The crisis before the crisis in Puerto Rico

January 16, 2018

Last year, Dr. Philip Alston, the United Nations Rapporteur for Extreme Poverty and Human Rights issued a report on the shocking levels of poverty he witnessed during his tour of the U.S. and Puerto Rico.

At a public hearing held in San Juan, Puerto Rico, last December, Marcia Rivera Hernández, founder of the Center for the Study of Puerto Rican Reality (Centro de Estudios de la Realidad Puertorriqueña, or CEREP) and a key member of a team of scholars that produced the First Human Development Report in Puerto Rico, made the following presentation. We reprint it here with the approval of the author and of the publication 80 grados, where it originally appeared in Spanish.

GOOD AFTERNOON, Dr. Philip Alston, United Nations Rapporteur for Extreme Poverty and Human Rights, distinguished experts who accompany him, representatives of social organizations, dear colleagues and friends.

My name is Marcia Rivera Hernández. I am an economist and sociologist, speaking here on behalf of the team that produced the First Human Development Report in Puerto Rico. We are a multidisciplinary group of scholars who worked on a voluntary basis, undertaking the task of analyzing how Puerto Rico was doing in terms of human development. In this effort, we examined the extent of poverty, inequality, working conditions, demographic and health indicators, and issues in education and culture, to construct baselines upon which future studies can be built upon. We were ready to present the final version of the Report when hurricanes Irma and María struck, generating a humanitarian crisis in Puerto Rico.

As we all know, in September 2017, two hurricanes of the highest magnitude, Irma and María, devastated the archipelago of Puerto Rico and unveiled the multiple and complex mix of vulnerabilities accumulated over many years. Failure to address the various scenarios of fragility in time, which were already evident to many, has led to a catastrophe in terms of human development. The data included in our First Report reflects the situation of the country before the hurricanes. But the analysis, as well as its conclusions, helps to capture the scope of the vulnerability that already existed in different areas, and allows for a better understanding of the human tragedy and the extent of the damages to the island's infrastructure.

The La Perla neighborhood in San Juan has endured grinding poverty for decades
The La Perla neighborhood in San Juan has endured grinding poverty for decades (Eric Pancer | Wikimedia Commons)

Since the mid-1970s, numerous studies had warned about the emerging problems that would be generated by Puerto Rico's economic strategies, which were prepared in consultation and with the consent of the U.S. Congress, an entity that has the ultimate power over all matters in this unincorporated territory of the U.S. Most of the problems were not addressed or solved in due course, and became serious limitations to economic growth; they became structural problems difficult to overcome. A dense, intricate fabric of general vulnerability mushroomed as a vigorously growing system, leading to a true multidimensional crisis. All aspects of daily life were persistently disrupted: job creation, salaries, economic growth, quality of education, maintenance of basic infrastructure, political institutions and processes, environmental concerns, human and food security. All these factors, along with a huge unpayable public debt, formed the substratum of the catastrophe unleashed by the hurricane's winds and its aftermath.

IN THE case of the fiscal crisis, generated by a public debt of nearly $72 billion, its exponential growth was the result of the application of U.S. policies toward its territories and local governments. Therefore, it is not exclusively the responsibility of the government or the people of Puerto Rico. As early as 1975 several studies, including the Tobin Report, already predicted that a fiscal crisis was underway and very little was done to cope with it. Many factors played in the growth of the debt burden. These include i) unfavorable changes in the U.S. economy to which Puerto Rico is intricately linked; ii) questionable practices in the international financial market and its U.S. institutions--which induced Puerto Rico to get more and more loans; iii) the availability of federal funds for costly and unnecessary projects which the island could access with relative ease when matching were available funds (generally sought through more loans); and iv) federal regulations in all areas of management, which forced Puerto Rico to create new programs to comply with determinations on which the people of Puerto Rico were never consulted. We cannot ignore that there are also questionable ethical issues around how the financial sector in the U.S. induced Puerto Rico to get more debt, and that the ruling powers, both in Puerto Rico and in the U.S., bare some of the responsibility for the fiscal crisis.

For all these reasons, Puerto Rican civil society organizations have demanded, publicly and in court, that the public debt be audited, in order to determine its origin and legality. The debt has to be cancelled, or a profound restructuring eliminating an important sum must be made, given the exorbitant interest rates that its payment requires, and the way in which it was generated. After hurricanes Irma and María, it has become crystal clear that the people of Puerto Rico are not in a position to assume its payment.

In addition to the public debt, in the Human Development Report we were able to identify many other problems that exceed Puerto Rico's capacity to solve them. It is worth noting, for example, that the strategies implemented for more than 50 years did not generate enough jobs in the private sector. This led to high and persistent unemployment rates (11.7 percent before the hurricanes); a very low participation rate in the labor market (only 40 percent in August 2017); and a very large proportion of employees only earning a minimum wage. As the private sector had persistently been very small, in comparison, the public sector seemed too large and measures to reduce it were introduced in the last decade. The reduction of the government's workforce was randomly undertaken, as part of a neoliberal public policy scheme that never sought to cut wages, benefits, or incentives to those who generate more income. The results were predictable: Puerto Rico was left with a very weak government structure, insufficient and unable to offer essential services, to carry out controls that governments need to do, and incapable of providing the necessary maintenance to the country's infrastructure. The intensity of the September winds, and the aftermath of generalized adversity that followed, highlighted the precarious response capacity of the diminished government apparatus of Puerto Rico, and contributed to the deepening of the multidimensional crisis that the country was already facing.

HURRICANE IRMA struck on September 6, 2017, leaving electricity failures in many sectors of the country. But on September 20, the electrical system totally collapsed and left the entire population of Puerto Rico without service, in more than 50 percent of the country for several months. Industries and businesses, schools, hospitals and government and municipal buildings were also without electricity for a long, long time. Almost all telecommunications towers fell, leaving virtually all the population without radio, television, cell phones and Internet access for weeks. This meant a huge economic loss, which has been estimated in around $90 billion. There is no final figure yet because thousands of subscribers are still without electricity, and we do not have a breakdown of how many of those are commercial subscribers or residential ones. In any case, the cost of recovery seems to exceed that of the public debt of Puerto Rico. Both the debt and the reconstruction costs, in addition to the low economic growth or stagnation verified during the last decade (and projected to continue in the immediate future), lead us to conclude that the Puerto Rico that we have known will never be the same again. The impact of this catastrophe on human development has been of such magnitude that it forces us to rethink the direction of public policies, the relationship with the U.S., and the strategies to redesign the new Puerto Rico.

The absence of electricity and telecommunications brought loss of jobs and income. Between the months of September and October 2017, some 31,600 non-agricultural salaried jobs disappeared, according to data from the Department of Labor and Human Resources. The sectors most affected by the loss of jobs in the private sector were tourism (15,800), commerce, transportation and utilities (7,700), educational and health services (3,400), professional services (2,300) and manufacturing (1,200). But this figure could be much higher, given that as of October 31, over 175,000 workers were waiting for employer notifications to return to their positions, but the extremely long period without electricity in the business sector and the difficulties with telecommunications that persist, will surely mean a reduction in the requests to return to their jobs.

The situation also meant an increase in household expenses, related to buying food made outside the home, purchasing drinking water, paying for repairs and cleaning of homes, and obtaining alternate sources of energy (such as solar lamps, lanterns, and power plants, which operate on the basis of gasoline or diesel, etc.). Most families could not afford to pay for any of that and became absolutely dependent on outside donations for food and shelter. The combination of an increase in the daily expenses of families with a decrease or disappearance of income, increased the level of poverty in Puerto Rico in the past two months. The Census Information Center (CIC) of the University of Puerto Rico in Cayey estimated that the level of poverty on the Island increased from 44 percent, before the hurricanes, to 52 percent after them. And most likely, many more people will cross the poverty threshold and will fall below the poverty line if the recovery process is as slow as it has been until now. The CIC report states that the 254,905 people who had an income between 25 and 50 percent above the poverty line before the hurricanes may also fall below the poverty level before the end of the year, potentially raising the poverty rate to 59.8 percent.

IT'S WORTH noting that Puerto Rican children had the greatest vulnerability of all, even before the hurricanes; and they still have it. When poverty is analyzed by age groups, one finds that before the current catastrophe, the poverty rate of children under 17 years of age was 57 percent, with big regional disparities. Some municipalities had 70 and 80 percent of children and adolescents under the poverty line. Today, most certainly, that proportion is much greater. This poses an enormous challenge, and should be assigned top priority in the reconstruction process.

The strength of the hurricane winds totally destroyed over 70,000 homes and another 250,000 suffered significant damage, according to information provided by the Department of Housing of Puerto Rico. Many public buildings, roads, bridges, dams, forests, parks, suffered enormously, and their recovery will be a titanic effort for families and for government agencies. Until now, there is no detailed analysis of the cost that repairing or rebuilding homes and roads, recreational and environmental infrastructure will entail. Nor has a comprehensive reconstruction plan been prepared with the participation of experts and the people whose properties and communities were damaged. We do not even have a firm commitment from the U.S. Congress for recovery assistance. So far, the support provided by the U.S. has focused on cleaning, restoring the energy network, and distributing food to families in need. Very little attention, if any, has been placed on getting the country in a position to initiate a path towards regaining economic growth. And even less to devising a new participatory strategy of integral, coherent, sustainable human development. Unfortunately, only civil society organizations are talking about this and generating local projects with this framework.

The decline in economic activity after the hurricanes will mean a reduction of at least $1,300 million [$1.3 billion] in the resources that go to the government's General Fund for fiscal year 2017-2018. This means less money available from the annual budget for operational expenditures, a fact that will surely lead to more government employment reduction. The Puerto Rican government will be left with a very meager staff and very limited resources for the urgent reconstruction phase. In this unfolding drama, the U.S. has not committed itself to providing relevant aid; the messages received from the White House and Congress are that they still do not know. Meanwhile, they have not allowed the United Nations System to mobilize its agencies and international cooperation for development, in order to help Puerto Rico in this humanitarian crisis.

Beyond economics, the human impact of the catastrophe is a huge one. Health professionals have expressed a concern for the high levels of personal and collective anguish evident, for the deterioration of serious mental health problems, and for the increase in suicide rates. Respiratory conditions have multiplied exponentially, due to air pollution with pathogenic particles and allergens, as well as gastrointestinal diseases, due to contamination of water supplies.

There was also greater loss of life than initially estimated. Many deaths were confirmed in neonatal hospitals, dialysis and operating rooms due to lack of electricity, in numbers that have not yet been confirmed. Many heart attacks and strokes took place in homes in the course and the immediate aftermath of hurricane María. Others were accidents in the process of preparing properties for the hurricane and in the use of power plants; while many seem to be related to fires, landslides and floods, among others. There have numerous deaths in the work environment, mostly due to accidents in the restoration of the electric power system. The process of certifying deaths and their causes has been strongly criticized by civil society organizations and we still do not have an accurate and reliable numbers of the dead. The estimates we have made of the total deaths related to the hurricane are twice the average number of deaths in a "normal" September or October in Puerto Rico. Our calculation coincides with investigations made by the Center for Investigative Journalism of Puerto Rico, the CNN TV chain, and a study conducted at the University of Pennsylvania by Alexis Santos, a demographer and Jeffrey Howard, an the epidemiologist. They state that at least a thousand people died as a direct result of the catastrophe.

THE CHALLENGES we are facing in Puerto Rico today are enormous and complex, given the precarious condition of the country and the impossibility of accessing the foreign aid we need. A sense of uncertainty and hopelessness has found a place in the hearts of the majority of the population, and the options of staying in Puerto Rico seem to be very scarce. The fragmentation of families is evident; many have had to send their elderly, their sick relatives and minors with special needs to places outside of Puerto Rico, where there is electricity. It is difficult to find a family that has not suffered the pain of seeing one of its members leave for the U.S. in search of better life prospects.

The most emblematic data on the human impact of hurricanes Irma and María are revealed when emigration data is analyzed. According to a recent projection of the Center for Puerto Rican Studies of Hunter College, between 114,000 and 213,000 residents of Puerto Rico will leave the island annually after Hurricane María. Their report estimates that between 2017 and 2019, Puerto Rico may lose up to 470,335 residents, or 14 percent of the country's population prior to September 2017. Some of those who left may return when electric power is guaranteed and working conditions are improved, but most will surely start a new life outside Puerto Rico. It is worth noting that in the process of emigrating we can find two strong variables: i) the conditions that exist in Puerto Rico, that drove them out; and ii) the attractive offers that are being made by some states such as Florida, or New York, geared to changing the balance of electoral power in those states, and to attracting more federal resources to their coffers. In that logic, Puerto Rico would be fatally trapped, becoming a political ball of contention between Republicans and Democrats, which battle for the electoral control of certain states where voting results are very close.

The first Report on Human Development in Puerto Rico reveals how even before the hurricanes the country was immersed in enormous contradictions, paradoxes, contrasts and challenges, and presented several fronts of vulnerability. This was evident in the access and distribution of resources, in the high proportion of unemployment in the country, the shortcomings in electricity and water infrastructure, the low level of food security, as well as in the high proportion of homes built in risky areas, and without the required construction codes. The plight of the two natural phenomena has forced Puerto Rico back several decades, and the road map for a dignified reconstruction process requires a massive investment of resources, a huge management capacity, the eradication of corruption and a collective rethinking of what we are, where we want to go and how we will do it.

Therefore, it's not a matter of simply doing patchwork on the problems that have besieged Puerto Rico; it's not merely attempting to recuperate what was there before the hurricanes. No; a radical change is required today; a conceptual reformulation has to guide the construction of a new strategy. We need coherent, integral, synergic thinking; we need collective action to prioritize on the reduction of poverty and social inequality, which for years has been limiting human development in Puerto Rico. We have to set specific goals, and create participatory processes and permanent verification of compliance. Social watch is required to ensure that corruption does not take away reconstruction funds that are urgently needed to restore at least a minimum of equilibrium on poor people's daily lives. We have to learn how to engage in active and serious scrutiny of government's actions, as more than 190 countries that belong to the UN have done it. We need to participate in exchanges, agreements and workshops that the Organization convenes to ensure policies are based on the respect for human rights. As you all know, the austerity measures implemented by the U.S., and which are required of Puerto Rico, are creating a society where 1 percent of the population has almost unlimited access to everything, and the vast majority of the population barely survives. This is not the society to which we, as Puerto Ricans, aspire.

WE MUST ensure that equity in all its dimensions, together with solidarity, become the anchor of the strategy to achieve a truly transformative reconstruction. Puerto Rico needs new founding principles and a development process centered on people; we need processes that are sustainable over time. We have to move toward economic and social policies based on transparency, participatory democracy, respect for human rights, equality of conditions and opportunities and a new relationship with our tropical ecosystems. Implementing a sustainable, comprehensive and diversified human development strategy will require a lot of dialogue between key social actors and undertaking a formal process of building a new social pact. Our Human Development team is deeply committed to initiating this process, and we look forward to it; hopefully with your help, Mr. Rapporteur.

We encourage you to stress in your report the need to achieve a cancellation or profound restructuring of the public debt of $72,000 million [$72 billion]. We cannot pay it; and is it not fair that we do so, because the debt was mostly induced. Because it has not been audited; because in many transactions there was corruption; because the interest we are required to pay is outrageous; and above all, because the debt was taken without people consenting it; without citizen verification; and without the possibility of reversing it.

We also hope that your report embraces our concern for developing a comprehensive socio-economic strategy, aimed at correcting the imbalances that exist in the economy of Puerto Rico. U.S. transnational corporations control and dominate our economy and their competition has weakened the productive capacity of local medium, small and micro businesses. Their prevalence has limited the possibilities of community economic development and of having a significant social economy sector in Puerto Rico. This economic structure has also generated very important imbalances between productive sectors and the types of incentives offered to entrepreneurs. The absence of value chains that could articulate the economic strategy as a whole is also a result of the export-driven model of export manufacturing and transnational retail preponderance of the Puerto Rican economy today. A high price has been paid for these imbalances. To achieve a sustainable, integrated and well-distributed human development, a new equation is needed.

To advance the goal of rebuilding Puerto Rico on a new solid and sustainable foundation, we also need to address the claims for decolonization and self-determination made by the people of Puerto Rico. In order to reach a final agreement on what the relationship with the U.S. will be, and the mechanisms for a transition process, we must engage the UN in initiating the decolonization process. For more than 40 years, the UN Committee of Decolonization has approved resolutions requesting that the General Assembly formally consider the colonial case of Puerto Rico. But the U.S. has always managed to derail the process of consideration by the General Assembly of these resolutions, arguing that this was solved in 1952. But since then, federal control over Puerto Rico has expanded in an enormous diversity of areas. The approval by Congress of a Fiscal Control Board under the PROMESA congressional law, to address the issue of public debt, is just one of the recent examples. The handling of the emergency following Hurricane María by the White House is another; and the confirmation of congressional power over Puerto Rico as an unincorporated territory in recent decisions of the Supreme Court of the U.S., are facts that clearly reinforce the colonial nature of Puerto Rico.

Just last week, the U.S. Congress approved a tax reform that will reshape the economic relationship between the Island and the U.S., without the slightest participation of Puerto Rico. Preliminary analysis suggest that the policies that have promoted economic activity in Puerto Rico in the past will be totally dismissed, to the point that the products sent by Puerto Rico to the U.S. will have to pay, for the first time, a high import quota. Puerto Rico, as you well know, distinguished Rapporteur, does not have an international forum to present a claim about this arbitrary decision.

IN SUMMARY, we want to stress that the conditions of general vulnerability prior to the hurricanes posed a serious threat basically for two reasons: i) the lack of powers that Puerto Rico has had as an unincorporated territory of the U.S.A. to build an economic structure guided by principles of sustainable human development; and ii) the severe austerity measures taken since 2009 reduced the real possibilities of well-being of the vast majority of the population, and also left a very weak government structure, unable to adequately maintain the country's infrastructure. Both factors led to a very high level of general vulnerability. The catastrophe was quickly installed when the hurricane winds began to blow.

Finally, Mr. Rapporteur, as a team we insist that there cannot be a successful project of sustainable human development if Puerto Rico does not correct its economic and social vulnerabilities; if it fails to regenerate its political arena; its institutional structure; and its party system. But above all, if it does not eradicate the scourge of corruption in public administration and generates a new society based on ethics, equity and solidarity.

The catastrophe of September 2017 demonstrated that Puerto Rico's greatest asset is its people. In the midst of devastation and without communications, or contact with the world beyond the family or neighborhood, our people went out to face adversity, opening roads, taking out debris, with solidarity as the only instrument to begin the construction of another future. Puerto Rico is strong and resilient; it has the capacity and conditions to reinvent itself--it has done it many times. But the international community must be informed of the situation we are experiencing, and the United Nations must begin to act on the case of Puerto Rico. It is extremely unfair that the Congress of the United States of America, being the ultimate power over our country, has not adopted to this date the necessary measures to support the efforts that, against all odds, we are deploying in Puerto Rico to build a more dignified, equitable and humane future for our people, by our people, and with our people.

Thank you very much.

First published in Spanish at 80 grados.

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