Bad bunny just released a new video yesterday about Puerto Rico and it brought up some very sensitive topics on the subject of Puerto Rico and their laws which were created to help stimulate the economy.
To understand Puerto Rico you must first understand its history. Puerto Rico began with the Taínos, an indigenous society that lived on the island for hundreds of years before the Spanish arrived. They called the island Boriken (Borenquin) and many Puerto Ricans still use the term Boricua to refer to themselves today. During a period of war between another indigenous tribe and the Spanish after they arrived, the Boricua were driven to the point of extinction. A combination of disease, mass killings, and slavery killed as many as three million people in only a few generations leaving only thousands left. Research appears to show that the remaining Tainos were assimilated into the Spanish genome of the island.
As Vonnegut would say, “So it goes” for the first inhabitants of the island.
Christopher Columbus visited the island in his second trip to the new world and the island was quickly “colonized” by the Spanish. Later on down the line though, the inhabitants of the island eventually revolted against the Spanish government in Spain similar to how the U.S. colonies revolted against England. The inhabitants of the island at the time, who were a mix of mostly Spanish but also some indigenous and African, were granted virtual autonomy to placate the uprising, but at the end of the Spanish American war they became a U.S. territory as a part of a treaty with Spain in 1898.
The people of the island still wanted autonomy from the U.S. though, so the U.S. congress approved of a constitution that gave the island some virtual autonomy and allowed the Islanders to maintain their U.S. citizenship and benefits at the same time. A certain percentage of the population has always wanted full autonomy though and has been vocal about it ever since the Puerto Rican constitution was established.
More recently there were three major natural disasters which devastated the island and which set it into an economic depression. In 2017 Puerto Rico became the largest failed state in US history by filing for bankruptcy and has only recently begun to pull itself out of bankruptcy in 2022. Hit by a glancing blow by hurricane Irma first, Puerto Rico went into a state of emergency. It then endured a direct hit by hurricane Maria, which made landfall as a category 5. Puerto Rico had filed for bankruptcy only a few months before, and when Maria struck it created a “perfect storm” which sent the already failing economy into a free fall. Many people died during the hurricane but the majority of people who died actually died after the hurricane from lack of clean water, sanitation facilities and electricity. In 2020 a swarm of earthquakes hit the Island as well, exacerbating the problem even more.
As a result, a massive 4% of the population left the island. The effect though can’t be measured by that percentage alone because it’s not hard to see when you walk around San Juan that there are neighborhoods where one in five of the homes are abandoned and falling apart. Downtown Santurce almost feels like a ghost town sometimes because of all the abandoned office buildings, and there are multimillion dollar hotels across the island which lay completely empty and falling apart.
The condition of Detroit with its abandoned buildings and neighborhoods from a decade ago is the best comparison to Puerto Rico today. The economic depression which swept the island had a massive effect on the people with the money who owned businesses and a large percentage of them moved to other US states to run more profitable businesses while living with the comforts and infrastructure that were lacking back in Puerto Rico.
In economics there is a concept called a trade deficit and although it is a very complicated subject the core concept is easy to understand. If you and I play a game of Monopoly and you keep landing on my hotels but I never land on yours, then your money leaves your pocket and enters my pocket until I have all the money and you have to sell your hotels to the bank or to me if you want to continue staying at my hotels.
You can apply the same idea to economic trade from one location to another. If location one is always spending their money on the goods and services (hotel stays in the game of Monopoly) of locations two and three, but locations two and three are never spending their money on location one’s goods and services, then eventually location one runs out of money. It is most often applied at the country level, but it can also be applied at the state and city level. The pool of money is relatively constant (except when the government prints new money which deals with another concept called inflation) so if the residents of a location (country, state or city) spend their money on goods or services produced or provided by another location, their pool of money decreases.
The only way to reverse this decrease in the money pool for that location is for them to provide a good or service that another location wants to pay them money for. As long as they sell an equal or greater amount of goods and services to other locations, then they will not experience a decrease in the pool of available money. Another alternative would be for everyone to choose to buy locally and to create a local currency which is not usable outside of the local economy. It is only a partial solution though but can play an important role in the resiliency of a local economy.
A trade deficit can also sometimes be described as the “Walmart Effect” because the same thing happens when Walmart enters a small town in the US. Even if Walmart creates new jobs, it also causes local businesses to fail and much of the money spent at Walmart leaves the town to the larger corporation, its distributors and its shareholders who all live somewhere else. When you buy your computer and your stereo at Walmart, and your furniture at Ikea and your food at Sam’s Club you are supporting the economies of other locations.
When the pool of available money decreases in a specific location there is less money to pay workers for work, which leads to less money spent on goods and services, which then decreases the demand for goods and services because no one can afford to purchase them. This can have a downward spiral effect when left unchecked and can lead to major economic depression. That is the problem that Puerto Ricans are dealing with today.
Many Puerto Ricans have always wanted autonomy though and have been fighting for it their whole lives as I pointed out earlier. It’s very similar to the way that many Quebecers want Quebec to secede from Canada. I lived in Quebec for nine years because I married a Quebecoise woman who I met while traveling. After the French lost Canada to the English the French citizens who stayed in Canada established the state of Quebec. Their fight for autonomy is similar to Puerto Rico’s.
Just like in Quebec, this fight for autonomy has caused the people of Puerto Rico who believe they are the true inhabitants of their location, to create a division amongst the rest of the population. This group who identifies as “native” wants all outsiders to leave so that they no longer have control over the government and the “native” people can rule themselves. They believe the “outsiders” are the root of their problems so it is also their belief that by making them feel unwelcome and forcing them to leave, so will the problem.
The U.S. colonies were established by the British and the British were the ones who established slave trading in the American colonies. Being the colonial power under Manifest Destiny of the Royal Crown they took advantage of their position and power to assert their dominance over all non-British people. They asserted that dominance over the French inhabitants and treated them poorly for a very long time according to most historical accounts.
In Quebec my father in law told me that he “Hated the English speakers” which I knew at least partially included me. The irony of a person from Quebec hating an American “English speaker” though, is that Americans were raised to hate the “English” a little too. The American Revolution was a result of colonialist hatred for the English crown treating the Colonies different from citizens at home in Britain. Although that hatred has subsided with time as it became clear that the U.S. was the dominant power and Britain became a Parliamentary Constitutional Monarchy, a little bit of that hatred still remains. It is much more pronounced though in Quebec probably because the hatred existed long before the French settled down in North America.
Many “native” Puerto Ricans have a similar feeling towards the U.S., their current “captors”. Ironically as many as 80.5% of the “natives” are of Spanish descent and their ancestors were the “colonizers” who helped decimate the indigenous people of the island… so it goes. That does not mean that there aren’t many people living on the island who are somehow related to someone who was taken advantage of by the Spanish or Americans. It’s complicated. Just like in Quebec the English elites along with members of the Catholic church actually worked with the French elites and together created systems that took advantage of the poor French population.
A lot of Puerto Ricans raise concerns about the Puerto Rican elites working with English speaking Americans from the mainland who want to “colonize” Puerto Rico and take advantage of the poor by “stealing” their properties and businesses. There have been many high profile cases of government bribery and corruption so their concerns are real and many of the native born Puerto Rican elites in positions of power may not have the best interest of the poor Puerto Ricans in mind.
What the poor Puerto Ricans don’t understand though is that there are also a growing number of Puerto Rican politicians who understand economics better than the poor residents. These politicians know that the real problem is a trade deficit and population decline so their policies must address those two problems in order to address the poverty problem.
In Bad Bunny’s video there are many examples of people being displaced after living in a location for 20 years with little to no increase in the cost of rent. These people are no longer able to afford the rent for the same property though after the investor increases the price of rent to help cover the cost of renovating the building. This is a perfect example of gentrification. Gentrification happens when people are pushed out of a neighborhood because the rising costs associated with living in that neighborhood go up, and they can no longer afford to live there.
Montreal is currently dealing with a gentrification problem as well, much like other major cities in North America including New York, Chicago, L.A. and San Francisco. Rich investors in Montreal are buying up properties in poorer neighborhoods and then renovating the properties and evicting the tenants in order to sell the rental properties as condos. This led Montreal to create a condo conversion moratorium to slow the effect of gentrification on Montreal neighborhoods. Many investors that are a part of the French and English elite in Montreal discovered a loophole though that allowed them to convert the rental properties into undivided condos thereby bypassing the current condo conversion moratorium.
When I lived in Montreal I went to Concordia university and studied Urban Planning. One of my upper division classes did a research study of a particular neighborhood in Montreal that required us to track down lists from government databases in order to see which buildings had undergone the undivided condo conversion process (a legal loophole) and then compare that information over time so that we could see a true picture of how the loophole was leading to the gentrification of the neighborhood. Our research had never been done before and was later published by our professor, was cited by the local news and was even mentioned by the Urban Planner of Montreal himself when publicly speaking about the problem of gentrification.
When people hear the stories like the ones mentioned in Bad Bunny’s video, it is natural for them to blame the real estate investors from outside of Puerto Rico who are looking for investments that will bring them a return on their money. You must put these stories into perspective though because these stories of displacement by gentrification don’t fully explain the conditions of many of these neighborhoods. In comparison to other major cities across the world undergoing gentrification many of the neighborhoods that native Puerto Ricans live in are in a state of disrepair. Some of the buildings have not been renovated in 20 years and are either aesthetically unpleasant or unsafe for people to live in. These locations are what social scientists would call “slums” and the landlords – most of whom are Puerto Rican – are what social scientists would call slumlords.
Many of these slumlords have been making deals with local politicians and been involved in less than ethical practices for years without any recourse available to the residents. Not all Puerto Ricans are considered equal by these slum lords and the different mafia like families who control the slums and social housing of Puerto Rico already operate outside of the law. How do we address the slum problem and how do we take the power away from slumlord elites who use their position of power to take advantage of their tenants? That is not a simple problem to solve.
Act 60 is legislation that is meant to solve the economic problem associated with a trade deficit and a declining population. Act 60 is not just for people outside of Puerto Rico, but is for native Puerto Ricans as well. I have met people at industry conventions who left the island after Maria but were able to return because they could move their business back to the island and save on taxes due to Act 60. These were native born Puerto Ricans returning to the island to help export their services to businesses outside of Puerto Rico which inevitably aids in fixing the trade deficit problem on the island.
Act 60 does not address the gentrification problem, but just like when the population of Detroit collapsed, gentrification is only a minor issue in comparison to the trade deficit and population collapse problem. In his book The Divided City: Poverty and Prosperity in Urban America Allan Mallach writes “Perhaps the greatest disparity between the rhetoric of gentrification and the reality of it is on the ground in Detroit.” Today, this same statement could also be said of Puerto Rico.
The population decline due to three natural disasters and a trade deficit, has left the island with little money to pay for social services like public housing. Not only that, but basic services that you might expect in any first world country like recycling or animal control don’t even exist currently in Puerto Rico because the government can no longer afford them. The power company Luma is under government investigation for corruption because a small storm can cause the power to go out all over the city for hours or days, and flooding can occur in some areas during storms because the infrastructure is not in place for proper drainage. Plus, anyone who has spent any amount of time driving around Puerto Rico will tell you that potholes are a way of life. You just have to learn how to live with them.
I spoke to a native Puerto Rican who was also a local San Juan motorcycle cop. He had to work part time as an Uber driver because he couldn’t maintain a comfortable standard of living on his police officer salary alone. He explained to me that many of the services like animal control existed before the economy collapsed so the overpopulation of stray cats and dogs whose diseased bodies littered the streets of the poor workers neighborhoods was a relatively new development. The government could no longer afford to neuter and spay them, hold them in animal shelters or even pick up their dead bodies when they died in the street. These animals’ bodies lay exposed to the elements for months rotting until what’s left of them gets scattered by other stray dogs looking for a bone to chew.
Until the economy has been turned around, and the people who left the island have an opportunity to return, gentrification will be a difficult problem to solve. The money doesn’t exist to solve it right now. The trade deficit problem needs to be solved, and money needs to begin flowing back into the island before the government can address the displacement issue by, for example, building more social housing. Care needs to be taken though that investors, landlords and developers don’t break current housing laws and new legislation could be devised to help reduce the impact of gentrification on already healthy neighborhoods who may eventually be encroached upon by outside investors. The gentrification problem you find in Montreal, New York and San Francisco has very little similarity to the problem you find in Puerto Rico currently. Some of the lessons learned in those cities could be a guide for policies in Puerto Rico though. For example, developers who are renovating multi-unit properties could be forced to provide a percentage (2-5% maybe) of the units as social housing. The developer must cover the cost with little to no cost for the government.
This is not an issue of their being too little housing. Many buildings sit completely empty and abandoned. Apartments go unrented for months and native Puerto Rican landlords are afraid to lower the prices because they don’t rent out any faster. There just aren’t enough middle class people to fill them up. This is an issue of there being too little inexpensive housing that is in a liveable condition. There is not enough public housing for the poor. The only way to solve this is with an infusion of money.
Puerto Rico could apply for statehood and then could lobby congress for more federal funds to help rebuild the housing and economy. That is what Quebec does. Quebec gets subsidized by the rest of Canada because they pay less in federal income tax then they receive in federal funds which helps them fund their public housing projects. They receive $738 dollars a year more in federal funds per person than they pay in federal taxes. If Puerto Rico became a state, the Puerto Rican government could follow a similar path, but residents of Puerto Rico would then have to start paying federal income tax. The cost of federal income taxes added on top of the current Puerto Rican income taxes would put taxes at an unbearable level for most Puerto Ricans (and most mainlanders too!) so the Puerto Rican government would have to lower local taxes to offset the added cost. I think that the people in Bad Bunny’s video are looking to take the route of more autonomy though, not less. The only other way to fix the problem then is to incentivize investors (people with the money inside or outside of Puerto Rico) to invest money in the rebuilding process.
If I have a restaurant, and I don’t want certain types of people to eat at my restaurant so I treat them differently and make them feel unwelcome, those people will eventually stop spending their money at my restaurant and start spending it somewhere else. On the flip side, if I not only welcome all cultures, genders, races and religions with open arms to come dine at my restaurant, but I also create a temporary discount to make it cheaper than other restaurants, then people will flock to my restaurant and spend their money. It’s the game of Monopoly. The beautiful part though is that even after I get rid of the discount later, people will still want to come back because they love the food and atmosphere and it’s worth the extra cost.
There is a chicken farmer who has an indoor chicken farm in a dilapidated building across the street from where I live. The building is falling apart and it’s missing a roof on the third floor. The building is across the street from a food truck park where families congregate in a beautiful outdoor setting to have dinner with a view of the Condado Lagoon. The bottom floor of the building next door to the chicken farm lay abandoned for years and was used by street walking prostitutes and drug addicts as a place to shoot up and make a little money, but recently it was renovated into a new restaurant.
It would be a shame if this chicken farmer were displaced to a new location in one of the many other abandoned buildings around the city because some investor purchased the building to renovate it so that he could rent it out to a Puerto Rican who was returning to Puerto Rico to start their own business because of the act 60 tax incentives. It would be a real shame because there would no longer be the smell of dead rotting flesh from some diseased chicken that the chicken farmer released “back to nature” so that it could crawl under a pile of trash behind his building and die. The neighborhood would really lose a little bit of its creepiness charm that all the food truck patrons and local families seem to love… and that would be a total shame.