Yves here. In this Real News Network segment, notice the parallels between the treatment of Puerto Rico and that of Detroit. But the added feature is the role of vulture funds.
GREGORY WILPERT, TRNN: Welcome to the Real News Network. I’m Gregory Wilpert, coming to you from Quito, Ecuador.
The U.S. Senate gave solid approval on Wednesday to a relief plan to help Puerto Rico address its $72 billion debt.
SPEAKER: The Ayes are 68, the Nays are 30. Motion to concur is [read.].
WILPERT: This sends the measure to President Barack Obama for his signing into law just ahead of a possible default by the U.S. territory on its next debt payment. Obama said in a statement he looked forward to signing the bill into law.
The legislation would create a federal oversight board appointed by Washington with the power to restructure Puerto Rico’s unimaginable debt load. Many Puerto Ricans are leery of the proposed oversight board, fearing it could usurp the island government and place investor concerns over local priorities. A Republican provision might also lower the minimum wage for some young workers from $7.25 to $4.25 per hour, and weaken overpay rules.
Senators Bob Menendez and Senator Bernie Sanders lead the opposition in the Senate, decrying the bill as “neo-colonialism,” and U.S. Senator Elizabeth Warren also voted against the bill. But many Democrats and liberal groups such as Jubilee USA and Center for American Progress supported the bill. Its CEO, Neera Tanden, said in a statement there are parts of the bill that could be improved, but, quote: “Given the severity of the situation in Puerto Rico, this legislation represents necessary and immediate aid for the territory to prevent a needless catastrophe. I applaud Congress for working to pass this bill, and look forward for its swift and fair implementation.”
Now joining us from Bridgeport, CT to discuss this is Julio Lopez. Julio is a lead organizer for the group Make the Road, an immigrants’ and workers’ rights organization based in Bridgeport, CT. Julio also leads the Puerto Rican work on the hedgeclipper campaign that looks to hold accountable the Wall Street hedge fund billionaires for their impact that they’ve had on the Puerto Rico crisis. Thanks, Julio, for joining us.
JULIO LOPEZ: Thank you for having me.
WILPERT: Puerto Rico was supposed to pay a nearly $2 billion debt payment on July 1, which it would have defaulted on. And Neera Tanden, who I quoted earlier, says a default would have led to a needless catastrophe for Puerto Rico. Would you agree with that assessment? Will the PROMESA bill, as it’s called, rescue Puerto Rico from a catastrophe?
LOPEZ: I think the PROMESA bill will help Puerto Rico restructure its debt, that is true. Part of what it does is it puts a moratorium on the debt payments for two years. Unfortunately, our concern is apart from putting that moratorium for two years it’s not really addressing the needs of the Puerto Rican people, the working people of Puerto Rico, and what it’s doing is actually accentuating what’s happening by imposing many more austerity measures.
WILPERT: Tell us about–and I mentioned one of the austerity measures, which was the reduction of living wage for young workers. What other measures does this bill include that would harm the population?
LOPEZ: Well, in Puerto Rico for the last three years we’ve seen how austerity measures have been creeping up. So we’ve had the fact that taxes have been raised to a point where people in Puerto Rico pay about 11 percent of taxes in whatever they buy. There’s been closings of 150 schools, hospitals have gone without electricity, and you know, special services providers have been unpaid for months.
PROMESA doesn’t have any type of an economic incentive, which means that we can argue on the letter of the law. It talks about consolidating agencies, it talks about lowering the minimum wage, it talks about taking really drastic measures to make sure that, you know, at the end of the day we pay the bond holders. So we don’t foresee this having any sort of direct impact on things that are getting really bad.
On the contrary, we think things are getting worse, are going to get worse, because the fiscal control board is going to have power to not only oversee the budget of Puerto Rico, but also review it to a point that they can actually deny a review board. And the fiscal control board is made in a way that is not really about making sure people eat in Puerto Rico. It’s about making sure that the people that we owe money to are paid.
WILPERT: Well, that was actually going to be my next point, about the fiscal review board. Bernie Sanders actually referred to it as a form of colonialism. I mean, would you agree with that assessment? I mean, what, would it basically be able to pretty much take over the responsibilities of the government and in effect place an administrative body that’s unelected in control of the territory of Puerto Rico?
LOPEZ: Well, you tell me. It’s seven people who are not from Puerto Rico, most of them. I think there’s a requirement for one or two to have a resident in Puerto Rico. They are going to have power to review the budget. They are going to have power to take down laws that don’t necessarily, aren’t in line with what the PROMESA bill has. The ironic part is we already know Puerto Rico is a colony, so I don’t think anybody’s saying, oh, Puerto Rico is now a colony. What really this brings into light is the fact that we are a colony, and what they’re doing is imposing this imperialistic control board that’s really going to determine the livelihood of Puerto Ricans for the foreseeable future.
And one of the things that the bill says is that it has the power to be extended if things don’t look good. So it’s one of those, like, open-ended fiscal control boards that say, you know, your democracy is as good as your ability to pay your debtors and the hedge fund people that have been really slamming on Puerto Rico for the last year.
WILPERT: And so, I mean, what do you think a better solution would have looked like? I mean, if, I mean, we mentioned earlier in the beginning that a bill saves Puerto Rico at least to some extent from the default and all of the implications. But what should have the bill included instead of what it’s doing right now, in your opinion?
LOPEZ: It should have been just the bankruptcy that Puerto Rico was asking for for the last year. Puerto Rico was taken its ability from being bankrupt in the ’80s. Nobody really understands why. But that means that municipalities and public corporations have no, no sort of, you know, way of restructuring their bill.
So in many ways you’re saying that a person that has no money and really bad credit gets a really bad credit card, and at the end of the day it can’t do anything. It can’t go to the IMF because it’s a colony, it can’t go to other countries because it’s a colony. And the only government that’s supposed to be supporting Puerto Ricans and the 3.5 million Puerto Ricans that live on the island is saying that the only thing that they’re going to do is impose a fiscal control board that is going to watch out more for the billionaires and millionaires in Wall Street than it is going to watch out for the millions of Americans living on the island.
WILPERT: But so many politicians and organizations seem to be supporting the bill, such as I mentioned earlier of the Center for American Progress, and also Jubilee USA. They’re all supporting it, as well as, of course, Obama and most Democrats, it seems. Why do you think that is? Are they lacking information, or they just don’t care about Puerto Rico? What’s going on here?
LOPEZ: It’s difficult for me to say that they don’t care about Puerto Rico. People, you know, the people at Jubilee are really good people that I know have the best interests at heart. We also know that our representatives, congresswomen and men have really been pushing hard to make sure that a good solution is done in Puerto Rico.
Our worry is that when you have, you know, I think there’s five people running for governor in Puerto Rico, and all of them have said no to the PROMESA bill. And when we know that 51 percent of the Puerto Rican people are against this bill, I think it’s rather ironic and sad that the people on the mainland are not respecting the will of the Puerto Rican people, even if they have good intentions.
WILPERT: Of course, one of the big questions that many people [inaud.] we don’t have much time to get into this. But if you could just briefly explain, and just perhaps this part of the problem is, like you said, the people on the mainland don’t really know, perhaps, what’s going on. How did Puerto Rico get into this situation? Just, you know, because we’re almost running out of time. How did this come about?
LOPEZ: So, I would say there’s 118 years of colonialism that have made it difficult for Puerto Rico to create a really robust and effective economics system. We’ve had tax breaks that have gone away for the last 15 years. We’ve had inefficient government.
But I think most importantly over the last two years, a lot of hedge funds and mutual funds came into Puerto Rico like they did in Argentina and Greece. They bought the debt for 30 cents on the dollar, which means that they are now asking for a dollar when they bought it for 30 cents. And when the Puerto Rican government was unwilling to pay, because it had no money, those same hedge funds and mutual funds were like, no, we want our money now, very similar to what they did in Argentina.
And that has meant that the government, because it doesn’t have any ability to pay, has been forced to pay the bond holders and has been forced to make really bad, you know, not bad, but really extreme decisions to keep the government afloat. And really, that has resulted in what we have now: a government that’s extremely broke, a Puerto Rico where 50,000 people or more are leaving the island, and the people that are staying are just suffering through whatever the U.S. government seems to want to impose.
WILPERT: So what do you think would be a way to get Puerto Rico out of that situation? I mean, right now there’s, like you mentioned, an enormous amount of immigration, poverty is at 45 percent, 13 percent unemployment. Given this PROMESA bill, which is going to help only to a very limited extent, what do you think would have to happen in order for the situation to improve right now?
LOPEZ: Well, the United States needs to take responsibility for the colony they took 118 years ago. They should be investing in Puerto Rico instead of making Puerto Rico foot the bill for a terrible fiscal control board. Like, the fiscal control board is going to cost more than $300 billion dollars. And this is a fiscal control board that, important to mention, they can actually receive gifts. So just, I’m just throwing that out there.
What we need to do as a Puerto Rican people is make sure that we’re mobilizing like we’re doing, that we’re moving in the island, that we’re trying to move the base. And now that we have this fiscal control board we need to make sure we hold it accountable. We don’t know who the people that are going to be on the fiscal control board are going to be, but what we know is whenever they are appointed we need to make sure that they are doing the right thing for Puerto Rico.
WILPERT: Okay. Well, thanks so much, Julio, for joining us on the program.
LOPEZ: Thank you.
WILPERT: And thank you for watching the Real News Network.
This is a tough one.
This bill stinks.
But does anyone really think that given this Congress and this President, we were going to get anything better?
So do you support the bill and kick the can down the road so that perhaps you will have a better Congress (forget about President) to re-do the thing later, or do you oppose it and let Puerto Rico default? I don’t know enough to know which is worse, but I’ll bet that it means austerity either way.
My despair mounts.
It is partially a matter of short-term vs. long tern suffering, and the further erosion of PR’s ability to govern itself. A default now will hurt, a lot, but ten years from now with a panel of overlords making the economy worse and worse, people will wonder in hindsight whether it would have been better to suffer the immediate shock rather than give up all control over local affairs.
And, I take issue with the article’s characterization of Puerto Ricans as immigrating to the U.S. PR is the US, for all intents and purposes, and the people of the island are American citizens. That Congress can get away with treating our fellow citizens like this just so bond holders can make out like bandits is the most galling thing of all.
I absolutely agree–no one said that when I moved from NY to MA I was immigrating or an immigrant. The thought would never enter the average American’s head, so we can see the prejudice pretty clearly there.
However, I cannot assume, the way economists do, that if X then Y (if they default, then it will turn out better in the long run). Like the Brexit, it might turn out better, but then again it might not. Politics and policy cannot be assumed. It’s a gamble–probably a good one, but nevertheless far from a certainty.
Curious why Puerto Rico doesn’t declare full independence and re-negotiate from the position of full sovereignty. Anyone care to explain?
Where is it going to get the dollars from to pay for essentials once the dollar is no longer legal currency in Puerto Rico? What happens to the status of families now split apart? Would all the Puerto Ricans in the USA become illegal aliens? And if the zika virus really is a big deal, where is the money and the expertise going to come from to deal with it without the CDC and Uncle Sam?
Answer to debt question: they’d have to deal with the IMF. Negotiating with Congress is awful. Negotiating as a bankrupt island nation with the IMF? What do you think the outcome would be? I’m not being snarky, just saying.
Apparently PR had been attempting to declare independence for the first hundred years that it was under US control. Here is a good background video from an independence perspective from teleSUR English.
The latest referendum in 2012 shows Puerto Ricans are not happy with the current situation as a territory but what they want seems to be somewhat unclear, statehood vs some kind of sovereignty. It would be interesting to see how the vote would go today.
A better link to the background video https://www.youtube.com/watch?list=PLhvPB4lyc4dT9m1v58H4lB8f0ynVGnKfM&v=bArxHAsJOKQ
I was shocked to discover from the video that armed PR nationalists had entered the US Congress and wounded 5 Congressmen in 1954. Something I never learned in my US history class.
Can Puerto Rico do a…PRexit?
Do they have that right, and if they do will it put them in an even more untenable position?
Puerto Ricans are American citizens with at least most of the rights that entails. It would be hard to simply give that up, in order to tweek the noses of bond holders.
The time-frames are way off.
Even if you could organize as “Leave” movement, and get a referendum agreed to by the Congress, and then get a majority of Puerto Ricans to vote for it, the time frame is way out of whack with the immediate needs of the island. And I’ve never seen a poll the indicated a majority of Puerto Ricans want to become independent and lose access to the US market and US schools for their children. If you want to go to any college in the US all you have to do is apply and if you get in you have access to US student loans, government aid, and can simply get on any flight and come on over. A Chinese or Peruvian kid would have to get a visa and then likely pay full freight. And if we assume the worst case scenario and President Trump actually starts rounding up undocumented aliens in their millions for deportation, being a Puerto Rican gives you ironclad protection against Immigration.
As Puerto Rico, Ukraine, Greece, Libya, Guatemala, goes, so do we all.
It’s time to hold those who commit crimes against humanity by waging war accountable for their actions, including the jihadists.
This all makes me wonder how long it will be before we see federal oversight boards appointed by Washington to oversee states like Illinois and New Jersey.
One can just imagine the people that Vice President Christie would get appointed to the Oversight Board that would run New Jersey! And Hillary would name Rahm Proconsul for Illinois!
God are we screwed.
I’m beginning to wonder if incremental change to the current system is even possible. It seems at every turn the neoliberals decide to double down on authoritarian control and austerity.
Similar to bankers exploiting the common desire of ordinary people to pay their underwater mortgages instead of walking away form them, as any sane business would, increased austerity seems to be based on a belief that people are mostly pacifists and won’t choose a violent response to their oppression. This seems to me to be playing with fire. How can undermining the health and stability of a society be a logical response to crisis?
The misuse of language is the driving force behind all these policies. Language is used to mask deplorable action. How long can this go on? The chaos being created must certainly lead to system failure eventually.
This is a tragedy and travesty. No good ever comes from fiscal review boards imposed from above (and from a country’s capital). It disgusts me that this is the best our government can do. And, of course, Obama and Clinton are ultimately responsible. I worry it’s going to be TINA until the end. What good does it do to have a female president, when we artificially lower youth wages in a shrinking economy that is about to get punished by the financial system. The next time you hear Clinton talking about compassion, family, or social unity keep this horrible decision in mind.
It’s emotionally satisfying to chest-thump about independence but, post-Columbus, being conquered by the US was the best thing that ever happened to Puerto Rico.
Has it been all sweetness and light? Or course not. But the island does have paved roads, indoor plumbing, an electrical grid. This is all no longer particularly well-maintained, but is holding up better than Soviet-provided infrastructure would be at this point. Moreover, the Puerto Rican bureaucracy operates with a level of corruption more characteristic of Anglo-Saxons than Iberians.
To declare independence now would likely result in conditions somewhere between Haiti and Venezuela, while removing the increasingly popular escape route to the loathsome, racist, xenophobic, patriarchal, US of rApeland.
Ironically, it’s because of those Soviets that Puerto Rico has the infrastructure it does, Much of it was a product of the Kennedy years when the USA tried to use Puerto Rico as a counterexample to Cuba. before that, conditions on the island were pretty dim.
Essentially correct. But counterexample is only part of the story. Also a listening post and military staging area and bombing range.
Speaking of Soviets: I am still waiting for some supporting evidence that backs up your attack on Solzhenitsyn from a while back.
“It’s all Greek to me.”
Anybody else hearing that in their heads quite a bit?
Reduce the minimum wage?
Sure. ‘Cause when someone owes you money the first thing you want them to do is quit their job or take a pay cut.
Look how well that’s worked in Greece.
Punish the bad borrower!
Okay. How many bad lenders will also be punished for making these bad loans? Shouldn’t they have known better? It is, after all, their line of work.
If pay cuts are so good for the economy, how come we don’t cut the pay of the people actually making the most money? How come they aren’t out there volunteering for pay cuts to get the economy rolling again?
A control board? Really? ‘Cause this approach worked so well in Flint, Michigan too. Let’s export it. Do you like your drinking water leaded or unleaded, ladies & gentlemen?
This is *not* colonialism. Colonies were run at a profit. The Raj won’t be packing up one day leaving you with a functional economy and a bureaucracy to govern it.
How many people on the control board will have their pay cut if per capita Puerto Rican GDP shrinks?
Wall Street lobbyists successfully lobbied for Puerto Rico tax exempt debt to also qualify for state income tax exemptions in all states. Because the interest yield and discounts on Puerto Rico bonds have been very high compared to other tax exempt borrowers, many hedge and mutual fund managers loaded their funds up with Puerto Rico bonds. By doing so, they thereby created a systemic risk of large writedowns being required in the market value of Puerto Rico bonds in event of default and forced widespread selling on liquidation. That in turn created the possibility of large writedowns being required in the mutual funds themselves. Although I disagree with related neoliberal austerity and privatization policies, the actions described in this interview would appear to reduce the likelihood that chain of events and financial contagion will now occur, at least in the near term. Bond buyers and the system will also again be saved from themselves.
Despite Puerto Rico’s unique commonwealth status and the parallels that were drawn to Greece and Argentina regarding the onerous nature of the debts owed by Puerto Rico, as well as the stark implications of imposed austerity, this emergent policy raises significant questions regarding whether debts owed by all financially troubled US state and local governments should enjoy an explicit federal guarantee? If so, why should any austerity measures and privatization of public assets be imposed on anyone?
What we Puerto Rican do. Is what Fidel Did in Cuba. Revolución Puertorriquena. Kick the Yankees out of our Island. Macheteros were right about the gringos. Puerto Rico. Let fight for our land. Get up and fight. To the last drop on blood. But we will fight for our land. That I warranty anyone.
This sounds a lot like the “emergency managers” Governor Rick Snyder of the state of Michigan has imposed on various cities in his state, the most notorious being Flint. Puerto Ricans are in for some truly horrific times ahead, as the Lords of Capital have shown themselves to be crap civic managers.
Peaceful rallys…….is a good start.
The significant paragraph says that hedge funds bought debt for thirty cents on the dollar and demand a dollar that they know the congress and the president will give them while saying they are doing something when what they do is take more from the people creating bad health, bad infrastructure in general & run more people with skills out.
Money is a tool.
People getting paid less obviously pay fewer taxes. People with little money can’t get the tools they need to do much more than eat. Where does food come from?
Look at what the Clintons do in Haiti, which doesn’t even have the benefits to being a colony. Hillary calls to prevent a raise for textile workers. Every time I think of the Clintons & Haiti I can’t vote for them.
There is a lot of paper, bonds are out there that just ought be burned and not sold to anybody. You learned from your parents to buy bonds so all these people buy bonds that are increasingly toxic. All of capitalism, which for the workers is just a paycheck, is held hostage by a criminal gang called Goldman Sachs. Same work, money in the check goes down so they get more of what is really earned and plus that that is printed for them.
Wherever there is guaranteed money they go till it won’t be long before reserve currency or not it won’t matter if Goldman Sachs & their friends get all of it.
If Goldman Sachs can make on top of it all a currency of their own protected by IP law as “Patented”, well Puerto Rico ought too.
The good thing done for Puerto Rico were the water reservoirs, who is buying those up? I’ll bet some smart guy in Sachs has already angled to get that. Mobsters in Haiti sell what good water there is there.