Janine Jackson: Puerto Ricans who want to stay in their homes forced to flee because life and work are not tenable, while wealthy investors and hedge funds push for more cuts to the island’s services to maximize their own profits.
It’s a distressing scenario, even more so when you realize the situation I’m describing predates hurricanes Irma and Maria that so devastated Puerto Rico last year. Puerto Rico has slipped from the nightly news, but behind that shroud of relative inattention, things are happening that compound the impact of what might be called natural and unnatural disasters.
What can be done? What would a humane way forward for Puerto Rico look like? Julio López Varona is the founding organizer, now the outgoing director of Make the Road Connecticut and an activist with the group Hedge Clippers. He joins us now by phone. Welcome to CounterSpin, Julio López Varona.
Never miss another story
Get the news you want, delivered to your inbox every day.
Julio López Varona: Great to be here.
Let’s start with the present. With many people forced to leave the island to make a living, and with economic incentives for investors to come in and buy stuff up, I have heard it said that we could be moving toward “a Puerto Rico without Puerto Ricans.” Can you walk through some of the factors that are in play, and some of the concerns? What’s going on?
Well, it’s interesting, because this had been one of those things that was a conspiracy theory for a long time, but now we’re seeing it actually happen. Over the last 10 years, as you mentioned, Puerto Rico has been in this great humanitarian crisis, where the economy has plummeted after many, many years of changes in the tax code, and colonialism, and a long history of just neglect from the US government, but within that, we’ve also had Puerto Rican governments that have decided that they want to incentivize the entrance of rich people to Puerto Rico, through laws like Law 20 and 21 that actually made it almost a tax-free haven for people that invested more than a million dollars, and while they did that, they actually raised taxes for working people in Puerto Rico.
And this combined with extreme unemployment of 12 percent, which is the highest in the nation, with 45 percent or more people living under the poverty line. You get this great exodus of people that are just desperate, looking for work that they can’t find in Puerto Rico, while at the same time, you get just a flock of rich people that are going in and buying cheap, trying to make this the island where it’s better to be a tourist than actually be someone living on the island.
In the wake of the hurricanes, we saw this two-person company with Trump connections, Whitefish Energy, get a no-bid contract to rebuild the power grid. You see that kind of deal and you can sort of smell it, you know? And that deal was in fact quashed. But a lot of the predation that’s going on, it’s not strictly speaking illegal. I wonder if you could explain what these vulture funds are—how does that work?
I usually tell people it’s very, very similar to what happened in Greece and Argentina. These were countries that were in great economic depression, and the governments, the same as the government of Puerto Rico, had no way of sustaining its debt. And it had been passing, you could say, the ball of debt from one government to the other, until Puerto Rico was in a position where it had no credit.
So vulture funds, or hedge funds, like they did in Argentina and Greece, came in; they offered money for Puerto Rico, knowing that Puerto Rico wasn’t going to be able to pay back. And about three years ago, when the governor of Puerto Rico said we’re not going to pay back, these bondholders decided to start pushing back. And they did that through pushing extreme austerity measures that have destroyed collective-bargaining agreements in Puerto Rico, they have lowered employment when it comes to government employees, when it comes to any sort of protections for working people.
Right now in Puerto Rico, we have less hospitals than ever, less schools than ever; we have privatization of public corporations, that’s something that has been happening for the last 20 years, and with Maria, we see that it happens more and more. So it was very much a conscious attack, of very wealthy people that saw Puerto Rico in a position where it could be attacked. These hedge funds and corporations are moving forward a very neoliberal way of running the island, and they’re doing so because Puerto Rico has no way of going into bankruptcy. Puerto Rico has no way of actually dealing with its debt.
The solutions that the US has put forward are the Board, which is called the Fiscal Control Board, that now controls all the budgets in Puerto Rico, and, ironically and sadly, the same people that are in the Fiscal Control Board, many of them are the same people that made this disaster happen. People connected to Santander, peopleconnected to past governments, so in many ways the remedy is worse than the cold for Puerto Rico. And with Maria, this has all been exacerbated: failing infrastructure that is now completely destroyed, people that had no jobs that are just fleeing the island by droves. So the conditions were there for disaster, and Maria just made it worse.
It’s a very strange understanding, for those of us who have just kind of a tangential understanding of how these things work, because we always hear that, “Well, investment involves some risk,” you know, and now the island has been devastated. So how on Earth would you expect 100 percent repayment?
That’s the question, but for them, we feel like the answer has never about repayment. The answer has always been about what they can do on the island, and how they can hold the island hostage so they can put forward the policies they want to put forward.
While we’re talking about repayment, we’re talking about people that bought debt for 30 cents on the dollar, meaning, “You give me 30 cents, I will give you a dollar.” And it was clear that they were never going to get that repayment. When we looked at some of the findings around banks that did deals with Puerto Rico during that time, we saw interest rates that were high, up to like 785 percent. And I don’t know about you, but I’ve never heard about any sort of bank telling us to pay 785 percent interest rates to get a loan. And just to give you an example: That meant that at some point, Puerto Rico got $3 billion and now has to pay $30 billion. So when you talk about the debt in Puerto Rico, people say that it’s $70 billion, but what we find is that Puerto Rico already paid its debt, and what it’s now paying is actually interest rates imposed by these hedge funds and these banks.
There was a recent series by the magazine In These Times and the Centro de Periodismo Investigativo in Puerto Rico that showed just how secretive, also, this stuff is. You would think that it would be fairly straightforward to just find out who, in fact, owns Puerto Rico’s debt. Who are they? I know that Hedge Clippers is very interested to name names, but it is not that easy, always, to dig this stuff out.
It is extremely difficult. We worked to find that this person called [Seth] Klarman, who is head of the Baupost Group, is one of the biggest investors in Puerto Rico, and he has bought a billion dollars in debt that he owns, and this person has been hiding for three years.
I think at the end of the day, this has to do with the fact that what’s happening in Puerto Rico is immoral. And when you’re telling people they should not eat so that a billionaire can have one more Ferrari or one more apartment in Manhattan, these people start to hide. Because no one, I don’t think anybody in their right mind, has the scruples to do this openly, and expect groups likeHedge Clippers and Centro de Periodismo Investigativo not to push them, and for people on the ground not to be outraged and try to do something against them.
I think one of the biggest issues that happens is that for many years, the blame has been put on the Puerto Rican government and the Puerto Rican people. And what we find is that the conditions that have put forward the situation in Puerto Rico are a combination of colonialism, a combination of a US government that doesn’t care about Puerto Rico, and the fact that many corporations are actually running our country, and those corporations have, in many ways, taken advantage of the situation that Puerto Rico has.
And I think that the important part about this, and the part that people should know about this, like, Puerto Rico is maybe the biggest and the best example of what happens when capitalism has no restrictions, and there’s no way of controlling it. Because this is happening in Puerto Rico as an island, to 3.5 million people, but when you look at Detroit andChicago and other places, this is happening on smaller scales. And this is not bargain-hunting, this is actually predatory practices that are destroying communities so that people—very rich people—can become richer.
Now, I know that you worked with a coalition on a series of short films with Brave New Films; Preying on Puerto Rico: The Forgotten Citizens of Hedge Fund Island is a kind of pushback media, while we have corporate media kind of blanding things out, talking about “bargain-hunting,” and that same piece indicated few people are going to shed tears if these billionaire hedge funds lose money, but their interests, really, are aligned with the interests of Puerto Rico itself. But there is media that is exposing these ties. I wonder if you could talk a little bit about the pushback? There is work being done.
I think for us, the work has been about, how do we uncover these practices in a way that’s understandable? As you said, it’s difficult to understand. It is difficult to really navigate, because it’s so technical.
But what we find is that there are clear villains in this story. And if we can draw a narrative that really talks about who are the bad people and what are they doing to common, normal people living here in Puerto Rico, and really connect those stories to create that contrast, between the guy living in Manhattan and the person in Puerto Rico that doesn’t have a roof, people start thinking about those contrasts.
Because I feel like, at the end of the day, people understand that nobody should live without a roof, or have nothing to eat, while these big hedge funds and corporations are just thinking about how they buy an island. So I think our work has been about doing the research and doing good research, but doing good research that translates into popular education, and that connects to Make the Road and other organizations that are doing the work. So part of that means creating strong coalitions that can actually move that information to the ground. I think one of the exciting parts about what we’ve done, in coalition with other groups, is really change the narrative from “This is about a bad government and bad Puerto Ricans” to “This is about hedge funds and vulture funds have actually and intentionally attacked our island.”
One thing we have found is that these people do have their public image, and they do care about their public image. And working with pension funds and working on corporate accountability campaigns, we’ve been able to actually do some impact, and, for example, in New York, we were able to divest $2.5 billion from a hedge fund that was hurting Puerto Rico. So there are ways to have an impact, and there are ways to create a narrative that people really resonate with.
Absolutely. Well, just as vultures have a vision for Puerto Rico—and I think for a lot of listeners, the point of reference can be New Orleans after Hurricane Katrina, where we know it was seen as kind of a, “Oh, now it’s a clean slate,” you know, “Now there is an opportunity to push for a lot of things that folks wanted to push for anyway”—for privatization, for charter schools, for example, and the hurricane just made that easier for them.
So we see that they have a vision; we’ve seen it play out in some other places. But other people have a different vision, for Puerto Rico as in other places; and that has to do with real investment in infrastructure, real investment in schools and in medicine. There is a different vision on the ground in Puerto Rico, is there not?
Yes, and I think the core of it is that has to be led by Puerto Ricans. It has to be the voices of Puerto Ricans living in communities, the ones that have stood up over the last three months, and have created their own civic community organizations, and decided that they were going to do what needed to be done. Those should be the voices that we’re hearing.
You know, we have a crumbling infrastructure. And there is a way to reinvent that infrastructure, so it really takes into account the environment, and the fact that this island is sunny and warm all year, and we could use the power of the Sun. I think there is a need for Congress to actually make a Marshall Plan–type investment in Puerto Rico, so those things happen.
Puerto Rico should not be paying any of its debt. That debt was paid, and in many ways the hurricane, as Trump said, wiped out the debt, and it’s a moment where we don’t need to be thinking about, “What are the debts we need to pay?” We need to think about, “How do we invest in the communities that are doing the work? How do we change the way that Puerto Rico deals with agriculture and infrastructure and electricity, and actually making sure that the people living here have opportunity?” So our hope is that a lot of people are thinking about a Puerto Rico for Puerto Ricans, and not a Puerto Rico for rich hedge funds and vultures.
Do you have any final thoughts on what you’d like to see from journalists, or what you would like to not see from journalists, as we go forward?
I think my biggest thought is that Puerto Rico, as a small island, is a representation of what’s happening in other places. So if you don’t care because you don’t care about Puerto Ricans, care because this is coming to your neighborhoods; this extreme, austerity measure-driven neoliberal model that cares more about people that are rich making money is something that we see in Puerto Rico, but we also see everywhere. And I think people have to be ready to find who are the bad guys, and start actually holding them accountable for the hurt they are doing in Puerto Rico, and in their communities.
We’ve been speaking with Julio López Varona. You can find Hedge Clippers online at HedgeClippers.org. Make the Road Connecticut is MakeTheRoadCT.org. Julio López Varona, thank you so much for joining us this week on CounterSpin.
Thank you for having me.