Puerto Rico suspends mass layoffs

By Tom Soto
San Juan, Puerto Rico

In September 2004, Moody’s Investor Services and Standard & Poor’s—two Wall Street credit rating houses—quietly announ ced they were downgrading the credit worthiness of Puerto Rico’s government bonds.

Moody’s cited a government debt of $39.4 billion—up almost $8 billion over the last 2-1/2 years—that makes Puerto Rico’s per capita debt higher than crisis-racked Argentina’s. Moody’s also pointed to the government’s $1.5-billion deficit in the fiscal year 2005 budget, which began in July.

In February 2005, Gov. Anibal Acevedo Vilá appointed William Lockwood Benet, “an expert in innovation of economic policy with experience in privatization transactions and bond issues,” to preside over Puerto Rico’s Development Bank and to lead the efforts “to reestablish Puerto Rico’s credit worthiness.” Lockwood’s “profes sion al experience” included former positions at Banco Popular of Puerto Rico, Citibank Global Finance, Merrill Lynch and Conservation Trust.

Offensive against workers and poor

In July, Governor Acevedo declared that, due to Puerto Rico’s debt and budget crisis, his administration had made the “painful and historic decision” to lay off 40,000 public employees out of a total of 312,000.

In addition, the government announced that water usage rates would increase by 128 percent, bus fares by 50 percent and highway tolls by 43 percent. In the last three years the price of electricity has risen 60 percent, while gasoline prices, even before Hurricane Katrina hit the Gulf Coast, were at the all-time high of $3 to $3.20 per gallon. The government has also announced it will increase yearly car registration fees by 100 percent.

In April, the University of Puerto Rico, which includes 11 campuses serving 70,000 working class students, introduced a 40 percent increase in tuition fees. A month-long student strike failed to revoke the increase, but students are continuing their struggle.

With many union contracts coming up for renegotiation, the governor has ruled out wage increases and has declared he will not sign any bills that require increased spending. Several labor laws are pending before the Legislature.

The first immediate victims of the announced cutbacks in social services were 600 children from the poorest communities whose government-supported daycare centers were closed.

A developing atmosphere of struggle

The announced layoffs, the reduction of social services, and increased prices for basic food stuffs and other commodities have generated shock, uncertainty and worry among workers and their families.

The most vocal opposition to the layoffs and cutbacks has come from the island’s organized labor movement, which is calling for a fightback campaign.

Unions representing the public employees as well as other sectors of the economy have denounced the layoffs and cutbacks as “unjust” and have demanded that the government tax the banks and the rich instead. They include the Federation of Puerto Rican Workers (Federación Puerto rriqueña de Trabajadores), the Union of Puerto Rican Workers (Sindicato Puertorriqueño de Trabajadores), the General Union of Workers (Unión General de Trabajadores), the Federation of Teachers (Federación de Maestros), the Electrical Industry Workers Union (Unión de Trabajadores de la Industria Eléctrica), the Teamsters (Unión de Tronquistas), and others.

The labor movement has warned the government that going ahead with its plans for mass layoffs and cutbacks could provoke a general strike like the one that occurred in 1998, when the unions paralyzed the country to protest the privatization and sale of the Puerto Rican Telephone Co.

Forced reduction of working hours

Though the opposition movement is only beginning, it has been so quick, sharp and vocal that the government has attempted to dress up its austerity plan by “asking civic-minded public employees to voluntarily work four days instead of five.”

All the unions have rejected this so-called voluntary reduction of working hours, but the governor has insisted that if public employees don’t participate voluntarily by Sept. 1, the reduced work schedule will be mandatory.

José González, a maintenance employee who has worked for 17 years at La Fortaleza (the governor’s mansion in old San Juan), told the newspaper El Nuevo Día: “A reduction of 20 percent in my salary would be a serious blow to my family. ... I earn $449 bi-weekly. Can you imagine removing 20 percent of my salary, with all the loans and bills to pay?”

In Puerto Rico, on average, 50 percent of a worker’s salary is committed to the payment of personal debt.

Unions begin to organize fightback

In August, organized labor began pulling out its members for noon-hour “warm-up demonstrations” in front of government buildings. On Friday, Aug. 12, 5,000 public employees and their supporters gathered at the Capitol Building demanding the intervention of the Legislature to avert the crisis. They later marched to La Fortaleza under the slogan: “Tax the rich.”

Some unions have mobilized delegations to lobby the members of the Legis lature, pressuring them to approve a tax on bank, corporate and Big Oil profits, which are at record levels but declared “untouchable” under the current capitalist model of this colonial economy. But as occurs in other capitalist countries, the governor blames the Legislature for not approving his budget, and the Legislature blames the governor for the current $1.5-billion deficit—all of which is calculated to mask the real problem and deceive the workers.

Two tendencies in labor movement

The organized labor movement in Puerto Rico is divided into two wings. Most public employees directly affected by the layoffs are represented by unions whose orientation is class-collaboration ist, favoring a non-struggle approach in the current crisis. Some of these unions are tied to the AFL-CIO in the United States.

The left wing of the labor movement is led by the Electrical Industry Workers Union, the Federation of Teachers (the largest union in P.R.), the Puerto Rican Workers Council, the Teamsters and the Brotherhood of Exempt and Non-Educational Employees, among others.

These unions are more class-conscious and struggle-oriented and are attempting to forge a fightback alliance within the labor movement. They openly criticize corruption within the government as well as union bureaucracy. They emphasize greater worker participation and often form community-labor coalitions to fight for working class political and economic objectives.

What lies behind the debt crisis?

Puerto Rico has been economically trans formed since the Spanish-American War in 1898, when it was invaded by the United States and taken over as a U.S. colony. Having developed a considerable economic infrastructure, Puerto Rico has become highly lucrative for foreign investors.

A recent advertisement for the Offshore Corporation explains: “Puerto Rico provides unparalleled value that no other location can match. It is a United States community with a foreign tax structure. Here you can enjoy the benefits and protections of operating within a U.S. jurisdiction with the added tax benefits of operating under a Controlled Foreign Cor po ration (CFC) structure. Profits from sales to the U.S. mainland are free from U.S. taxation, and goods enter the U.S. market duty-free. In addition, Puerto Rico offers a highly attractive incentives package that includes 100 percent exemption from multiple taxes; special treatment for pioneer industries and much more.

“With a 7 percent maximum tax rate, tax deductions and exemptions, cash grants, and a financial environment with scores of financing options, Puerto Rico eases the financial burden of your company, making it the perfect place for profits and growth. The government of the Commonwealth of Puerto Rico is committed to supporting this pro-business view by offering a wealth of incentives and favorable tax laws combined with cash grants, tax credits and venture capital initiatives, further enhancing your bottom line.”

Who pays for all the unparalleled “benefits and incentive packages” for foreign corporations alluded to in this advertisement? The working people of Puerto Rico do. According to the Development Bank of Puerto Rico, in the fiscal year 2004 the island’s Gross Domestic Product was $78.8 billion; of that, $30 billion went straight into the pockets of U.S. investors. In that same year, per-capita income was reported at $12,947.

If one looks at the corresponding profits taken out of Puerto Rico over the previous 107 years of U.S. colonial capitalist domination, and add that to the debt service to the banks, which is now at $1 billion each year, you begin to understand what is really behind the so-called debt crisis.

The current struggle being generated by the so-called debt and fiscal crisis in Puerto Rico is a reflection of the fundamental contradiction of capitalism: that while the working class collectively produces all the wealth of society, this wealth is appropriated by a handful of private corporations and banks.

Due to the enormous pressure exerted by the labor movement, the government of Puerto Rico thus far has not gone ahead with its announced plans of mass layoffs.

In late August, Benet, the “expert” president of Puerto Rico’s Development Bank, suddenly resigned for “personal reasons.” Two weeks later the government “found monies it had not included in its original calculations,” and now claims the deficit is down to $300 million.

We will see what the Puerto Rican government decides to do, but in the meantime organized labor has begun to lay the groundwork for any future struggle that may be necessary.

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