Yale has a long history of investing its endowment in ways that cause substantial social harm. During the 1980s, Yale invested in many companies doing business in South Africa during apartheid. More recently, Yale has profited immensely from its hedge funds involved in the Argentinian debt crisis and continues to profit from investments in the fossil fuel industry. As of this moment, Yale is continuing its legacy of predatory investments through at least three of its endowment investment managers, all of which are holding Puerto Rican debt: Baupost, Fortress Investment Group and Carmel Asset Management.
Fossil Free Yale, a student organization on campus, has been urging Yale to divest from the fossil fuel industry since 2012 and is now working to promote the Cancel the Debt campaign. The Cancel the Debt campaign demands that Yale pressure its hedge fund managers to stop the predatory debt collection they are currently pursuing against Puerto Rico. It also demands that, if these partners refuse to do so, Yale then divest from these investment managers. Predatory debt investments clearly harm the livelihood and recovery of Puerto Rico. However, the Yale Investments Office does not believe that this behavior is unethical enough to warrant divestment. The issues of fossil fuel and debt investments are both strongly linked to Puerto Rican justice due to the fact that island nations and communities of color are most heavily impacted by climate change and natural disasters today.
Since May 2017, Puerto Rico has been declared bankrupt, with around $120 billion of public debt and pension obligations. Many believe that this debt was illegally created by the United States through a combination of exploitative business tax laws and the systematic exclusion of Puerto Ricans from the political body that passes these laws. Puerto Ricans, therefore, should not be responsible for paying this debt. Yale, however, does not agree. Yale’s fifth and seventh largest investment managers, Baupost and Cyrus Capital Partners, hold $911 and $93 million in bonds issued by COFINA, the Puerto Rico Sales Tax Financing Corporation. Baupost is currently the largest owner of COFINA bonds. Alongside others, several of Yale’s funds managed by Baupost and Cypress Capital Partners have sued Puerto Rico, demanding that their bonds be paid back before the Puerto Rican government tends to its obligations to its own citizens.
Repaying debt holders has become the primary duty of the Puerto Rican government, as opposed to promoting the social welfare of its citizens. The Puerto Rico Oversight, Management, and Economic Stability Act, known as PROMESA, was passed by the U.S. government in 2016 to establish a board — called “La Junta de Control Fiscal” or “La Junta” for short on the island — to oversee debt restructuring. This board is inherently undemocratic because the Puerto Rican people were not allowed to vote on it. Due to Puerto Rico’s status as a territory, the island’s residents cannot vote for the President of the United States or any of the “representatives” forced upon them by the U.S. government.
Instead of helping Puerto Rico achieve a sustainable level of debt, La Junta has consistently pressured the Puerto Rican government to slash public spending in order to repay its debt holders. This is exacerbated by the pressure of Yale’s investment in Puerto Rican debt. The plan of the fiscal oversight board consists mostly of austerity measures, including the closing of hundreds of public schools and cuts to health care and pensions. Simply put, La Junta is jeopardizing the long-term development and well-being of the island in favor of the interests of private investors. The malevolent presence of the control board has led to a popular saying in Puerto Rico: “PROMESA es pobreza” — PROMESA is poverty. Board members of La Junta benefit from the island’s exploitation with million-dollar salaries, while the average annual income of a Puerto Rican household is a mere $20,000.
With the ongoing financial crisis and additional financial pressure being put on the island by debt collectors, recovery from the recent destruction brought on by Hurricanes Maria and Irma in September of 2017 has been impossible. Yale’s investment in things like fossil fuels impacts the entire student body. Yale’s investment in Puerto Rican debt, however, specifically and disproportionately harms the lives of its Puerto Rican students by contributing to a long history of abuse of Puerto Ricans, both on the island and abroad. This behavior is appalling, especially when placed beside Yale’s alleged commitment to providing equal opportunities to all of its students, irrespective of background.
While the path for the continued development of Puerto Rico should be a choice left to the people of the island, Yale students have an opportunity and responsibility to demand that this University ethically manages its investments, so as not to further bar Puerto Rico from recovery. A first step toward Puerto Rico’s sovereignty is for Yale to stop profiting from its suffering.
Learn more about how you can support the Cancel the Debt campaign by signing up for the Fossil Free Yale panlist and reading about the movement at www.yalecancelthedebt.org.
Jamie Chan is a first-year in Ezra Stiles College. Adriana Colón is a junior in Trumbull College. Contact them at email@example.com and firstname.lastname@example.org, respectively.
Correction: The original article mentioned that Yale is continuing its legacy of predatory investments through at least five of its endowment investment managers. However, Corbin Capital no longer manages investments on behalf of Yale’s endowment, and Cyprus Capital has sold its bonds in the Puerto Rican debt. The piece has been edited to reflect those two facts.