Puerto Rico's Debt Crisis Empties Houses, Impoverishes Citizens

On a recent Friday night in San Juan's poorest neighborhood, Jose Hernandez rested in a plastic chair outside his garage, nursing dirty blisters and fresh leg wounds. He'd worked almost 80 hours fixing cars that week, at one point falling from exhaustion. But as 9:00pm neared, he kept waiting for more clients.

"If people call me to work right now, I say yes. I wasn't like that before," Hernandez, a burly 43-year-old in a greasy brown t-shirt, said as he sat on his stoop in La Perla, a notorious project just steps from touristy Old San Juan. "I've had to double my hours."

As Puerto Rico confronts a $72-billion debt crisis, Hernandez and other islanders attempt to pay exorbitant fees for their bare essentials. Water and electricity bills are three times the price of those in the 50 states, sales taxes the highest in the nation, and the poverty rate is 45 percent compared to 15 percent in the continental US.

The hardship is projected to worsen — US Congressional members, who held a hearing Tuesday to discuss Puerto Rico's economic situation, projected that the island's debt would increase by another $27 billion over the next five years. The Puerto Rican government is scrambling to stop the downward spiral, and presented proposals to its creditors Monday to exchange part of its debt for bonds that could be used to create economic growth.

Since it is not a state, Puerto Rico cannot declare bankruptcy to the federal government. The US Treasury Secretary Jack Lew last month urged Congress to pass legislation that would allow Puerto Rico to do so in order to avoid total collapse, and the island's governor Alejandro Padilla has begged legislators to make such a move. The US Supreme Court is also considering allowing the island's utilities companies, which are billions of dollars in debt, to file bankruptcy.

"Let us be clear: we have no cash left," Padilla warned at a US Senate hearing in December. "This is a distress call from 3.5 million Americans that have been lost at sea."

Hundreds of thousands of Puerto Ricans have already abandoned ship — about 84,000 people are fleeing to the US mainland each year, leaving decaying, vacant buildings to dominate the island's landscape.

"My mother, my sister, my brother — everyone left," Hernandez said of his family, now in Orlando. "But I love my island. They can buy me a ticket, but I'll stay here."

Related: Puerto Ricans Face an Uncertain Future After Debt Default

Hernandez, who long worked in the mailroom of the Puerto Rican Senate just blocks from his current home, was laid off two years ago as the government cut jobs to save money. He then had no choice but to live in La Perla.

"I don't go to the rest of San Juan, I can't afford anything there," Hernandez said. "Before I was making $2,000 a month for the government. I can't believe how easy I had it."

The daily struggle is magnified in more rural parts of Puerto Rico, where jobs and resources are even scarcer. On the small island of Vieques, famous to foreigners for its pristine beaches and bioluminescent bay, the local government can't afford to repair its ragged roads and will likely cut about 100 employees in upcoming weeks. Even highly educated residents struggle to find work.

When Ruth Rodriguez, who has degrees in nursing, special education, and legal administration, searched for employment in Vieques this summer she could only get a job at the public library. Within a few weeks the municipality slashed her hours from eight per day to four, in order to cut expenses.

"My parents, thank God, give me a home," Rodriguez, 48, said inside the Vieques library. "I make enough only to pay the $400 a month for my car and for my gas. With our high taxes that's all I can afford. Here you have to adapt to what there is, and take things one day at a time."

Puerto Rico's unemployment rate is more than double the national average, at 12.2 percent compared with the US rate of five percent. Many small businesses have been wiped out, as owners confront sky-high taxes and licensing fees.

"We had 15 stores in this town and now there are only four," Luis Ventura reflected behind the counter of his convenience store, in the Vieques town Esperanza. He waved to a large bulletin board on the wall, covered with certifications of his payments. He said he pays $16,000 for his license each year, plus another $9,000 monthly in taxes.

High food costs and sales taxes have meanwhile driven down spending, Ventura said, so fewer customers enter his shop. The government raised sales taxes to 11.5 percent last summer, hoping to use the money for debt payments.

"If it weren't for the tourists, we wouldn't make it. When it's not high season we hurt," admitted Ventura, whose grandparents opened the shop and gave it to him 15 years ago.

Produce is especially costly--the island now buys about 85 percent of its fruits and vegetables from the continental US, since small farmers haven't been able to afford the costs of fertilizer, energy, and labor.

"People don't want to have farms because it pays so little and you have to wait a year for your crop," Wilfredo Sanchez, the manager of a plantain farm in the northeast town Nagaubo, said. "People are buying less, and we can't compete with chain stores."

Healthcare is also in jeopardy in Puerto Rico, since thousands of doctors have left for the US in recent years and the federal government has threatened to cut funding to the island's Medicare. Bilmares Melendez, a mother of three asthmatic children in Vieques, said their "medicine is never in the pharmacy," and Berto Saldaña, a 29-year-old Viequense born with spina bifida, a defect of the spinal cord, claimed that there were never enough nurses in the local hospital.

"It's always been hard, but now it's gotten worse," Saldaña, said as he rolled his wheelchair down the jagged sidewalk. "I've got most of my family in Brooklyn, but my parents are here, so I stay with them."

The territory's economic woes have been crescendoing for years due largely to government overspending and institutional corruption, Edwin Nieves, Research Associate for the Council of Hemispheric Affairs, said.

One major over-spender is Puerto Rico's electrical authority, known as PREPA, which has a complete monopoly over power on the island. PREPA has offered free electricity to government buildings and to certain large corporations, therefore spending more than it earns each year, Nieves explained. As a result, PREPA has fallen into debt and raised rates for consumers.

Related: Puerto Rico Says It Can't Pay Debts, Others Claim That 'Crisis Looms'

The island's status as a territory has also created financial obstacles and driven up costs. All imports must pass through the continental US first, due to stipulations in the 1917 Jones Act incorporating Puerto Rico into the nation, Nieves said.

"When the Jones Act was passed it prevented any foreign ship from carrying cargo between two American ports so those foreign ships don't have an incentive to go to Puerto Rico since it's a relatively small market," Nieves explained. "So Puerto Rico must import a lot from the US."

Puerto Rico's status as a territory is particularly concerning to residents at the moment, since Congress has not stepped forward to bail the island out of debt. Richard Vazquez, a radio news announcer in the coastal town Fajardo, told VICE News he feels like Puerto Rico is a "dressed-up colony" of the US.

"I don't understand how we can be citizens, and Congress won't rescue us," Vazquez said. "When Puerto Ricans go to war, we fight to defend the American flag. But now it feels like the US is turning their backs on us."

Follow Meredith Hoffman on Twitter: @merhoffman