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  October 4, 2017

Puerto Rico Suffers as Debt Vultures Linger

The White House has already walked back President Trump's suggestion of debt relief for Puerto Rico, threatening more draconian austerity
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Sarah Molinari is a doctoral student in cultural anthropology at the Graduate Center of the City University of New York and a collaborator on the 'Puerto Rico Syllabus,' a digital project offering resources on Puerto Rico's economic crisis. Sarah's dissertation research focuses on debt politics and popular responses to austerity and the PROMESA Bill in Puerto Rico.

Efrain Elias is vice president at SEIU Local 1 and a member of Vamos4PR. Efrain's family is in Puerto Rico and he's helping to lead the fight in Chicago for a fair economy for all Puerto Ricans and the elimination of the island's public debt.


AARON MATÉ: It's The Real News. I'm Aaron Maté. It's two weeks since hurricane Maria hit Puerto Rico. The death toll has now doubled to 34 and most of the island remains without power. Aid is slowly reaching areas in need but not fast enough. And then there's the question of Puerto Rico's tens of billions of dollars of debt. On Tuesday, President Trump ended his short trip to the island with a suggestion that the US government would offer a bailout.

DONALD TRUMP: We have to look at their whole debt structure. They owe a lot of money to your friends on Wall Street and we're gonna have to wipe that out. That's gonna have to be, you can say goodbye to that. I don't know if it's Goldman Sachs but whoever it is, you can wave goodbye to that.

AARON MATÉ: Trump's comments to Fox News raise some hopes for an island whose economy was in crisis even before Maria hit. But earlier today, Mick Mulvaney, Director of the Office of Management and Budget shot down the idea of a bailout.

MICK MULVANEY: But it doesn't that the federal government is going to be bailing out Puerto Rico's long term debt situation, bailing out the bond holders. What I think you saw there was the president focusing on the reality that in order to sort of get its long term fiscal operation back in order, Puerto Rico's gonna have to figure out a way to restructure its debt, which is happening through the Promesa process already. It was happening before the storm, and it's happening after the storm. So I don't think you saw any indication there of a federal involvement in the bond situation.

AARON MATÉ: I'm joined now by two guests, Sarah Molinari is a doctoral student at the Graduate Center of the City University of New York and a collaborator on the Puerto Rico Syllabus, a digital project offering resources on Puerto Rico's economic crisis and Efrain Elias is vice president at SEIU Local 1 and a member of the group Vamos4pr. Welcome to you both. Efrain, I'll start with you. Your reaction to what we've heard over the past few days, first from Trump making that suggestion that there might be a bailout for Puerto Rico to today with his budget director, Mick Mulvaney, shooting that down.

EFRAIN ELIAS: I think Trump's response to the bailout is not sufficient enough. There shouldn't be a debt crisis in the first place and his actions yesterday were certainly embarrassing and just a travesty when given the amount of catastrophe that's happened on the island.

AARON MATÉ: When you say there shouldn't be a debt crisis in the first place, what do you mean?

EFRAIN ELIAS: Well, this was a debt created by the vulture funds and the hedge funds reminiscent of Detroit trying to strangle the folks on the island with these draconian austerity cuts, and the people from the island don't even know what they're in debt for. So, we've been asking as part of Vamos for Puerto Rico is an audit to this debt to see where this debt came from and who's responsible for it. It's a fictitious debt similar to a money grab on Wall Street and these hedge funds and vulture funds want trillions and trillions of dollars on the back of the islanders on Puerto Rico, who many forget are US citizens.

AARON MATÉ: Sarah, your thoughts on this. We should be clear. There's kind of two main categories for debt, right? There are the bonds, billions held by vulture funds as Efrain has described, but there's also the pension obligations. That's public workers on the island and elsewhere who've bought into them who are owed billions of dollars in pensions. Your thoughts on what we've seen over the past 24 hours from Trump and then Mulvaney.

SARAH MOLINARI: Right. I think it demonstrates a disconnect with the gravity of the situation in Puerto Rico. I think that Trump's visit also made it very clear the devaluation of Puerto Rican lives and clearly demonstrated also the colonial nature of the territory's relationship with the United States. Puerto Rico needs debt relief right now. They don't need paper towels thrown at them, for example. They don't need golf trophies as the president offered this weekend. Pensioners have been hit already by austerity and already by the Colonial Fiscal Control Board's actions and ten year fiscal plan. So, I certainly think that Wall Street profiting of Puerto Rico needs to stop now. I agree with Efrain that the audit should have already been done, so this is a debt that is ambiguous, already was being questioned by multiple groups on the island in the diaspora and certainly now we need to be talking about debt relief and debt cancellation.

AARON MATÉ: Now, The Intercept did a piece today about the debt crisis and they point out that in terms of the known creditors from Wall Street in terms of what they've been offering so far in terms of relief, there's been nothing. They previously surveyed more than 50 of the island's known creditors. I'm reading now from the report, and none had offered more than thoughts and prayers. Few had even gone that far. David Tepper, a hedge fund manager behind a major bond holding in the island recently made a $3 million gift to the relief effort, but that was the only case they could find of creditors from Wall Street showing generosity towards the island. Sarah, you and Efrain say that we don't know what the debt is. I mean, isn't the common that a lot of it is in actual real bonds that were bought, and the creditors are simply saying, "We deserve to be paid back for that?"

SARAH MOLINARI: Well, a lot of it in fact is interest, absurd interest rates at over 700% which groups like The Refund America Project have done great reporting on. So, there's this question of illegitimate debt and what exactly is owed to whom. Another very concerning thing, you mentioned the creditors in The Intercept report, a number of PREPA bondholders, in fact, offered a debt swap, which would have made Puerto Rico buy new bonds which would have prioritized them for repayment. And it's lucky that this deal was rejected but it indicates how the creditors, I think, will start responding. Their interest will be for further profit.

AARON MATÉ: Right. And PREPA, to explain, that is the electrical utility of Puerto Rico that is billions of dollars in debt and was decimated by Maria, power totally wiped out on the island. Efrain, in terms of what is being done here. There's a huge diaspora community here in the US. What do you see as the main focus of activism here in the US right now when it comes to Puerto Rico?

EFRAIN ELIAS: I think the number one focus is to let this message be known that there's a lot of Puerto Ricans that are stateside. There's a lot of Puerto Ricans on the island. People seem to forget that Puerto Rico is a US territory, and ultimately what these bond and vulture funds and creditors are going to do is that's going to affect the tax payers, which is all of us that are here mainland and off the backs of the Puerto Rican community. You can't do draconian cuts to basic services, public services, cut jobs, cut hospitals, cut administration, cut schools and then say, "Before the lights get turned back on, you have to pay us first before any federal aid comes to rebuild the island." How does that even work? These guys are not millionaires anymore. These are multi billionaires saying, there's a fictitious character, the chupacabra, these guys want to suck the blood off the people of the island and it's not fair, and we're not gonna sit back stateside nor on the island and allow this to happen. We gotta fight back and build consciousness and that's what Vamos For Puerto Rico with labor and other coalitions are trying to do, exactly that.

AARON MATÉ: Sarah, I'll end with you. So, the issue of how much of Puerto Rico's debt, if any, that will be canceled is actually before a US federal judge right now in a case that's gonna play out for a long time, what are the biggest issues and questions you have in terms of this process going forward? What are you looking at to gauge how this is gonna play out?

SARAH MOLINARI: Well, I think the PROMESA bill, which this bankruptcy procedure is coming under and now it's a bankruptcy procedure specifically for the territory because Puerto Rico was excluded from the federal bankruptcy code, right? But in the first place, PROMESA was a bill to pay back the creditors. It was a bill to establish fiscal stability on the island and reestablish Puerto Rico's access to credit markets. So, I don't think that the Title III bankruptcy proceedings under PROMESA will actually bring debt cancellation and debt relief. It was always a matter of restructuring, but the creditors have a very strong lobby to reduce their haircut they can take or the amount of loss they would experience on their bonds. So, I don't know if the bankruptcy proceedings are the place to do the debt relief.

AARON MATÉ: I want to thank my guests, Sarah Molinari, doctoral student at the Graduate Center of the City University of New York, a collaborate on the Puerto Rico Syllabus, a digital project offering resources on Puerto Rico's economic crisis and Efrain Elias, vice president at SEIU Local 1, member of the group Vamos4pr. Thanks to you both.


AARON MATÉ: And thank you for joining us on The Real News.


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