Governor Announces Puerto Rico “Insolvent“

At the United Nations Secretariat on Monday 22 June 2015, Cuba demanded an end to Puerto Rico’s status as a colony of the United States. A week later, Puerto Rico’s Governor Alejandro García Padilla announced that the US territory could not pay its $73 billion debt. But Puerto Rico is not able to declare bankruptcy like Detroit, due to its lack of State status, nor can it reach out as a sovereign state, as Greece can. Meanwhile, calls from around the world for the release of Oscar López Rivera, the Puerto Rican community activist held in prison since 1981, still go unheeded.

Fifty-five years after the U.N. General Assembly formally adopted Resolution 1514 (XV), The Declaration on the Granting of Independence to Colonial Countries and Peoples[1], Puerto Rico remains a nation under domination, its people paying tribute in the form of taxes to the United States but having, like other US territories, no right to vote in presidential elections, no representation in the Electoral College, and mere observer status in Congress.

Even the flag of Puerto Rico elicits memories of its dreams of independence and fraternity with Cuba. Designed by separatists in 1898, and finally adopted in 1952, the red, white and blue bars, stripes and single star of the flag optically mirrors that of Cuba, which was created 50 years earlier, while both flags reflect an idealistic idea of the independence won by the United States in 1776. Cuba succeeded in liberating itself from Spanish colonialism in 1898, but Puerto Rico, as well as other former Spanish colonies such as the Philippines and Guam, was quickly claimed by the U.S. the following year under Theodore Roosevelt’s doctrine of “manifest destiny.” The Philippines wrested itself away, but Puerto Rico has remained firmly under control and domination ever since.

The UN considers Puerto Rico to be a “non-governing territory” and, as such, slated for decolonization.

There have been many efforts to free Puerto Rico since the turn of the last century. Historically crippled by the imperialistic restructuring of the sugar industry in 1900, Puerto Rico has also been hit hard by laws still in effect requiring overpriced shipping fees to the Merchant Marines on all deliveries to the island. Faced with ambiguously worded referendums on status and independence, massacres at peaceful demonstrations such as in Río Piedras and Ponce, eugenicist cancer experimentation, non-consensual pharmaceutical testing, especially on girls and women, and destructive bombing practice resulting in carcinogenic waste, Puerto Rico has been enduring and fighting oppression in many ways over the years.

Up until the 1970s, a campaign of mass sterilization was carried out. According to the filmmaker Ana María García in her 1982 film, La operación, “In Puerto Rico, one in three women of childbearing age has been sterilized. The method is so common that it is referred to simply as The Operation.” In the film, García interviews a woman who recounts how each of her sisters has been operated on. “So the line of our family will fade, right?” she says. Informed consent was not given and forced consent was instituted at hospitals, which refused admittance to pregnant women unless they were sterilized after childbirth.[2]

What happens when a people’s voice is cut off? Puerto Rican, Harvard lawyer Dr. Pedro Albizu Campos spent 26 years in prison on charges of “seditious conspiracy.” He was finally pardoned shortly before his death, from what he claims was radiation experimentation on his body while in prison. An independent Cuban doctor confirmed it. In 1981, Oscar López Rivera was jailed and sentenced to 75 years, also on charges of “seditious conspiracy,” and he has never committed any violent or injurious crime. He has been held in the maximum security prisons of Marion and Terre Haute for 34 years now, with over a decade of that time, 12 years, in solitary confinement. López has already been incarcerated for longer than Nelson Mandela.[3]

Meanwhile on the economic front, Governor García appeared on television on Monday 29 June 2015, requesting assistance and permission to restructure the island nation’s debt. Like Greece, Puerto Rico is seeking to renegotiate and postpone payments on its debts to bondholders. Puerto Rico does not have the option of seeking protection from creditors as Detroit did because of its commonwealth status, but it also cannot negotiate as a sovereign nation as Greece can.[4]

In the summer of 2014, the island passed the Puerto Rico Public Corporations Debt Enforcement and Recovery Act to ensure the continuity of things like the operations of its public utilities company, Prepa, which supplies electric power to residents. Prepa accounts for $9 billion of the outstanding debt. But major funds like Oppenheimer and Franklin fought back, and the act was overturned in February.[5] Prepa, organized in 1941, exempts major energy consumers on the island like government offices and hotels from paying for electricity, while ordinary citizens are expected to offset this, footing bills set at higher rates than anywhere in the US except for Hawaii, Guam and the U.S. Virgin Islands. And Puerto Ricans are required to pay a substantially higher portion of their income on electricity than anywhere else. Individuals’ indebtedness is also very high as a consequence.[6]

Though it is true that residents of Puerto Rico do not pay federal tax on local income, per capita income in Puerto Rico is extremely low at less than half that of the United States’s poorest state. Those that do earn enough to pay therefore have no recourse to the Earned Income Credit on federal tax returns. Puerto Ricans pay a comparable income tax to the local government, and they also pay into Social Security even though their benefits are capped to less than that of other US citizens by the Federal government. They are ineligible for Supplemental Security Income for the elderly, blind and disabled. Puerto Rico already receives less than 15% of the Medicaid funding it would normally receive as a state. Unemployment stands at over 12%, more than twice that of the average rate in the 50 states. Hence the lack of federal income tax only benefits the wealthy who establish residency there, and denies benefits to normal islanders.

Hedge funds that bought Puerto Rican debt were paid relatively high yields over the years, and those profits are tax-exempt as well.

Governor Garcia Padilla has called upon Puerto Rico’s citizens to share the burden and further cuts to education and social services are mentioned. On June 30, he retweets a statement from his aide de camp, “As the responsibility for the crisis was shared, so should the work to get us out of it.”[7] The government already raised sales taxes in May to an unprecedented 11.5% and cut 12,500 jobs, a 12% contraction in the public sector work force. Will heavily invested hedge funds share some of the pain? According to Bloomberg, since they bought at distressed levels, they stand to make a profit. [8]



[2] The documentary can be viewed, with English captions, at