Warnings of 'Disaster Capitalism' and Privatization Emerge in Puerto Rico

Following news that the Montana-based company Whitefish Energy was rewarded a "shady" $300 million contract to restore Puerto Rico's crippled electrical grid and as U.S. officials look to install an emergency manager to direct the island's hurricane relief efforts, advocacy groups are urgently warning that authority is being stripped from local elected officials and placed in the hands of "disaster capitalists" looking to profit from the territory's recovery at the expense of the Puerto Rican people.

"We saw how taking control away from accountable local officials worked out in Flint."
--Wenonah Hauter, Food and Water WatchIn a statement on Friday, Wenonah Hauter, executive director of Food and Water Watch, cautioned that the move to place an emergency manager in charge of Puerto Rico's recovery signifies "a first step on the road to privatization."

"We saw how taking control away from accountable local officials worked out in Flint," Hauter said, referring to the beleaguered Michigan city. "What's more, Puerto Rico already had a failed experiment with water privatization. Whether it's water or energy, privatization helps Wall Street, not communities."

It was similarly appointed "emergency managers" who made the fateful decisions that poisoned Flint. These financial coups are not neutral. https://t.co/hrlYqCHdY2

-- Naomi Klein (@NaomiAKlein) October 26, 2017

As The Intercept's Kate Aronoff reported Thursday, Noel Zamot has been chosen for the emergency manager role and placed in charge of the Puerto Rican Electric Power Authority (PREPA), the island's lone power utility.

Zamot has a long record of supporting efforts to privatize PREPA. As Aronoff observes, Zamot was initially brought on to Puerto Rico's financial oversight board with an eye toward "privatiz[ing] the Electric Power Authority as soon as possible."

"Now Zamot will get the chance to carry out that job directly," Aronoff writes, adding that he may even attempt "to put a green spin on it."

Concerns that "audacious cronyism" is threatening to overtake the Puerto Rico recovery grew even louder Thursday after a copy of the Whitefish Energy contract was published online by USA Today.

One of the more startling sections of the agreement declares that "[i]n no event shall PREPA, the Commonwealth of Puerto Rico, the FEMA administrator, the Comptroller General of the United States, or any of their authorized representatives have the right to audit or review the cost and profit elements of the labor rates specified" in the contract.

"The most alarming part of this contract is that it prohibits the government from reviewing the costs Whitefish charges for services."
--Rep. Raja Krishnamoorthi

The agreement also states that the Puerto Rican government "waives any claim against [Whitefish] related to delayed completion of work."

Journalist Ken Klippenstein concluded that the contract appears to be little more than permission for Whitefish to carry out "colonial-style plunder," and the leaked document quickly caught the attention of members of Congress, who immediately began demanding answers.

On Friday, Rep. Raja Krishnamoorthi (D-Ill.) wrote a letter to the Committee on Oversight and Government Reform demanding that Congress "convene hearings to investigate both the Whitefish deal and the full scope of any anti-auditing language in government contracts."

"The most alarming part of this contract is that it prohibits the government from reviewing the costs Whitefish charges for services," Krishnamoorthi wrote. "The federal government has a sacred promise to the American people not to misuse or waste federal funds. This contract breaks that promise, and Congress needs to investigate both the deal with Whitefish and the full use of any anti-auditing clauses in the federal contracting process."

This post has been corrected to reflect the fact USA Today first published the Whitefish contract.