Puerto Rico’s governor may have said the commonwealth’s debt is unpayable, but that doesn’t mean Puerto Ricans aren’t going to pay for it. Vulture capitalists are circling the island, ready to extract still more wealth from the impoverished island.

You already know the drill: Capital is sucked out by corporate interests that pay little in taxes, budget deficits grow and speculators swoop in to take advantage, leaving working people holding the bag. Already, the Puerto Rican government is considering imposing an 11 percent cut to Medicare and Medicaid for 2016 and more than 600 schools may be closed in the next five years on top of the 150 already closed by budget cuts.

To ensure more austerity, a group of hedge funds hired three former International Monetary Fund economists to issue a report on what Puerto Rico should do. And — surprise! — the report, released this week, says to lay off teachers, cut education spending and sell public assets to provide money for hedge funds.

The crisis has already been profitable for Wall Street as banks and law firms racked up $1.4 billion in fees from 86 bond deals that raised $62 billion for the island between 2006 and 2013 alone. Because of downgrades in Puerto Rico’s credit rating, Wall Street can demand hundreds of millions more in lending fees, credit-default-swap termination fees and higher interest rates.

What has a century of colonialism — a century of domination by U.S. corporations — wrought? An activist with the island’s Party of the Working People, Rafael Bernabe, puts it in stark terms:

“Puerto Rico’s economy has not grown since 2006. During that period, total employment has fallen by 20 percent or 250,000 jobs. Since 1996 manufacturing employment in particular has fallen by half (from close to 160,000 to less than 80,000). The labor force participation rate has dipped under 40 percent. Through firings and attrition, since 2007 public employment has fallen by 20 percent or 50,000 jobs. Migration has accelerated to levels unseen since the 1950s. …

Not only does mass unemployment result in significant migration, it also depresses wages, which consequently deepens economic inequality and insures high levels of poverty. This helps explain the persistence of the wide gap in living standards between Puerto Rico and the U.S. mainland. Contrary to neoliberal dogma, after more than a century of a colonial experiment in free trade, free mobility of capital, and even the free movement of people between Puerto Rico and the United States, Puerto Rico’s per capita income is a third of the U.S. figure.”

Although the neoliberal clamp has recently tightened on the island, its current subaltern position is many years in the making.

A century of colonialism and the repression that goes with it

Puerto Rico’s tenure as an independent nation lasted exactly eight days in 1898, ending when the United States invaded it during the Spanish-American War. Quickly taking control of the island’s economy, the U.S. response to a hurricane that wiped out the coffee crop in 1899 was not to send aid but instead impose a 40 percent devaluation on Puerto Rico’s monetary holdings. (The source for this and the following two paragraphs is the “historical overview” page of Nelson Denis’ War Against All Puerto Ricans web site, an excellent trove of information.) The devaluation forced Puerto Rican farmers to borrow money from U.S. banks and within a decade, thanks to usurious interest rates, farmers defaulted on their loans, giving the banks possession of their land.

One of those banks was the Riggs National Bank, and a member of the family that owned the banks, E. Francis Riggs, became Puerto Rico’s chief of police. By 1931, Mr. Denis reports, 41 sugar syndicates, 80 percent of which were owned by U.S. corporations, owned essentially all of the island’s farmland. Just four of them controlled half the island’s arable land. When the island’s legislature enacted a minimum-wage law, the U.S. Supreme Court declared it illegal. An island-wide agricultural strike in 1934 was answered by Police Chief Riggs, the member of the banking family, with this response: “There will be war to the death against all Puerto Ricans.” The following years saw a series of massacres, and mass arrests and torture of independence activists, and a 1948 law criminalized advocacy of independence, with penalties of 10 years in jail and massive fines. Even owning a Puerto Rican flag was made illegal.

In 1976, the tax code was amended so that U.S. companies operating on the island would pay no corporate taxes. For the next 30 years, until 2006, U.S. pharmaceutical companies took advantage of this tax loophole to generate massive profits. Mr. Denis reports that in 2002 the combined profits for the ten drug companies in the Fortune 500 ($35.9 billion) were more than the profits for all the other 490 businesses combined ($33.7 billion).

An independent Puerto Rico could not exploited to such a degree, so repression was particularly aimed at anybody with independence sympathies but especially leaders of the Nationalist Party. In a Democracy Now! commentary in 2010 on the 60th anniversary of the Jayuya independence uprising, Juan Gonzalez said:

“Between a thousand, two thousand people were arrested. Anybody who had any kind of political leanings toward independence or was seen as a leader was thrown into jail. And for years afterwards, it was impossible for supporters of independence to get jobs in the government. It really was an enormous repression and crackdown that occurred in the years following.”

One legacy of these decades of repression is the electoral silencing of independence advocates. Voting on the island tends to split evenly between the parties of statehood and continued commonwealth status. Mr. Bernabe wrote:

“The vote for the Partido Independentista Puertorriqueño (the Puerto Rican Independence Party or PIP) was less than 3 percent in the 2008 and 2012 elections. Independentistas, of course, have a far more significant presence and often play a leading role in labor, environmental, student, and other struggles. Many vote for the [pro-commonwealth Popular Democratic Party] in accordance with the same ‘lesser-evil’ logic that leads many U.S. progressives into the orbit of the Democratic Party.”

Education, health care cuts so hedge funds get paid

Having profited on the backs of Puerto Ricans, can Wall Street really be the solution to the island’s massive $73 billion debt? Common sense says no, but the island’s political leaders believe otherwise. Lest there be any lingering doubt about what the vulture capitalists circling their next target have in mind, a group of them issued a report this week, “For Puerto Rico, There is a Better Way,” that complains Puerto Rico spends too much money on education, even though the island spends about 80 percent of the U.S. average on a per-student basis.

The report’s three authors each had long careers with the International Monetary Fund, and they have not strayed from the IMF’s usual “one size fits all” austerity model. Although there are a couple of reasonable suggestions in the report — most notably, increasing the island’s low tax-compliance rate — it calls for much sacrifice by working people and none by hedge-fund billionaires. Among other recommendations, it calls for an increase in the sales tax, a flat income tax (always a benefit for the richest), cuts to education and Medicaid, and loosening labor laws that protect pay and vacation.

Hedge funds that own a significant part of the island’s debt have had a series of meetings with officials. But just who these hedge funds are can be difficult to ascertain. Puerto Rico’s Center for Investigative Journalism reports it received “runarounds and silence” from several government officials when it requested a list of those who hold the debt and what conditions bondholders are seeking. But the Center has been able to put together what it calls “the most complete list of the companies that are getting ready to renegotiate or demand complete payment of the debt.”

Several of the hedge funds seeking payment have also held bonds issued by Argentina, Greece and the city of Detroit. Three of them — Aurelius Capital Management, Monarch Alternative Capital and Canyon Capital — have held bonds for all three plus Puerto Rico.

Aurelius is a notorious speculator that joined with vulture-capitalist Paul Singer to demand Argentina pay full face value on bonds bought at tiny fractions of that price. Aurelius is seeking a 1,600 percent profit on its Argentine bonds, regardless of the cost to others. The principal of Aurelius, Mark Brodsky, was previously involved in squeezing the Republic of Congo-Brazzaville, an episode in which $400 million was demanded on bonds bought for less than $10 million from a country where children die from malnutrition.

Another on the list is John Paulson, who has been busy buying up luxury properties, including spending $260 million to buy three resorts. Another billionaire, Nicholas Prouty, has invested more than $550 million so that San Juan’s marina can accommodate yachts larger than 200 feet.

Power-company ratepayers expected to pay for profits, too

In line with those speculators, a group of hedge funds that own Puerto Rico Power Authority bonds (a debt separate from the general-obligation government bonds discussed above) propose a plan that would pay bondholders 33 percent less than face value. That sounds like an offer to accept a “haircut,” to use the financial term, but those bonds are currently trading at about half of face value, so the hedge funders would be guaranteeing themselves a profit. The plan would also impose a surcharge on the power authority’s customers, so they would be paying more for electricity to guarantee hedge-fund profits.

Whether buying bonds or real estate, it is profits hedge-fund billionaires are after. Puerto Rican bonds are tax-exempt, one reason for their popularity. Extracting wealth from the island is not new, however. Mr. Bernabe of the Party of Working People, in his commentary, noted the imbalance between profits and what’s available for the common good:

“[T]wo dozen U.S. corporations extract around $35 billion a year in profits from or through their operations in Puerto Rico. Bear in mind that the total income of the government of Puerto Rico is around $9 billion. U.S. corporations benefit from the tax-exemption measures that have been the centerpiece of the government’s development policy since 1947.”

Puerto Rico is due to make $5.15 billion in debt payments in its 2016 fiscal year, which began on July 1, a total that represents more than half of its $9.8 billion budget. Given the previous experiences of Argentina and Detroit, the future does not look rosy for the working people of Puerto Rico.

It is not difficult to notice that, although it is always time for us to cut back, it is never time for financiers to cut back. The financial industry, in contrast to the mythology it loves to peddle, does not create wealth — it confiscates wealth, attempting to profit off every aspect of human activity. Attention is now focused on hedge funds’ manipulation of debt, and although that is a necessary focus, these circling vultures represent only the latest manifestation of a long history of colonialism.