Erik McGregor/Pacific Press/Sipa USA via AP Images
Puerto Ricans in New York gathered ouside the Park Hyatt Hotel in Manhattan to tell corporate vultures that Puerto Rico is not a tax shelter, June 29, 2016.
During the height of U.S. intervention and CIA meddling in Latin America, anti-imperialist protesters cried out “Gringo go home” and “Yankee go home.” But now these derogatory terms are plastered on walls in Puerto Rico, figure prominently on social media, are written on placards, appear on murals, and are regularly chanted at protest marches. It’s ironic that Puerto Ricans, who are U.S. citizens, want to expel the “Yankees,” meaning other, typically white U.S. citizens from the mainland who have migrated to the archipelago in pursuit of lucrative, and exclusive, financial opportunities.
The unexpected Puerto Rican antipathy to Yankee investors evolved gradually. In 2012, Gov. Luis Fortuño, of the pro-statehood New Progressive Party (PNP), approved two controversial laws: Act 20 and Act 22 (consolidated into Act 60 in 2019). American investors are lured to Puerto Rico because these laws provide “tax benefits that Americans could not obtain anywhere else in the world.” A Puerto Rican law firm in search of clients announced that firms should invest in “Puerto Rico: America’s Last Tax Haven.” In return, investors are required to buy property within two years of moving to the archipelago, and become bona fide residents.
Fortuño lost his re-election bid in 2012 to Alejandro García Padilla of the pro-commonwealth (that is, the status quo) Popular Democratic Party (PPD), which was opposed to these laws. But after winning power, the PPD became ardent promoters of the tax exemption scheme. Thousands of drop shippers, cryptocurrency traders, e-commerce firms, financial services, social media influencers, gentrifiers, real estate speculators, hedge fund managers, and investors living on passive income have migrated to Puerto Rico in the last decade, so as to shirk paying state and federal taxes. More than 4,000 mainland U.S. residents and firms moved to the territory between 2012 and 2019. In 2021, the government received a record 1,349 applications for Act 60 exemptions, and 982 were approved.
By lavishing transplanted American high-income earners with unparalleled tax breaks and other incentives, while denying them to Puerto Ricans, the local government is provoking a wave of anti-Americanism. Many Puerto Ricans consider these economic transplants freeloaders who aggravate income inequality and are displacing Puerto Ricans from their homes. The quantity and quality of affordable housing stock is shrinking, and the homeless are living in abandoned buildings. Others have reclaimed vacant lands and transformed them into community development centers. Puerto Ricans have organized dozens of protests and maintain an active social media campaign asking the legislature to rescind Act 60 legislation. The level of popular ire against American investors has seldom been seen in Puerto Rico.
YouTube influencer Logan Paul and cryptocurrency huckster Brock Pierce are the poster boys for a new breed of colonizer, a self-absorbed investor eager to avoid taxes, with little regard, if not disdain, for the island’s inhabitants. Investigative reporting by documentarian Bianca Graulau, reports from the Centro de Periodismo Investigativo, documentaries by the Center for Puerto Rican Studies, and frequent videos and commentary on social media capture the magnitude of popular ire against the foreign settlers. According to Sen. Juan Zaragoza of the pro-commonwealth Popular Democratic Party, people want to “kick them out of the island and repeal the law retroactively … There’s a high level of hate against these people.”
By lavishing transplanted American high-income earners with unparalleled tax breaks and other incentives, while denying them to Puerto Ricans, the local government is provoking a wave of anti-Americanism.
For many Puerto Ricans, Paul, Pierce, and their ilk epitomize the Ugly American. In William Lederer’s novel by the same name, a fictional character observed that “A mysterious change seems to come over Americans when they go to a foreign land. They isolate themselves socially. They live pretentiously. They’re loud and ostentatious.” This caricature is an apt portrayal of how many Puerto Ricans see the new breed of colonizer that has recently landed on the archipelago. They live in tony Dorado and Rincón in exclusive gated communities and remain aloof from the community in which they have staked their claim. They have established organizations to pressure the local government not to amend or rescind Law 60.
These colonizers are not the typical agents of imperialism, who violently strip vulnerable countries of resources and coerce their inhabitants into brutal plantation labor. These are rentier capitalists, who come by the thousands in pursuit of a once-in-a-lifetime profit-making opportunity, at no risk.
The Puerto Rican government has failed to adequately monitor investor compliance with Act 60. Its lax attitude spurred a group of progressive Democratic congresspeople to ask the Government Accountability Office to assess the impact of Act 60 revenue for the federal Treasury and on Puerto Rico’s economy (citing fraud, failure to comply with tax exemption requirements, lost revenue for the local and federal governments, distortion of the housing market, and other adverse consequences). The IRS started monitoring Act 60 beneficiaries a couple of years ago, and announced that it would “vigorously pursue any individuals and professionals that fraudulently enrich themselves by abusing government tax incentive programs.” In July 2023, the agency revealed it is investigating over 100 individuals suspected of violating the law’s requirements.
It is ironic that the United States, which has held Puerto Rico as a colony since 1898, did not perpetuate this scheme to reward its investor class at the expense of citizens in the archipelago. The U.S. had bigger fish to fry. Gov. García Padilla unexpectedly announced in June 2015 that Puerto Rico faced an unprecedented debt overhang crisis. Thanks largely to a decade-long recession that was papered over with austerity and Wall Street–fueled borrowing, Puerto Rico had accumulated $74 billion in debt that was owed primarily to U.S. institutional investors. García Padilla warned that Puerto Rico faced a “death spiral” and that “la deuda es impagable” (“the debt is not payable”). Nonpayment would disrupt the bond market and lead to billions of dollars lost.
Fearing that U.S. bondholders would suffer catastrophic losses, Congress exerted its plenary powers over the territory. In 2016, Congress approved and President Obama signed PROMESA, a law that rescinded the fiscal autonomy it had granted the local government in 1952. The law created the Financial Oversight and Management Board (FOMB)—or as it is called in Puerto Rico, “the junta” (a term often associated with Latin American military dictatorships)—which was given control over the colony’s finances. The junta was vested with sovereign authority to restructure the debt and restore Puerto Rico to fiscal solvency.
The junta’s “solution” was to impose austerity, including shrinking the public-employee labor force, reducing pensioners’ benefits, and cutting the University of Puerto Rico’s budget by $500,000. The severity of the cuts quickly led to widespread protests from students, pensioners, teachers, and other public employees, which had little effect. The austerity measures accelerated the out-migration that started with the severe 2005 recession and the massive cuts Fortuño imposed on the public labor force.
The junta’s purpose is to extract wealth from Puerto Rico to limit the damage to private capital accumulation. It is imbued with sovereign powers and incontestable authority over Puerto Rico, a throwback to the period of military rule from 1898 to 1900 when governor generals ruled without limits to their authority. Juan Gonzalez observed in 2016 that FOMB was given “dictatorial powers” since its purpose is “protecting bondholders and paving the way for massive cuts in the island’s public services.” Indeed, as the Center for a New Economy agreed, the FOMB has powers characteristic of authoritarian regimes. According to CNE, Congress imposed on “its colonial subjects: debt restructuring in exchange for the loss of political control over government spending, taxation, and indebtedness.”
Ramon “Tonito” Zayas/GDA via AP Images
Part of a demonstration against LUMA Energy, in San Juan, Puerto Rico, August 25, 2022. LUMA utility rates are currently the highest in the United States.
Recent court decisions validate this view. On appeal, the Supreme Court affirmed in late 2022 that since the junta is vested with sovereign immunity it is insulated from all suits, which includes the release of documents that were requested by the Centro de Periodismo Investigativo, a respected independent media organization. Moreover, in August 2023 another federal court ruled that the junta had the authority to repeal a labor reform law approved by the Puerto Rican legislature.
In early 2022, after more than four years of intense negotiations, U.S. District Court Judge Laura Taylor Swain approved a debt restructuring plan that was accepted by all stakeholders. The plan saved Puerto Rico $50 billion in debt service by reducing debt payments from $90.4 billion to $34.11 billion. But the plan has its critics who oppose the cuts to public pensions, and worry that over 30 percent of Puerto Rico’s budget will go to bondholders and retirees. The Center for Popular Democracy warned that the restructuring plan “leads us down the path of austerity and bankruptcy.”
But the Puerto Rican economy is still in dire condition—made worse by the damage from various hurricanes, much of which is still not fixed—and it is still hemorrhaging population. Plus, the junta still has complete control of Puerto Rico’s finances.
ONE OF CURRENT PRO-STATEHOOD GOV. PEDRO PIERLUISI’S most controversial decisions was selling PREPA, the public utility company, to LUMA Energy, a private consortium of Canadian and U.S. energy firms concocted specially to make this deal. Over a hundred organizations wrote to President Biden to ask that he prevent privatization to avoid “an impending disaster.” The company and the government negotiated the terms of the agreement in secrecy, and did not require legislative approval.
Under LUMA, Puerto Rico continues to experience blackouts, brownouts, and voltage surges. Thousands of local businesses have incurred losses. LUMA utility rates are currently the highest in the United States, but it struggles to maintain a regularly functioning electric grid. Persistent public outrage compelled Gov. Pierluisi, who was an indefatigable LUMA proponent, to publicly reprimand LUMA for its poor performance. As public pressure mounted, the legislature asked LUMA in April 2022 to submit documents about its operations. The legislature sued LUMA when it refused to comply fully with the request, and in November a Puerto Rican judge “ordered the arrest and immediate transfer to jail” of LUMA president Wayne Stensby.
Stensby quickly complied with the judge’s request. In October 2022, the U.S. House of Representatives Committee on Natural Resources held hearings on LUMA operations. It also demanded key data after Stensby failed to answer questions fully and “refused to answer others.” LUMA’s lack of transparency, deteriorating service and rate increases, dismissive treatment of the legislature, and strained relations with labor have spawned regular angry protests. Journalist Ed Morales commented that the privatization of the power authority “is part of a larger move to gut public goods for private profit.”
None of this had any effect on Gov. Pierluisi, who authorized the sale of the Puerto Rico Electric Power Authority to Genera PR, a subsidiary of U.S.-based New Fortress Energy. Genera PR was awarded a ten-year contract for power generation and to manage the decommissioning of the public utility. Not surprisingly, Puerto Ricans who are skeptical of privatization protested the sale. A local energy sustainability group criticized the sale as “another expensive transaction full of conflicts of interest and a contractor that has broken contracts and laws.”
The growing popular discontent is a diffuse and amorphous movement, but it is determined to end conditions that American colonialism has created.
In its singular pursuit of American investors, the local government has ignored political protests and demonstrations, disregarded the concerns raised by opposition political parties, and ignored studies that caution against privatizing the public power utility. For many Puerto Ricans, the Pierluisi government seems intent on converting the archipelago into a dystopia for its people. The chant often heard at protests conveys a sense of displacement and removal: “Puerto Rico se defiende, no se vende” (“Defend Puerto Rico, it is not for sale”). The governing PNP party is not representative of the electorate, nor does it have the mandate for the policies it has enacted. Gov. Pierluisi obtained only 33 percent of the votes in the 2020 elections, and his party suffered huge losses in the legislature. Lacking a mandate for the extraordinary changes he has imposed, and for his cozy relationship with the junta, Pierluisi is regularly castigated in social and print media for abusing his power.
The growing popular discontent is a diffuse and amorphous movement, but it is determined to end conditions that American colonialism has created. One problem, however, is that Puerto Ricans disagree about what to do about their country’s future—seek independence or free association to escape U.S. meddling, or seek statehood to have influence over U.S. policy and attain the long sought-after first-class citizenship. But for now, Puerto Ricans want to resolve the crises that mar their lives.
Two opposition political parties want to do just that. The Puerto Rican Independence Party is committed to ending the nation’s colonial status and transitioning to a sovereign independent Puerto Rico, but understands the urgency of combating the multiple crises that fuel popular indignation. Its 2020 campaign platform merely calls for a “revision of our relation with the United States and the drafting of a statement that will serve as the basis for a new Constitution.” The insurgent Movimiento Victoria Ciudadana agrees that the people are fed up with the interminable politics of status. Its “urgent agenda” is a politically inclusive statement that endorses all decolonization options. The MVC’s priority is to “rescue public institutions and fight corruption” to set the conditions for “social, economic, environmental and fiscal reconstruction.”
The FOMB, LUMA, and Act 60 have two things in common. They were imposed over the opposition and resistance of the people. All are instruments for extraction of wealth from Puerto Rico. The FOMB appropriates public revenues for debt repayment. Act 60 permits U.S. rentier capitalists to displace Puerto Ricans from livable housing and is responsible for the wave of gentrification. LUMA extracts wealth from captive consumers and siphons its profit to the United States and Canada. The FOMB, Act 60, and Luma Energy collectively resurrect the state-engineered process of accumulation by dispossession that marked the first three decades of U.S. colonialism.
Puerto Rico is quickly devolving into a dangerously fragmented society. With an entrenched and corrupt PPD/PNP political class controlling the local government, Puerto Rico will continue its descent into a deeply inegalitarian society. A foreign rentier class and its island compradors will luxuriate in a tropical paradise while the rest of the citizenry clings to an increasingly precarious dystopian existence in which education, health, housing, infrastructure, and the environment are all sacrificed to foreign capital. “Puerto Rico is not for sale” is the clarion call for activists who fight the state-abetted displacement that is transforming Puerto Rico into a Caribbean poorhouse.
