Puerto Rico faces a long, painful struggle ahead. Stephen Lendman elaborates on how it has come to this and what could the future hold for its citizens.
Colonised and exploited by America since 1898, its people, governor and other officials are powerless – ruled by US administrations and Congress.
Islanders have no control over their lives, welfare and destiny, no say over foreign relations, commerce, trade, air space, land and offshore waters, immigration and emigration, nationality and citizenship, currency, maritime laws, military service, US bases on its territory, constitutionality of its laws, jurisdictions and legal procedures, treaties, radio and television, communications, agriculture, natural resources and more.
For nearly 120 years, it’s been victimised by US imperial rapaciousness. Things finally came to head financially. Puerto Rico is bankrupt, though can’t declare it under US law.
It’s a wasteland of high unemployment, poverty and deprivation. Force-fed austerity exacerbates dire economic conditions. Islanders are US citizens without enfranchisement on the mainland. They pay federal taxes, getting back pathetically little in return. They suffer from mismanagement, political greed, widespread corruption, deplorable social services, and monied interests exploiting them, enforced by police state harshness.
Debt-entrapped, it’s been forced to pay bankers and other large creditors at the expense of responsibly serving its residents. Its debt is crushing, unrepayable at around $123 billion – $74 billion owed creditors, another $49 billion in unfunded pension obligations.
Historically Puerto Rico was barred from declaring bankruptcy. Legislation enacted last year allows bankruptcy-like proceedings. Creditors were unwilling to grant concessions. Now they’ll be forced to take big haircuts. Government pensioners and workers nearing retirement may lose out altogether.
Mass exodus to the mainland, including the island’s best and brightest, complicated things further. Puerto Rico is a zombie economy, unable to function without help – not forthcoming after Congress refused bailout help. So did Trump, saying no “bailout” for Puerto Rico, just generous handouts he wants for Wall Street, war-profiteers, other corporate predators, and America’s super-rich.
An 11th hour effort to avoid bankruptcy failed. Creditors refused a restructuring deal to take a 23% haircut on their general obligation bonds, and a 42% loss on their Cofina sales tax-backed debt, according to the Municipal Securities Rulemaking Board web site. Now they’ll incur bigger hits.
Last summer, Congress passed the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA), giving a federally appointed committee control over the island’s finances, along with creating a Title III bankruptcy process.
PROMESA gives the federal committee authority to consolidate island agencies, privatise government assets, fire public workers, restructure Puerto Rico’s balance sheet, and retroactively stay bondholder lawsuits.
A Supreme Court-appointed judge will handle proceedings, bankruptcy without formally declaring it. Unlike US counties, cities and other municipalities, states and US territories can’t declare Chapter 9 bankruptcy, allowing them to restructure debt.
Puerto Rico faces a long, painful struggle ahead, debt-entrapped by creditors, ill-served by uncaring Washington, mismanaged by corrupt officials, a deplorable situation, affecting its poor and most vulnerable hardest.
The article was originally posted at SteveLendmanBlog on May 7, 2017 at http://sjlendman.blogspot.com/2017/05/puerto-rico-declares-bankruptcy.html.
Featured Image: Alvin Baez/Reuters.
About the Author
Stephen Lendman received a BA from Harvard University in 1956. Two years of US Army service followed, then an MBA from the Wharton School at the University of Pennsylvania in 1960. After working seven years as a Marketing Research Analyst, he joined the Lendman Group family business in 1967. He remained there until retiring at year end 1999. Writing on major world and national issues began in summer 2005. His new book as Editor and Contributor is titled “Flashpoint in Ukraine: How the US Drive for Hegemony Risks WW III.”