Hedge funds helped wreck Puerto Rico’s economy
Angry graffiti scrawled across the brightly colored buildings of San Juan tells the creditors of the world exactly where they can stick their plan to extract roughly $73 billion in debt from the struggling U.S. territory. “Puerto Rico comes first. To hell with the debt,” reads one wall. “Don’t play around with my retirement,” says the side of a major freeway. Down by the University of Puerto Rico, the walls and sidewalk are filled with laments — “Look into my unemployed face” — and calls to action: “Study and fight!”
Depending who you ask in Puerto Rico, the debt crisis was caused by neo-colonial and imperialist policies from the U.S., the Puerto Rican government’s wasteful overspending and corruption, or the cadre of hedge funds that are currently profiting from the island’s woes. Add to that toxic mix a series of free-trade agreements that triggered mass outsourcing, and a population in rapid decline due to out-migration, and you arrive where we are today, with the government on the hook for tens of billions of dollars.
After the island’s Public Finance Corporation failed to make a major payment due this weekend, the threat of a default looms larger still.
Two recent reports, one by former consultants of the International Monetary Fund and the other by the island’s hedge fund creditors, say the only way out of the mess is a regime of harsh austerity that eliminates the minimum wage, sells off public buildings and assets, lays off teachers and shutters schools, cuts workers’ vacation and benefits, and raises sales taxes and electricity rates.
Pedro Pierluisi, Puerto Rico’s sole representative in the U.S. Congress, told ThinkProgress he somewhat agrees with this model. “When you tell me ‘austerity,’ I tell you, of course we have to be austere. Of course we have to be fiscally responsible. When our financial viability is at stake, we should all be concerned.”
Speaking to ThinkProgress in the office of his pro-statehood political party, Pierluisi said in alternating English and Spanish that Puerto Rico must prioritize paying its debt — not only because their Constitution mandates it, but because it’s the “adult” thing to do.
“We can’t follow Argentina. Argentina has spend 12 years fighting its creditors before tribunals and they’ve lost billions in foreign investments. I don’t want that model for Puerto Rico,” he said. “So we have to talk to our creditors in a responsible and civilized way. We have to say, ‘I want to pay you. Help me pay you.’ That’s what I don’t see: both sides sitting down at the table to negotiate like adults.”
Pierluisi, who will run for governor of Puerto Rico in 2016, has introduced bills that would give the island the same bankruptcy protections as U.S. states and cities. This would allow the commonwealth to restructure its debt in a more manageable fashion. But Pierluisi has no vote in Congress, even though he represents more U.S. citizens than any other House member, and hope for passing the proposal has fizzled in the face of Republican opposition. Furthermore, the White House has already ruled out a bailout.
Without a lifeline from the mainland, the island could run out of cash as soon as this summer, sending the economy into a Greece-like spiral that makes the path to austerity all the more likely.
For some U.S. progressives, including presidential candidate Bernie Sanders (I-VT), this is a “moral outrage.”
“At a time when 56 percent of children in Puerto Rico are living in poverty, the last thing that Puerto Rico needs is more austerity,” he said in a recent statement. “The people in Puerto Rico should not be forced to suffer so that a handful of billionaires can make even more money.”
According to a new investigation, many of those same billionaires demanding payment from Puerto Rico have also profited from the debt crises in Greece, Argentina, and Detroit. These hedge funds specialize in buying up “distressed” assets and pushing governments to take on debt they can’t afford under predatory rates and conditions. At the same time, the groups arelobbying Congress to not allow the island to declare bankruptcy, as doing so would cut into their profits.
yes they have..and they do it all over the world..and then this happens:
“Two recent reports, one by former consultants of the International Monetary Fund and the other by the island’s hedge fund creditors, say the only way out of the mess is a regime of harsh austerity that eliminates the minimum wage, sells off public buildings and assets, lays off teachers and shutters schools, cuts workers’ vacation and benefits, and raises sales taxes and electricity rates.”