Van der Sluijs 1

Mariëlla van der Sluijs

PO-243-51 | SC-195-51
Dr. Peden | Dr. Wiedenhoft-Murphy
December 10, 2018

The Struggle to be Heard: The Puerto Rican Debt Crisis

After the Spanish-American War of 1898 and a series of Supreme Court decisions, Puerto

Rico officially became a colony of the United States. This decision deferred from the 1787

Northwest Ordinance under which previously annexed lands were incorporated as states. Puerto

Rico’s status as a colony gave the United States complete control over the islands economic,

political, and social dynamics. The United States’ stronghold over the island is seen very clearly

in Congress, where Puerto Rico’s sole congressman has no voting rights yet the body has full

command over the policies that shape the island (Rodriguez Domínguez). The colonial and

capitalist influence the United States exerts over Puerto Rico can be clearly seen through the

economic crisis that has plagued the island for over a decade.

In the twentieth century, Puerto Rico transformed from a largely agrarian society to a

manufacturing powerhouse due to a series of generous tax breaks put in place by Congress in

order to protect the profits of United States’ corporations. However, when Congress decided to

phase out this tax credit by 2005, it drove the island into an economic recession that has yet to

end. This recession led to a debt of over 70 billion dollars in 2015, according to then-Governor

Alejandro García Padilla (qtd. in Fletcher and Mufson). “In some ways, what you have in Puerto

Rico is an economic crisis manufactured by the United States,” stated Victor Rodriguez,

professor in the Department of Chicano and Latino Studies at California State University Long

Beach. “Now trying to fix it is like fighting a championship battle with your hands tied” (qtd. in
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Fletcher and Mufson). Due to Puerto Rico’s status as a commonwealth, the island is sometimes

treated like a foreign country, other times like a state, and in other ways unlike anywhere else.

But one thing is for sure, Puerto Rico has never had full control over its own destiny.

In 2015, García Padilla plead to Congress and President Barack Obama to allow Puerto

Rico and its public corporations – which provide necessities such as water and electricity – to file

for bankruptcy. This process would give the island the opportunity to restructure its pressing

debt. “This is the worst crisis ever that we have had in our history, and we have no tools to fix

it,” explained Gustavo Vélez, economist and former legislative and gubernatorial adviser to

Puerto Rico. “We have to start a conversation with the United States government to change the

current restrictions on Puerto Rico. We have to revise the current economic relationship with the

mainland” (qtd. in Fletcher and Mufson). The power the United States exercises over Puerto

Rico in both its colonial and capitalist capacity is painfully clear as the island begs for an

opportunity to file for bankruptcy, a right that all other states possess.

To say that the United States’ federal government is solely responsible for the debt crisis,

however, would not be completely correct. “The federal government has a great deal of

responsibility for the problem,” said Jeffrey Farrow, chairman of the Oliver Group and former

co-chair of President Bill Clinton’s Interagency Working Group on Puerto Rico. “Not

exclusively. Puerto Rico created a lot of the problem itself. It does not have to be in the situation

it is in. But there is a big element of federal responsibility” (qtd. in Fletcher and Mufson). Puerto

Rican policy makers are not blameless for the economic problems the island faces. Local

regulations discourage job creation and the development of clean energy, which would aid in

lowering the excessive electricity prices. Additionally, paying the ever-growing debt consumes

almost half of the island’s budget (Fletcher and Mufson). Puerto Rico currently has over 15 times
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the median bond debt of the fifty states. García Padilla even stated that at this rate every man,

woman, and child on the island will owe 40,000 dollars to creditors by 2025 (Williams Wash).

As Puerto Rican officials found it easier to borrow money rather than fix any financial or

structural shortcomings, the island and its people are left in a state of economic despair.

Puerto Rican officials have a difficult situation on their hands; the island is cash-starved

but in order to get out of debt, they first must go into more debt. In 2015, six Puerto Rican

officials were relieved: they just got 3 billion dollars to keep the government running by

convincing some of America’s largest hedge funders to lend them more money. For hedge

funders, lending money to Puerto Rico is a safe investment as they earn around a 20 percent

return on investment. Furthermore, the Puerto Rican Constitution states that he island must pay

back it debt before paying any other bills, such as teachers’ salaries or retirees’ healthcare

(Mahler and Confessore). Only a few months after this deal, García Padilla states that the island

ran out of money and is even more indebted. The continuous lending of money only provided

temporary relief in the face of an ever-pressing debt crisis.

The debt crisis facing Puerto Rico did not only significantly impact the island’s

government, but also its citizenry. Due to the government’s shrinking tax base, as more than

50,000 Puerto Ricans flee the island to mainland United States each year, and the huge debt-

service expensive, a sales tax of 11.5 percent, which is higher than any other state, has been put

in place on the island. The island is twice as poor as the mainland’s poorest state, Mississippi,

bases on income per-capita, yet the cost of living in Puerto Rico is 13 percent higher than in the

United States, showed the Council for Community and Economic Research. Ever since García

Padilla took office in 2013, over 31,000 jobs have been lost and hundreds of schools had to

close. Additionally, García Padilla proposed to slash 166 million dollars from the island’s public
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university budget. Moreover, a healthcare crisis is imminent due to the proposed 150 million

dollars cut in Medicare Advantage reimbursements, despite nearly two-thirds of island’s

residents being on Medicaid or Medicare, and the mass exodus of doctors; it is estimated that at

least one doctor a day leaves the island. The migration of doctors leads to hard-to-fill vacancies

and waiting lists for patient care. Factor in an unemployment rate of over 12 percent and a

workforce participation rate of 40 percent, and the future for Puerto Ricans seems bleak (Allen;

Morales; Morris). It is no wonder that Puerto Ricans have decided to take their voices to the

street to speak out against their misery and economic despair.

The population of Puerto Rico is far from happy about the dire economic situation. In

spring of 2015, massive protests joined the street of San Juan as students demonstrated against

García Padilla’s proposed cuts. “The situation at the university is very tense,” stated Alex

Betancourt-Serrano, Chair of the Department of Political Science at the University of Puerto

Rico, Rio Piedras. Betancourt-Serrano continued to explain that over the past few years, the

university lost over 300 million dollars in appropriations from the general treasury, which has

been strongly felt among the professoriate (qtd. in Morris). In 2017, the situation at the

University of Puerto Rico got so bad that students stormed a board of trustees meeting. A May 1

protest even turned violent, forcing lawmakers to introduce several new bills that would increase

penalties on disobedient acts. “We see it as a kidnapping of a public institution,” explained

Anamar Menéndez, a law student who sued the university to force the institution to reopen. “If

the students want to strike, fine, let them strike, but the university has to offer its services” (qtd.

in Robles). The protests against Puerto Rico’s debt crisis were not only visible among students.

On April 3, 2017, various civic and religious organizations joined one another for a mass vigil to

call for an audit of the island’s public debt. Part of the group’s demand read, “We are being
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extorted and we are being enslaved. The people of Puerto Rico refuse to pay a debt that is not

ours. We will not choose between education or healthcare. Our elders will not have their

pensions reduced. We demand immediate action” (qtd. in Global Voices). If these cries are heard

in Washington, D.C. remains yet to be seen.

The colonial stronghold of the United States and years of poor financial planning by the

Puerto Rican government has plummeted the island into a massive debt crisis that it is yet to be

solved. The consequences of the economic situation are felt by the Puerto Rican people every

day through cuts in basic societal necessities, such as education and healthcare. Protests have

broken out over recent years that fight the pressing debt and financial cuts. If these cries for help

will change anything about the economic future of Puerto Rican is unclear. The thousands of

voices of the American citizens inhabiting the island are yet to be heard by the rest of the United

States.
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Works Cited

Allen, Greg. “SOS: Puerto Rico Is Losing Doctors, Leaving Patients Stranded.” NPR, March 12,

2016.

Fletcher, Michael and Steven Mufson. “How Washington helped create Puerto Rico’s staggering

debt crisis.” The Washington Post, July 9, 2015.

Mahlter, Jonathan, and Nicholas Confessore. “Inside the Billion-Dollar Battle for Puerto Rico’s

Future.” New York Times, December 19, 2015.

Morales, Ed. “The Roots of Puerto Rico’s Debt Crisis – and Why Austerity Will Not Solve It.”

The Nation, July 8, 2015.

Morris, Catherine. “The Future of Puerto Rican Education.” The Atlantic, October 1, 2015.

“Puerto Ricans Hold a ‘Vigil for Light and Truth’ to Demand an Audit of Public Debt.” Global

Voices, April 20, 2017.

Robles, Frances. “Puerto Rico’s University Is Paralyzed by Protests and Facing Huge Cuts.” New

York Times, May 25, 2017.

Rodriguez Domínguez, Victor. “Puerto Rico: The Invisible and Recurring Social Struggles in the

Oldest Colony in the World.” Dissident Voice, June 21, 2010.

Williams Walsh, Mary. “The Bonds that Broke Puerto Rico.” New York Times, June 30, 2015.