Puerto Rico faces another disastrous bankruptcy deal
A US federal judge ruling on a debt restructuring plan will have major consequences for working class Puerto Ricans
A New York federal judge is set to rule on a plan to restructure almost half of Puerto’s Rico’s debt in the coming weeks. The Financial Oversight and Management Board, an undemocratically elected fiscal control board commonly called “la junta”, came to an agreement on the plan with the holders of the island nation’s $73 billion debt.
The plan includes a list of cuts to public spending and a continuation of the harsh austerity measures which have decimated Puerto Rico’s social safety net, closed a third of public K-12 schools, and privatized the islands’ electric grid.
It would allot $500 million in annual spending for the University of Puerto Rico for the next five years, a cut of nearly 40% compared to a decade ago. Students have been organizing and holding strikes to protest further budget cuts. Since the fiscal control board took control of the economy in 2016, tuition has increased threefold and several programs have lost accreditation.
The plan would also restructure pensions for public employees, eliminating cost of living adjustments and switching from “defined benefit” to “defined contribution” plans, which amount to cuts in people’s pensions.
In Puerto Rico, 72% of government pensioners have pensions of less than $1,500 per month. Half of the population lives below the poverty line.
25 Puerto Ricans residing on the islands were chosen at random from a group of hundreds of residents who applied to address US District Court Judge Laura Taylor Swain during the weeks-long hearings on the plan. One of them, Dr. Manuel Martinez Maldonado, a graduate of the University of Puerto Rico, told the court on November 9th, “The economic future of Puerto Rico is at stake and is in the hands of PROMESA,” referring to the law signed by President Obama in 2016 which established the fiscal board. “It depends on the creation of jobs and, most importantly, education. Education depends on teachers and students. We must protect the welfare of all teachers, past, present and future. Their pensions should not be altered or reformed or frozen.”
Another resident, a mother of three children, told the judge, “My aspiration is that my children can live in Puerto Rico in the future. This will not be possible if the board continues to guarantee the welfare of the bondholders who don’t live here by compromising our lives.”
The population has fallen to 3.2 million, as more and more Puerto Ricans, young professionals in particular, leave the islands with hopes for a better life. At the same time, wealthy investors from the US continue to buy up beachfront properties and land and move to the islands to avoid taxes.
Judge Swain told the resident speakers that she would keep their testimonies in mind when making her decision and highlighted that “The law requires me to consider many factors and of course I understand that this process is a process that must allow Puerto Rico and its people to continue as a society, and to hear the pain and the hopes and the dreams today is very important for the court and for all who are participating in the process.”
This was originally published on Peoples Dispatch.