FacebookTwitterGoogle+RedditEmail

The Pain of Puerto Ricans is a Profit Source for Creditors

Photo by Western Area Power | CC BY 2.0

Puerto Rico was already in trouble after suffering a “lost decade” without economic growth after 2005, leading to a default on its public debt and mass migration from the island. That was before it got hit with one of the most powerful storms in history, Hurricane Maria, on September 20, 2017, followed by criminally inadequate relief and reconstruction funds. Now some of those funds might actually end up with its creditors, compounding the outrage that the remaining residents must suffer.

A new study from Harvard University estimates Puerto Rico’s death toll from Hurricane Maria to be close to 5,000 people, prompting demands for a revision of the suspiciously low official count claiming only 64 people died as a result of the storm.

To make matters worse, the Harvard study attributes thousands of deaths to delays in receiving medical care in the storm’s aftermath. Many of these deaths were avoidable, an outrage that made many Puerto Ricans feel like they were being treated as second class citizens.

But their troubles were just beginning. With an unsustainable debt burden, the island’s finances had been handed over to a Fiscal Management and Oversight Board (the Board) that was appointed by the US Congress. Prior to the storm, the board had certified a ten-year austerity plan that would lead to another lost decade of economic growth.

In the months after Maria, some federal support started to trickle in and appropriations from the US Congress increased. Even President Trump declared the island’s public debt to be “unpayable.” The situation prompted a review of the Board’s fiscal plan, in order to account for the island’s post-hurricane reality.

When the review process started, the Board released a set of “core principles” that promised a plan that would provide sufficient relief and focus on rebuilding the island. A number of prominent economists, including Nobel laureate Joseph Stiglitz, signed a letter warning of the devastating effects that a return to austerity would have for both Puerto Rico’s people and its economy.

Yet, as my colleague Jake Johnston and I show in a new report, the Board’s new post-hurricane fiscal plan takes the same path of demanding more austerity, including sharp cuts for most government services. Government agencies are also expected to implement a series of layoffs, restrict labor rights, and cut public sector pensions across the board. The measures mandated by the Board would directly hurt a large number of Puerto Ricans already struggling to recover.

Even more shocking, the plan puts aside funds for a fiscal surplus that may be available for creditors to claim. The surplus would be about $6.1 billion over six fiscal years ― actually higher than the $4.5 billion surplus that was predicted before the storm hit.

Puerto Rico needs an estimated $95 billion to rebuild, but is due to receive just $54 billion from the federal government, and about $8 billion from private insurers. The increase in the surplus is not due to Puerto Rico having too much money, but rather to the Board’s seeming willingness to prioritize creditors’ interests over relief efforts.

One place where austerity was not considered was for the Board itself. The plan set aside a whopping $1.5 billion to cover its expenses and professional fees. The Board’s executive director has an annual salary of $625,000, topped with very generous benefits. This type of lavish spending is especially distasteful coming from an unelected body that’s mandating sharp cuts for the island’s residents.

Meanwhile, as our fellow citizens in Puerto Rico suffer, The Wall Street Journal has named Puerto Rican bonds the investment of the year. Bond prices ticked up after news of the projected surplus reached creditors, some of whom were vulture funds who bought the bonds at a steep discount, hoping to cash in at full value.

This is too much. The US Congress and the Federal government cannot continue to destroy what is left of Puerto Rico’s economy, and drive more of the population from the island (over 10 percent have already left over the past decade). The federal authorities must arrange for debt cancellation and sufficient reconstruction ― not austerity ― so that Puerto Rico can survive and return to economic growth.

This column originally ran in the Philadelphia Inquirer.

More articles by:

Lara Merling is a researcher at the Center for Economic and Policy Research in Washington, DC.

July 19, 2018
Rajai R. Masri
The West’s Potential Symbiotic Contributions to Freeing a Closed Muslim Mind
Jennifer Matsui
The Blue Pill Presidency
Ryan LaMothe
The Moral and Spiritual Bankruptcy of White Evangelicals
Paul Tritschler
Negative Capability: a Force for Change?
Patrick Bond
State of the BRICS Class Struggle: ‘Social Dialogue’ Reform Frustrations
Rev. William Alberts
A Well-Kept United Methodist Church Secret
Raouf Halaby
Joseph Harsch, Robert Fisk, Franklin Lamb: Three of the Very Best
George Ochenski
He Speaks From Experience: Max Baucus on “Squandered Leadership”
Ted Rall
Right Now, It Looks Like Trump Will Win in 2020
David Swanson
The Intelligence Community Is Neither
Andrew Moss
Chaos or Community in Immigration Policy
Kim Scipes
Where Do We Go From Here? How Do We Get There?
July 18, 2018
Bruce E. Levine
Politics and Psychiatry: the Cost of the Trauma Cover-Up
Frank Stricker
The Crummy Good Economy and the New Serfdom
Linda Ford
Red Fawn Fallis and the Felony of Being Attacked by Cops
David Mattson
Entrusting Grizzlies to a Basket of Deplorables?
Stephen F. Eisenman
Want Gun Control? Arm the Left (It Worked Before)
CJ Hopkins
Trump’s Treasonous Traitor Summit or: How Liberals Learned to Stop Worrying and Love the New McCarthyism
Patrick Bond
State of the BRICS Class Struggle: Repression, Austerity and Worker Militancy
Dan Corjescu
The USA and Russia: Two Sides of the Same Criminal Corporate Coin
The Hudson Report
How Argentina Got the Biggest Loan in the History of the IMF
Kenn Orphan
You Call This Treason?
Max Parry
Ukraine’s Anti-Roma Pogroms Ignored as Russia is Blamed for Global Far Right Resurgence
Ed Meek
Acts of Resistance
July 17, 2018
Conn Hallinan
Trump & The Big Bad Bugs
Robert Hunziker
Trump Kills Science, Nature Strikes Back
John Grant
The Politics of Cruelty
Kenneth Surin
Calculated Buffoonery: Trump in the UK
Binoy Kampmark
Helsinki Theatrics: Trump Meets Putin
Patrick Bond
BRICS From Above, Seen Critically From Below
Jim Kavanagh
Fighting Fake Stories: The New Yorker, Israel and Obama
Daniel Falcone
Chomsky on the Trump NATO Ruse
W. T. Whitney
Oil Underground in Neuquén, Argentina – and a New US Military Base There
Doug Rawlings
Ken Burns’ “The Vietnam War” was Nominated for an Emmy, Does It Deserve It?
Rajan Menon
The United States of Inequality
Thomas Knapp
Have Mueller and Rosenstein Finally Gone Too Far?
Cesar Chelala
An Insatiable Salesman
Dean Baker
Truth, Trump and the Washington Post
Mel Gurtov
Human Rights Trumped
Binoy Kampmark
Putin’s Football Gambit: How the World Cup Paid Off
July 16, 2018
Sheldon Richman
Trump Turns to Gaza as Middle East Deal of the Century Collapses
Charles Pierson
Kirstjen Nielsen Just Wants to Protect You
Brett Wilkins
The Lydda Death March and the Israeli State of Denial
Patrick Cockburn
Trump Knows That the US Can Exercise More Power in a UK Weakened by Brexit
Robert Fisk
The Fisherman of Sarajevo Told Tales Past Wars and Wars to Come
FacebookTwitterGoogle+RedditEmail