We Fight Back to Thrive, not Survive: Bargaining for the Common Good in Puerto Rico

As our underfunded and crippled healthcare system braces for the COVID-19 pandemic, Puerto Rico must struggle to survive yet another humanitarian crisis─the third one in as many years─while facing off with Wall Street in the largest and longest US municipal bankruptcy in history. Barely three years have passed since Hurricane María ripped through our Caribbean archipelago; three months since a series of earthquakes damaged or leveled major regional hospitals and thousands of homes; and the second week of a nationwide COVID-19 quarantine breaks with news of more than 2,500 hotel workers laid off from just 10 hotels. Widespread uncertainty is at an all-time high for over 3 million residents in Puerto Rico, but the lessons from past disasters allow us to value and understand the kinds of partnerships needed to not only survive the maelstrom, but to build (and win!) strong campaigns that help working families and our communities to thrive.

Puerto Rico began its steep decline into economic depression in 2006, following the complete phase-out of a U.S. federal corporate tax break that allowed Big Pharma and Big Tech to generate a self-serving colonial economy, tailor-made to help their companies temporarily shelter and eventually repatriate billions in annual profits, tax-free. This economy and its colonial government afforded cheap labor in the private sector, relative to the wages these industries would otherwise be forced to pay if their operations were based in the states. Unions, therefore, focused the greater part of their energy organizing workers in the public sector, reaching nearly 50% public-sector density at its height circa 2002.

When the tax-haven bubble burst, Wall Street propped up government operations through debt, but public sector working families would be punished hard by successive rounds of austerity policies allegedly meant to balance the budget, stimulate the (private) economy, and hand out enough local subsidies to multinational giants to compensate for the near absolute lack of U.S. federal investment in our archipelago. Wall Street lenders, directly and through their credit rating agencies, pushed for large-scale layoffs, unfunded early retirement windows, hiring freezes, privatization, and outsourcing, cutting nearly 40% of the public sector workforce in under 8 years. Unions would be nearly decimated by the time Puerto Rico's government found its way into bankruptcy court in 2017.

Drained of resources, politically weakened and isolated, unions were ill-prepared for the onslaught of litigation and politicking that ensued in bankruptcy court. A slew of Wall Street hedge fund vultures descended on the single largest, most expensive, and drawn-out government bankruptcy in the history of the United States, carving up the remains of Puerto Rico's economy in backroom deals cut with a deeply conflicted and unelected control board that was created and appointed by the federal government in 2016 to manage the colonial government's public finances with an iron fist. 

Hedge funds in Puerto Rico are looking to improve their returns on a playbook well known to working families in Greece, Argentina, Detroit, and many other jurisdictions who have faced off with this flock of vultures: slashing pensions, downsizing and privatizing essential public services, hiking regressive taxes and utility rates, deregulating industries and the labor market, and making out like bandits with as much government cash as possible up front. Puerto Rico is already only making partial payments on its first restructured debt deal, 15 months into its new payment plan. Subsequent deals promise additional rounds of austerity, at least through the year 2058, and are just as likely to lead the government back into bankruptcy in the very near term.

Meanwhile, frontline communities in Puerto Rico are impacted threefold: (1) two category 5 hurricanes ravaged the archipelago 4 months into the bankruptcy, and reconstruction efforts have been halted by the U.S. federal government; (2) the new year in 2020 kicked off with three weeks of earthquakes and aftershocks, some ranging between 5.0 and 6.6 in magnitude, that wrecked the southern and southwestern regions of the main island, with thousands of families living in tent cities and many thousands more children unable to return to school more than three months later; and (3) the global coronavirus pandemic threatens an increasingly elderly population, as well as the food supply, commerce, and tourism in our island economy. 

Emergency management programs have been useless in the hands of an emaciated government structure, while stagnant wages and rampant unemployment leave no real recourse for families to rebuild or resist with their own resources.

Feeling overwhelmed yet? This is what workers in Puerto Rico contend with on a daily basis, as they are not divorced from the broader reality of their communities. Climate change, financial depredation, gentrification, pollution, and myriad other issues typically relegated as "community" concerns, are also workers' concerns insofar as workers live in communities harmed or targeted by these practices. There is an urgent need for unions, community, and advocacy organizations to figure out new ways to organize and mobilize around comprehensive demands that speak to the reality of working families. 

Contract campaigning and community campaigning have common ground, common enemies, and a common membership base. Collective action is also a common tactic. The challenge for union and community organizers lies in designing and executing, as equal partners, common campaign strategies that can transform collective action into extraordinary leverage. Community leverage is strengthened when coupled with collective bargaining rights, so how can we shape our demands in a way that allows unions to include them in a contract fight? Union leverage is strengthened when workers are energized by their community's support, so how can we shape a labor-community partnership that gives an energized community reason to trust that the union won't cut and run once the labor demands in a contract are settled? 

Enter Bargaining for the Common Good.

Bargaining for the Common Good neither precludes nor relies upon solidarity, but it does require incisive and strategic research analysis that allows both labor and communities to explore the intersection of interests at the core of their organizing objectives. Our first encounter with this theory dates back to a February 6, 1996 speech at the Massachusetts Institute of Technology by Stephen Lerner: "We have to win workers' support at their worksites and we have to gain workers' support in the community¹. [...] In terms of coalition-building, it's also critical to demonstrat[e] the ties between corporate interests that both impoverish workers through lower wages and damage the community through development and tax break policies²..." This is what we've set out to do in Puerto Rico, in an effort to revamp the labor movement mid-bankruptcy.

Wall Street banks scored record underwriting fees and gave themselves immunity as they drove Puerto Rico into the largest bankruptcy in US municipal bond market history. Hedge funds that bought Puerto Rico's bonds at crisis-level discounts have partnered with the federal control board to squeeze the economy and the bankrupt government of its assets. Private equity firms are targeting distressed real estate, hotels, hospitals, prisons, and other privatized services. The financial industry has real power over workers' lives, at the worksite and in the community. If we want to organize workers in Puerto Rico, we have to offer them "a vision, a plan or a coherent solution that workers think is worth fighting for, and workers won't organize if they don't believe they're going to win!"³ If we have any hope of galvanizing the labor movement, "we need to win, and win on a big scale," against the financial industry.

Over the past five years, unions, community organizations, and advocacy groups, both in Puerto Rico and the US, have worked collaboratively through the Hedge Clippers campaign, building an international support network to fight back against the Wall Street vulture funds that are bleeding Puerto Rico dry. In 2018, the Hedge Clippers crew kicked off a pilot initiative aimed at cancelling or discharging as much debt as possible held by hedge funds in Puerto Rico's record-setting experimental bankruptcy, leveraging grassroots organizing opportunities inside and outside of the bankruptcy's legal framework. Public sector labor organizations in Puerto Rico joined forces with government retirees fighting for their pensions, professional guilds representing public sector workers excluded from collective bargaining rights, feminist organizations advocating for a robust and comprehensive government response to gender violence, a coalition of community watchdogs advocating for Wall Street accountability and greater transparency in public finances, and the largest network of stateside Puerto Rican diaspora organizations, activists, and allies.

Collectively, we've developed an analysis of each level of power and what it takes to beat the hedge funds. There is no hand-me-down playbook for this. We're studying the hedge fund playbook in other jurisdictions, looking for every conceivable advantage in the rulebook, exploiting weaknesses in the opposition's playbook, and we hit them where we are strong (hint: it's not in the courtroom). The fight is ongoing, but so far the results have exceeded internal expectations of success. Big banks face billions of dollars in lawsuits over negligent underwriting practices, hedge funds are facing intense public scrutiny over the trading tactics employed to arrive at their deals, and the federal control board is politically isolated, whilst our labor-community coalition is rapidly amassing public support and political capital to thwart attempts at imposing yet another back-breaking debt deal on Puerto Rico's working families.

But, what does any of this have to do with union organizing? 

Public sector wages and union contracts were frozen 11 years ago; any and all labor litigation against government employers has been stayed since the bankruptcy filing 3 years ago; and new organizing growth has been stunted through 13 years of government-wide hiring freezes, predicated on the assumption that an impending fiscal cliff required massive labor concessions in order to avoid an ever-apocalyptic outcome. In reality, money transferred from labor concessions went to make interest payments on government bonds that were largely hidden from public disclosure, budgets, and audits. 

Labor is now in a position to use its collective bargaining powers to cut a Common Good deal that protects pensions and essential public services, avoids regressive tax and rate hikes, cuts debt to sustainable levels so as to avoid a second government bankruptcy, and forces vulture funds to take the loss through a bankruptcy cramdown. Otherwise, once the bankruptcy ends and contracts finally unfreeze, unions will be forced to compete with each other over hedge funds' table scraps, likely leading to further rounds of labor concessions across the board. If public sector organized labor wants to win their next contract fights, in any significant way, it needs to do away with most, if not all, of Puerto Rico's outstanding government bonds. The closer we get to that result, the better our chances of regaining some of the ground lost over the past decade. 

Just as importantly, our ability to curtail hedge funds' municipal bankruptcy winning streaks in Puerto Rico will echo in other U.S. jurisdictions hoping to fend off similar encounters (e.g. Illinois, New Jersey, and Connecticut). International coordination leading to success in Puerto Rico would keep dangerous precedents from spilling over into other jurisdictions and bankruptcies where hedge funds might go looking for a rematch.

Public sector retirees can also be organized to wield a collective bargaining power of sorts in a municipal bankruptcy, which means public sector retirees are also in a position to cut a Common Good deal that simultaneously protects their pensions while forcing a large haircut on vulture funds, through a cramdown, that protects the rest of the population from deeper austerity measures and abject poverty. To do this, an unprecedented amount of public pressure must be exerted on the government-debtor-employer. This is exactly what retirees in Puerto Rico have set out to do.

Over the past year, nearly 10,000 government retirees have united under a new campaign, Construyamos Otro Acuerdo, to redirect Puerto Rico's bankruptcy strategy alongside unions and community advocates. After 9 months of organizing and mobilizing, in November 2019, retirees were able to secure a unanimous resolution in Puerto Rico's legislature that blocked any debt restructuring bill that included pension cuts for current and retired public sector workers. 

Consequently, on February 22, 2020, Construyamos Otro Acuerdo and a national coalition of organized labor's retiree chapters hosted the first-ever national assembly of retired government workers, where over a thousand retirees came together to make a stand, regardless of their former bargaining units, against Wall Street's predatory deal with the federal control board. A 10-point resolution was overwhelmingly approved in the assembly where, among other pension-specific demands, retirees included a broader set of demands for what they believe constitutes retirement justice: opposition to privatization efforts; defense of public investment in public basic and higher education, healthcare, housing, communications, utilities, and safety; opposition to regressive taxes and utility rate hikes, low wages, underemployment, gender violence, and more.

On March 23rd, in the face of a global coronavirus pandemic, retirees united under the banner of Construyamos Otro Acuerdo brought together over 80 organizations across Puerto Rico and the US calling on Congress to force its autocratic board to fund a fair and comprehensive response by releasing over $9 billion of Puerto Rico's own funds. In order to release the funds for a COVID-19 response, the board would be forced to discharge or cancel most of Puerto Rico's outstanding debt through bankruptcy mechanisms it originally meant to use to cut pensions and bail out bondholders.

On the morning of March 24th, the chairman of the federal board announced a major change was due in their bankruptcy exit strategy, including possibly setting aside any pension cuts in their debt adjustment plan and funding the Puerto Rico government response to the COVID-19 pandemic with the cash they originally meant for bailing out bondholders.

In short, retirees are using their collective bargaining power to turn the tide on 20+ years of neoliberal politics in Puerto Rico, pushing back against the unending cycle of poverty and misery left in its wake, and banding together with community and advocacy groups to make sure the rising tide lifts all boats. We remain confident that Bargaining for the Common Good might just prove to be a key strategic component in winning the fight against disaster capitalism in Puerto Rico.

But turning the tide on Wall Street in Puerto Rico also means targeting their foothold in our economy. In the earlier stages of Puerto Rico's debt saga, vulture funds not only swept up distressed bonds at steep discounts. Hedge funds and private equity firms that invested in Puerto Rico's debt also amassed a portfolio of luxury hotels and residential real estate, commercial office buildings and warehouses, call centers and data centers, among others. Meanwhile, the most recent official survey of union membership in Puerto Rico is over six years old, by itself indicative of organized labor's present state in the archipelago, and its estimated private sector union density was below 1.7%. Communications, transportation, hospitality, and healthcare are the few private sector industries with any significant union presence in Puerto Rico. So, how do we build from there?

Labor unions are among the most important progressive and grassroots organizations in any society⁴. For over fifty years, Unión de Trabajadores de la Industria Gastronómica de Puerto Rico, UNITE HERE Local 610 has been a powerful voice for social justice, progress, and human rights, and the union works hard to keep it that way. Throughout our extensive experience in dealing with the hospitality industry in Puerto Rico, Local 610 has seen ups and downs in terms of sectoral density and bargaining power, but it's clear that the recent onslaught against public sector unions has spilled over into private sector bargaining as well.

Over the last ten years, even as Puerto Rico sunk deeper into financial crisis and economic depression, the hotel and restaurant sectors experienced an increase in net income in excess of 30%, but workers' share of that income dropped by more than 10%. Nonunion workers are the hardest hit with poverty wages, few if any benefits, and increasingly precarious working conditions, following corporate-friendly labor reforms pushed by the federal board. Absent the political clout garnered by our sister unions in established union towns, like the Hotel Trades Council in New York City, Local 610 has decided to adopt a Bargaining for the Common Good approach to organizing new membership in Puerto Rico.

Few hotels in Puerto Rico are union shops, and Local 610 is looking to change that by building power for working families at the worksite and in their communities. Getting hotels to recognize the union, agree to major contract improvements, and eventually enter into a master contract, especially under the current political climate, would be close to impossible if the Union has to negotiate separately with each employer. Similarly, it is impossible for the Union to ignore the effects of climate change on the stability of the hospitality industry and the job security of thousands of hotel workers in Puerto Rico, especially when a majority of our members work in beach-front properties and so many live in low-lying coastal communities vulnerable to floods.

The connection seems rather obvious, but how does it translate into Common Good bargaining demands? In early 2017, Local 610 called a strike at the El San Juan Hotel & Casino over unfair labor practices by the owner, who refused to recognize and bargain with the union. The owner? Fundamental Advisors, at the time a $2.2 billion private equity fund based out of New York City that bought the hotel at a steep discount in 2015, shortly after buying up several million dollars worth of Puerto Rico's junk-rated debt, illegally issued amid the worst liquidity crisis faced by any US municipal debtor.

As the vulture fund waged two campaigns against the Puerto Rican working class, one at the hotel and another in DC lobbying against efforts to restructure Puerto Rico's debt, Local 610 joined forces with the student movement at the University of Puerto Rico (UPR). Students had also called for a strike at the University in early 2017, protesting a 50% budget cut and a 100% tuition hike imposed by the federal control board in order to pay off greedy bondholders like Fundamental Advisors. Striking students called for a comprehensive audit of Puerto Rico's debt, the repeal of the federal legislation that imposed the control board over Puerto Rico, and a stop to the austerity measures that threaten their education.

As it happens, several of the Union's most active members during the strike had also been active in the UPR student movement, and several other members had their children enrolled at the University and would have to bear the brunt of the tuition hike while their employer was trying to cut wages and benefits. It was a hard-fought 60-day strike, but in the end our members won the best contract in the industry and UPR students were able to stop the tuition hike from going into effect that summer. Shortly thereafter, in May 2017, Puerto Rico's government filed for bankruptcy and Fundamental Advisors was no longer listed among the vulture bondholders preying on our people.

In disaster-stricken Puerto Rico, this organizing model is especially easy to replicate: as previously stated, we look for the intersection of "corporate interests that both impoverish workers through lower wages and damage the community through development and tax breaks." As it turns out, the same hedge funds who have profited from Puerto Rico's debt are also buying up hotels of strategic importance for the Union's stated organizing goals, and using Trump's flagship tax break program to develop luxury housing atop natural reserves, flooding and displacing neighboring low-income, working class Black families who have been deprived by the federal and Puerto Rico governments of the necessary funds to rebuild their homes and mitigate against floods in the aftermath of hurricanes Irma and María.

Most members of Local 610 live in these communities and are among these families, threatened with displacement by the same hedge fund employers who would deprive them of fair wages and benefits in the workplace as well as basic public services and infrastructure in their community. Here is a logical confluence of interests that would simultaneously galvanize workers into militant action, and elevate the progressive demands of a community fighting for racial, economic, and climate justice. 

Our Union is in a position where we can simultaneously fight for workplace and community justice for our members in one fight. To that end, our Common Good demands of the vulture employer include putting a stop to the development of luxury housing on protected land; rehabilitating the riverbed damaged by the construction so that local fishermen and tour guides may continue to earn a sustainable living; redirecting Opportunity Zone investments into community-endorsed flood-mitigation infrastructure that would allow the community to rebuild more resilient homes and small businesses; local hiring for both the hotel and the construction of flood-mitigation projects; a write-off of any Puerto Rico debt still held by the hedge fund; and labor-community oversight powers to ensure the fair implementation of these demands.

Working and poor people in the United States and Puerto Rico are suffering the social and environmental consequences of decades of neoliberal economic policies. Puerto Rican and American working families need a robust program of economic reconstruction for a sustainable future, geared toward creating and sustaining good union jobs, and addressing historic social inequalities.

Puerto Rico is a Latin American nation occupied and colonized by the United States government for over 122 years. The structural inequalities inherent to this imperial-colonial relationship cannot be overstated, but working families across both nations can unite in the struggle against the unfettered actions of corporate interests. We can work together to make colonization, privatization, deregulation, corporate welfare, and free trade fundamentalism relics of a bygone era, and strive to build a democratically-run economy that works for all.

We draw our inspiration from many like-minded movements in the United States and Latin America. We must tax corporate profits, create better jobs programs, plan urban reconstruction, expand social services to include universal healthcare and free public higher education, transition to renewable energy, cancel student debt and provide relief for indebted working families, provide quality and affordable housing, cut military spending and end wars, organize workers and revitalize the labor movement, and put an end to all forms of racism, sexism, homophobia, transphobia, and xenophobia.

In the face of disaster, we have learned the power of Bargaining for the Common Good. We have won in the past, and we will continue to win, forging bridges between communities and unions along the way to ensure that our people thrive.

¹Lerner, Stephen. "Labor Forum: Strategic Labor Organizing; How to win against the odds," Dollars and Sense, mayo/junio 1996, pág. 33.

 ²Ídem, pág. 36.

 ³Ídem, pág. 32.

⁴ McAlevey, Jane. “A Collective Bargain: Unions, Organizing, and the Fight for Democracy”, Harper-Collins, New York, 2020.