Section 2

Explosion of the Debt Crisis

The origins of Puerto Rico’s $72 billion debt, and various resolutions local and federal governments pursued to alleviate it.

The origins of Puerto Rico’s $72B debt

are explained in this section, and the various resolutions that the local and federal governments pursued to alleviate it. In terms of the debt’s origins and legality, the Puerto Rican government’s money mismanagement is discussed, as well as the colonial economic system’s sanction of “vulture” hedge funds to prey on Puerto Rico.

Many authors consider the ways in which different solutions are shaped and limited by Puerto Rico’s relationship with the United States. These solutions include filing for bankruptcy, renegotiating the debt, austerity measures, and a transformation of the Island’s political status. The Public Law 7, which allowed the firing of more than 17,000 government employees, was one of the first policies of austerity imposed by the Puerto Rican government to alleviate the economic crisis. A portion of texts in unit 1 examines the effects of this law, including the further exacerbation of the Puerto Rican economy.

Eventually, the debt led to the imposition of the Fiscal Oversight Board, whose determinations cannot be challenged by the Puerto Rican government. One subsection explores the PROMESA bill, the Board that it empowered, the members of the Board, and their exorbitant salaries. Furthermore, since Puerto Rico did not have a bankruptcy process in place, Title III under PROMESA represents a quasi-Chapter 9. Unit 5 expands on the bondholders’ unwilling negotiation that led to Title III and the consequences of this policy, such as loss of local control.

“La Medicina Amarga:” the Unleashing of Austerity

Yarimar Bonilla and Rafael Boglio Martínez, “Puerto Rico in Crisis: Government Workers Battle Neoliberal Reform,” NACLA Report on the Americas (2010).

This article discusses Public Law 7 in Puerto Rico, which was passed on March 2010 by the Fortuño administration, in response to the fiscal crisis. This law declared a state of economic emergency and, therefore, allowed the government to impose policies that would otherwise be illegal, which stripped the rights of government employees. One of the effects of this law was the laying off of more than 17,000 government workers. In addition to describing the law and its effects, the authors describes the one-day-general strike on October 5, 2010 when approximately 200,000 demonstrators protested in the streets against the economic and labor policies. The article also discusses the decisions and challenges of the union organizers who had a leading role in the protest.

“Ley 7 fue adversa para la economía,” Primera Hora, April 19, 2011.

This news article studies the impact of the Fortuño administration’s Public Law 7, which, in 2010, was promoted as the antidote to the economic crisis. This article’s findings demonstrate that this claim of economic alleviation was false. Instead of reactivating the economy, the statistics show that the policy exacerbated the Puerto Rican economic crisis.

Argeo Quiñones, “Crisis y perspectivas en economía de Puerto Rico/2010,” 80 Grados, October 28, 2010.

This article explains how the United States’ economy has affected the world, creating a global feeling of uncertainty and economic polarization. Conditions have only worsened due to neoliberal practices where the lack of regulation wreaks havoc on the economic, social, and natural spheres. The author then zeroes in on Puerto Rico, placing it in the context of the US and global economic recession: the neoliberal and neoconservative solutions imposed by the Fortuño administration destroyed the route towards just, sustainable, democratic, economic development and has only lead to a greater recession.

Victor Rodríguez Domínguez, “Puerto Rico: The Invisible and Recurring Social Struggles in the Oldest Colony in the World” Dissident Voice, June 21, 2010.

This article from an online newsletter, provides an overview of how Puerto Rico acquired its status as a contradictory legal space—an “unincorporated territory”—and how its relationship with the United States has affected its social and economic policies. Afterwards, the article explains some of the history of anti-colonial and national struggles on the Island, from the 1960s to the 2010 University of Puerto Rico strike. According to the author, the 2010 UPR strike emerges as a response to economic collapse and the Fortuño administration austerity measures. The author shows that the University of Puerto Rico has often been a crucial locus of resistance on the island.

PRIMARY SOURCES AND MULTIMEDIA

“Ley Especial Declarando Estado de Emergencia Fiscal y Estableciendo Plan Integral de Estabilización Fiscal para Salvar el Crédito de Puerto Rico,” Ley Núm. 7 del año 2009, (P. de la C. 1326).

FURTHER READING:

Alejandro Torres Rivera, “Ley 80 y la protección contra despidos injustificados,” 80 grados, May 25, 2018.

This article discusses the debate surrounding the elimination of Act No. 80, set in place on May 30th, 1976. This act ensures protection for workers in the private sector against unjustified dismissals. The protection includes a salary based on the amount of years of service that the employee gave to their employer only if the employer was unable to demonstrate a just cause for dismissal. However, the concept of a “just cause” dismissal in Puerto Rico was always different from the United States. Nonetheless, Act No. 80 was changed thoroughly through Act No. 4 of 2017 in an attempt to change reduce “just cause” dismissals.

Joanisabel González, “La vida laboral sin la Ley 80,” El Nuevo Día, June 3, 2018.

This article discusses the pros and cons of repealing Act No. 80. It is predicted that while employers can lay off employees with ease, repealing Act No. 80 will result in more flexible labor standards, therefore creating more jobs on the island. La Junta agreed to repeal Act No. 80 in exchange for more money in the budget as well as ensuring Christmas bonuses and paid holiday and sick leave for their five-year fiscal plan.

Ricardo Benassi, “Puertorriqueños contra despidos masivos,” BBC Mundo, October 16, 2010.

Marisol LeBrón, “Policing Solidarity: State Violence, Blackness, and the University of Puerto Rico Strikes,” Souls: A Journal of Black Politics, Culture, and Society (2015).

Firuzeh Shokooh Valle, “Puerto Rico: Ready for the National Strike,” Global Voices, October 13, 2009.

Film: La generación del estanbai en Puerto Rico (documental sobre la precariedad laboral) by Juan C. Dávila

“The Death Spiral”

“Juan González on How Puerto Rico’s Economic ‘Death Spiral’ is Tied to Legacy of Colonialism,” Democracy Now! Nov 26, 2015

Michael A. Fletcher and Steven Mufson, “How Washington helped create Puerto Rico’s staggering debt crisis,” Washington Post, July 9, 2015.

This news article describes the ways that Puerto Rico’s $70 billion debt is largely a result of its colonial relationship with the United States. Furthermore, Puerto Rico’s request to file for bankruptcy, shows, again, how the Island is at the mercy of Washington. Even recognizing Puerto Rico’s role in the debt and how Puerto Ricans are protected as U.S. citizens, the article, ultimately, states that to find a more permanent solution to the Island’s economic woes, there needs to be drastic changes to the relationship between Puerto Rico and the United States.

Ed Morales, “The Roots of Puerto Rico’s Debt Crisis—and Why Austerity Will Not Solve It,” The Nation, July 8, 2015.

Puerto Rico’s 72 billion dollar debt has had detrimental consequences, such as the closing of schools, unemployment, and the depopulation of the Island. The journalist investigation discusses the pros and cons of various proposed solutions. For instance, the solution many groups are fighting for—the right to file for bankruptcy—along with the suggestions of the Krueger Report, could mean the imposition of austerity measures that could depress the economy further. Another solution described by the article is the need for the United States to own up to its role in the Island’s debt and collaborate in its restructuring. Yet, others think that the only solution is a change of political status.

Luis Gallardo Rivera, “What Exactly is Going on in Puerto Rico?,” La Respuesta, July 21, 2015.

In the wake of Alejandro García Padilla’s declaration that Puerto Rico’s debt payments will not be met, this digital magazine article attempts to provide a general context for understanding Puerto Rico’s debt crisis. The author focuses on the role of the Puerto Rican government in creating the debt, mentioning not only the deficits left behind by each administration, but also the challenges the government faces moving ahead such as the shaky tax and labor base due to people leaving the Island. This article discusses how, faced with the only options of cutting services and increasing taxes, the government solutions to the crisis include bankruptcy and reforming the government itself, whose inefficiencies, the author argues, are one of the primary causes of the Island’s public debt.

Ismael García-Colón and Harry Franqui-Rivera, “Puerto Rico Is NOT Greece: The Role of Debt in US Colonialism,” FocaalBlog, August 26, 2015.

This blog post focuses on anthropological research which compares and discusses the Puerto Rican and the Greek debt crisis, establishing major differences between them. However, focusing on Puerto Rico, the authors discuss the negative effects the economic struggles have had on the economy and on the people, as well as some positive outcomes, such as the growing movement to learn about agriculture. They argue that the roots of the financial crisis can be found in the colonial relationship between the Island and the U.S., where a cycle of dependency was established.

Marian Díaz, “Expertos urgen combatir la desigualdad.” El Nuevo Día, May 15, 2018.

This article discusses the message put forth by the Human Development Index Report – Informe del Indice de Desarrollo Humano (IDH) – in 2016. This 300-page report touches on the demographic changes in Puerto Rico, as well as its healthcare and education systems, and emphasizes the fact that poverty and inequality are the main obstacles to human development on the island.

Eduardo Lalo, “La última vez,” El Nuevo Día, May 19, 2018.

Touching on the Puerto Rico Human Development Index Report published in 2016, this article views the findings through the eyes of the Puerto Rican novelist, Eduardo Lalo. He notes on how these findings were apparent to many Puerto Ricans living on the island, and how many politicians and studies stress how this should be “the last time” Puerto Rico should ever be in such a negative state. However, he notes that history keeps repeating itself and it may never be “the last time” for the island.

José Nicolás Medina Fuentes, La deuda odiosa y la descolonización de Puerto Rico, CreateSpace, 2017.

This book discusses how Puerto Rico’s ever-growing insurmountable debt was created, with a look at the U.S’s obligation to the creditors of the debt. Fuentes further outlines alternatives to confront the debt and crisis, and how to develop a Puerto Rico that can prosper. He argues that the way to do this is through total decolonization that benefits Puerto Ricans, statesmen, and sovereignists.

PRIMARY SOURCES AND MULTIMEDIA:

“Debt,” Radio Ambulante, December 20, 2016.

“Juan González on How Puerto Rico’s Economic ‘Death Spiral’ is Tied to Legacy of Colonialism,” Democracy Now, November 26, 2015.

“Puerto Rico Underwater,” Latino USA, February 5, 2016.

FURTHER READING:

Facultad de Derecho de la Universidad Interamericana de Puerto Rico, “Deuda Pública, Política Fiscal, Y Pobreza En Puerto Rico” (2016).

Deep Debt, Wall Street Wealth

Mary Williams Walsh “The Bonds that Broke Puerto Rico” New York Times June 30, 2015.

This NY Times article outlines the factors that formed the $72 million debt Puerto Rico has amassed. There were many incentives for lenders to provide money to the island, including avoiding taxes and laws that gave bond buyers a guarantee. However, the amount of debt has become insurmountable, and it is expected that every resident of the island will owe creditors $40,000. Many of the lenders were middle-class who wanted to cash in on the tax-exempt municipal bonds. Additionally, Puerto Rico’s constitution contains a clause which demands bonds be paid before any other government expense. As the borrowing expanded, Puerto Rico was running out of revenue streams that would be able to pay the creditors back, with different sectors borrowing money from one another to pay back other sectors.

Natasha Lycia Ora Bannan, “Puerto Rico’s Odious Debt: The Economic Crisis of Colonialism,” CUNY Law Review (2016).

A piece of legal scholarship, this journal article discusses the source of Puerto Rico’s debt—the unscrupulous practice of hedge funds that bought junk-rated municipal bonds at extremely low prices and then charged excessively high interest rates. Consequently, the author argues, the debt is not only odious in effect and impact, but also in origin: the debt was not accumulated for the purpose of benefitting the population and should therefore not be repaid. The context of colonialism is crucial to understanding debt and its odious nature. The author suggests that Puerto Rico could argue the odiousness of its debt as a defense to repayment.

David Dayen, “How Hedge Funds Deepen Puerto Rico’s Debt Crisis,” The American Prospect, December 11, 2015.

This in-depth magazine article analyzes the “vulture” hedge funds that are responsible for a large portion of Puerto Rico’s debt. These hedge funds prey on troubled governments, such as Puerto Rico and Greece, buy cheap debt and then coerce their debtors to pay, at the expense of millions of citizens. The article discusses Puerto Rico’s challenges, such as the fact that it has no power to renegotiate its debt, the “vulture” hedge funds lack of transparency (hedge funds don’t have to report their bond purchases), and their political ties that provide them with a voice in Washington. Moreover, the author describes different solutions that are being considered such as bankruptcy and nullifying the debt.

Jonathan Mahler and Nicholas Confessore “Inside the Billion-Dollar Battle for Puerto Rico’s Future,” New York Times, December 19, 2015.

This news article discusses the process through which Puerto Rico got immersed in debt with hedge funds and how the bond holders dominate discussions of possible solutions to the Island’s debt crisis. Paying the hedge funds and financiers means imposing serious austerity measures in Puerto Rico and, essentially, letting investors, some of the wealthiest people in America, rewrite the social contract for the US territory. The article shows how bankruptcy was discussed in terms of what advantages bondholders could establish and how the bondholders ultimately favored Puerto Rico being submitted to federal financial oversight.

Jennifer Wolff, “Debtors’ Island: How Puerto Rico Became a Hedge Fund Playground,” New Labor Forum, March 29, 2016.

This article published in an academic journal dedicated to economic and labor issues, discusses the effects that the debt crisis has had on the working and middle classes, including how past fiscal emergency laws have produced the loss of one in four government jobs and eroded the compensation and benefit packages for those remaining in public employment. Making the government reduce its expenses even more is serious, considering how much Puerto Rican society depends on the government for employment, investment, purchases, etc. The article discusses efforts on the Island, particularly from local unions, to challenge further austerity measures, which would be imposed by the Washington-recommended Fiscal Control Board.

Rafael Bernabe, “El régimen de los acreedores y la crisis de la deuda,” 80 Grados, August 21, 2015.

Responding to the discourse where the Puerto Rican government is blamed for mismanaging money and the bondholders are people maintaining fiscal responsibility, this article argues that, if the Island’s debt is viewed as the global problem that it is, it will become evident that the bondholder’s and lender’s suggestions do not solve the economic issue justly and efficiently. The author draws upon economists Joseph E. Stiglitz and Martin Guzman work on debt restructuring in order to analyze the debt crisis in Puerto Rico. With this theoretical analysis, the author finds that more responsibility should be given to the lenders and the government’s financial advisors. In particular, the author argues that the unjust and counterproductive agenda of the lenders must be resisted. Austerity measures will cause the debt to grow and worsen the economic crisis.

Joel Cintrón Arbasetti y Carla Minet, “Mapa de los protagonistas del juego de la deuda de Puerto Rico y sus posiciones,” Centro de Periodismo Investigativo, July 23, 2015.

The authors of this article clarify the different types of debt and creditors behind Puerto Rico’s debt crisis. The investment firms are divided into what the authors term “clans.” These groupings depend upon the type of debt the firms are trying to recuperate and those that support restructuring the debt and those who do not. The article describes the different “clans” and their particular interests and ties to Puerto Rico’s ballooning debt.

Joel Cintrón Arbasetti, Carla Minet, Alex V Hernandez and Jessica Stites “100 Years of Colonialism: How Puerto Rico Became Easy Prey for Profiteers,” In these Times, November 12, 2017

Providing a context of US policies and the 2008 global financial collapse, this article discusses the exploitative role of bondholders in Puerto Rico’s debt, the secrecy regarding their identity, and the illegality surrounding their behavior. Regardless of the debt that Puerto Rico was accumulating, financial firms were targeting bond offerings, growing more interested in the riskier the debt became. This did not affect the hedge funds, which have ways of protecting themselves with lawyers and lobbyists. This article explains how the hedge funds’ efforts have been effective.

José Nicolás Medina Fuentes, “Deuda pública odiosa colonial: la flecha dirigida al Minotauro norteamericano,” 80 Grados, June 2, 2017.

In this article, the author argues that the PROMESA law, approved by Congress, which compelled Puerto Rico to essentially be governed by an unelected Fiscal Control Board, is evidence of the territorial colonial federal structure of the Island. The article focuses on the campaign in favor of auditing the debt, which seeks to challenge the Fiscal Control Board’s austerity measures. The author takes a critical stance, analyzing the positive and negative consequences of auditing the debt, emphasizing the need to not merely blame corrupt Puerto Ricans, but to take into consideration colonialism’s role in the debt.

FURTHER READING:

“Pirates of the Caribbean: How Santander’s Revolving Door with Puerto Rico’s Development Bank Exacerbated a Fiscal Catastrophe for the Puerto Rican People,” HedgeClippers, December 13, 2016.

Michelle Chen, “The Bankers Behind Puerto Rico’s Debt Crisis,” The Nation, June 8, 2017.

Saqib Bhatti and Carrie Sloan, ReFund America Project, “Puerto Rico’s Payday Loans” (2016), “Scooping and Tossing Puerto Rico’s Future” (2016), and “Beware of Bankers Bearing Gifts: Wall Street Sold Puerto Rico Billions in Predatory Loans Disguised as Gifts” (2017).

Ed Morales, “How Hedge and Vulture Funds Have Exploited Puerto Rico’s Debt Crisis,” The Nation, July 21, 2015.

PROMESA and Imposition of a Fiscal Control Board

Luis J. Valentín Ortiz, “Puerto Rico’s Fiscal Control Board: Parallel Government Full of Lawyers and Consultants,” Centro de Periodismo Investigativo, August 1, 2018.

This article goes looks at who makes up la Junta: a fiscal control team made up of 200 lawyers, consultants and contractors who, in total, have cost Puerto Rican taxpayers at least $80 million. Natalie Jaresko, the Board’s executive director justifies the $80 million bill, stating that “Puerto Rico’s problems are very complex, they are unique”. Despite the fact that the board is supposed to be a temporary organization, it is unclear how long the restructuring of the debt will take. In the meantime, la Junta continues to be a thorn in the side of the commonwealth as fees exceeded initial projections. One can argue that these fees cause further damage, with the average hourly rate for the consultants, lawyers, and contractors being around $700, however, much of this money leaves the island. La Junta is considered by Valentin to be a parallel government, as they advise on everything from macroeconomic projects to budget/fiscal plans, resulting in budget cuts and adjustments to governmental programs (schools, law enforcement, PREPA, etc.) As time goes on, la Junta continues its restructuring of the debt, increases in expenses are expected, as la Junta plans to open a third office in DC and open 11 new positions.

Sergio Marxuach, El Costo Social del Plan Fiscal, CNE Blog, April 29, 2018.

This article outlines la Junta’s fiscal plan and its potential social impact. The plan aims to create a program of structural reforms, a fiscal consolidation program, and a reconstruction program financed by the federal government. These programs will use the recovery attempts of Hurricane Maria and the resulting increase in economic activity to implement the fiscal austerity plan. La Junta feels that although the plan will have a small immediate negative impact on the economy, the long-term effects will be worth it. Marxuach argues that the plan is based on a theory of macroeconomics that has failed in many countries, and as a result, may fail in Puerto Rico. However optimistic the projections are, Marxuach’s concern lies with the social costs of implementing the new plan; namely, the cuts and restrictions to many government departments and programs. The Department of Education and the University of Puerto Rico are facing cuts despite the fact that investing in education is one of the key factors of economic growth. These cuts will mainly negatively impact the poorest of Puerto Rico, resulting in an increased dropout rate and may permanently stunt the growth of the economy. The plan also proposes a labor reform that will eliminate “excessive” benefits and protections in exchange for a slight increase in the minimum wage. While the plan predicts that the reform will result in an increase in the participation rate of the labor force, this will leave the most vulnerable communities open to risks like unjustified dismissal and dangerous working conditions. The program also requires that certain beneficiaries of the Nutritional Assistance Program (PAN) work at least 80 hours a month or take part in training/volunteer services. This policy is not only classist, but it is too broad to apply to all beneficiaries of PAN. The plan will also affect the pension system in place: a cut of around 10% will be taken from retirees benefits. This will result in many retirees seeking to supplement the cuts by other means, or cutting back on expenses themselves(medical care, food, etc). The cuts to health care are projected to be $840 million by the year 2023, by introducing a competition model amongst insurers, generic medicine, and cuts in premium benefits like dental. Like the rest of the plan, the cuts in health will negatively impact the poorest of Puerto Rico the most.

Joanisabel González, “Roselló alega que la Junta de Supervisión Fiscal ‘usurpa’ sus poderes,” El Nuevo Día, July 6, 2018.

This article discusses Governor Ricardo Rosselló’s request to limit the powers of la Junta through a lawsuit filed in early July, arguing that the board usurps his administrative and legislative powers. Roselló also asks for the federal district judge to issue a ruling preventing members of la Junta from usurping powers from other elected officials.

Alyosha Goldstein, “Promises Are Over: Puerto Rico and the Ends of Decolonization,” Theory & Event, 2016.

This academic article studies the indeterminate position of Puerto Rico as a “free associated state,” which is affirmed by a series of recent judicial rulings and by the fiscal crises. According to the author, this liminal position can give way to “colonial agnosia,” where the legacies of colonial slavery are ignored, or it can be faced with an epistemic refusal, where new forms of knowing are sought. The author explores how Puerto Ricans, including the diaspora, practice “disidentification”—that is, a negotiation where they do not reject their contradictory status, but maintain the contradiction while attempting to invest it with a new meaning.

Marisol LeBrón, “People Before Debt: Puerto Ricans Confront the Island’s Debt Crisis From Below” NACLA Report on the Americas (2016).

This article provides a brief overview of the proposed solutions the Puerto Rican government, the U.S. government, and the people of Puerto Rico have imagined for the Island’s debt crisis. For instance, García Padilla’s administration’s declared an Emergency Moratorium and Financial Rehabilitation Law in order to prevent the government from using funds for essential services. Nonetheless, the Centennial Group International, the International Monetary Fund, and the World Bank suggest that Puerto Rico lay off teachers, shut down public schools, reduce the University of Puerto Rico’s budget, increase taxes, etc. The author explains how Puerto Ricans are fighting neo-liberal austerity as the solution to the economic crisis with activism, collaboration, and grassroots efforts to jumpstart the local economy.

Ed Morales, “The Technocratic Takeover,” Jacobin, September 13, 2016.

Written shortly before the U.S. presidential election, this news article states that Trump’s bigotry has diverted attention from other important issues Latinas/os face, such as the imposition of the Fiscal Oversight Board in Puerto Rico. This article provides a description of the people that compose the Board, as well as a discussion of Puerto Rican’s reaction to it—both resistance and wary acceptance. The author condemns the Board as an undemocratic and neoliberal project that is doomed to fail the Puerto Rican people, while protecting and enriching the municipal bond market.

Carla Minet and Joel Cintrón, “Banqueros e inversionistas a la Junta de Control Fiscal” 80 Grados, July 1, 2016.

This news article discusses the debate and predictions about who would form part of the Fiscal Oversight Board, which was ultimately decided by the President and Congress. It mentions various candidates who formed part of one of the three following categories: “most likely candidates,” “least likely candidates,” and “unlikely candidates.” The author briefly describes their careers and ties.

Roberto Alejandro Rivera, “La Junta de Control y sus laberintos,” 80 Grados, June 10, 2016.

This article goes through different sections of the PROMESA bill, which gives a Fiscal Oversight Board power over the Puerto Rican government and its decisions. The author provides a close reading of different passages. There are contradictions in the bill that show a clear path towards the imposition of austerity measures, which will further impoverish the island.

Anibal Acevedo Vilá, “Sueldo incompetente y negligente para Jaresko” El Nuevo Día March 31, 2017.

It was announced that the annual salary of the appointed executive director of the Fiscal Oversight Board would be $625,000 paid by tax payer money. The author of this editorial, a former governor of Puerto Rico, column explains how this amount and its source are abnormal for various reasons: a country that is in the midst of a debt crisis should not be the payee and this salary is inordinately larger than the salary of other high ranking officials of the U.S. government. According to the author, this unjustifiable decision is one of many that foreshadow the Fiscal Control Board’s incompetence.

“Detroit paid less for the Manager of their Board” Noticel March 31, 2017

This news article discusses the exorbitant a $625,000 salary of the appointed executive director of the Fiscal Control Board, Natalie Jaresko, in addition to other compensations she would receive. The author compares this salary and benefits to those of the manager of the Detroit fiscal emergency board, Kevin Orr. However, in the case of Puerto Rico, due to the fact that the Control Board is not under the jurisdiction of any of the three branches of the government of the Island, there is little the government can do to challenge this injustice.

PRIMARY SOURCES AND MULTIMEDIA:

PROMESA Bill, H.R.4900, 114th Congress (2016).

Spanish translation of PROMESA Bill by Dr. Alejandro Álvarez Nieves (2016).

Congressional Research Service Report on PROMESA (2016)

Website of the Puerto Rico Oversight Board

“La Junta de Supervisión Fiscal aprueba el presupuesto con condiciones,” El Nuevo Día, June 2, 2017.

UPRRP TV, “Junta de Control Fiscal, ¿Por qué y cómo nos podría afectar?” (2016).

HANDOUTS:

Yarimar Bonilla Ramos, Fabiola Meléndez Olmo, Dayanira Moya Pérez, Jose Franqui Vazquez, and Naomi Raíces López, “Puntos Importantes de la Ley PROMESA” (2016).

Unidos Contra Promesa, “La Promesa: Una Guía Rápdia para entender la crisis económica en Puerto Rico/ A quick guide to understand Puerto Rico’s economic crisis” handout (2017)

Campamento Contra La Junta, “PROMESA para Principiantes” handout (2016)

Campamento Contra La Junta, “Conoce a los 7 gobernadores no electos de Puerto Rico” (2016)

“La Quiebra:” Puerto Rico files for Title III

Colin Dwyer, “Puerto Rico Makes Unprecedented Move To Restructure Billions In Debt,” NPR News, May 3, 2017.

This news article provides a general explanation about the form of bankruptcy that Puerto Rico requested in order to grapple with its public debt. Because the Island is not eligible for the Chapter 9 protection available to other US jurisdictions, Puerto Rico must create a custom-built bankruptcy-like process. The article briefly explains this process, which is called “Title III” from the federal PROMESA law. Ultimately, Title III mandates that the Island must negotiate with hedge funds, mutual funds, and bond insurers to pay its debt.

“Puerto Rico hace historia al acogerse a un mecanismo de quiebra para su deuda,” RCNradio.com, May 3, 2017.

After negotiations between the PR government and the bondholders proved unfruitful, the president of the Fiscal Oversight Board, José Carrión, determined that utilizing Title III was necessary in order to prevent a negative impact on the Island’s economy. This news article mainly presents the Carrión’s point of view regarding Title III as a last resort. For instance, the Board still thinks that consensual negotiations are preferable and it will continue to pursue those conversations with bondholders.

Kurt A. Mayr, “A Territory in Uncharted Territory, the Commonwealth of Puerto Rico Files for Bankruptcy Protection,” The National Law Review, May 3, 2017.

This news article from a business law website provides an explanation of the framework of Title III, the petition filed by Puerto Rico to commence insolvency proceedings. Title III is composed of certain sections of the Bankruptcy Code, therefore creating a quasi-Chapter 9, designed for the management of debts for municipalities of the U.S. However, the author explains significant differences between Title III and Chapter 9, emphasizing how Puerto Rico’s process represents uncharted territory.

“Puerto Rico vs Detroit: What’s different?,” Reuters, May 3, 2017.

Comparing Detroit’s bankruptcy proceedings with Puerto Rico’s Title III proceedings, this news article shows differences and similarities between these two major insolvency cases in U.S. history. For instance, differences emerge related to the amount of debt and what quantity creditors will recover. Similarities between both cases include the loss of local control over finances and the negative effects on the lives of citizens.

Juan Lara, “La deuda se negociará en el tribunal,” El Nuevo Dia, May 3, 2017.

This article shows how Puerto Rico was forced to utilize Title III because bondholders did not agree with the proposal for a “haircut” of the debt. Bondholders rejected a reduction of 50% to 60% percent of the public debt, which, according to the author, represents an aggressive effort on behalf of the Puerto Rican government and the Fiscal Oversight Board during these negotiations. Through this news article, we learn how these efforts compare to those of other countries that have tried to secure abatements in order to restructure their debt and what these cases could mean for Puerto Rico.

Joanisabel González and José A. Delgado, “Territorial bankruptcy court to sit in San Juan,” El Nuevo Dia, May 6, 2017.

Laura Taylor Swain, a New York federal judge, was appointed to adjudicate the quasi-bankruptcy process to restructure Puerto Rico’s public debt. This news article describes her career and experience. The author cites people who find her very well equipped for the task due to her character, ethnicity, and excellent performance as a labor attorney and bankruptcy judge.

“Puerto Rico bonds trade higher in wake of petition filing,” Reuters, May 3, 2017.

This brief news article reports on the trading of Puerto Rican bonds after the commonwealth filed for Title III, a form of bankruptcy. In the wake of this attempt to restructure the Island’s debt, these bonds traded higher: from 65 cents on the dollar to 67 cents.

FURTHER READING:

Mary Williams Walsh, “Puerto Rico: A Debt Problem That Kept Boiling Over,” New York Times, May 5, 2017.

Michael Corkery and Mary Williams Walsh, “Message of Puerto Rico Debt Crisis: Easy Bets Sometimes Lose,” New York Times, May 4, 2017.

Vann R. Newkirk II, “The Historical Exclusion Behind the Puerto Rico Bankruptcy Crisis,” The Atlantic, May 2, 2017.

Edwin Meléndez, “Bankruptcy does not absolve Congress of responsibility to Puerto Rico,” The Hill, May 8, 2017.

Juan González, “Puerto Rico’s $123 Billion Bankruptcy is the Cost of U.S. Colonialism,” The Intercept, May 9, 2017.

COFINA and the Proposed Commonwealth Debt Adjustment Plan

Little Sis: Public Accountability Initiative. “Debt Island: Wall Street Closes in on 40 Years of Profit at Puerto Rico’s Expense.” Little Sis, January 2019.

This report outlines the adjustment plan for sales tax-based debt called COFINA that was passed under the Title III bankruptcy court proceedings in January 2019. It discusses the social consequences of the COFINA adjustment, which imposes debt service payments for over four years at the expense of essential services. The report also details how certain creditors profited from the debt in the wake of Hurricane Maria.

Mary Williams Walsh and Karl Russell. “$129 Billion Puerto Rico Bankruptcy Plan Could Be Model for States.” The New York Times, September 27, 2019.

This article reviews the Control Board’s proposed Commonwealth obligations debt adjustment plan released in September 2019. The authors suggest that if the plan is approved in court, it may serve as a model for US states facing debt crisis, such as Illinois and New Jersey. Authors discuss what the plan will mean for different kinds of bondholders and retirees who may face pension cuts of 8.5%.

The Struggle Over Pensions and a Dignified Retirement

“Manifestantes Despiertan a José Carrión y Wanda Vázquez con Protestas,” NotiCel, September 30, 2019.

This article highlights the early-morning protest and “carcerolazo” outside Control Board President, José Carrión’s residence in Condado, which was accompanied by another protest outside the governor’s mansion. Protests were led by retirees demonstrating their rejection of the pension cuts that the Commonwealth debt adjustment plan proposes and demanding “zero cuts.”

Sarina Dorna-Pesquera, “Las Pensiones y las Opciones,” 80grados, October 4, 2019.

The author narrates her personal experience as a retired public employee whose pension had been cut beginning in 2013, even though she signed an agreement when she began working for the government to receive 75% of her salary upon retirement. Critiquing the preliminary pension settlement between the COR (Official Committee of Retirees) and the Control Board that proposes to cut public employee pensions over $1,200 by 8.5%, the author shows how the COR has consistently failed to act in the best interests of pensioners. She calls retired government employees to join the movement Constryamos Otro Acuerdo to demand zero pension cuts in the debt adjustment plans.

Public Accountability Initiative and Constryamos Otro Acuerdo, “The Puerto Rico Pension Heist,” 2019.

This report explains the potential impact of the proposed pension cuts in the latest Commonwealth debt adjustment plan, how vulture funds will profit from these pension cuts, and how retirees can mobilize against the plan’s approval.

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