The world has been focused on the spectacle of the “Troika” of the International Monetary Fund, European Union and the European Central Bank crushing the Greek people, but it is far from the only example of strong nations using a “debt crisis” to extract more wealth from those that are weaker.
A case in point is the
colony of US Puerto Rico. In a June 28 Times interview, the governor
of the New York Caribbean archipelago nation declared its
debt of US$73 billion “is not payable. There is no other option. I would love
to have an easier option. This is not politics. This is math.”
Most of the debt is owed to US hedge funds, mutual funds or other investment accounts. Also known as “vulture funds”, these institutions buy up debt owed by the Puerto Rican government and public enterprises at very low prices because investors know they are almost worthless. They then demand repayment at full value.
On June 30, Puerto Rican officials began negotiations with creditors. Among those attending the meeting was former IMF official Anne Krueger. Her proposed solution to the debt crisis includes
Puerto Rico cutting its minimum wage below the federal level of $7.50 an hour and
slashing subsidies for the US . University of Puerto Rico
Protesters gathered outside the
offices of the financial giant
Citigroup, where the meeting took place. On July 14, Democracy Now! spoke
to protester David Galarza, who said: “I live here in Manhattan . I’m puertorriqueño, and my
parents and my family live in New York Puerto Rico …
“We are saying with one clear voice, ‘no’ to the austerity plans being proposed by Anne Krueger. And we are saying ‘no’ to the austerity plans being pushed by the hedge fund owners and the managers and the banksters that created similar situations in
, in Greece and even in this country.” Spain
The White House has announced the federal government would not contribute any money to help
Janet Yellen, head of the Federal Reserve Bank, chimed in that it would also do
nothing. Yellen sees “no risk” that a default by Puerto Rico will spread to the mainland, so it is of no concern. US
This is the same Federal Reserve that pumped billions into the financial institutions such as Citicorp, and then lent them trillions more, in the wake of the 2008 financial collapse. So the
has its own “troika” — the federal
government, the Federal Reserve Bank and the financial institutions — telling US Puerto Rico to “drop dead”.
The squeeze on
Rico by finance capital comes in the
context of a depression in the archipelago that dates back to 2005. The poverty
level is nearly double that of the poorest US state. US
The unemployment level is twice that across the
as a whole. US Puerto Rico’s health system if on the verge of
collapse. Sixty percent of the population relies on federal programs of
Medicare, Medicare Advantage or Medicaid.
Under President Barack Obama's healthcare program,
Puerto Rico gets only 60% of the funding of
that states get for Medicare, and 70% of
state Medicaid funding. The shortfall amounts to $500 million, which the
cash-strapped country cannot afford to cover. US
This led to the Philippine-US War, where the
killed 100,000 Filipinos who were
fighting for that country’s independence. US , meanwhile, became a virtual Cuba colony up until the 1959 Cuban
Revolution, while US Puerto Rico remained a colony.
In the 117 years since, US companies have taken huge profits from
Puerto Rico. For the first 50 years, it was sugar barons’ plantations that benefited
from the very low wages. US
Over the next 50 years, the
government gave US firms big tax
write-offs to locate in US Puerto Rico. At first, it was shoes and clothing manufacturers who
Then more capital-intensive businesses such as pharmaceuticals also moved in. That made Puerto Rico one of the top prescription drug manufacturers in the world. At one point, 13 of the top 20 prescription drugs were made in the country.
In 1996, Congress began to phase out the tax breaks, and with them much of the country’s industry. The tax breaks were gone by 2005. Since then,
Puerto Rico has been in recession — made worse
by the 2008 financial collapse and Great Recession.
It was forced to rely on loans to keep afloat. This means for the past decade, it has been mainly the financial vultures who have sucked the country dry.
Puerto Ricans are US citizens and are allowed to come to the mainland. They cannot be kept out like Mexicans fleeing poverty, who are forced to enter the
without documents. US
Puerto Ricans are moving to mainland US at the rate of 50,000 a year. Now there are 5 million puertorriqueños living on the mainland, while 3.5 million live in the colony.
We have reached the point where
Puerto Rico simply has no more money to pay the loan sharks. To top it
off, because it is a colony, it is not allowed to declare bankruptcy like a
state or even a city could, like has done. Like Detroit , it does not have its own currency. Greece
It is not clear what the outcome of the debt crisis will be. Will it be like
, forced to take out even more loans
with interest to pay previous loans and accumulated interest while forced to
implement even more austerity? Greece
> The article above was written by Barry Sheppard and is re-printed from the Green Left Weekly.