David Medina /CTLatinoNews.com
In today’s episode of “Puerto Rico Death Spiral”, as they say on the telenovelas, the Natural Resources Committee of the U.S. House of Representatives postpones the release of what was supposed to be the third and final draft a bi-partisan bill to restructure the island’s $72 billion bond debt and rescue it from financial collapse.
The Republicans who control the committee maintain that the brief delay is necessary to iron out some “technical difficulties”. Previous versions of the bill, however, included controversial provisions to reduce Puerto Rico’s minimum wage from $7.25 an hour to $4.25 an hour, which the Obama Administration flatly opposed, and to cut the pensions of Puerto Rican retirees. There was also language in the previous drafts that would have allowed the stateside hedge fund managers, who invested in Puerto Rican municipal bonds, to be paid ahead of the aging Puerto Ricans whose retirement plans also purchased the bonds in large quantities. Those are not exactly technical difficulties.
About the only thing that the Democrats and Republicans on the committee seem to agree on so far is that the debt restructuring would be, to some degree, involuntary and that it would be supervised by a financial control board, appointed by Washington, that may or may not include members of the Puerto Rican community.
Puerto Rico has already missed a $367 million payment on the bonds that was due May 1 and has announced that it will probably skip another $2 billion payment that’s coming up on July 1.
Meanwhile, workers by the thousands continue to lose their jobs. Schools and hospitals continue to close and those that remain open are running on fumes. Essential services are cut to the bone and taxes climb to astronomical levels. The effect of all this belt tightening, as one might expect, has been to further increase Puerto Rico’s unemployment rate, already at 12 percent, raise the poverty rate past 50 percent, and trigger a mass migration of residents — more than 84,000 in 2014 alone — to the United States, thereby further diminishing a dwindling tax base that is needed to repay the debt.
That’s why they call it a death spiral. It feeds on itself.
As if all this carnage isn’t dramatic enough, Politico now reports that Puerto Rico’s non-voting representative in the congressional negotiations, Resident Commissioner Pedro Pierluisi Urrutia, is under scrutiny for apparently profiting from the debt crisis.
Pierluisi became a target of the Federal Election Commission and the office of Puerto Rico’s Electoral Controller after he submitted an earlier version of the Puerto Rico relief bill that would have benefitted two Wall Street hedge funds that hired his wife, Maria Elena Carrion, as a financial advisor. The companies — Fundamental Advisors and Och-Ziff Capital Management — were part of a group that purchased $110 million in Puerto Rican municipal bonds in 2014. To make matters worse, the executive for Morgan Stanley, who arranged the bond sale, also sponsored a fundraiser at about the same time for Pierluisi’s current bid to become governor of Puerto Rico. The FEC wants him to return $91,000 in campaign donations he received when he ran for his present job.
Pierluisi maintains that everything he and his wife did was legal, ethical and appropriate, and — who knows? — maybe he’s telling the truth. But, obviously, what they did smells fishy enough that it drew the attention of two investigative agencies.
His coziness with hedge fund managers, however, didn’t surprise the vast number of Puerto Ricans who have come to accept that corruption among their governing elite as an essential component of being a U.S. colony.
As in all colonies throughout history, the establishment politicians in Puerto Rico know quite well that they’re merely subordinates of a larger ruling power, whose only objective is to bleed the island of its natural and financial resources for its own economic benefit. They also understand — with a wink and a nod to each other — that they are free to skim off as much as they can for themselves, so long as they prop up an economic model that they’ve known all along is unsustainable and is now proving itself to be just that.
Party affiliations in Puerto Rico, whether they stand for statehood, status quo, enhanced autonomy (whatever that is), and even independence, only serve to distract the public from the political establishment’s real objective: making money. Elections are simply orchestrations to determine which group of elites will have its turn at riding the money train. Their greatest fear at the moment is that Congress will craft a rescue plan for Puerto Rico that eliminates their role as stooges.
Pierluisi offers a perfect case in point. He’s running for governor of Puerto Rico as the candidate of the pro-statehood Partido Nuevo Progresista (New Progressive Party), yet he and his wife are accepting huge chunks of money from hedge fund managers, who are fighting tooth and nail to prevent the island from acquiring the right to declare bankruptcy, as is done in the 50 states. Statehood, in this instance, is like kryptonite to hedge fund managers.
Pierluisi is hardly the only one.
Late last year, the FBI arrested 10 members of the ruling Partido Popular Democratico (Popular Democratic Party), on charges of bribery, wire fraud, extortion, perjury, and money laundering. According to the indictment, one of the suspects, a top fundraiser for the party during the 2012 gubernatorial race, arranged to have the others appointed to top government jobs in exchange for steering federal contracts to companies he controlled.
A year earlier, the FBI charged the treasurer of the Puerto Rico Highways and Transportation Authority with accepting kickbacks for awarding highway contracts that were financed with federal funds controlled by the authority.
In 2008, the U.S. Justice Department in San Juan charged then-governor Anibal Acevedo, also from the Popular Democratic Party with soliciting campaign donations in exchange for government contracts.
In 2003, the former Speaker of the Puerto Rico House of Representatives, a member of the New Progressive Party, was convicted of extortion and money laundering for using his influence to help a group of private investors purchase a state-run hospital. In that same year, the former Secretary of Education — also NPP — was convicted of shaking down Education Department contractors for $4.3 million and an aide to former NPP Gov. Pedro Rossello was convicted of taking $125,000 in bribes from contractors for setting up meetings with cabinet officials.
And on and on it goes.
All that said, there is a silver lining to the debt crisis. More Puerto Ricans than ever and a surprisingly large number of U.S. residents (Thank you, John Oliver) are openly denouncing the colonization of the island as the root cause of the debt crisis. Whether the outcry leads to changes that give Puerto Rico a measure of control over its own destiny remains to be seen. But it’s a start. There was a time in the United States, when that kind of talk would get you arrested and charged with sedition.
Stay tuned for the next episode of “Puerto Rico Death Spiral” and find out.