Puerto Rico’s Double Devastation: Hurricanes And Austerity

Puerto Rico could not have prepared for natural disasters with failing infrastructure and privatization push.
09/26/2017 04:51 pm ET

By now, you have seen the images of devastation. Flooded towns, infrastructure damaged beyond repair, people wading through water past their homes or on their roofs, waiting for help to arrive. The catastrophic damage in Puerto Rico left by Hurricane Maria, preceded only days before by the damage caused by Hurricane Irma, is perhaps the worst in a century, and will have reverberating effects for years to come. But there was a disaster that struck the island even before this destructive hurricane season arrived, and it was the economic crisis and resulting deep austerity measures that have left the island nation incapable of preparing itself for these (un)natural disasters. 

Puerto Rico could not have prepared for natural disasters with failing infrastructure and privatization push.

The Autoridad de Energia Electrica, or Electric Authority (PREPA, as it’s commonly known in English), became a bankrupt public good and stopped maintaining and tending to its services, increasing the number of black-outs in pockets throughout the island prior to these hurricanes. The debt crisis, of which PREPA plays a critical role, crippled the agency from being able to afford upgrades and maintenance to its power systems. Governor Ricardo Roselló warned that recovery of basic services, like electricity, could take 4-6 months, and that was prior to Hurricane Maria, as a result of debt repayment.  Rollbacks to public services or maintenance, like pruning trees, were also instituted as a part of austerity, leading to more fallen branches on electric wires, knocking out power more frequently.

As a result of the bankrupt power authority’s inability to provide consistent customer service due to the burden of the debt its servicing instead, many feel their calls to privatize PREPA will now be heard.  This is a familiar call from the privatization playbook: defund public services; when they are unable to meet public need due to being stripped of resources, label them inefficient and ineffective and insist upon a “public-private partnership,” also known as outsourcing essential government services to private contractors for profit.  The private administrator could raise rates, which in a poor nation like Puerto Rico where electricity bills for homes are the second highest in the United States, could be detrimental to economic growth, limit spending and add seriously to the economic hardship faced by many already on the island. 

And yet privatization seems exactly what the federal fiscal control board - created by PROMESA (the Puerto Rico Oversight, Management and Economic Stability Act) passed by Congress last year - has in mind. The board, which is widely viewed as unpopular and an unwelcome assertion of congressional authority over the island’s autonomy, wrote that their vote to reject a restructuring deal this summer was not because they don’t only believe that PREPA’s debt shouldn’t be restructured, but that its operations should be as well. Privatization doesn’t mean a more efficient or well-run commodity that provides an essential service; in fact, PREPA operated at a loss to Puerto Rico (but at a profit for Wall Street).  Even with the restructuring proposal, Puerto Ricans would still have been responsible for 90% of the debt service for PREPA, which would absorb every dollar of economic growth for the next 30 years.  That means that as the economy of Puerto Rico grows, as at some point it is expected to, all additional income would be sent to bankers and investors in Manhattan and elsewhere and would not be re-invested in the Puerto Rican economy.

While creditors, and perhaps the government, are waiting for existing public agencies like PREPA to fail in order to insist upon privatization, mega-projects like gas fracking proposals that would be “the largest public/private energy project ever attempted in Puerto Rico” continue to be considered, despite deep public opposition.  In 2012, a similar gas pipeline project was widely rejected by the citizens of the island given the extreme disruptions to their communities and environment.   Despite that, former Governor Luis Fortuño, who was Governor at the time the pipeline plan failed, is now lobbying the local government to push a new one through.  This summer, “public-private partnership” initiatives were approved and appropriated millions of dollars with little to no public feedback.  That is likely because when the Puerto Rican legislature took up discussion of the public budget, they closed the doors and refused public access to the “house of the people” when discussing and pushing through projects that have a serious financial impact on the public budget and economic and environmental impact on the lives of 3.5 million Puerto Rican citizens.  There was no public debate or opportunity for public comment, as legislation was at times introduced and approved within 24 hours with no advance notice and no public hearings.  In the House of Representatives, doors were shut to the public as they were discussing the Senate-approved bill to eliminate the widely supported Commission to Audit the Public Debt. The lack of transparency in assigning public funds and the discriminatory impact on how vulnerable communities in particular are devastated by austerity may become evident again as Puerto Rico awaits disaster relief funds, and communities await to see how those funds will be distributed. 

Austerity and natural disasters: a recipe for permanent devastation

The policy of austerity is not new, nor is the United States’ sinister influence in shaping Puerto Rico’s economy.  Our system of law recognizes and prioritizes property interests over human rights, which is how the claims of hedge funds have taken precedence over the adequate funding of the public budget.  In 1952 when Puerto Rico was drafting its constitution, which created the legal fiction of the “Free Associated State,” the United States did not hesitate to assert its colonial influence to ensure that the rights afforded the citizens of Puerto Rico did not provide greater protections than that of the federal Constitution, nor interfere with the rights of U.S. corporations.  Broader protections beyond the ones included that recognize certain economic and social rights, such as the ones enshrined in the International Covenant on Social and Economic Rights, were originally included, only to be removed at the insistence of the United States and replaced instead with the novel constitutional provision that requires payment of general obligation bonds to private creditors over funding the public budget – the problematic pretext for many of the creditors’ on-going litigation against Puerto Rico.

The reality is that the austerity measures imposed, along with the underlying economic crisis, have only deepened with the federal fiscal control board.  The board, which is composed of seven members who all come from the world of banking and private investments (including the very institutions responsible for indebting the country), has insisted on austerity measures from the beginning, including most recently vetoing the elected government’s fiscal plan and demanding additional cuts to essential services like health and education.  The federal fiscal control board in one of its most recent letters to Governor Roselló proposed eliminating subsidized public housing and nutritional assistance. Austerity, in addition to the hurricane, has crippled whatever safety net was left.  Natural disasters tend to lay bare the inequalities that have always existed, deepening them and openly displaying the structural inequities that racism, sexism and anti-poor policies are based on.

Rebuilding Puerto Rico for whom?

There were no real long-term economic development plans prior to the hurricane, as PROMESA was not passed to deal with the economic crisis – but rather the debt crisis.  The control board has been explicitly clear about what their priority is: pay back creditors, at whatever cost to the people of Puerto Rico.  As a result, the economy has not bounced back from its depression, which has caused hundreds of thousands of Puerto Ricans to migrate to the United States and other countries in what is the second largest wave of mass migration in a century.  The island nation’s economy has been further devastated after Hurricanes Irma and Maria, with no sense for what a recovered economy looks like.  Federal disaster relief has been promised, yet will be a temporary respite to help access basic assistance rather than prepare and assist citizens in a return to a working economy. The only thing people seem to agree on is that Puerto Rico post Hurricane Maria will not resemble the Puerto Rico that existed before.  Whether the island rebuilds its future for Puerto Rican citizens or for off-shore investors, tourists and creditors remains to be seen. 

The adage that no good crisis goes to waste will likely be true in Puerto Rico yet again.  Investors who profited irresponsibly, if not criminally, off of indebting the nation’s inhabitants and future generations will likely see the influx of federal aid as a boost to the local economy, ensuring the public institutions they purchased bonds for return to functioning status; undoubtedly an encouraging sign for those seeking to get a return on their investment. While most families have lost many or all of their assets, the assets of creditors will likely only grow as basic services strain to meet the needs of Puerto Rican households and as Puerto Ricans continue to struggle to have their most basic needs met.

Not only is a moratorium on the debt required for now, but actual debt relief.  Puerto Rico is in no position, and never was, to ask its citizens to repay billions and billions of dollars to Wall Street investors who played a risky stock market game.  People cannot be asked to indebt their children and grandchildren or pay with their lives shady bond trades instead of demanding the public education, accessible and quality health care and affordable housing that their constitution guarantees them.

People before debt. Justice would have it no other way.

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