovereignty to a U.S. territory, absent statehood or independence, because all land under the sovereignty of the United States that is not a State is subject to “the authority of Congress,” and Congress may not irrevocably delegate its authority over such land.

Although Puerto Rico exercises significant local authority, with great benefit to its people and to the United States, Puerto Rico remains a territory under our constitutional system. Puerto Rico does not possess sovereignty independent of the United States, and its prosecutions cannot invoke the dual sovereignty doctrine under the Double Jeopardy Clause.

The very popular SCOTUS blog offers a comprehensive analysis about the amicus brief, concluding that the Obama administration has “thus challenged the island commonwealth’s claim that since 1952 it has had the status of a self-governing entity with its people free to have their own legislature write the island’s own laws, including criminal laws.”

What the Puerto Rican Government Says

Over the weekend, the Puerto Rican government officially reacted to the amicus brief in a letter governor Alejandro García Padilla wrote to the United Nations Secretary-General Ban Ki-moon. Here is the entire García Padilla letter (h/t @jayfonsecapr):

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What the Puerto Rican Bar Association Says

Additionally, another brief submitted to the Supreme Court by the Puerto Rican Bar Association offers a different perspective from that of the Obama administration brief:

The Constitution is the supreme law of the Nation. But for more than three million U.S. citizens who live in Puerto Rico, only portions of our foundational document apply.

Pursuant to the Insular Cases —a series of decisions by this Court dating from 1901— Puerto Rico is undeserving of the full panoply of constitutional rights because the island is “inhabited by alien races, differing from us….” That holding reflects views from a bygone era. But while the views have long since disappeared from mainstream American thought, this Court’s racially motivated precedents remain in force, limiting the rights of millions of U.S. citizens living in the territories.

The complete 43-page brief from the Obama administration is below:

US Amicus Brief in Valle by Latino USA

This is the 35-page brief from the Puerto Rican Bar Association:

Insular Cases Amicus Brief

The Political Money Behind Puerto Rico’s Crisis

As Puerto Rico’s government anxiously awaits a decision from Congress as to whether the federal government will play a more direct role in solving the island’s fiscal problems, a report from the Center for Investigative Journalism (CIJ) this week examined the political money behind the debate, including how investment firms who would collect on the island’s $72 billion debt have donated to U.S. senators working on ways to resolve the crisis.

CIJ provided Latino USA a version of the English article it published on December 9. (A Spanish version was also published.) The CIJ reporters are Joel Cintrón Arbasetti, Laura Moscoso and Carla Minet. The following italicized text is a condensed version edited from CIJ’s report, with some revisions to reflect new developments, including measures from Republicans to offer the island $3 billion and establish a federal financial oversight board:

The investment firms waiting to collect on the $72 billion debt from Puerto Rico and its corporations have separated into two groups: those who oppose the restructuring of the debt or that the island be included in Chapter 9 of federal bankruptcy law, and those who support it. Democrats have said that they back H.R. 870 (introduced to the U.S. House of Representatives by Puerto Rico’s Resident Commissioner Pedro Pierluisi). That bill seeks to include Puerto Rico in Chapter 9 protection. Republicans, who control both houses of Congress, are opposed to Pierluisi’s measure, although a new measure to assist the island was introduced on December 9. That measure is called the Puerto Rico Assistance Act of 2015.

Politicians from both parties who are members of the U.S. Senate Finance Committee, which has to evaluate the Chapter 9 measure for Puerto Rico and held a hearing about this issue in September, have received $327,250 in donations from mutual fund and hedge fund companies that hold the island’s bonds, the Center for Investigative Journalism found out. The 14 Republicans committee members and 10 of the 12 Democrats members have received donations from companies between March 2014 and October 2015, according to Federal Electoral Commission documents.

On the other hand, the Senate Judiciary Committee, which held a Puerto Rico hearing last week, is made up of 11 Republicans and 9 Democrats. Seven Republicans and seven Democrats of that committee have received donations from investment firms that hold Puerto Rico government bonds. The political donations were made through investment firm employees or through political action committees.

Dashboard 1

The politician who has benefitted the most from donations made by investment firms holding Puerto Rico bonds was Chuck Schumer, the senior Democratic senator from New York and member of the Finance and Judiciary Committees. Schumer has expressed his support for Chapter 9 legislation. Between March 2014 and October 2015, he received $99,150 from these companies.

Among Schumer’s donors who hold Puerto Rico bonds are hedge and vulture funds firms York Capital, Fore Research & Management, Appaloosa Management, Fir Tree Capital, Davidson Kempner, Redwood Capital, Centerbridge Capital, Avenue Capital, Blue Mountain, Apollo Management and D.E. Shaw.

In addition, law firms hired by different bondholder groups in Puerto Rico have also made donations: Quinn Emanuel Urquhart & Sullivan, the firm hired by the Ad Hoc Group of bondholders of COFINA (Puerto Rico Sales Tax Financing Corporation); Davis Polk & Wardwell, hired by the Ad Hoc bondholders group of Puerto Rico’s GDB (Government Development Bank) and Gibson Dunn, hired by the bondholders of the AEE (Puerto Rico Electric Power Authority).

Schumer has also received donations from companies hired to lobby for or against including Puerto Rico in Chapter 9 legislation: Podesta Group, hired by the government of Puerto Rico to lobby in favor, and Venable LLP, hired by the investment firms to lobby against Puerto Rico.

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The Investment Company Institute of Mutual Funds, MassMutual Life Insurance and the Oppenheimer Fund have also made donations to Schumer. MassMutual and its subsidiary company, the Oppenheimer Fund, which according to Morningstar holds more than $4 billion in Puerto Rico bonds, are opposed to the restructuring of the debt. Besides donating to Schumer, MassMutual and the Oppenheimer Fund made donations to Iowa senator Chuck Grassley (R), who chairs the Judiciary Committee and is also a member of the Senate Finance Committee. Grassley has opposed including Puerto Rico in Chapter 9. This week, however, Grassley co-sponsored the Puerto Rico Assistance Act of 2015.

“There are political interests that have two sides. They push one side more than the other, but they cover themselves with the other side just in case as to not get too hot. This is the cockfighters’ strategy: I’ll bet on my rooster but I’ll bet on my opponent’s in case I lose. It’s a matter of political maturity and we should not only focus about people in favor and the others against. This is why I don’t have any problem saying that bankruptcy for Puerto Rico is impossible. Money is against it,” said Alfonso Giménez-Lucchetti, political and international issues commentator who has worked with Democrats.

Last July, Schumer introduced another legislative motion in the Senate to allow public corporations and municipalities in Puerto Rico to file Chapter 9, in a bill prepared jointly with Sen. Richard Blumenthal (CT), another Democrat and member of the Senate Judiciary Committee.

Schumer’s July proposal received support from Democrats but not from Republicans. At the last Judiciary Committee hearing about Puerto Rico, Schumer asked Congress to pay attention to financial situation on the island and said that the protection provided by Chapter 9 is a necessary measure but it is not enough to solve the island’s crisis.

“I am not surprised that Schumer has many donations from investment funds because he is a senator from New York and the majority of those funds have their operations base in New York. And Schumer is the first one who is promoting the Chapter 9 bill that I introduced in the House and is one of the co-authors in the Senate,” said Pierluisi, when asked about the influence of donations to politicians as related to Puerto Rico’s debt.

As for the various committee hearings this year in Washington, Pierliusi said that “the reason these hearings are held is that they have to acknowledge the issue or, at least, listen to it. They do not have a choice in the matter, the issue of Puerto Rico has generated so much press coverage, in Washington, in New York, in Europe, that they cannot ignore it… the least [members of Congress] have to do  become acquainted with, become informed.”

60 Plus, Mainstreet Bondholders and the Center for Individual Freedom

Another option available to influence politics is the creation of 501(c)(4) nonprofit organizations, which function as political pressure groups. An example of this type of organization is 60 Plus, which created the “Mainstreet Bondholders” project and has brought together a coalition of bondholders in Puerto Rico. The 60 Plus entity says it represents older people and is primarily financed by multi-millionaires David and Charles Koch.

This type of organization cannot influence political party issues, and they are not required to reveal who their contributors are. Mainstreet Bondholders lobby in the United States and in Puerto Rico against the restructuring of the government debt and are against Chapter 9 legislation. They have invested tens of thousands of dollars in Puerto Rico through media and the Internet.

CIJ asked 60 Plus vice president Matthew Kandrach who the organization’s contributors were and why it has paid for media ads related to the Puerto Rico debt. Kandrach refused to reveal the information.

In 2014, Citizens for Responsibility and Ethics filed a IRS complaint against 60 Plus and its president, Amy Noone Frederick. The complaint alleged that 60 Plus violated federal law by not disclosing the $11 million spent in political activities in 2010 and 2012. 

Another 501(c4) nonprofit organization running a campaign against Chapter 9 for Puerto Rico is the Center for Individual Freedom (CIF), a conservative group that set aside $1.9 million in 2012 for media campaigns against Democratic politicians.  This year, CIF has spent $26,000 in congressional lobbying, which included opposing Chapter 9 for Puerto Rico.

“At the very least, there should be a requirement in the law where contributors have to identify themselves. I believe, that as part of a democracy—people and the press should have access to their names, addresses and, if they are corporations, we need to know which corporations are making donations, as well as individual donors. I am in favor that there should be more transparency in the electoral process and in contributions,” Pierluisi told CIJ.

Chapter 9 Lobbying

The lobbying in the two measures submitted in Congress to extend Chapter 9 to Puerto Rico add up to more than $1,377,800 against it and $1,010,000 in favor, for the first three quarters in 2015. These amounts could be larger, since in some cases, the lobbying reports in the House of Representatives and the Senate several bills can be included under the same budget and the amount assigned to each measure is not specified.

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The efforts in favor of the measure are channeled through the Podesta Group, Smith Dawson & Andrews, The Roth Group and Primer Policy. The Government of Puerto Rico has invested a total of $300,000 in 2015. This total includes lobbying efforts of other issues not related to Chapter 9. Another player that lobbies in favor of Chapter 9 is the Fonalledas Company. It has spent $490,000 in the first three quarters of 2015 lobbying for Chapter 9 through the East Por LLC and Akin Gump firms.

Hedge funds companies Blue Mountain, Knighthead, Marathon Asset and Angelo Gordon & Co. have lobbied against the Chapter 9 measure, as well as insurance company Ambac Financial Group, CIF and the National Public Finance Guarantee Corp.

“The lobbyist group is an industry that thrives on those interests. If you show me opposition, I will lobby against you. I know that you are going to win but I make money lobbying against you. This is barbaric capitalism. To lobby against something that is impossible to defeat is part of the business. The lobbyists know this, but provide hope that we can make you win even though they know it is not going to happen. This is the game of –in parenthesis– American democracy,” stated Giménez-Lucchetti.

But does that strategy work on politicians?

“Not much. When they are clearly in favor of one party, well, no,” Giménez-Lucchetti concluded.

Featured image: Puerto Rico’s Capitol building (Wikimedia Commons)

Puerto Rico’s Democracy Gap

Puerto Rico’s current fiscal crisis is unprecedented, drawing worldwide attention to the island’s unique political relationship with the United States. The island is self-governed and receives generous federal funding, but on the other hand does not have voting representation in Congress and is subjugated to U.S. federal law. Island leaders have capitalized on the heightened attention to promote their particular status preferences, be it statehood, increased autonomy or independence. Nevertheless, there are crucial internal deficiencies that if gone uncorrected would result in further chaos regardless of whether Puerto Rico were to become a state or not.

Puerto Rico has a monstrous and bogged-down government apparatus. All of the island’s 1,055 schools are administered by a single agency, with a non-existent role of local governments when compared to other states and countries. The truth of the matter is that the distribution of power within the island is highly centralized, inefficient and frankly undemocratic.

State law also creates a cookie-cutter model for each and every of the island’s 78 city governments. The state establishes each mayor’s pay scale, and even establishes a minimum of nine departments that each mayorship must have. Each and every expenditure carried out by the city must be processed through a state agency. Local property taxes are capped by the state and collected by a centralized agency, who in turn keeps its cut and distributes funding per its own formula. City Councils for most municipalities are composed of 14 members, each hand-picked by the mayoral candidates and elected at large on the mayor’s ticket, as opposed to separate city council districts.

77% of all public revenues are kept by the state. Neither can cities go directly to the bond market to finance their public works and long-term investments, instead having to beg the state for a chunk of whatever bonds the central government bank can get ahold of. If the state has bad credit —which it does— then bond dollars do not trickle down to the local level. Most importantly, local governments cannot roll out basic public expenditures such as trash collection or payroll without state transfers or handouts, which at times are distributed discriminately.

Mayors are heavily partisan, compared to other jurisdictions that at times even prohibit mayoral candidates from running for a particular party. Despite Puerto Rican mayors having absolutely no say in the status question, the pro-statehood and pro-autonomy parties fight over mayorships each election cycle. The mayors thus dangle between caudillo-style politics and the embarrassingly weak local government. Clientelism ensues.

Citizens are rarely consulted, with all elected post up for grabs simultaneously every four years. Occasionally highly political issues are submitted to referendums, but never matters regarding public administration or finance. Bonds and tax proposals are not decided at the polls, but by politicians in San Juan and central bank bureaucrats. Billions of dollars are borrowed each term to divide among legislative pork and big dollar projects that often generate long-term losses or are left incomplete. Mayors and legislators have traditionally won elections promising large public works such as trains, convention centers and sports complexes. Meanwhile, lampposts lack bulbs, community centers paint, and park swing sets broken.

The statewide public utility company is grossly inefficient, with electric costs being the highest in the U.S., after Hawaii. The authority has long been mired by highly paid executives with luxurious bonuses, bureaucracy and political favoritism among its ranks. Nevertheless, legislation recently proposed by Puerto Rico’s executive branch suggests decreasing public participation on the board, lowering the number of elected members from three to two. Meanwhile, many local governments in other jurisdictions stateside and internationally use public utility cooperatives as opposed to centralized authorities. Island leaders are considering privatization before democratization.

It does not stop there: the tendency to centralize even further is predominant, as seen in a 2014 tax code amendment that took away one third of cities’ sales tax revenue and designated into a state legislature pork barrel fund. Though the state has experimented with the delegation of certain functions to local governments, such as school transportation and road maintenance, the central government is still hesitant to let go of its power and decentralize further responsibilities.

The lack of democracy and local governments in Puerto Rico is a subject which has gone largely ignored in previous months. As interest spikes with recent congressional talks on Puerto Rico’s fiscal situation, numerous bills have been filed with the intention to create a President-appointed federal fiscal control board to oversee the island’s finances. The tendency to seek even more top-down oversight, further isolates the already disgruntled electorate from their leaders. The result is a democracy in Puerto Rico that only exists one day each four years, with politicians running amok in between.

Featured image: San Juan, Puerto Rico (Flickr)

The views expressed in the op-ed are the author’s own opinions and do not necessarily reflect the editorial views of Latino USA or Futuro Media Group.

The ‘Must Read’ Pieces About Puerto Rico’s Crisis

If you have been following what is happening in Puerto Rico the last few months (or maybe you haven’t), I thought I would provide with a series of recent links and MUST READ pieces that will give you a better perspective on the current economic crisis down on the island. Curating this list of recent op-eds, news articles and even a few videos will hopefully leave you a bit more informed about Puerto Rico—my place of birth, the place I was raised (with a future stop in the Bronx) and a topic I have been studying/covering as a student/blogger/journalist since the late 1980s.

puerto rico flag

So what is the latest from San Juan? Here is what Bloomberg reported this past Friday:

Puerto Rico said it won’t make a bond payment due Saturday, putting the commonwealth on a path to default and promising to initiate a clash with creditors as it seeks to renegotiate its $72 billion of debt.

The government doesn’t have the money for the $58 million of principal and interest due on Public Finance Corp. bonds, Victor Suarez, the chief of staff for Governor Alejandro Garcia Padilla said during a press conference Friday in San Juan.

“We cannot make the payment tomorrow because we do not have the funds available,” Suarez told reporters. “This payment will be made as we address how to restructure the government’s debt prospectively.”

In short, Puerto Rico cannot pay its debt. What this means is still open for discussion, but that is where we are at right now. (FYI: Of all the U.S. English-language news outlets out there, Bloomberg’s coverage has been pretty stellar in the area of financial reporting. If you go to this link, you will see almost daily stories about Puerto Rico. So, to get a strong sense of the financial implications of this crisis, read Bloomberg or follow @business on Twitter.)

Puerto Rico Struggles With Impending Debt Crisis

Right now, a lot is being written and produced by U.S. English-language media about the crisis. Most of the stories are very informative, like this piece in last week’s Guardian, which breaks down what the hedge funds involved in Puerto Rico are recommending for the island. These are the same hedge funds who have been visiting the island and meeting with elected leaders, former politicians and government officials for a while now. Other good stories include a July 3 news article in The New York Times, a front-page Times article from June 28 and a July 17 article from AJ Vicens of Mother Jones. In addition, I just saw this digital video from NBC News, which gives you a Puerto Rico 101 take on it all.

Puerto Rico is indeed getting more coverage and attention, especially in light of the 2016 presidential race. The political press now understands that Puerto Rican voters in Florida matter. Just yesterday, Martin O’Malley became the first Democratic presidential candidate to visit the island, and even though Republican candidate Jeb Bush was technically not a candidate when he visited Puerto Rico in April, he was the first candidate from either party to say that the island’s public agencies should be allowed to seek bankruptcy. Last week, Bush said this to Telemundo’s José Díaz-Balart about Puerto Rico: “I believe that since [Puerto Rico is] a territory for U.S. citizens, they should receive the respect first for self-determination, and then we should assist them as much as we can in their economic crisis.”

Which leads me to my main point and why I decided to write this post in the first place. For the best information about how to understand the crisis in Puerto Rico, read what actual Puerto Ricans are writing and saying, too. When I tweeted this in early July, I meant it and I still do:

So, if I could choose five essential pieces that you should read right now, here they are. (One thing to note: I am presenting these five pieces because they offer a variety of opinions about the topic. This necessarily doesn’t imply that I am fully endorsing all the views of the writers here, just that I do think that these five links will give you a very good picture of the situation and the challenges involved.)

Puerto Rico’s Symbolic Power by Maritza Stanchich: This July 31 piece published in HuffPost Politics is one comprehensive op-ed. (Full disclosure: Maritza and I are friends). This well-researched and well-argued piece rests on the one very simple question that Maritza poses near the end of her essay: “Now that Puerto Rico is no longer important as a capitalist showcase and U.S. military and intelligence outpost of the Cold War era, are its U.S. citizens expendable?” 

Statehood Is the Only Antidote for What Ails Puerto Rico by Pedro Pierluisi: The island’s Resident Commissioner (a non-voting member of the U.S. House of Representatives and the leader of Puerto Rico’s statehood party) wrote a July 10 op-ed in the Times where he makes this an issue of equality: “Puerto Rico’s illness is a chronic condition. The unemployment rate, poverty rate and median household income have always been far worse than any state’s. The main cause is inequality. Residents cannot vote for president or senators, and have one nonvoting delegate in the House. It is disheartening to see many self-styled progressives, who otherwise speak eloquently about the importance of voting rights, go silent on this subject when it comes to Puerto Rico.”

Puerto Rico in crisis: weighed down by $73bn debt as unemployment hits 14% by Ed Morales: Morales, who has written a few pieces this summer for The Guardian about Puerto Rico, filed this June 28 article from San Juan. Here is a part of his central thesis: “The current debt crisis is largely assumed to have resulted from years of irresponsible borrowing by the Puerto Rican government, as if it were a consumer using one credit card to pay off another. But the US government deserves a considerable share of the blame. The Jones Act that gave Puerto Ricans US citizenship in 1917 in effect made Puerto Rico a US dependent. Puerto Rico’s government cannot make trade agreements with other countries. No trading ships can dock in its ports without flying the American flag.”

What a federal financial control board means to Puerto Rico by Gretchen Sierra-Zorita: The Hill published this op-ed on July 25 (yes, Gretchen is a friend, too and also contributed this earlier article for Latino Rebels). It focuses on what few are talking about: what if the federal government formed a control board for Puerto Rico? The article basically says that politicians must begin to put Puerto Rico first: “But the most important condition for Puerto Rico to succeed is for all its elected officials to show commitment to economic reform even if means losing the next election. This is what Washington and Wall Street expect. This is what the people of Puerto Rico deserve.”

What Exactly Is Going on in Puerto Rico? by Luis Gallardo: This July 21 essay, published in La Respuesta, includes detailed commentary and analysis. I even quoted Gallardo in my own July 23 Guardian op-ed: “Government inefficiencies, paternalist politics, clientelism, and short-term politicking are the primary causes of Puerto Rico’s public debt; characteristics that would persist no matter the island’s political status.” 

If you want to get into deeper historical conversations and discussions about this topic, I will also share the two recent media appearances I made about Puerto Rico. The first one is of me rambling on for 20+ minutes on Houston’s Pacifica Radio (yes, I did say Spanish Civil War and not Spanish American War at one point) from about two weeks ago:

Last Thursday, I was also part of a Nerding Out show on MSNBC Shift:

In addition, Rep. Luis Gutiérrez spoke twice on the floor of Congress last week about the issue. This is the first video.

This is the second one.

Let me know what you think by tweeting me @julito77.

Are Puerto Rican Veterans Neglected?

Maria Hinojosa talks to Congressman Pedro Pierluisi, Puerto Rico’s Resident Commissioner and official delegate to the U.S. Congress, about the conditions for Puerto Rican veterans on the island and the recent federal probes into Puerto Rico’s Veterans Affairs health system.

 

Pedro-Pierluisi-cropped

Pedro R. Pierluisi has been Puerto Rico’s Resident Commissioner in Washington since January 2009.  A member of the national Democratic Party and the local pro-statehood New Progressive Party, he is the sole representative in Congress of the 3.6 million American citizens who reside on the Island. Born in San Juan, Congressman Pierluisi is an attorney with 24 years of legal experience in the public and private sector. He is a graduate of Tulane University and The George Washington University Law School. He began his career in Washington, working for six years as a litigator at an internationally-recognized law firm. From 1993 to 1996, Pierluisi served as Attorney General of Puerto Rico.

 

Calle 13: Accidental Revolutionary

Rene Perez Joglár, lyricist and frontman for Calle 13, didn’t mean to become a revolutionary icon for Latin America’s youth.

“They try to put stamps on you,” Perez tells Latino USA in a one-on-one interview. “It’s more simple than that. It’s just a normal guy, writing about the things he sees around him.”

Calle 13 began life as a potty-mouthed rap group from Puerto Rico. They gained attention for their alternative take on reggaeton, with a style characterized by over-the-top sexual humor and smart punch lines. Over years and albums, their music became more serious and socially engaged, addressing topics like poverty, migration and social justice in Latin America. Musically, they absorbed influences from traditional and folk sounds from the region.

Now, nine years after their debut, Calle 13 has released their most introspective album yet, titled Multi_Viral. Featuring guest spots from leftist icons Eduardo Galeano, Julian Assange and Silvio Rodriguez, the album touches on a lot of “big ideas”: on the resilience of the human spirit in “El Aguante”, on the ephemeral nature of life and death in “La Vida (Respira el Momento)” and on the power of ideas itself in “Así de Grandes Son las Ideas.”

René Perez sits down with Maria Hinojosa for a an intimate interview about his new album.

Below, listen to the songs we played in this segment:

“Adentro”

“El Aguante”

“Así de Grandes Son las Ideas”

 

 

ECUADOR-US-CHEVRON-POLLUTION-CALLE 13

Calle 13 is a Puerto Rican rap/reggaeton band formed by René Pérez Joglar (“Residente”) and Eduardo José Cabra Martínez (“Visitante”).

Photo by Juan Cevallos – AFP/Getty Images.

 

 

 

 

 

Photo by Jason Kempin/Getty Images

 

 

 

 

The Other Border: Puerto Rico’s Seas

There’s no fence to divide it. There are no bridges to cross or checkpoints to be checked at. There’s no desert to lose oneself in.

The other border is a 60 mile stretch of ocean between the island of Hispaniola – shared by the Dominican Republic and Haiti – and the US commonwealth of Puerto Rico, known as the Mona Passage.

The Mona Passage is the main route for unauthorized immigration to Puerto Rico, mostly from the Dominican Republic. The migrants are brought over by smugglers in small wooden boats called yolas. Each boat can be packed with 100 people or more.

US Customs and Border Protection aid a group of migrants (Photo: US Customs and Border Protection).
Undocumented migrants arrive in Puerto Rico (Photo: US Customs and Border Protection).

 

 “THE MONA IS TREACHEROUS”

“The Mona is treacherous,” says US Coast Guard Captain Drew Pearson, the man in charge of patrolling the Mona. “It can be nearly calm one minute, and then have 8-10 foot seas the next minute. And that can lead to a boat capsizing or people being ejected into the water.”

For migrants, the chance to dramatically better their lives makes the journey worth the high risk. Puerto Rico is poorer than Mississippi, the poorest state, but it’s still almost five times wealthier than the Dominican Republic.

DIFFICULT DECISIONS

Before immigrating to Puerto Rico 10 years ago, domestic worker Altagracia Pablo had been living in deep poverty in a rural region of the Dominican Republic. “We didn’t even have a house – it collapsed in a storm, and we were sleeping wherever people would let us,” she says.

She made the difficult decision to leave her two daughters and look for a better life in Puerto Rico. She borrowed $1500 to pay the smugglers. They told her to pack a single change of clothes and brought her to Miches, a town on the eastern edge of the island.

The journey took 28 hours. She remembers vomiting over and over again. And there were other problems.

“Water leaked into the gas supply, there were problems with the motor. There were fights between passengers with knives and bottles,” she says. “But in the end, thank god, we made it safely.”

US Customs and Border Protection aid a group of migrants (Photo: US Customs and Border Protection).
US Customs and Border Protection aid a group of migrants (Photo: US Customs and Border Protection).

 

KNOCKING ON THE DOOR

Altagracia arrived undetected by the authorities, but had she been caught, she might have ended up at the Border Patrol station in Aguadilla, a few hours west of San Juan, where migrants who are apprehended are taken to get processed.

“The best analogy is a door,” says Jeffery Quiñones, a communications officer for US Customs and Border Protection.  “You have to knock on the door and say what your purpose is. If you come to a place that’s not the door, it makes it a crime punishable with immigration law.”

A group of Haitian migrants, just arrived from the sea, await processing at the Border Patrol station. (Photo: Marlon Bishop)
A group of Haitian migrants, just arrived from the sea, await processing at the Border Patrol station. (Photo: Marlon Bishop)

 

THE DEPORTED

While I’m at the station, a new group of migrants is brought in, just picked up from the sea.

One of them, a Dominican man in handcuffs I’ll call Pedro, had lived undocumented in Puerto Rico for 11 years, working as a welder. One day while he was playing dominoes outside, he was picked up by immigration agents and sent back to the DR.

Since being deported, he’s tried to return to Puerto Rico five times. Each time the boat turned back due to ad weather. Finally, this time he made it across, but his vessel was caught by the Coast Guard. As a repeat migrant, he’ll be prosecuted, and could serve jail time.

“TWO SIDES OF THE SAME COIN”

Pedro shrugged off his misfortune. “You take a risk knowing you will either win or lose. Either way – amen. They’re two sides of the same coin,” he says.

 Most of the other migrants at the station aren’t Dominican, however, they’re Haitian. They look scared and exhausted as they wolf down plates of rice and beans.

Their presence reflects the changes in immigration patterns to Puerto Rico. Recently, fewer Dominicans are arriving as the Dominican economy improves. At the same time, there’s been an explosion in Haitian migrants. In 2006, only two Haitians were apprehended by Border Patrol. Last year, the number was 600.

WET FOOT, DRY FOOT

The reason so many Haitians are crossing the Mona is what amounts to a de-facto “wet foot, dry foot” policy. When Haitian migrants reach American soil, including the tiny outlying islands that are part of Puerto Rico, US immigration authorities allow them to begin asylum proceedings based on the requirement of “credible fear” of persecution in Haiti.

Those asylum proceedings can take years to resolve, and having an open case allows you to stay and, in many cases, work in the US in the meantime. But if the migrants are caught at sea, even within American waters, they are turned back to Haiti.

As word spreads in Haiti that migrants arriving in Puerto Rico are being allowed to stay, more and more are showing up. The possibility of asylum has created a cruel reality: you’re allowed to live in the United States, if you can make it here alive.

 

Photo 5: The rectory at Father Olin Pierre’s church in San Juan has become a makeshift refugee center for Haitian migrants. (Photo: Marlon Bishop)
Photo 5: The rectory at Father Olin Pierre’s church in San Juan has become a makeshift refugee center for Haitian migrants. (Photo: Marlon Bishop)

 

HELPING THE WEAK

The Haitians who do make it find help from Father Olin Pierre, a Haitian priest in San Juan.

“It’s a main role of a priest to help the weak,” says Father Olin. “And, they’re my people.”

Puerto Rico has no system in place for dealing with Haitian arrivals, so Father Olin has taken up the slack and turned his church into a makeshift refugee camp. Now, whenever a new Haitian boat comes in, authorities take the migrants straight here.

Cots are laid out all along the floor of the rectory. Women cook a meal of seafood as the guys watch a DVD on a portable player. One of them is 27-year-old William Joseph, who witnessed tragedy in the crossing.

“The trip was not easy,” says Joseph. The waters were rough as they were approaching land, and the Dominican smuggler forced his passengers out of the boat so he could head back quickly. They would have to swim the rest of the way. “But some of us didn’t know how to swim. I tried to save some of them too but… in the end we have five people missing.”

“They had already arrived,” says Father Olin, shaking his head. “They had a bright future ahead of them.” He trails off.

“IT’S LIKE PLAYING THE LOTTERY”

Five of Joseph’s companions drowned. Nobody knows how many migrant bodies lie at the bottom of the Mona Passage. Estimates vary – from single digits to the thousands.

“It’s like playing the lottery,” says Father Olin. For the winners who make it to Puerto Rico, and on to Olin’s church, life in the continental US is so close they can touch it. Olin raises money from his congregation to buy them tickets to Miami or New York, where family members are waiting for them. Almost no one stays in Puerto Rico.

Meanwhile, Dominican immigrants, who are generally not granted the “credible fear” status needed to start asylum proceedings, can’t just zip of to the US. Many do try, however. Flights to the mainland are considered domestic, so Dominican migrants just need a fake ID to get on a plane. But, it’s risky. Most choose to remain and work in Puerto Rico, even if they are undocumented. Journalist Carmelo Ruiz says the island completely relies on the Dominican community to function.

“It’s the same dynamic with immigrants in the United States,” says Ruiz. “They do a lot of the worst work and if they left all of a sudden – who’s going to fix my car? Who’s going to mow my lawn? Who’s going to work in construction? I don’t know what would happen but it probably wouldn’t be good.”

 ONCE YOU’VE MADE IT

However, immigration in Puerto Rico doesn’t seem to stir up as much controversy as it does on the mainland.

“Illegal immigration is not necessarily an issue of public concern,” says Jeffery Quiñones, from US Customs and Border Patrol. “There’s no sense that there’s a conflict about their presence in the country.”

Kelvis Polo, the owner of a discount clothing shop in San Juan agrees – the presence of the Dominican just isn’t a big deal.

“Everywhere, you’ll find a few people who are racist,” he says. “But you don’t really see much of that here. You see it more in the States.”

Photo 2: Dominican immigrant Altagracia Pablo poses with her flag. She left dire poverty and immigrated to Puerto Rico 10 years ago. (Photo: Marlon Bishop)
Dominican immigrant Altagracia Pablo poses with her flag. She left dire poverty and immigrated to Puerto Rico 10 years ago. (Photo: Marlon Bishop)

 

“PUERTO RICO, I LOVE YOU”

Still, others I spoke to paint a more nuanced picture – Dominicans are the butts of a lot of jokes, and you might hear Puerto Ricans complaining about Dominican moving into the neighborhood. And, with no legal recourse to turn to, labor abuses are common.

“They treat you differently,” says domestic worker Altagracia Pablo. “You can’t complain about anything.

She says employers sometimes try to take advantage of her and make her do more work than she’s paid for. That kind of unfair treatment can make her pine for home. But overall, she says, life in Puerto Rico has been good to her.

“My dream isn’t to go back to the Dominican Republic. It’s to pledge allegiance to this flag, to the United States,” she says. “Truthfully, Puerto Rico, I love you.”

UPDATE 3/21/14:

A previous version of this article stated that Haitian migrants are allowed to stay in Puerto Rico because of a TPS (Temporary Protected Status) for Haiti, as our reporter was originally told by US Customs and Border Protection officials in Puerto Rico. Haitians who have resided in the US continuously since 2011 are still permitted to stay in the US under TPS through 2016, but new arrivals are not granted TPS.

However, Haitians arriving in Puerto Rico by boat are currently being allowed to stay with a “notice to appear” before an immigration court on the US mainland and request asylum status. This occurs if the migrant claims “credible fear” of returning to their country of origin.

The de facto situation on the ground in Puerto Rico is that Haitian migrants are being allowed to stay, while Dominican migrants caught on land or sea are removed to the Dominican Republic.

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Marlon Bishop HeadshotMarlon Bishop is a radio producer and journalist with a focus on Latin America, New York City, music and the arts. He got his start in radio producing long-form documentaries on Latin music history for the public radio program Afropop Worldwide. After a stint reporting for the culture desk at New York Public Radio (WNYC), Marlon spent several years writing for MTV Iggy, MTV”s portal for global music and pop culture. Marlon has also lived and traveled all over Latin America, reporting stories as a freelancer for NPR, Studio 360, The World, the Village Voice, Billboard and Fusion, among other outlets. He is currently a staff Producer for Latino USA.