Tanzina Vega: In the past few years, Puerto Rico has experienced crisis after crisis, and earlier this year in an attempt to further address the Island's debt crisis, the Puerto Rico electric power authority began making moves to privatize the Island's electric grid. For years, the government-owned electric power authority has faced difficulties, including debt and mismanagement, and damage from Hurricane Maria in 2017.
The move to privatize the electric grid fits into a larger pattern of privatization and austerity measures on the Island since 2016 when the Puerto Rican financial oversight board was established to address the Island's multi-billion dollar debt. The board has attempted to privatize other industries on the Island. Ed Morales has been following all of this. He's a freelance journalist based in New York and author of Fantasy Island: Colonialism Exploitation, and the Betrayal of Puerto Rico. Ed, welcome back to The Takeaway.
Ed Morales: Hi, thanks for having me.
Tanzina: Remind us, the public power authority has faced challenges over the past few years, including what?
Ed: The main challenge is the $9 billion debt, which is one of the largest segments of the debt. Puerto Rico's debt, which is $72 billion, is broken up into a lot of different entities. Before that, the main problems for the power authority is the fact that it's an antiquated system. Hardly any of the lines are underground. It's all overground, so very vulnerable famously to the Hurricane Maria, which knocked down all these poles, as you know. One of the things that they tried to do to manage the fact that they were in debt is laying off a lot of workers, which then made the keeping up of the polls even worse.
You could drive around the mountains and see all this outgrowth of vegetation, and they were swelling up the polls. The privatization of the electrical authority has been in the works for some time, and it's just intensified under the fiscal oversight and management board that was imposed in 2017.
Tanzina: Let's talk about that management board that's-- You're talking about PROMESA-- Remind us how that fiscal oversight board came together and who was on it.
Ed: In 2016, the governor of Puerto Rico declared that the debt was unpayable after years of irresponsible borrowing that was aided by Wall Street firms and speculators. The Obama administration was worried about seeming that they wanted to give Puerto Rico a bailout rather than renegotiate the terms of the debt directly. What they did was, they set up this fiscal oversight management board through a bill that was passed in Congress in 2016 called PROMESA. That bill provided for the appointment of seven members of the board, and half of the members would be picked by Democratic members of Congress, and the other half Republican.
Then the seventh would be picked by Obama. All of the members of the board are from the financial sector, which I guess is obvious, but it's an indication that dealing with everyday people's problems is not at their forefront. Their forefront is to restructure the debt. The fiscal oversight and management board is basically a representative of the business community that is making decisions about Puerto Rico's budget because all of the budgets that the government produces has to be approved by the fiscal oversight and management board.
Tanzina: The question I have is, we know that Puerto Rico was in a significant amount of debt. We have to remind people that before Hurricane Maria, that was one of the biggest issues pressing on the Island, this board was set up to try to attempt to manage that, and now the board seems to have favored privatization of different organizations and utilities on the Island. Is the only organization we're talking about being privatized the utility, or are there other attempts at privatization in Puerto Rico?
Ed: Yes, there has been a brief history of privatization in Puerto Rico beginning earlier in the 2010 with the privatization of the airport, for instance, it was sold to a Mexican company, the toll roads and the maintenance of the highways was sold to a Spanish company, and then there was botched privatization of the sewer and aqueduct authority which had to be abandoned because it was causing higher prices for water.
Tanzina: Who and how would the privatization of the electric utility affect most?
Ed: That's an easy question. It's basically the consumers because there have been studies done that the price of electricity, which is already among the highest of anyone within the US and its territories, would increase significantly, and the Puerto Rico average income is far below the poorest state in the union. They're already paying too much for electricity, and a rate increase, which not only has been predicted by studies but has been floated in the media, would affect an already reeling population and still retry and recover from the hurricane and other things like the homelessness created by the earthquakes earlier this year.
Tanzina: Are there any other privatization efforts promoted by this fiscal oversight board right now?
Ed: One of the things that's on the horizon is privatizing some of the lands that the university owns, and a part of that process would entail raising tuition rates further. There has been a process of trying to privatize the public school system by introducing more charter schools, but that's going to hit a major snag because with a new president Biden, Betsy DeVoss, who was involved with the former secretary of education, Julia Keleher, and the privatization of the school system, won't be there anymore.
Julia Keleher herself has been indicted on fraud charges, and her trial will be coming up next year. Still, the school system is in disarray, but sadly, it's not going to be moving forward. Most of the only plan for moving forward is privatization, and that's a really headed snack.
Tanzina: US representative Raúl Grijalva from Arizona has put forth legislation to reform the PROMESA Board. What are some of those proposals, and is it enough?
Ed: Grijalva, I think it's a really well-intentioned thing that he tried to do. He wants to have federal funding for the board, which costs several hundred million dollars that the Puerto Rico people pay for themselves just to pay for the members of the board and all these activities and the courts. They also improve the access to information because a lot of the information surrounding the board, even though they publish a lot of things on the website, has been obscure to the people.
Some more relief from the debt, a comprehensive audit of the debt, which is something that should have happened before the imposition of PROMESA and was really undermined by both the Puerto Rico government and the process of creating PROMESA law itself.
The thing is why it's not enough is, most people on the Island really believe that the only way for real economic growth to happen on the Island is for canceling a really substantial amount of the debt. Columbia University economists put out a report several years ago that said that up to 90% of the debt should be canceled, because even with the restructuring, for instance, there was a deal reached about a sales tax, which is called COFINA, which is the highest of any territory in the United States, at 11.25%.
Tanzina: Let's just be clear that if you purchase something in Puerto Rico, your sales tax is 11.25%.
Ed: Yes, and it's quite a sticker shock. That part of the financing of the government and the debt has been restructured, and that deal has been criticized as giving way too much money that should be going to essential services in Puerto Rico, to the holders of the debt who are mostly large investment firms and what they call "vulture funds."
Tanzina: Ed, I'm wondering about the privatization, not just of the utility on the Island, but also the land. You mentioned some of the land from the University of Puerto Rico being talked about making that land private, but what about things like beaches and beachfront that in some parts of the Island has been untouched, and it's just pristine? I'm thinking about the Island of Culebra, for example, and other parts of the Island. Are those also at risk for privatization?
Ed: Yes, because the real estate industry is always looking for opportunity, and right now, because prices of real estate fell substantially after the hurricane and then some measures after the earthquake, investment is really being encouraged, and there's a development of luxury housing that's booming in Puerto Rico. There were a couple of projects on the North Coast of Puerto Rico as there's a resort there that's being developed by John Paulson, who is a notorious character from Wall Street that was involved in the 2008 crisis. It said stuff about building property too close to the land, and then it causes beach erosion that's happened in Condado too.
There's been a lot of real estate development in Vieques. Culebra is probably next, it's less developed, but unfortunately, this is something that plays the United States overdeveloping near the coastline and causing damage to the land.
Tanzina: Finally, you mentioned canceling the debt, Ed. I'm wondering, with the new Biden administration coming in, are we going to see a similar approach from Joe Biden and his administration having been Obama's vice president, or will a Biden administration be open to finally canceling the debt in Puerto Rico and starting fresh?
Ed: That would be nice, and it would really aid the future development of Puerto Rico in a serious way to show a serious commitment to the economic development of Puerto Rico. I kind of like to look at the way that there's been debate about the canceling of student debt. First, there's a lot of proposals about canceling in its entirety. Now, there are proposals about $50,000 for each person, so I think there's going to be a negotiation.
I hope that there's a really substantial canceling of Puerto Rico debt, particularly because it seems that Biden administration is going to try to reverse as many things as possible that happened under Trump administration, and the handling of Puerto Rico is a fairly major thing, particularly when you keep in mind the embarrassing siphoning away of boats to Republicans in Florida, and so making a serious commitment to Puerto Rico would really shore up the Democrat's numbers in Florida.
Tanzina: Turning the subject for a minute, Ed, I'm a Nuyorican. I have mixed feelings about using that word, but in this context, we can absolutely use it. There's a cafe in downtown Manhattan called the Nuyorican Poets Cafe, and one of its founders, Miguel Algarin, passed away recently, and I'm wondering if you could talk to us a little bit about his legacy.
I, myself, went to the Nuyorican Poets Cafe as a young woman growing up in that community, being Puerto Rican, being from New York and spent many nights there, watching poetry slams. It was transformative to my development as a thinker, as a writer, and just feeling like there was a place for us. What were your thoughts on the passing of Miguel Algarin?
Ed: Oh, I always grew up wanting to write. I wrote a lot of poetry and creative writing when I was younger, and so when I first saw the poetry that came out of Nuyorican Poets Cafe, it was really freeing to me because what they did was, they mixed English and Spanglish, and it seemed like an intense source of creativity and opening up of language and being able to express a hybrid identity that Nuyoricans have, combining the both of the best of being an Island Puerto Rican and being a New Yorker.
Miguel was really- he was one of the founders, but the other founders passed away back in the '70s and '80s, so he was a real survivor and one of the real driving forces. It was his living room where the first salons were held, that were eventually moved into the physical building on 6th Street, the first location.
Now, that he's died, he was so varied in his influences. He was this really strong Africanist. He was really involved in African-American literature, Harlem Renaissance, took a lot of inspiration for that, and he had a really fluid sexual identity, which he also pioneered a lot of queer writing for Puerto Ricans or Latinos in the US, even though that's not one of the main things that people talk about him when they do.
Then he was an incredible survivor because he was diagnosed with HIV in the late 1980s and continued to play a major role in the cafe up until just about five years ago.
Tanzina: Ed Morales is a freelance journalist based in New York and author of Fantasy Island: Colonialism, Exploitation, and the Betrayal of Puerto Rico. Ed, thanks so much for being with us.
Ed: Thank you. Have a great day.
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