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  September 30, 2017

Puerto Rico's Recovery is a Battle Against Austerity

As the Trump administration touts its relief effort in Puerto Rico as a 'good news story' and threatens more austerity, writer Ed Morales argues the island's devastation is a wake-up call against neoliberal excess
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Ed Morales is a freelance journalist based in New York and has been covering the Puerto Rico Debt Crisis for the Nation. He is an adjunct lecturer at Columbia University’s Center for the Study of Ethnicity and Race, the author of Living in Spanglish and the upcoming book Latinx for Verso Press.


AARON MATÉ: It's The Real News. I'm Aaron Maté. A top U.S. official says, "The relief effort in Puerto Rico is a good news story." Appearing on CNN, the Mayor San Juan, Carmen Yulín Cruz, was asked to respond.

Carmen YulĂ­n C.: I know it is really a good news story in terms of our ability to reach people and the limited number of deaths that have taken place in such a devastating hurricane.

Speaker 3: ... Mayor.

Speaker 4: Well, maybe from where she's standing it's a good news story. When you're drinking from a creek, it's not a good news story. When you don't have food for our baby, it's not a good news story. When you have to pull people down from their buildings, because, I'm sorry, but that really upsets me and frustrates me.

AARON MATÉ: Joining me now is Ed Morales, a freelance writer based in New York City. He has piece up on It's called, “Puerto Rico Needs Massive Emergency Aid Now—and an End to Austerity.” Welcome, Ed. Let's talk about both components of your article there starting with emergency aid. Your understanding of what Puerto Rico needs right now and your response to that comment from that U.S. official that the operation, the relief operation so far is a good news story.

ED MORALES: Yeah. I mean, that's typical of what we've heard from the Trump administration so far. I mean, usually itÂ’s been been, he sounds like a used car salesman that is telling you that a car that is completely broken down is going to be a great car and it's going to be wonderful for your family. I mean, it's the same thing over and over with him. It's incredible how the American public allows, or elected him or allows him to continue to operate in this fashion. I guess we're just in sort of a post-fact age, or just an age of disconnection.

AARON MATÉ: Right. Now, your piece for The Nation also calls foreign end to austerity, arguing that the economic conditions that Puerto Rico faced before the storm helped worsen its impact. Why does Puerto Rico now need an end to austerity?

ED MORALES: Well, it could be argued that they needed an end to, I mean, people were arguing that they needed an end to austerity before the hurricane because this purported objective of the Fiscal Oversight And Management Board, which was enforced by the PROMESA Act that bipartisan effort of Congress people passed, that purported purpose was not only to restructure the debt but to get the economy going again.

The idea of getting the economy going is not something that they tackle seriously and most of the measures for at least the first year and probably the years after that were more designed to just extract more from the populace through levying more taxes, privatizing more services, and that would result in less money going to the government coffers and cutting jobs. The island was going into a really bad situation economically regardless. I think that the hurricane, I mean, I don't want to see it all as a good thing but it's almost making PROMESA meaningless or obsolete. I mean, even today the head of the Fiscal Oversight And Management Board said that they had to have a meeting so that they can reassess exactly what they were doing.

AARON MATÉ: What kind of pressures, though are they going to face from the bondholders? I mean, already you had one major group of bondholders putting forward an offer this week saying that they'll take a haircut of 15% if they get to the front of the line, in terms of being paid back. Are the bondholders going to keep demanding Puerto Rico pay up its debts, something like over $70 billion in debts even as this crisis unfolds?

ED MORALES: Okay. I mean, there's some stuff about how the bondholders are reacting that I haven't been following that closely in the last couple of days because of how incredible it was, but I did see that the government rejected their proposal for, because basically it was just, it's almost like an interest rate swap that they proposed, where they could lend more money now at a lower rate and then it would be paid back with further interest in the future. I think the bondholderÂ’s probably and the debt, they were unhappy enough as it was in terms of the way that the fiscal plan was set up, which denied them, they wanted higher payments than they were going to get under the fiscal plan.

Now, I don't see how significant payments are going to be delivered for a while. I mean, one interesting thing which I don't know how much worth it has, but one of the ex-governors of Puerto Rico, Aníbal Acevedo Vilá, he said a couple of years ago that he had this theory that if there's continuing difficulty in collecting from Puerto Rico, that the bondholders could conceivably sue the U.S. government because that's almost the saving grace of not being independent or being an unincorporated territory because they might argue that the U.S. is ultimately responsible for its territory.

AARON MATÉ: Right. In terms of pressure, what about the forces who want to privatize even more of Puerto Rico's resources especially the electric grid heavily in debt, some $9 billion? Juan González of Democracy Now! even reported that he's heard that some people on the island believe that the operators of the grid were deliberately not making repairs so that they could make it easier to be sold off just to get the desperate injection of cash that it needs. Your thoughts on that.

ED MORALES: Oh yeah, that's what was definitely going on. I mean, the President of the Electrical Workers Union has been saying that since 2015, 2016. The electrical service has deteriorated quite a bit in the last seven to 10 years and there are increasing, there have been increasing power failures. I mean, I go there two, three times a year and the last time I went in August, because I wrote it in a piece for The Nation back then, I just went to the supermarket and then there was a blackout. Then I had to go back and there were no street lights working and everybody was nudging through the intersection. It was kind of chaotic. Yeah, the idea of privatizing, they've been talking about this for a long time. They've thought about these different kinds of public, private partnerships that would privatize aspects of production of the electricity.

But this has been argued and there hasn't really been a consensus that's been reached. I think that, again, one of the problems is that since the authority owes so much money, they can never get the kind of price that would be desired because they're low-balling the price for privatization. Right now, again, there's going to be such a difficult problem with just getting the grid back up. Basically, the grid is based on these poles that are like telephone poles and 90% of them, well I'm roughly speaking, I don't know that for a fact, have just fallen down and it's going to be an incredible task just to get the infrastructure back up so that you have a semblance of an actual system that would be then the object of privatization. That's why they probably are going to have some kind of an infusion of federal cash there because I just can't see someone, a private interest, investing the money needed with no immediate possibility of profit.

AARON MATÉ: Right. Speaking of a federal infusion, there's revived talk now of a proposal that Bernie Sanders had during the campaign which is basically that the Federal Reserve would pay off the Puerto Rican bondholders so that vulture funds couldn't make a profit off of buying up that debt and then trying to collect it themselves. I'm wondering, what are the wider implications of, not just for Puerto Rico, which are catastrophic enough, but the wider implications of this debt issue not being taken care of? Because the debt that Puerto Rico has is a lot of money with a potential to impact markets and people far beyond the island.

ED MORALES: I feel like it's intimately connected with what's going on in the United States and the future of the United States, because the municipal bond market invested really heavily in Puerto Rico, so there's danger to the stability of the entire municipal bond market's system. There have been some theories like, I always forget the name of the group that's based in Detroit that puts out these great reports about Puerto Rico and the debt, but their theory is, is it the Center for Popular Democracy? No, I'm not sure. They say that the reason that the hard line that the Fiscal Oversight And Management Board is taking on Puerto Rico for what they, they think they're going to have to do with other troubled municipalities, like for instance, Illinois is a state that has severe debt problems. The hard line that they take on the Puerto Rican people is something that they may wind up taking out on mainland U.S. full citizens.

AARON MATÉ: We'll leave it there. Ed Morales, freelance journalist in New York City. His piece up on is called “Puerto Rico Needs Massive Emergency Aid Now—and an End to Austerity.” Ed, thank you.

ED MORALES: Great to be on Real News Network.

AARON MATÉ: Thank you, Ed, and thank you for joining us on The Real News.


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