Jones Act PROMESA

in 1917, jones act known jones–shafroth act imposed civil administration new import , export taxes , regulations. key legislation implementation of triple-tax exempt municipal bonds. means interest on municipal bonds not subject federal, local or state taxes, causing economically desperate government of puerto rico flock buy bonds in order finance public services. jones act granted u.s. citizenship onto puerto ricans, disallowed puerto ricans living on island ability vote in u.s. presidential or congressional elections. institutionally implemented structural dependency reinforced in 1952 when puerto rican government constructs own constitution, officially deeming island estado libre asociado de puerto rico (literally associated free state of puerto rico ) known commonwealth of puerto rico. unlike “free state” name may seem suggest, did not give puerto rico significant political , socio-economic autonomy stands apart u.s. powers control territory. in fact, constitution openly supports unspoken exploitative economic code, containing language limits fiscal ‘misbehavior’ suggesting islands’s public debt must prioritized before other spending basic public services occurs.

after politically establishing puerto rico official colony , dominating economic infrastructure neoliberal process of industrialization, u.s. helps create puerto rico’s debt problem allowing continuous economic stagnation. after operation bootstrap of 1945, agricultural economy transformed processes of industrialization, great emigration of 1950s in puerto rico becomes part of larger pattern of migration workers colonized or ‘underdeveloped’ parts of world move metropolitan countries looking better socio-economic opportunities. realizing puerto rico’s economy dwindling in public debt , lack of growth, congress passed sec 936 of 1976, giving major tax breaks export sector in puerto rico. thought of central tool economic growth on island, because investors, of pharmaceutical , other manufacturing companies, incentivized tax breaks, bringing revenue island , generating jobs. (davis 2015) yet many critiqued use of tax breaks on island, deeming unfar advantage leads perpetuation of corporate monopolies. in 1996, president clinton signed legislation phase out section 936 on ten-year period, , 2006, repealed. repeal sends puerto rico ten-year recession (coupled beginnings of u.s. 2008 recession) on half of manufacturing jobs lost, gdp drops 13%, , municipal bonds become addiction puerto rican government. because companies, disincentivized lack of tax breaks, either closed or moved locations, causing people either lose jobs or have move them. government forced rely on borrowed money interest rates around 785%-1000% wouldn’t have paid until decades later. what’s worse when “vulture hedge funds” or investment fund organizations (companies, countries or individuals) invest in debt ‘weak’ or in default selling , trading bonds in secondary market. these hedge funds take advantage , make profit off of debt situation buying ‘weak’ bonds cheap price, , gaining larger amount forcing full repayment of purchasing value. (davis 2015) public debt in puerto rico accrues, situation becomes human rights issue: extremities in loss of basic government services has led extreme poverty, food insecurity , lack of access healthcare , education services.

according nelson denis, in response socio-economic situation, many native puerto ricans continued leave island in hopes of better future; emigration rates estimated @ 50,000 year. result, act 20 , act 22 passed in 2012 repeal obligations on personal income tax new puerto rican residents (those non-natives choose move puerto rico u.s.) , repeal obligations capital investors (mainly of industrial or manufacturing sectors) pay capital gains taxes. made puerto rico tax haven u.s. mainland citizens looking invest in manufacturing industry, continues ignore problem of structural dependency , economic stagnation has led such large amount of unpayable debt.