Statement by Jeanette Graulau, published on Labor Today, November 2022
While some Western countries are planning to re-nationalize their energy industries, the U.S. imposes upon its colony of Puerto Rico a privatization plan to ‘unbundle’ the Puerto Rico Electric Power Authority (PREPA), one of the oldest and fully operational electric power corporations of Latin America. Since 2020, LUMA Energy, a Canadian-American joint-venture, holds monopoly rights of energy transmission and distribution in the island since 2020, when the colonial government granted a privatization contract for the distribution and transmission of electricity. The real multinational giant behind LUMA Energy is the Canadian Utilities through its subsidiary ATCO. The other owner is Quanta, a young corporation based in Texas. A second privatization contract recently granted will allow American corporation Convergent Energy and Power, to hold monopoly ownership rights over a solar- power and storage project to be soon built in the southern shores of Puerto Rico. Leading the Puerto Rican fight against privatization is the Unión de Trabajadores de la Industria Eléctrica y Riego (UTIER), one of the most militant labor unions of Puerto Rico.
Privatization by ‘unbundling’ national energy and electric power enterprises is nothing new in Latin America. The ‘ABC’ group -Argentina, Brazil, and Chile- plus Mexico, have experienced staged privatization of their electric power industries since the 1990s. In Argentina, the Servicios Eléctricos del Gran Buenos Aires was broken into smaller units that were sold cheaply to foreign capital under the government of Carlos Menem, increasing the cost of electricity in the form of the tarifazos impagables and a massive, nation-wide power failure June 2019. The once powerful Electrobrás, symbol of Brazilian national identity along with Petrobrás, was also unbundled and is still being sold in pieces to Western energy multinationals, triggering alarming increases in energy bills and massive unemployment of electrical workers. In Chile, the privatization of Compañía Chilena de Electricidad S.A. during the military dictatorship and later the Concertación Government in the 1990s, has left Chileans with one of the highest electricity bills of Latin America and one which continues to increase, as Chileans are expected to see a 40% increase in the bill during the next nine years. The amount is the revenue projected by Spain’s multinational Endesa S.A. to fulfill its inter-corporate loan obligations. In Mexico, where the Comisión Federal de Electricidad celebrates this year its 62nd anniversary, privatization by unbundling was attempted by the governments of Felipe Calderón and Enrique Peña Nieto. Regional electric power competitors made it to Mexico, including ATCO. Full-scale unbundling of CFE, however, was halted by SEDEM’s militant struggle and by anti-austerity measures legislated under the presidency of Manuel López Obregón. Mexicans, however, experienced damaging power failures in 2019 and 2020, affecting 1.6 million Mexican households and businesses, and 10 million across the country, respectively, after CFE’s limited privatization. The ABC group + Mexico presents only the most iconic cases of privatization by unbundling, but such privatization has spread around the world in the last decades.
Why global capital ‘unbundles’ State-owned electric power industries
Privatization by unbundling is presented by the U.S. and Western banks as an economic imperative given Latin America’s structural debt problem. Using a neoclassical axiom much in vogue in the 1990s, Western banks argue that Latin America’s low saving rates and high capital requirements can only be solved by privatizing the backbone of industry -energy and electric power. Private energy industries would bring the ‘efficiency and energy progress’ needed for economic growth. However, the unbundling of national power industries is not, nor has anywhere been, a necessity imposed by national structural-economic conditions. Nowhere, unbundling has been an autonomous industrial project, planned by national governments in democratic ways. Everywhere, it has been, and continues to be, an imposition of the monopolized, financialized global capital that emerged in the 1980s as part of the reorganization of capital accumulation that still goes on, as the late Egyptian Marxist economist Samir Amin analyzed.
The goal of privatization by ‘unbundling’ is to make it impossible to socialize ownership of monopolies of electric power industries, as it breaks these industries into small ‘productive’ units or firms that compete for capturing a higher share of profits. These are firms that obtain contracts for transmission and distribution of electric power, and thus become plugged to the ‘national’ grid of a country, while the State exercises general power grid operation functions (maintenance of dams, reservoirs, shafts, turbines, etc.). The State subsidizes these private firms by absorbing these costs. In the most aggressive privatization models, unbundling of the power industry includes privatization of rivers and hydroelectric dams, as in Honduras, in a highly corrupt privatization scheme sponsored by USAID. The sole function of the ‘productive’ units is each to serve as new sources of profits or rents, independent from each other, and on behalf of monopolized, financialized global capital. Firms are ‘assets’ yielding debt, because they operate only when financed by new forms of commercial lending. Before a single kilowatt is generated by a new firm under this scheme, there is already a loan attached to the new firm, which generates interests (profits in the form of rents) on behalf of bankers. The simplest loan transaction works like this: owners of a new firm sell newly created bonds (debt) to capitalists in rich countries, in exchange for money to cover operational costs. These capitalists become the bond buyers who get in exchange a steady flow of money representing interest payments, long before their bonds reach maturity (when the firm pays back the loan). A more speculative debt transaction works like this: a group of bankers organized as a syndicate administer a large loan package for the firm, but the package contains different loans granted by the individual members of the syndicate, which is nonetheless formed for a specific project. All loans have interest charges set at varying rates, and some can be renewed or altered before the loan reaches maturity, depending upon the nature of the project at stake. Thus, a new firm that holds monopoly rights over specific functions of power transmission and distribution, usually has various loan commitments that it must fulfill irrespective of the firm’s actual investments in the power infrastructure of the host country.
These debt relations, which invariably strangle State-owned industries, are at the root of what many call neoliberal austerity. They are however only one side of the coin of today’s global capital accumulation. The other side is the global counter-revolution, waged against organized labor since 1989 with the dissolution of the Soviet Union. The year marks the beginnings of an offensive war that the West is still waging against labor unions in the periphery, as Brazilian Marxist historian Mário Maestri argues. This global counter-revolution has radically transformed labor. The most conspicuous evidence is the structural decline of waged-labor globally. This decline is manifested in the fact that labor unions’ struggles for workers’ rights, which historically took place in the streets, take place today in courts, mediated by lawyers, and with legalistic instruments dominated by corporate capital. The political outcome is a dangerous one, as labor unions’ militancy increasingly moves away from direct confrontation with the social relation that reproduces exploitation. The two sides of the permanent restructuring of capital accumulation -privatization and destruction of waged-labor- mean one thing only: that in the era of monopolized and financialized global capital, labor exploitation increases. Profits per unit of labor increase when and because the number of waged laborers per unit of capital diminishes. The myth of the entrepreneurial, autonomous, independent worker, moving ahead without labor unions, conceals the fact that labor exploitation cannot decrease under the conditions of monopolized, financialized global capital.
Puerto Rico’s UTIER fights against privatization
Privatization by unbundling has just arrived to Puerto Rico with LUMA Energy, which assumed monopoly rights over transmission and distribution of electric power. The island has none of the domestic energy endowments of the ABC group + Mexico. Moreover, the island is a colony of the U.S., whose Spanish-speaking population stands at approximately 3.2 million inhabitants, of which an estimated 45% live below poverty line. Yet, the Puerto Rican economy offers ideal conditions for this latest venture of global capital. First, it is an American colony, de facto governed by a Fiscal Oversight and Management Board or la Junta. Appointed by Washington, D.C., la Junta is a colonial governing body that holds the power of the purse, and has the by-partisan mandate to privatize all assets of the Puerto Rican economy, including the national public university, hospitals, domestic transport infrastructure, roads, and public lands. Its goal is to syphon the ‘value’ produced by the sales of assets to a group of 30 hedge and mutual funds, and bond responsible for the US$ 72 billion in ‘national’ debt. Of the ‘group of 30‘, 24 are vulture funds based in the U.S. and the U.K., and specialize in the buying and selling of banking-made ‘toxic assets,’ which explains the illegitimate character of the Puerto Rican debt. Half of the debt is estimated to be interest charges. Privatization by unbundling of PREPA will allow Washington D.C. to fulfil the wishes of monopolized, financialized global capital.
Secondly, privatization of PREPA is taking place when the U.S. is re-financializing its imperialist Caribbean Energy Security Initiative (CESI). CESI seeks to reproduce the model of privatization by unbundling across the Antillean and Central American economies. These are economies that have hurricane- and earthquake-induced energy problems, but these problems have suddenly become monetized and monetizable assets, whose value is mathematically determined by a group of invisible investors determined to profit from the ‘risks to energy supply.’ The U.S. Department of Defense, which pioneered the modeling of these risks, has added in the last two decades an ‘energy security risk,’ also monetizable, and which refers to ‘direct assaults on energy supply.’ Herein lies the real goal of the U.S.: to launch and offensive energy war against Venezuela’s oil and energy foreign policy in the Caribbean. Puerto Rico’s planned privatization is testing ground for this purpose, just like the island’s colonial Commonwealth was conceived by the U.S. as a model to be exported to revolutionary Bolivia, Guatemala, and Cuba during the 1950s-1960s.
The problem is that LUMA Energy was caught off guard by UTIER’s fight against privatization. UTIER’s sustained struggle against privatization has exposed the corrupt nature of privatization as well as the ideological instruments that Canadian energy multinationals contribute to the imperialist energy project in the region. Specifically, the ideology of reactionary petro populism presents animage of the Canadian energy business as good for people and the environment. It conceals a fierce ethno-nationalist ideology that Canadian energy corporations have launched back in the Canadian provinces against migrant workers and First Nations, as a Canadian anthropologist told me. This is an ideology meant to travel far on the wings of corporations’ subsidiaries. UTIER has denounced that LUMA Energy top officers are Canadians, who only speak English, conducting a business in a Spanish-speaking island. Moreover, reactionary petro-populism emerged when energy-market deregulation was in full swing in Alberta, the province that serves as headquarters of ATCO (LUMA Energy’s Canadian parent corporation). It conceals the ugly side of the so-called ‘green’ Canadian energy business. ATCO is second in the rank of the top-50 corporations that have the highest emissions footprint in Canada (including end-use emissions when extracted fossil fuels are consumed), according to the Canadian Centre for Policy Alternatives. Its energy business, located in Alberta, mostly relies upon coal-fired power plants. ATCO has profited from the exploitation of the bituminous coal deposits of this eastern Canadian province, which are the most lucrative of all deposits currently exploited in Canada.
Reactionary petro-populism requires a propagandistic apparatus to manufacture consent around the idea that corporate take overs of publicly-owned enterprises are inevitable, and extinction of local labor unions is but a fate imposed by a new ‘green revolution.’ The goal is to hide from public scrutiny the anti-labor practices that are intrinsic to the Canadian energy business. Labor unions’ struggles tell us that extinction of labor unions is not an inevitable phenomenon, but is an ongoing politico-juridical project that requires the use of the State and its court system, as the work by the late Leo Panitch showed. Since the 1980s, Canadian energy corporations have relied upon antilabor legal interpretation made by courts in cases pertaining to the ‘back to work’ legislation. Also, courts have increasingly granted legal remedies to energy corporations in cases of labor unrest and using the equity injunction against labor unions. In cases of capital labor disputes that go to courts, the norm has been to allow corporations to hire non-unionized workers, behind the back of labor unions. During 1975-2002, 115 separate labor strikes in Canada ended when Courts used equity injunctions eroding the organizing power of labor unions, according to Canadian labor experts. Canadian energy corporations like ATCO have gotten used to this sort of anti-labor politics, as a Canadian labor leader told me, and expect no labor confrontation whatsoever especially by ‘Third Worldist’ labor unions.
UTIER’s struggle against privatization has also exposed the ideology of ‘industrial reputation’ with which global capital legitimizes its takeover of power industries. This ideology is born out of the fact that financial capital, committed to the permanent restructuring of accumulation, relies upon a‘conflict-free’ environment for profit accumulation to take place at the lowest possible labor and environmental cost. This in turn requires to hide the tremendous labor and environmental opposition Western energy corporations face in Latin America. ‘Transparency,’ ‘fair competition,’ and ‘accountability,’ are pure ideological slogans. They do not and cannot exist, as long as monopolized, financialized global energy capital takes over national electric power industries. The reason is only one: this form of capital generates profits not by increasing investments in power infrastructure but by rents created in the buying and selling of loans and debt instruments. Flows of inter-corporate loans in the ABC group + Mexico are in the order of billions, surpassing by far real investments in infrastructure. According to CEPAL, inter-corporate loans are the driving force behind FDI in Latin America and the Caribbean today. These flows do not translate into an expansion of energy infrastructure in proportion to increases in capital investments. Rather, they produce the only thing they can deliver: power failures in the periphery. The consequences are catastrophic. Energy deficits in the periphery and energy profits in the core are two sides of one single coin: dependent, peripheral and rentier capitalist development. Latin America’s gross national government debt stands at 77% of gross GDP, which makes it the most indebted Global South region of the world. Neoclassical economists’ response is that the U.S., the Euro Area, and even China also have high levels of debt as percentage of GDP; what they fail to see is that unlike these three, Latin American governments have no monetary instrument to decrease their national debt relative to money supply. This has been the U.S. strategy, and one that is based upon the imperialistic advantage of global reserve currency. Energy deficits created by the expansion of financial capital (in the form of sovereign bills, notes, stocks, debt assets, liabilities), only deepens peripheral capitalist development in Latin America. This problem has no solution whatsoever under the present conditions of the capitalist world economy.
The high number and frequency of power failures in Puerto Rico since 2020 are just a dimension of this problem. According to Puerto Rico Energy Bureau, power interruptions have increased by 35% since LUMA took over the national grid. There were 1.5 million homes and businesses without power during August – September 2021; 3.3 million on September 18, 2022; 349,000 on September 28, 2022; 120,000 by October 3, 2022, two weeks after Hurricane Fiona’s landfall. Power outages since LUMA Energy took over have had longer duration time on average than under PREPA. While in the U.S., the average time a power failure lasted was 82 minutes, in Puerto Rico the average time was five hours for the year of 2020. The longest power outage took place in September October 2022, when after rainfall created by Hurricane Fiona on September 22, most of the island was left without power for two weeks. UTIER has publicly denounced that the Puerto Rican economy can enter a dangerous downward trend of prolonged energy deficits given its colonial status. Its calls for labor union solidarity have been undermined by AFL-CIO, which has done everything to co-opt unionized UTIER workers into abandoning UTIER, consistent with its imperialist strategies in Puerto Rico since at least 1950, the year when UTIER disaffiliated from the AFL-CIO. The AFL-CIO has never forgotten it, and keeps trying to brainwash UTIER workers that Puerto Rico today has the best it can get for PREPA. UTIER has defied such colonial, imperialist ideology, double-talking by AFL-CIO. It denounces that the contracted granted to LUMA Energy be rescinded because it is antithetical to PR the Public Policy Act of 2019, which set a maximum price cap of 20 cents per kWh rate for Puerto Ricans. LUMA has made no official pledge to this goal. Moreover, Puerto Rico has established a goal of 100% renewable energy by the year 2050. To this end, UTIER and other labor unions and social movements have produced a comprehensive proposal on how to achieve this environmental target. LUMA Energy has made no contractual agreement to reach this goal.
UTIER also denounces that LUMA Energy will only deepen Puerto Rico’s colonial problem. Puerto Rico’s oil and liquified natural gas (mainly propane) demand has become fully dependent upon the requirements set by the Jones Act. The Jones Act is a century old protectionist law that grants monopoly rights over domestic oil-shipping and transport to U.S. operators as long as these build shippers, tankers and barges domestically, are owned by U.S. citizens, and are never sold to foreign competitors. Oil shipped anywhere in the coasts of the U.S., and for domestic consumption, has to be transported by ‘Jones Act operators,’ the largest American shipping and maritime traffic corporations, and whose oil-shipping, tankers, and containers can be seen traveling from Port Valdez in Alaska to Los Angeles, and from Corpus Christi in Texas to Delaware Bay, passing through Puerto Rican ports. Historically, ‘Jones Act operators’ have secured U.S. government subsidies, low-interest government loans, and special laws in times of crisis shielding Jones-Act operators from international competition. American labor unions linked to these operators have also acted historically in defense of the the Jones Act. But such law has forced the Puerto Rican economy into absolute dependency upon the American oil-shipping monopoly business. Jones Act oil tanker and shipping requirement allows the U.S. to transfer surplus from the island’s economy by high-oil transport and shipping cost. Moreover, the tendency towards higher Jones-Act-market freight rates that emerged after the end of the COVID-19 pandemic further increases the energy prices in Puerto Rico.
We stand with UTIER!
UTIER’s fight against privatization is part of a longer Latin American struggle against debt, energy deficits, and U.S. imperialism. When U.S. energy corporations were taking over national energy assets of the ABC + Mexico group, seeking to avoid the rise of ‘Japan south of the border,’ as Brzezinski put it, UTIER extended its solidarity to Latin American labor unions and joined their struggle. It led a nation-wide workers’ strike against U.S.-imposed austerity in 1979, possibly the largest in Puerto Rican labor history. UTIER supported and still does the anti-colonial struggle of the Puerto Rico, aware that economic austerity and U.S. imperialism are two sides of one single coin. In the 1980s, UTIER led a nation-wide march against privatization under the slogan que la crisis la paguen los ricos, protesting a national law that tried to impose higher taxes, and against the boycott of the AFL-CIO to the protest. In 2009, UTIER denounced and defeated the attempts by the colonial government to impose privatization of the power grid from below, in the form of regional hydroelectrical cooperatives. Since 2019, UTIER has led national mobilizations against the colonial fiscal Junta and its plans for privatization of Puerto Rican national assets.
UTIER’s struggle against privatization demands our solidarity today more than ever. The monopolized, financialized global capital behind the unbundling of Latin American electric power industries has discovered that it wins only if it destroys labor unions. Its strategy has not worked as planned in Latin America. Labor unions and social movements in the ABC group + Mexico continue the struggle for full re-nationalization of electric power industries. In Puerto Rico, the strategy will not work either. UTIER workers remain militant, and the political principles that guide their struggle are unharmed by the anti-labor ideological warfare of global capital. To UTIER’s president, ‘Angel Figeroa Jaramillo, and all union members, we say, ¡a LUMA la sacamos todos!
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