Fantasy Island, page 25
—Puerto Rico governor Ricardo Rosselló
Most Puerto Rican and diaspora thinkers and activists were strongly disappointed with the PROMESA process, its imposition of the Fiscal Oversight and Management Board to supersede local government, and its clear mandate to carry out debt restructuring to favor the US financial sector. The mainstream Democratic Party was by no means exempt from this disappointment, as its members in Congress for the most part had acquiesced to the PROMESA deal as the only resort to address the spiraling debt crisis. They accepted the neoliberal premise that a “bailout” from the Federal Reserve was unacceptable and acknowledged that the best thing that could be done for Puerto Rico was to put it on a somewhat painful path to regain “access to capital markets.” Yet as exasperating as the Democrats’ (with the exception of Bernie Sanders and, to some extent, Representative Luis Gutiérrez) accommodationist stance turned out to be, the election of Donald Trump turned Puerto Rico’s situation from bad to much worse than could have been previously imagined.
As I’ve chronicled through much of this book, Puerto Rico has long been a kind of fantasy island for all manner of US economic and political ventures as well as ways of reformulating its power through the control of nonterritorial subjects as well as offshore economies. It has been a scientific laboratory for dangerous chemicals and unproven birth control methods, a dumping ground for unwanted or overstocked products and a place where American industry leaders could test their ability to work with a large population of employees who didn’t speak English. It’s been a place where the idea of North American free trade could be proven to benefit large corporations, and nonwhite men with limited English skills could be drafted into the armed forces. Lastly, it’s been a place where the United States could experiment with tax policies that allowed for the accumulation of capital under conditions that were virtually offshore yet still within US territory and under the laws of the US banking system.
Now, with the end of Keynesian demand-side economic policy, the decline of labor unions, and the turn toward universal neoliberal privatization and worker disempowerment, Puerto Rico was poised to enter a new phase of extreme exploitation. With the twin devastation of the imposition of PROMESA to restructure the island’s debt in favor of hedge and vulture fund investors and the widespread devastation caused by Hurricane María, Puerto Rico became a ripe target for what Naomi Klein calls “disaster capitalism.”1
The disaster of Hurricane María created the perfect conditions for neoliberal capitalism, which needs a contraction of population and resources in order for a new capital project to expand quickly ex nihilo—from “nothing.” The “blank canvas” Governor Ricardo Rosselló alluded to at an investor’s showcase in New York in February 2018 sets disaster capitalists’ mouths watering. Even better, from their perspective, was the reality that—unlike New Orleans, a recent setting for disaster capital explosion after Hurricane Katrina—Puerto Rico lacked the full protection of US laws and had already created laws to nurture a community of super-rich speculators. There was also the scope of the destruction to consider. It wasn’t just neighborhoods like the Lower Ninth Ward that were severely affected; it was the entire island. The Shock Doctrine—a phrase coined by author Naomi Klein to describe how neoliberal powers take advantage of national economic and political crises to push through new policies that disaster-fatigued citizens find difficult to mount a resistance against—was looming to become Puerto Rico’s way of life, its new normal.
Just weeks after Hurricane María, on October 2, the government of Puerto Rico awarded a $300 million contract to reconstruct fallen power lines on the island to a company based in Secretary of Energy Ryan Zinke’s hometown of Whitefish, Montana. The company, called Whitefish Energy, had two employees, including its CEO Andy Techmanski. Apparently Ricardo Ramos, the CEO of PREPA, had already been in contact with Whitefish during the recovery period for Hurricane Irma. Ramos said he felt the company had “special skills” because of its experience with rebuilding electrical infrastructure in the mountainous areas of Montana.2 Despite the fact that Whitefish did not have numerous linemen on its staff and had no experience working in disaster conditions nor a tropical climate, Ramos quickly signed a deal with Whitefish, ostensibly because they did not ask for any money upfront.
Ramos had the option of asking for mutual aid help through the American Public Power Association, but he was quoted telling CNN’s HLN network that he didn’t think they would respond quickly enough because their resources were already stretched thin in Texas and Florida dealing with Hurricanes Harvey and Irma. Almost immediately questions were raised about Zinke’s involvement with the deal, but in late October he issued a statement denying any ties. Yet a few weeks later it was revealed that Techmanski had hired Zinke’s son as an intern and that the firm’s biggest investor was a Dallas-based firm that had given huge campaign contributions to Rick Perry, John McCain, and Marco Rubio.3 Ramos also rebuffed these concerns, saying, “The doubts that have been raised about Whitefish… are completely unfounded”—implying that competitors who were disgruntled from having lost their bid were spreading the criticism.4
The contract was rather rich by even normal standards. The hourly rate for a site supervisor was $330 and a journeyman lineman would receive $227.88 per hour, but even worse, the rates for subcontractors, which were the majority of Whitefish’s workforce, were $462 per hour and $319.04 per hour. Nightly accommodation fees of $332 per worker, with an $80 a day meal money rate, also attached. These rates compared with reports that Whitefish’s subcontractors from the Jacksonville Electric Authority were making $90 an hour (twice as much as subcontractors normally made), which would mean Whitefish would be pocketing over $200 per hour per worker through the terms of the contract.
The Whitefish contract was followed in mid-October by a $200 million contract with Cobra Acquisitions LLC, a subsidiary of Oklahoma City–based oil company Mammoth Energy Services, Inc. The contract contained the same language as the Whitefish contract, stating that neither PREPA, the commonwealth governor, FEMA, nor the US comptroller general would have “the right to audit or review the cost and profit elements of the labor rates” in the contract.5 The Whitefish controversy ended with the cancellation of its contract at the end of October 2017, with Rosselló calling for a federal investigation of the contract award process, ultimately forcing Ramos out of his job by mid-November.6
FIRST ON THE NEOLIBERAL LIST: THE PRIVATIZATION OF PREPA
The Puerto Rico Electric Power Authority was under fire from all sides in the aftermath of Hurricane María. Already targeted for privatization before the storm because of its $9 billion debt and ample evidence of the electrical grid’s deterioration, PREPA was now elevated to a number-one priority in the disaster capitalist playbook. Although this plan had been considered during the original stages of the PROMESA board and would be just the latest in a series of privatizations that go back to the Pedro Rosselló administration in the 1990s, dissolving PREPA would kick off the island’s new era. Since then Puerto Rico has privatized its phone company, its international airport, the toll collection for its major highways, various municipal medical clinics, and parts of its aqueduct and sewers authority. None of these moves have improved service to consumers, and almost all have resulted, as was the case when Chicago and Detroit privatized their parking meters, in higher costs.
The FOMB itself had been explicitly on the privatize-PREPA bandwagon months before Hurricane María. In an unapologetic opinion piece for the Wall Street Journal toward the end of June, board members Andrew Biggs, Arthur González, Ana Matosantos, and David Skeel endorsed the privatization move, saying they came to the decision after rejecting PREPA’s restructuring proposal filed in March of that year. The FOMB used a simple, neoliberal logic to justify privatization: “Puerto Rico’s electricity costs are two to three times as high as mainland levels. The board concluded that lowering the price of electricity and spurring economic growth depended on reforming PREPA’s operations, not merely restructuring its credit. Affordable electricity could boost growth by up to half a percentage point annually, raising family incomes on the island, stemming out-migration and increasing funds available to repay creditors.”7
This reasoning leaves out a crucial reason for the higher rates: electricity generation in Puerto Rico is almost entirely dependent on imported oil. It also failed to take into account that there is no guarantee that privatization would lead to more affordable electricity or that because a variety of factors—including access to education, stable employment, and health care—cause out-migration, lowering electricity costs, if achieved at all, would not necessarily “stem” it. This logic is often used to disguise the guiding principle of neoliberalism, which is neatly embodied in public-private partnership (PPPs) projects: selling off public corporations is most efficient at making the public pay for the costs of something like providing consumer electricity while also making it easier for private companies to obtain profits from production and distribution. This model can most clearly be seen in the oft-considered strategy of privatizing the generation and sourcing of electrical energy, while PPPs would handle transmission-line infrastructure rebuilding and repairs.8
A Puerto Rico Center for Investigative Journalism report revealed that as early as October 18, 2017—less than a month after Hurricane María—Arizona senator Jeff Flake and Utah senator Mike Lee had been pushing for privatizing PREPA. This was uncovered through emails written by their representatives to FOMB member Andrew Biggs. The report claimed that Flake and Lee “delayed granting supplementary disaster-relief funds to Puerto Rico” until amendments to reform the island’s “energy sector,” including privatizing PREPA, were included in the legislation. Biggs apparently acted as a conduit so that messages could be sent to FOMB budget director Ana Matosantos, providing a backdoor channel of interest—out of the public view—to promote the interests of ExxonMobil, Duke Energy, and Chevron. These corporations were among the oil and electric utility companies that had donated almost $800,000 to Flake in previous campaigns. Lee’s donations, which included funds from Chevron, Haliburton, and Koch Industries, totaled almost $550,000.9
The following January Governor Rosselló announced that PREPA would be privatized. Calling the system outdated and inefficient, the governor criticized PREPA as monopolistic; noted that electricity generation was obsolete and depended almost completely on importing gasoline and that its south-north delivery system was inefficient, in which gas is manufactured from coal ash in southern towns like Peñuelas and electricity is then transmitted to a plant just west of San Juan; and cited how, in the last five years, 30 percent of PREPA workers had been laid off—all without mentioning the government’s role in perpetuating the system’s ills. This privatization would be accomplished in three stages: first, the legal framework would be defined, then buyout offers considered, and finally, the winning bid would be awarded. He promised a “transformation” of the system that would be “community centered,” innovative, technologically advanced, and—this is key—“financially viable.”
There are several ways to interpret what the still-in-negotiation privatization of PREPA will mean. Will Rosselló be able to fulfill his fantasy of some kind of variation of Elon Musk’s proposed micro-grid reorganization, whose benefits seem significant but whose control could fall into the hands of external corporate interests? How would the settlement of its $9 billion debt—the restructuring of which was completed in November 2018—affect bidding? Finally, how exactly would different parts of PREPA, including electricity generation, be sold off? Even as four bidders were announced in January of 2019—Exelon Corp; PSEG Services Corp; a consortium of ATCO Ltd., IEM Inc., and Quanta Services; and Jeff Flake campaign contributor Duke Energy—there were clearly inescapable problems to privatization. Whether you take the bottom-line humanist angle of UTIER president Ángel Figueroa Jaramillo, who declared passionately that “PREPA is a public good that belongs to the people and not to the politicians of the day…. Energy is a human right and not a commodity,” or the economist position that the public-private partnership mechanism that dominates this process will make decisions about the need for restoring and extending services on a purely for-profit basis, it’s clear that this is just another way to subject Puerto Ricans to crucial policy decisions that are made far beyond their control and completely lacking their input. When the executive director for the island’s Public-Private Partnership’s Authority, Omar Moreno, while addressing investors in a San Juan hotel, equates “the people” with “the people of the private sector” as the just authority over what projects would be picked to modernize Puerto Rico’s infrastructure, it’s a clear indication of the Orwellian doublespeak involved in this process.10
There is an irony to the arguments over PREPA’s privatization that involves who ultimately controls what happens in its restructuring processes on both the debt-restructuring and infrastructure rehabilitation and reconstruction side. The interests for privatization say that PREPA has been held hostage by its “politicization,” meaning that it has been corrupted by favoritism in handing out contracts to cronies of whatever political party is in control. Yet privatization and its public-private partnerships are designed to create favoritism based on relationships outside the island and in the mainland United States. The Puerto Rican people are essentially being asked to accept a shift in favoritism/corruption from its own elites to “mainstream” elites who are arguably even less likely to intervene in their favor. It’s essentially a neoliberal process of favoring globalization over local capital and/or governance, using the same sort of mainland US scams—like “retail choice,” which largely has the effect of imposing higher rates on the consumer—something that has produced markedly unfavorable results to electricity consumers in the New York area for years.11
One of PREPA’s earlier forays into privatization involved investing in private companies that generated electrical power from coal ash. The main problem with this strategy is that the residue of the coal ash left in the water supply generates a tremendous danger to the environment, particularly the fragile ecosystems of a southern Puerto Rico coast, which is dotted with the ruins of the failed petrochemical plants of the 1970s. In early August of 2017, in the southwestern town of Peñuelas, there was an uptick in police violence against a stubborn group of one hundred or so protesters fighting the deposit of toxic coal ash in local landfills. The ash had been transported by the energy company AES, which operates a Guayama, Puerto Rico–based electric-power plant, to the Dominican Republic in 2016. This severely contaminated a small town, caused widespread disease among adults and children of another small town where the ashes were dumped, and was subsequently rerouted to a landfill in Peñuelas, a community that had in the past been subjected to contamination from the petrochemical plants.12 The government said at the time that coal produced about 15 percent of the total amount of electrical energy generated by PREPA. PREPA warned in mid-July that if its use of coal was disrupted, the cost of electricity would rise by 2.5 cents per kilowatt-hour, or 15 percent, and that this would also increase the number of blackouts.13
On July 4, 2017, the Puerto Rico government passed a law stating that a toxic element of coal ash, called fly ash, could not be deposited anywhere on the island. This prompted AES to turn to using a new product called Agremax, which mixed fly ash with other forms of ash and water. On August 6 a court in nearby Ponce dismissed a suit that claimed dumping it would cause health and environmental damage, such as chronic respiratory and coronary disease and contamination of rivers and reservoirs. The ruling said that, according to Puerto Rico’s Environmental Quality Board, the dumping was in compliance with law and did not pose an environmental threat. The Puerto Rico Center for Investigative Journalism has reported that the coal ash was shipped in freighters to the Dominican Republic, where it wreaked havoc with that island’s ecosystems, and there was a brief panic in Puerto Rico after Hurricane María concerning Agremax’s inability to contain the ash during the storm. Studies remain to be done about any effects that may have had on local streams and rivers.
The presence of the toxic dumps in their communities naturally led students and environmental activists to begin engaging in organized activism. Gerardo Medina Rivera, an adjunct professor at the University of Puerto Rico–Ponce and a Peñuelas resident, argued that despite the court ruling, Agremax contains highly toxic elements and that the government should explore safer ways of producing energy. Medina Rivera had been part of a protest encampment that the community had sustained for two years. The encampment was similar to the one that protested the imposition of PROMESA, and like the university-based resistance movements of 2010, 2011, and 2017, in the wake of the imposition of the FOMB, it combined youth with labor and environmental activists and was organized in a horizontal rather than hierarchical structure.
Tactical police and a riot squad regularly visited the encampment, deploying tear gas and similarly violent confrontational methods. Puerto Rico is vulnerable to the kinds of harsh police oppression of environmental activism that has been increasing in Latin America, most notably in countries like Mexico and Colombia. Questioning the primacy of global oil and energy interests is a role a resistance movement can play that can create a volatile situation in terms of public protest. In Puerto Rico’s case, direct ties to lobbyists for those interests, represented by Congress members like Rob Bishop and Jeff Flake, provide an incentive for the state to protect those interests over those of their own citizens. One of the more notable examples of the perils of environmental activism was the movement led by eco-activist community organization Casa Pueblo, which led the fight against Luis Fortuño’s ill-fated Gasoducto project in 2011.
