After Congress steps in, Puerto Rico reignites statehood debate


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By Ivette Feliciano

IVETTE FELICIANO: Along the streets of San Juan, Puerto Rico, graffiti reading “No more abuse” and “Fascism in Puerto Rico” are a window into the unrest sparked by the largest financial crisis in the island’s history. Since January, thousands have protested austerity measures and cuts to public services imposed on this U.S. territory that’s home to 3.4 million U.S. citizens. But Puerto Rico currently owes creditors a massive $72 billion.

Last year, following a series of defaults on debt payments, Congress passed and President Obama signed the Puerto Rico Oversight Management and Economic Stability Act, or PROMESA, which means “promise” in Spanish. The law gave a financial oversight board veto power over Puerto Rico’s budget and provided a process to restructure the debt.

Did you realize what you were getting yourself into?

JOSE CARRION: I did not.

IVETTE FELICIANO: Jose Carrion, who runs a large insurance brokerage in San Juan, chairs the appointed seven member board.

JOSE CARRION: The budget was unbalanced by around $3 billion. So we had to begin getting our fiscal affairs in order, and that entailed difficult decisions as to, you know, major spending.

IVETTE FELICIANO: Those difficult decisions included cuts to pension payments for retired government workers, reducing spending on healthcare, closing 179 public schools and reducing the government workforce. Since 2013, nearly 30 thousand government workers have lost their jobs.

Roxana Perez had worked as an administrative assistant for the police department in Carolina, a town outside of San Juan.

ROXANA PEREZ: I love serving my country.

IVETTE FELICIANO: She’s now looking for a new job. But it’s not easy. The unemployment rate in Puerto Rico is 11%, two-and-a-half times the U.S. rate. I asked whether she was worried the position could be cut, given the debt crisis.

ROXANA PEREZ: I had faith that maybe there would be an opportunity to continue. There is a real need for civil employees here at the Puerto Rican police, believe me.

IVETTE FELICIANO: This spring, students and faculty protested a proposed $450 million budget cut to the university system over the next four years.

Architecture student Minette Bonilla was part of a delegation that met with the fiscal oversight board.

MINETTE BONILLA: We asked them point blank, ‘Do you know what the consequences will be of those cuts? Do you know what the consequences will be for students and their accessibility to education?’ ‘We haven’t done those studies.’ So they’re just cutting out of sheer numbers without knowing any implications for the people that are suffering those cuts.

IVETTE FELICIANO: More broadly, students also want a thorough audit of the island’s public debt by an independent body. But above all, students like Mario Gonzalez Nevares are critical of the Promesa law, which created the board in the first place.

MARIO GONZALEZ NEVARES: Promesa is the example of colonialism in the 21st century. This law was created unilaterally by the U.S. Congress, and it was imposed over Puerto Rico. And it’s only, only reason to exist is to make sure the bondholders are paid.

IVETTE FELICIANO: Puerto Rico’s $72 billion dollar debt is owed to bondholders, or creditors, who bought bonds that financed the island’s government.
That includes large investors like mutual funds and hedge funds on the U.S. Mainland, as well as local Puerto Ricans.

IVETTE FELICIANO: There are those on the island who believe that the board is more closely aligned to the needs of the creditors, how do you respond to those criticisms?

JOSE CARRION: I don’t consider myself beholden to any particular bondholder class. We’re trying to do the best we can under extremely difficult circumstances but the reality is that we’re taking everything and everybody into consideration and trying to balance all those interests.

IVETTE FELICIANO: But bondholders are worried. Rafael Rojo is a San Juan real estate developer and chairman of Bonistas Del Patio, a group representing some of the 60 thousand Puerto Rican bondholders. He estimates they’re owed $15 billion.

RAFAEL ROJO: Behind wall street, there’s a lot of individual people who have their savings in these instruments.

IVETTE FELICIANO: Rojo is alarmed by the Puerto Rican government’s plan to pay back less than a quarter of the debt it owes over the next decade.

RAFAEL ROJO: It’s quite clear, and it’s scientifically impossible to say otherwise, it is the bondholders who have been targeted as the ones who are going to pay for the crisis. And I think that’s a huge mistake.

IVETTE FELICIANO: He’d like to see the size of Puerto Rico’s government shrunk even more, and the 78 separate municipalities on the island consolidate their services.

The oversight board forecasts the island’s economy will continue to shrink through 2021 before starting to grow. Yet outside economists, such as Nobel laureate Joseph Stiglitz, warn the board’s austerity measures will all but guarantee a social as well as an economic catastrophe.

IVETTE FELICIANO: Are there examples of economies elsewhere in the world that have eventually grown under austerity?

JOSE CARRION: Puerto Rico’s situation is very specific. It is unlike Greece in that it is not a sovereign nation. If folks here do not care for what’s going on, they will move off island. Comparisons are difficult in light of Puerto Rico’s territorial situation.

IVETTE FELICIANO: Puerto Rico has been under U.S. control since the end of the Spanish-American war in 1898 and in 1947 was granted an elected government. But as an unincorporated territory, the U.S. Congress in Washington can override the island’s laws, and Puerto Ricans cannot vote for president and have no voting representation in congress.

IVETTE FELICIANO: The appointment of a fiscal control board and the effect of austerity measures on the island have reignited a decades-old debate regarding Puerto Rico’s relationship to the united states. Many people here, including the governor, believe a solution to the economic crisis will never be found unless the territory’s political status is resolved once and for all.

RICARDO ROSELLO: The voice of the Puerto Rican people was loud and clear.

IVETTE FELICIANO: Last month, 97% of Puerto Ricans voted for the territory to become the 51st U.S. State in a referendum organized by the island’s pro-statehood governor. Yet only 23% of eligible voters turned out.

The vote was heavily boycotted by those favoring independence and the status quo of remaining a commonwealth. It’s up to Congress to ratify statehood, but previous referenda have been ignored…And the current movement has scant support on capitol hill.

KENNETH McCLINTOCK: If we’re American citizens, we should strive to have first class treatment in Puerto Rico.

IVETTE FELICIANO: Former Puerto Rican Secretary of State Kenneth McClintock is president of “Equality for Puerto Rico,” a pro-statehood lobby group.

KENNETH McCLINTOCK: Once we move to Orlando, or New York, or Texas, or North Carolina, we’re treated as first class citizens. We have the right to vote, we have the right to congressional representation, we have the right to participate in every federal program.

IVETTE FELICIANO: McClintock believes Puerto Rico’s territory status led to the crisis, in part, because past governments were forced to borrow for essential services like roads and health care. For example, Puerto Rico receives much less federal funding for Medicaid than U.S. states do.

KENNETH McCLINTOCK: The truth is that there will not be a stable fiscal situation, economic situation in Puerto Rico, until there’s economic growth. And there will not be a healthy economic growth rate until there is equality.

MANUEL NATAL: I’m one of the people that believe that we should definitely attend to the issue of status. But it’s not a magic wand that will resolve all of our problems.

IVETTE FELICIANO: Manuel Natal, a representative in Puerto Rico’s own legislature, favors remaining a commonwealth with more economic sovereignty. For example, he’d like Congress to repeal the century old law that requires all imports to arrive on American made and manned ships, which makes all food and goods more expensive.

MANUEL NATAL: The tools that we have to achieve economic development in Puerto Rico, one Congress might give it to you, another congress might take it away.

But for some on the island, the solution for Puerto Rico is separating from the U.S. And becoming a sovereign nation.

JUAN DELMAU: Puerto Rico is a Latin American, Caribbean nationality with its own identity.

IVETTE FELICIANO: Puerto Rican senator Juan Delmau leads the Puerto Rican Independence Party, the third largest on the island.

JUAN DELMAU: An independent Puerto Rico would have political and legal authority to join the global community and open markets while at the same time maintaining friendship and cooperation with the U.S. But on an equal footing, not in political subordination.

IVETTE FELICIANO: While challenges to the status quo persist, last month, the federally appointed financial oversight board approved deep spending cuts to Puerto Rico’s budget.

JOSE CARRION: Regardless of how anyone feels about status in Puerto Rico, you need a balanced budget.

IVETTE FELICIANO: This graffiti on one San Juan street reads “Down with his majesty Jose Carrion”

JOSE CARRION: It makes me sad, and you know, I’m not a politician, so I’m learning to deal with criticism of that nature.

IVETTE FELICIANO: Yet Carrion says he understands the criticism that his board is not accountable to the island’s residents.

JOSE CARRION: There’s no way anybody could conceivably think that this is a democratic process. But, how about looking at the positive sides. The law, it provides us the opportunity to procure a way forward, and to restructure, you know, $72 billion worth of debt. We need to take this opportunity that congress has provided us and move our people and our island forward.

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