This article is adapted from AQ’s print issue on how to make Latin American cities better
Naomi Klein’s The Battle for Paradise: Puerto Rico Takes on the Disaster Capitalists doesn’t dwell on the causes of Puerto Rico’s debt crisis. By now, the details of the island’s splurge and subsequent economic collapse are well-known. Klein’s new book instead focuses on the crisis’ after-effects; in short, how measures intended for recovery have made life worse for Puerto Ricans, and exacerbated the humanitarian tragedy that began after Hurricane Maria hit in 2017.
As the subtitle implies, Klein, an award-winning journalist and activist, is not sympathetic to bond investors. She is sharply critical of recent austerity packages, as well as moves to privatize state-owned firms, shut down schools, and reduce the “island government’s executive-branch entities.” She believes that Puerto Rico’s “colonialist” relationship with the United States plays a large part in the current situation by virtue of Puerto Rico’s dependence on the U.S. and vulnerability to its policies; she also sees Puerto Rican society as a victim of exploitation from outsiders.
To that effect, Klein places little blame for the current crisis on Puerto Rican authorities who took on this debt in the first place. In a foreword written by a group of Puerto Rican academics, the island’s $73 billion in debt is termed “patently unpayable, illegal and illegitimate.” This sets the tone for Klein’s criticism of those she calls disaster capitalists: investors and entrepreneurs of various stripes who take advantage of clauses in the U.S. tax code that allow citizens to move money to the island and avoid federal income tax on their earnings there. Another local law allows the same U.S. citizens to pay zero capital gains taxes and zero taxes on interest and dividends sourced in Puerto Rico.
In Klein’s view, these disaster capitalists are exploiting Puerto Rico’s desperate economic circumstances for their own benefit, looking to scoop up assets on the cheap. One group of U.S. investors is targeting Puerto Rico as a potential center for cryptocurrency operations. Klein notes that “the idea of turning an island that cannot keep its lights on into the epicenter of this multi-trillion-dollar market rooted in the most wasteful possible use of energy is a bizarre one and is raising mounting concerns of crypto-colonialism.”
While she dedicates chunks of the book to criticism of disaster capitalists, Klein gives something of a free pass to authorities who have mismanaged the Puerto Rican economy for many years. Of course, one cannot blame government for natural disasters. But a succession of Puerto Rican administrations raised mountains of debt from the market without diversifying the economy or developing a way to administer it more efficiently. When and if a disaster came — a financial hurricane or a literal one — the island was left vulnerable.
Still, Klein gives needed attention to the tragedies that have followed Puerto Rico since the storm: an increase in suicides, a relief effort described as “sluggish, inept, and corrupt, ”aid supplies sitting in storage for weeks at a time, and an overall feeling of desperation among many segments of society. More than a year after the hurricane, Puerto Rico is still far from recovery.
There are also sections where Klein’s message is more encouraging. She delves into how groups of Puerto Ricans are pursuing more sustainable energy sources, as Maria caused “devastating ruptures within every tentacle of Puerto Rico’s energy system.” She advocates a more decentralized approach to energy and power production, minimized dependence on imports and greater pursuit of solar energy sources. She speaks admiringly of grassroots organizations that are adopting innovative sustainable farming techniques.
Ultimately The Battle for Paradise asks who will have greater influence over the future of Puerto Rico. Will it be the real estate investors looking at empty beach-front property, speculating that, thanks to tax incentives, Puerto Rico can become the new South Beach? Or will it be the Puerto Ricans who have taken to the streets to protest budget cuts and are pursuing alter- native energy and agriculture that would be less vulnerable to future storms? Klein, who is donating the royalties from The Battle for Paradise to a group of Puerto Rican NGOs, is betting on the latter.
Rosen has 20 years of experience in the Latin America financial markets, and has lived and worked in both Argentina and Brazil.