This February, a restructuring plan for the $74 billion Puerto Rican debt was approved under the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). This plan, a huge payday for non–Puerto Rican investors in the debt, will ensure that for the next 40 years, Puerto Rico will continue to suffer under an increased sales tax—one much higher than in any of the 50 US states.
This deal also blatantly favors non–Puerto Rican holders of senior Puerto Rican debt (COFINA) bonds, mostly hedge funds, who will be paid back almost entirely, at the expense of Puerto Rican citizens who invested in local bonds, and who will suffer the lowest investment returns. That is, the deal is structured to benefit billionaires rather than the people whose lives depend on Puerto Rico’s improved economy.
As is the case with many universities, Yale, where we are currently enrolled, directly benefits from this crisis. The fifth-largest fund manager of Yale University’s endowment, Baupost Group, is also the largest owner of these senior COFINA bonds, meaning that Yale is profiting off the exploitation of the Puerto Rican people. David Swensen, the director of Yale’s $29.4 billion endowment, also sits on the board of Baupost, which has been suing Puerto Rico to be paid back before other debt creditors and before the island can recover from Hurricanes Maria and Irma. Yale is also invested in at least two other holders of Puerto Rican debt: Fortress Investment Group and Carmel Asset Management.
On December 7 of last year, 54 community members occupied the lobby of the Yale Investments Office for over five hours to protest this and the way in which Yale is profiting off climate destruction, such as Hurricane Maria, by investing in fossil fuels. We demanded, and continue to demand, that Yale University cancel its holdings in the Puerto Rican debt and divest from the fossil-fuel industry.
During the December occupation, more than 300 additional supporters of the campaign participated in a public rally outside the building. Activists delivered personal letters stating why they were sitting in—some talked about being scared to bring children into this world because of the climate crisis.
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We initially planned to deliver the letters directly to Swensen’s fifth-floor office. However, when we arrived, the elevators and stairwell doors had been locked. Undeterred, we filled the lobby of the building for the day, creating and holding space for community-building exercises and presentations on the history of Yale’s endowment and Puerto Rico. Rather than listening to our call for climate justice, Yale ordered its police department to arrest the 48 activists who refused to leave until Yale agreed to our official demands.
Despite these arrests and Yale’s lack of action in the wake of our protests, students at Yale University are holding strong to what we know is true: Though Yale claims to avoid investments that cause “substantial social harm,” its definition of this standard is clearly corrupt.
Puerto Rico has a long history of being used as a cash cow for the United States. American companies, whose profits have always been siphoned off the island back to the mainland, were attracted to Puerto Rico by the tax exemption the United States offered. However, in 1996 the United States phased out this tax-exempt status and the companies left. This sudden loss of businesses, on top of American-implemented financial restrictions such as the Jones Act, caused the recession which the island has suffered for over a decade.
The Puerto Rican government had to borrow money for schools, roads, and government payrolls to keep the island afloat. It is these borrowing practices, which spiraled out of control, that led to Puerto Rico’s current debt crisis.
Wall Street investment firms such as Baupost began to prey on Puerto Rico because they knew that the island’s US-enforced inability to file for bankruptcy ensured that they would get paid. Banks continued to offer risky loans even while the Puerto Rican economy was in shambles. When Puerto Rico finally defaulted with over $74 billion in debt, hedge funds swooped in and sued to force the island’s government to pay.
The fiscal control board appointed by PROMESA, which approved the recent debt-restructuring plan, only further perpetuates the colonial history of Puerto Rico. PROMESA was implemented by the United States without the consent of the Puerto Rican people, who cannot vote in federal elections. This board, called La Junta, has final say over all economic decisions on the island. So far, it has ordered the closing of hundreds of public schools and cuts in funding for health care, pensions, infrastructure, and the island’s only public university, the University of Puerto Rico (UPR).
Although PROMESA was supposedly created to make the debt manageable, it has only served to ensure that Puerto Rico pays back investors in its debt before its own people. Many appointed members of La Junta even have ties to the same creditors fighting over Puerto Rico’s limited financial resources, further highlighting the corruption of the board’s existence.
The story of Puerto Rico’s debt tells a longer narrative of exploitation by US colonial rule over the island that was highlighted by 2017’s hurricanes. Now, Puerto Rico is being forced to pay this debt even though it is yet to be determined whether it is legal, since it has not been audited. Regardless, we believe the investments in the debt are far from ethical and should not be normalized.
The Yale Endowment Model is replicated by many institutions worldwide. By canceling its holdings in Puerto Rico’s debt, Yale could help ameliorate the conditions on the island and signal other universities to follow suit—because while Yale is not the only institution guilty of profiting from PR’s suffering, it can be difficult to determine whether a university is invested or not. Endowment investments often lack transparency. Several other schools that we believe are invested in Puerto Rican debt are Harvard University, Cornell University, Princeton University, Berklee College of Music, Brandeis University, Clark University, the University of Chicago and Marquette University. Those of us who participated in the Yale endowment-justice sit-in urge our peers to demand divestment from your own complicit schools.
Our fight for justice through the Yale endowment is joined by several other groups. Our sit-in occurred during other anti-Baupost divestment actions that week. On December 5, Harvard students delivered a letter to their university’s president demanding divestment from Baupost. These two actions follow the student-led strike at UPR in 2017, whose students also voiced support for our sit-in.
In continuation of our work last semester, the student-led endowment-justice coalition at Yale will be launching a petition aimed at current students and alumni. By signing this pledge, individuals will promise not to donate to Yale University until it divests from fossil fuels and the Puerto Rican debt.
During the spring semester every year, the university begins strongly encouraging graduating seniors to commit to the “Senior Class Gift,” in which Yale asks seniors to begin a life-long habit of donating to the Yale Alumni Fund. We hope that graduating students will use the influence they have over Yale to create positive change by encouraging the university to invest its endowment ethically.
As we promised our university at the sit-in two months ago, we will continue to hold Yale to the high standards of an institution motivated by knowledge and progress, not profit and exploitation. We will not stop fighting the the Board of Trustees until it stops profiting from climate destruction and colonialism.
