It’s official: America now has a failed state within its borders, just the way Europe has Greece.
America’s biggest unincorporated territory, Puerto Rico, effectively ran out of cash this summer and has stopped paying its debts. Now, Congress is putting together an oversight board to call the shots until the island gets back on its feet.
The similarities with Greece are uncanny: a sunny vacation paradise that suddenly goes bust, a huge debt taken out in a currency — the euro, the dollar — that’s too strong for the local economy. Both crises have elicited long debates about what went wrong, whose fault it was and how to respond. Austerity? A bailout? Something else?
While the debates drag on, things get worse on the ground.
In Washington, Puerto Rico’s woes are often described in terms of a “humanitarian crisis” — a phrase that evokes famine, war, skeletal children and shellshocked refugees arriving by the boatload. But that is not what you see in Puerto Rico. What you see is a perplexing panorama of contradictions.
There are fully stocked supermarkets and vacant houses. Gleaming commuter trains rolling past boarded-up storefronts. Patriots who denounce Yankee imperialism and shop at Walmart. Twelve percent unemployment and no one to pick the coffee crop. Teenagers dancing in sequined prom dresses while the homeless sleep outside on the sidewalk. It is America, beneath a surreal veneer.
You don’t see the devastation on view in Detroit in the depths of that city’s historic bankruptcy — but Puerto Rico’s debt is, in fact, much bigger than Detroit’s. Frightened people are leaving for the mainland, but there are still those who hope that federal oversight will bring change, and give them a reason to stay. Already, some are even coming back.
“This is an amazing place,” said José Rojas, 23, who was 6 when his parents left small-town Puerto Rico to seek work in Ohio. Now he’s back, sitting on his family’s porch at the top of a hill overlooking one of the island’s coastal cities, catching the breeze and communing with friends on social media. Sure, the house is cramped and sometimes the power and water cut out. But things are better here, he said. His family can grow its own food year-round, and keep hens for fresh eggs. On a clear day, he can see the ocean.
“I’m stuck here now, but that’s just because I don’t have a car,” he said. “A lot of the kids here were raised before there was even a road. The houses were all built of wood then. Now they’re made of cement.” A concrete house can ride out a hurricane.
Others are less upbeat. No one knows yet how intrusive federal oversight will be. Some expect a destructive clash of cultures. A majority of the seven-member board will be Republican; Puerto Rico’s current government is aligned with the Democrats. Will things get worse before they get better? How much worse? Will they ever get better?
Even if they aren’t struggling with joblessness, most Puerto Ricans are struggling with a gnawing fear of the unknown, said Miguel A. Soto-Class, president of the Center for a New Economy, a research institute in San Juan.
Every day, he said, he gets calls and texts from people asking him what’s going to happen and how to prepare. He doesn’t know. The situation has no precedent.
For months, he said, he has had the phrase “Dancing to the Precipice” in the back of his mind. It’s the title of a book about life at Versailles before the French Revolution. But to him, it captures the feelings of foreboding and powerlessness that seemingly everybody in Puerto Rico is dealing with now.
“We’re dancing toward a precipice because we don’t know what else to do,” he said. “There’s a lot of this in Puerto Rico.”
Here are some of the dancers.
LIVING ON NEGATIVE RENT
“Puerto Rico is Macondo. I shouldn’t say it, but it’s true.”
Night is falling over the Nemesio Canales housing project. In the yard, between the yellow low-rises, a Pentecostal group is setting up a tent, folding chairs and conga drums.
“Surely, the presence of the Lord is in this place,” they sing. “Siento su gran poder y su gracia — I can feel his mighty power and his grace.”
The music floats out over the flapping laundry, the barred windows, the strutting roosters and the scrawny cats. Someone rattles a tambourine.
“I’m dying to leave this place,” says Dalia Ramos, 32, perched on the arm of her sofa with her brood: Esmeralda, 12; Aramis, 10; and Jandiel, 7. The sofa is the only real chair in the room.
Home is a third-story walk-up directly under the roof, and it’s hot. Some of her neighbors have air-conditioners, but Ms. Ramos can’t afford one. She teaches Spanish at a private high school, earning a salary so low she qualifies for both subsidized housing and food stamps.
With just a couple of fans to stir the hot air, the family keeps the windows open. There’s no escaping the tent show.
“I can hear the rush of angels’ wings.…”
Welcome to public housing in Puerto Rico, a realm of high intentions and low outcomes. The island has America’s second-largest public housing system, after New York’s. Roughly 125,000 people inhabit 54,000 apartments, paying rent according to a federal formula: Rent, plus utilities, must be no more than 30 percent of a household’s adjusted income.
Paychecks here are small, and the tenants’ rents are never enough to cover the system’s costs. So Washington subsidizes the rest, currently to the tune of $254 million a year.
It isn’t the housing that’s making Ms. Ramos want to leave. It’s the crime and a culture of cheating.
“Negative rent!” she exclaims. “It doesn’t exist in other parts of the world, but in Puerto Rico, sí!”
Public housing experts say “negative rent” is theoretically possible; Ms. Ramos says she sees it all around her. She pays to live in the projects, but other people have found ways to be paid.
The projects were built to house the working poor, like her, but over time they have cultivated a beat-the-system culture, in which working off the books and lying about your income means getting more money from Washington.
“I have all these people around me who don’t pay anything,” she says. “They just hang out.”
The school where Ms. Ramos teaches is registered with the Puerto Rican tax authorities. That means the Public Housing Administration sees every aspect of her finances: earnings, withholdings, loans. It plugs the facts into the federal formula and says she should pay $320 a month.
But not all employers are registered. As much as a third of all economic activity in Puerto Rico is off the books — from the homemaker running a hair salon in her kitchen to the drug dealer working out of a tackle box. People see the system as stacked against them, especially now, when the government keeps raising taxes to pay an incomprehensible debt.
So people lie about their incomes, seeing it as the only way to protect themselves.
Federal Housing and Urban Development records say that 36 percent of the families in Puerto Rico’s housing projects have incomes of zero. By law, tenants with no income must pay $25 a month. This turns into “negative rent” when their electric bills are factored in.
That’s because Washington gives public housing tenants a “utility allowance,” which is normally deducted from their rent. But if someone is paying just $25 a month, for example, and gets a utility allowance of $65 a month, they’ll end up with a “negative rent” of $40. It’s paid in cash.
Some people pocket the money and stiff the Electric Power Authority, a government monopoly with a bad track record for bill collections. The Power Authority is responsible for $9 billion of the government’s $72 billion debt. It could use the money.
Ms. Ramos suspects that if rates go up, Washington will send bigger utility allowances — and people living on “negative rent” will get more money. She falls back on Gabriel García Márquez to explain it. “Puerto Rico is Macondo,” she says, referring to the town in “One Hundred Years of Solitude,” where inexplicable events are part of the routine. “I shouldn’t say it, but it’s true.”
HORSES IN THE SCHOOLHOUSE
“They charged $100,000 per home, and it should have been $30,000, tops.”
In 2001, Puerto Rico opened a new front in the war on poverty. It identified 742 “Special Communities” — places left behind when the rest of the economy grew. It sent organizers to find local leaders who could name the most pressing needs. And it set aside $1 billion for projects in a dedicated trust fund at the powerful Government Development Bank.
The money would come from the central government, but the ideas would come from the grass roots — the people who knew best what they needed.
First, the board surveyed residents. More than anything else, people said they wanted run-down housing fixed. The Government Development Bank released money to rebuild 11 houses. Work began.
Mr. García said he began to have qualms when he saw one contractor charge $15,000 for putting a simple tin roof on a house. He knew it was way too much. And it kept happening.
“They charged $100,000 per home, and it should have been $30,000, tops,” he said.
Meanwhile, as one branch of the government spent millions trying to revive his hamlet, another one spent millions all but cutting it off from the rest of the island. The Highways and Transportation Authority, with its eyes on the island’s whole economy, expanded an expressway nearby, which the planners hoped would make it easier for outlying manufacturers to get their goods to San Juan for export.
The completed expressway had no exit near Abra San Francisco, and it blocked the area from all public transportation and nearly all business activity. People with jobs had no way to get to work. Families started moving away.
The gleaming new expressway didn’t work its magic, either. In the face of tax increases and a deep recession, manufacturers closed.
Today, Abra San Francisco’s biggest problem isn’t dilapidated houses, Mr. García said. It’s empty houses. Vacancies spread blight. Squatters pull the windows right out of their frames, climb in and do drugs.
“Would you like to see our ‘farm school?’” asked another board member, José Hernández.
They led the way down a path. Mr. García said he spent six years wangling $50,000 to expand the schoolhouse. But by the time the money came through, a stream of families had left town. So the Department of Education closed the schoolhouse.
Today, the building is a makeshift horse stable for a nearby racetrack.
The board thought that the schoolhouse could at least be turned into a study hall or a tutoring center. “There are tons of kids here,” Mr. García said.
So they asked for money to get rid of the horses. But the officials said there was no money left.
Meanwhile, the Highways Authority — flirting with default on its debt — privatized the expressway. Then it defaulted anyway. Now it wants to take over Abra San Francisco’s school and turn it into an administrative building. But the Department of Education still holds the title and isn’t giving up yet.
COCKTAILS WITH COLUMBUS
“The way I see it is that the government steals from the government, and the people also steal from the government.”
The federal oversight board that will soon take charge of Puerto Rico’s finances has been given investigative powers, in the hopes it can find out where the money went.
Some people here think they already know.
“The way I see it is that the government steals from the government, and the people also steal from the government,” said Mr. Rojas, whose family recently returned to its hometown, Cerro de Ladra, after a long stint in Ohio. “It’s like a stalemate.”
The family homestead is on the crest of the highest hill in all Cerro de Ladra. Times were tough in Ohio. Times are also tough in Arecibo, the city spreading on the coastal plain below.
A pharmaceutical plant is closing. A trash-to-energy project is stalled. TheNational Science Foundation is pulling out of a renowned radio-telescope site. Sometimes, the city can’t even pay its water bills, and the faucets in city hall go dry.
But out here on their hilltop, the family feels above the fray. They can produce homegrown food all year, Mr. Rojas said. Everyone’s health has improved. His father has gone into business for himself, breeding roosters for cockfights, which are legal in Puerto Rico.
They have heard that taxes may have to go up, but they aren’t terribly worried. Puerto Rico may have the highest sales tax in the United States, but who cares when there’s nothing to buy? Their house is exempt from property taxes because it has a tin roof. Only houses with concrete roofs are assessed.
Just about the only complaint is the closed schoolhouse — the horse stables — in nearby Abra San Francisco. Come fall, Mr. Rojas’s young cousins will have to take the bus to another town.
And then, there’s the matter of the giant statue.
Years ago, Zurab Tsereteli, the Russian artist known for his giant outdoor sculptures, created a bronze-and-steel figure of Christopher Columbus at a ship’s wheel, sails billowing above him. He presented it to the United States for the 500th anniversary of Columbus’s voyage.
But on the mainland, city after city turned it down. It stands taller than theStatue of Liberty and weighs 600 tons. City councils thought it would mar their skylines or perhaps be a hazard to aircraft.
Finally, Puerto Rico accepted it.
Columbus is not universally well regarded here. Many see him as a kind of conquistador. But troubled Arecibo sees the giant statue as a tourist draw. Pan American Grain Manufacturing, a big maker of premixed cocktails, is installing it now, as the centerpiece of a seaside party venue.
The statue towers alarmingly over its neighboring houses and roadside restaurants. But from the Rojas porch, it’s just a harmless folly on the horizon.
“My father said he heard that Puerto Rico is going to be one of the first countries to go underwater because of global warming,” Mr. Rojas said. “I said, ‘Yeah, and that statue is going to add a couple more pounds to sink it faster.’”
THE CASE AGAINST TRUCKFACE
“When he was arrested, I thought, ‘When would he have had time to cause trouble?’”
Puerto Rico’s most famous slum, La Perla, stands on some of the island’s most coveted real estate. It rises precariously above the Atlantic shoreline, a cluster of gaily painted houses clinging to a bluff just outside the walled city of Old San Juan.
Every day, tourists file off the cruise ships that dock nearby and stroll the steep cobbled streets of Old San Juan, taking in the views and the sea breeze. From the heights, they can look down into La Perla’s rabbit warren of houses, shoehorned between the 16th-century crenelated fortress El Morro and another Spanish citadel.
But tourists seldom venture into La Perla. Guides warn against it, citing drug lords, thieves, gun battles, knife fights and lookouts who might mistake you for an undercover cop. If you get into trouble in La Perla, it’s said, the police won’t come for you.
Among locals in Puerto Rico, it’s customary to bond with a padrino — a godfather — who has the connections and clout to help you move ahead in life and solve problems. La Perla is a tough place, and for many years, it had a suitably tough godfather: Jorge Gómez González, a man known to all as Cara de Truck, or Truckface.
“He did everything for people,” says his wife, Irma Narváez, sitting in her kitchen on a quiet Sunday morning, “from buying groceries to helping repair their roofs if they collapsed.”
From morning to late afternoon, she says, he was at City Hall, calling in favors, twisting arms, being photographed with dignitaries. From 9 p.m. to 2 a.m., he worked on the docks as a welder and crane operator.
“When he was arrested, I thought, ‘When would he have had time to cause trouble?’” she says.
Today, La Perla’s story is about whether a precarious community can make do without its padrino. In 2014, Truckface was convicted of conspiracy to possess and distribute illegal drugs and sentenced to 30 years in federal prison. He has appealed.
Outsiders are always talking about “improving” things in La Perla. The locals think that means pushing them out.
Even Donald Trump tried it, they allege. His bodyguards wouldn’t let him come into La Perla, but he stood on the heights and said he would buy them out for $11 million.
No dice.
That was 10 years ago. Then in 2010 came an ambitious urban renewal plan, promising to untangle bottlenecks, restore fading neighborhoods, triple the number of hotels, add light-rail service and water taxis, and even put a sand beach right in front of La Perla, where now there are only rocks.
From La Perla, it looked like another land grab in the works. The federal government owns San Juan’s Spanish fortifications. It forbids private buildings within 30 feet of the walls, even if the locals think they own the land.
A few months later came the biggest raid in La Perla’s history. The police broke down the door, Tasered Truckface and took him away. They also took the deed to the house, Ms. Narváez says.
More than 100 people were indicted on drug and weapons charges. Ms. Narváez says her husband had no drugs, no weapons and no time for conspiracies. But prosecutors said he was the linchpin of the whole scheme. They made him lead defendant in a case called United States of America v. Jorge Gómez González, a.k.a. Jorge “Cara de Truck.”
The indictment called for the defendants to jointly pay $20 million or forfeit that amount in property, and it listed houses all over La Perla.
Ms. Narváez thinks it was all about getting their land.
On a walking tour of La Perla, she points out a home where her uncle lived, which has been seized by the government. It’s still standing, but the man next door, Héctor Torres, says federal agents tore down his garage. It, too, was too close to the old Spanish wall.
What else could he do but put up a new swimming pool, right here in no man’s land, and keep on living the American dream? “I’m not scared of dying for this if I have to,” he says, while children and grandchildren frolic in the water. “I’ve taught all my kids to fight for this.”
ORANGES FROM CALIFORNIA
“We’ve been taught to depend on the United States. They taught us in school that Puerto Rico was too small, and it had to depend on a bigger country.”
“All this used to be coffee,” says Yanna Muriel, with a wave of her hand toward a hillside planted with citrus and guava trees in the island’s lush interior mountain range. The star fruit are coming into season now, and the first few to ripen are scattered on the ground.
“They’re still a little green, but you can eat them,” she says, picking up a few to offer. “They’ll be sweet.”
A storm has just blown through. Every leaf is wet, and the sun shining through the lingering clouds seems to make the landscape glow.
You don’t need to know about farming to see why Ms. Muriel is determined to preserve the 30-acre farm her parents carved out of lovely, unforgiving terrain here. But it helps to know a bit of the island’s history.
Seen through local eyes, it’s all about outsiders imposing their will on Puerto Rico, to its lasting detriment. Spain brought disease and African slaves and built a plantation economy. The French, the British and the Dutch all wanted what Spain had and mounted attack after futile attack on the slave-built fortifications. Then the Americans attacked, took possession and muscled their way into the sugar business, crowding many local farmers off their land.
Even America’s big development push in the 1950s, Operation Bootstrap, is viewed as suspect. With tax incentives for United States manufacturers, it prompted Puerto Ricans to leave the hinterland by the thousands. As they flocked to San Juan to seek factory jobs, Washington responded with new public housing, paved roads and schools.
Living standards rose, but Puerto Ricans see a big downside: A whole generation learned that life in the country was backward and miserable, something to escape. Farming, once the island’s mainstay, fell to less than 1 percent of its economic output. Today the island imports 82 percent of its food.
“Agriculture died, and with that, all of the local markets died,” says Ms. Muriel, pausing to point out a tree she ate tangerines from as a girl. Today, she says, it’s a thrill to see her own daughters, Emma and Ceiba, eating fruit from that same tree.
But you can’t bring the fruit to market if the market no longer exists.
Today, Puerto Ricans shop in supermarkets. Go into one and you’re apt to find oranges from California, bananas from the Dominican Republic, avocados from Mexico and no local produce. Even staples like rice, beans and coffee are imported.
They certainly aren’t cheap. A 1917 law requires Puerto Rico to import everything on American ships with American crews. That adds to retail prices.
Ms. Muriel isn’t the only one turning her back on all this. Here and there, other young Puerto Ricans are moving back to the land that their parents and grandparents abandoned, trying to revive farming and a sense of self.
“It’s incredibly uphill,” says Ms. Muriel. She shuns government assistance but gets help from a nonprofit group, the Boricuá Ecological Agriculture Organization. Three years ago it sent a building brigade to her farm to make a terracing system, so she can plant corn, kale, bok choi and flowers.
Back when all those thousands of Puerto Ricans were abandoning the countryside, Ms. Muriel’s parents bucked the trend. Her mother, Veeta Mohan, spotted a “Land for Sale” sign on a bulletin board at the coin laundry. She and her husband, now deceased, decided to take the plunge.
When they bought the 30 acres, it was planted entirely in coffee, and struggling. The seller made ends meet by running a bar by the side of the road. For the first few years, Ms. Mohan says, all she seemed to do was dig up the empty bottles people had thrown. But she persisted and ended up raising six children here.
There were government programs to help coffee planters, but Ms. Mohan saw them as a ploy to hook Puerto Rico’s farmers on herbicides from the United States. Out went the coffee bushes. In went fruit trees, bamboo, orchids and herbs, all organically grown.
“Around here, we’re the only organic farm,” Ms. Muriel says.
Today, all that’s left of the coffee plantation is an old system of roads, now used as footpaths. The family plants nothing in rows, preferring groves that combine plants they think will benefit one another — citrus near guavas, for example. The result is a farm that looks more like a forest.
Her farm isn’t profitable, but perhaps self-sufficiency is its own reward.
“We’ve been taught to depend on the United States,” Ms. Muriel says. “They taught us in school that Puerto Rico was too small, and it had to depend on a bigger country.” She shakes her head, then bends to smell the orchid that Ceiba has picked.
A DEFICIT OF DOCTORS AND FUNDS
“The valves, sutures, tissues for repairing the heart all get more expensive every day, and the hospital cannot get any more money.”
Dr. Enrique Márquez Grau, 81, is one of just two pediatric heart surgeons in Puerto Rico. Many people slow down in their 80s, but he says he can keep up.
“Actually, there has been an exodus of young people,” he says.
Dr. Márquez Grau exemplifies a peculiar side effect of Puerto Rico’s financial crisis: the graying of its doctors. It’s most extreme in the pediatric specialties. There is only one pediatric anesthesiologist on the whole island, serving a population of about 900,000 people under 18.
There are just six pediatric surgeons of any kind. Dr. Márquez Grau himself trained four of them. All are over 50.
Even for adults, surgeons are in short supply. There are 180, for a population of about 3.5 million. The average age is 58.
Puerto Rico’s financial troubles are driven, to a remarkable degree, by health care. In 1993, Puerto Rico set up an islandwide health plan for people lacking coverage at work — but it didn’t establish a way to pay for it.
Today the program, known as Mi Salud, or My Health, provides generous coverage to 45 percent of the population. For now, federal money covers much of the cost, but much of that money is scheduled to run out in a year or two. Meanwhile, Mi Salud has been scrimping by delaying payments to doctors. It is about $200 million behind.
About 500 doctors voted with their feet last year, moving off the island. Ten years ago there were 14,000 doctors, according to the College of Physicians and Surgeons. Now there are 9,000.
Dr. Márquez Grau has no intention of leaving. He has been working at Puerto Rico’s sophisticated Centro Médico since it was built, in better times.
“It’s a very good hospital,” he said. “It’s a pity that it doesn’t have money.”
GUITARS AND GAUZE
“There are 28,000 people on the street on this island.”
Doctors aren’t the only ones hurting as the government tries to stretch health care dollars. Patients say it can now take weeks or months to be seen by a specialist. Hospitals have fewer beds, and insurers drag their feet when asked to approve even lifesaving treatments, like chemotherapy.
But for all that, the safety net still holds. People can get care if they’re in the system and can bear to wait. Not so the indigent — the people who have fallen through the holes in the net.
“There are 28,000 people on the street on this island,” says José A. Vargas Vidot, the founder of Iniciativa Comunitaria, which delivers food, basic health care and clothing to them.
Iniciativa Comunitaria has mapped Puerto Rico’s comunas, or informal homeless camps, and set up delivery routes to them. On a recent night, volunteers packed a guitar with their other supplies, just in case the mood seemed right for music. Some of the homeless said they wanted to sleep, but others sang.
In the parking lot of a gun club in the San Juan metropolitan area, the volunteers came upon a man they knew only as Don Luis. He had a walking stick, a crucifix and big open sores on his legs. Heroin users who sleep in the rough are prone to soft-tissue infections where they shoot up.
“We don’t force anyone to go into any treatment,” said Kamille Camacho, a public health student with the group. But if people say they want to go into rehab, or to enroll in Mi Salud, then Iniciativa Comunitaria helps with the paperwork.
But not Don Luis. Once he went to a hospital, but the staff made it clear, he says, that he and his ilk were unwelcome. They yanked off his dirty bandages, slapped on some new ones and gave him the bum’s rush. The treatment made his sores worse, he says. He won’t go back.
Now the volunteers lead him into the pool of light from a streetlight and seat him on the gun club’s front steps. They wet his dirty gauze with a spray bottle and pull it off gently, layer by layer. Don Luis groans in pain.
“There’s no rush,” one says reassuringly. Another massages his shoulders.
Don Luis says he doesn’t want ointment. He’s afraid it will make the gauze stick. The volunteers wash his calves and wrap them in layers of fresh gauze, tape them, then give him a new pair of socks. Then, after a cheese sandwich, a cup of coffee and a few jokes, Don Luis disappears into the night.
Swimming pools pop up in slums, horses graze in schoolhouses, and public housing tenants pay negative rent on an island whose government has effectively gone broke.
A Surreal Life on the Precipice in Puerto Rico
