Free Puerto Rico, America’s Colony
PUERTO RICO has begun to default
on its bond payments, for the first time since it became part of the
United States, 117 years ago. If it fails to make interest payments on
its $72 billion public debt, pension funds across the United States may
be unable to meet their payment obligations. But if it were allowed to
file for Chapter 9 bankruptcy protection, as cities and counties have
done, every state will want that right.
For
this reason, the Puerto Rico crisis is a national financial crisis, one
that neither President Obama nor Congress has taken steps to resolve.
Even a simple debt restructuring — in the unlikely event bondholders
agreed to it — would not solve the mess. With a population of 3.6
million, every person on the island would need to pay $1,400 a year — 9
percent of Puerto Rico’s per-capita income — just to cover this year’s $5 billion principal and interest payments on the debt.
The
problem is not Puerto Rico, or even the vulture funds that have refused
to renegotiate the island’s debts: It’s the rigged capitalism the
United States has forced on its Caribbean colony.
The
United States “liberated” Puerto Rico from Spain in 1898. The following
year, Hurricane San Ciriaco destroyed millions of dollars in property
and nearly the entire year’s coffee crop. Banks swept in, buying land at
a steep discount.
Even
worse, in 1901, property taxes on every remaining farmer in Puerto Rico
were raised. Farmers were forced to borrow from American banks at
usurious rates; many lost their land to foreclosure. By 1930, 34 percent
of land in use was managed on behalf of absentee owners.
A
once-diversified island harvest (coffee, tobacco, sugar and fruit) was
turned into a one-crop economy, dependent on sugar. By 1930, a
collection of syndicates controlled all of the island’s sugar farms.
With
no money, crops or land, Puerto Ricans left for cities like San Juan,
Ponce and Mayagüez. The Legislature enacted a minimum-wage law, but the
United States Supreme Court did not recognize the constitutionality of
the law until decades later.
In
the 1950s, the United States began giving companies tax exemptions to
produce cheap products like bras and razors on the island. But once the
corporations found cheaper labor in Asia, the factories disappeared.
The
most unfair law of all is the Merchant Marine Act of 1920, also known
as the Jones Act, which requires that every product that enters or
leaves Puerto Rico — cars from Japan, engines from Germany, food from
South America, medicine from Canada — must be carried on a United States
ship.
A
foreign-flagged vessel may directly enter Puerto Rico — but only after
paying taxes, customs and import fees that often double the price of the
goods it carries.
This
is not a business model. It is a shakedown, a form of legalized
price-fixing, the maritime version of a protection racket. From 1970
through 2010, the Jones Act cost Puerto Rico $29 billion.
If
the Jones Act did not exist, neither would the island’s debt, and tens
of thousands of maritime jobs would shift to the island from
Jacksonville, Fla., where the giant carriers Crowley, Horizon Lines and
Sea Star Line conduct their offloading and reloading for shipment to
Puerto Rico.
Puerto Rico has more Walgreens and Walmarts per square mile than any other part of the country. It’s a dumping ground for cheap American-made exports.
Car
prices are typically $6,000 higher in Puerto Rico than in mainland
United States. Some products, like unprocessed food items, cost twice as
much as on the mainland. The cost of living is higher in Puerto Rico,
even though per-capita income is less than half that of Mississippi, the poorest state.
When a set of tax exemptions expired in 2006, pharmaceutical companies abandoned the island, the final blow to its manufacturing sector. Without a real private sector, the government became the island’s largest employer.
The
island’s Legislature has done what creditors and bond rating agencies
have demanded: Since 2010, it has laid off workers; raised prices for
water, gasoline and electricity; increased property, sales and
small-business taxes; cut public pensions and health benefits; raised
the retirement age; and closed schools.
No
surprise that over the past 10 years, nearly 400,000 Puerto Ricans have
moved, many to Central Florida. With a shrinking tax base, Puerto
Ricans are unable to meet this burden. Gov. Alejandro García Padilla
calls it a “death spiral.”
What
can be done? The Jones Act must be repealed, right away. Congress will
have to overcome opposition from lobbyists for the Jacksonville-based
carrier companies that control trade to the island.
All
import fees levied on foreign-flagged vessels should be paid into the
Puerto Rican Treasury, not the merchant marine. Any tax abatement deals
for corporations should require the reinvestment of a stipulated
percentage of profits into Puerto Rican infrastructure and industrial
development. Puerto Rico must be permitted to develop its own shipping
industry and, eventually, negotiate its own international trade
agreements.
Independence
is the only solution, for Puerto Rico and the United States. After 117
years, many Puerto Ricans are victims of Stockholm syndrome, fearful of
losing the “safety net” of United States benefits. But it’s clear that
the safety net is a chimera. A gradual transition to independence (like
that of the Philippines in 1946) would allow both island and mainland to
adjust to a sovereign and self-sustaining Republic of Puerto Rico. It
is the only way to end this colonial tragedy.
Nelson A. Denis, a former
New York State assemblyman, is the author of “War Against All Puerto
Ricans: Revolution and Terror in America’s Colony.”
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