Puerto Rico’s bankruptcy cost problem is complicated â but the various ways in which the crisis is hurting most Puerto Ricans are undeniable.
Since Puerto Rico declared bankruptcy in 2017, it has become more difficult for people to decide where they can afford to live and where their children can enroll in school.
The island declared a form of bankruptcy in 2017. At the time, the island was facing historic debt levels, exceeding $72 billion. But Puerto Rico’s Debt Crisis Far Worse Than Detroit’s $18 Billion Bankruptcy in 2014has now reached a potential turning point.
U.S. District Judge Laura Taylor Swain approved a large-scale debt restructuring plan on January 18, 2022 that would reduce $33 billion of Puerto Rico’s debt and work to pay off its creditors.
Because Puerto Rico has been a United States territory since 1898, the bankruptcy plan has unfolded in a unique way that has limited residents’ say in financial cuts to public programs that directly affect them, anger of many Puerto Ricans.
As a scholar of Puerto Rican Politics and of Puerto Rican descent, I believe the island recently announced debt deal will not make it easier for citizens to find housing, school and employment. But it will fuel and test the ability of Puerto Ricans to mobilize politically.
Puerto Rico’s Controversial Bankruptcy Crisis
Puerto Rico’s money problems, which have increased over the past two decadesare the result of many factors: years of borrowing to cover budget deficits, economic growth, political corruption and one population decline all play a role.
Since Puerto Rico is a US territory and not a state or city, it has no right to officially file for bankruptcy.
In 2016, Congress passed the Puerto Rico Economic Supervision, Management, and Stability Act, a PROMESA law, which created a new government agency. This agency, the Puerto Rico Financial Supervisory and Management Boardwas responsible for defining Puerto Rico’s debt repayment strategy.
But local people had no say in the creation or composition of this council, known simply as Junta â which means council in Spanish. None of its currents seven board members come from the island. Puerto Ricans were also not involved in the junta’s financial decisions.
Puerto Rico’s debt has never been publicly audited, which has lent to public concerns on the lack of transparency in the management of this crisis.
The junta has mainly implemented financial cuts, or austerity measures, to deal with the debt. They reached an agreement with the Puerto Rican government to partially repay its debt.
But, for ordinary people, these cuts have deteriorated their quality of life.
An unpopular austerity measure taken by the junta was the freezing of public schools teachers’ pension plans. Financial cuts have also limited Puerto Rico Health insurance expenses and to have funding threatened for popular retirement regimes and public universities.
Thousands of teachers, earning a starting salary of $1,750 a month, have gone into the streets in protest. Puerto Rico Governor Pedro Pierluisi announced on February 8, 2022 that teachers will receive a temporary monthly raise of $1,000 from July.
The teachers’ demands echo the sentiment of many Puerto Ricans, who do not like these austerity measures.
Public schools take a hit
Puerto Rico’s Department of Education has steadily closed public schools in recent years due to budget cuts, at a rate never seen before. decades.
Julia Keleher, the former Secretary of Education of Puerto Rico, is a lawyer school closures.
Keleher was a polarizing public figure â she was also a mainland American official in Puerto Rico â a reminder of the island’s colonial history. Keleher pleaded guilty to federal fraud conspiracy charges on mismanagement of public funds in June 2021.
Puerto Rico’s Department of Education has a new direction. But some specialized art schools, like Central High School in San Juan, continued to close, prompting online petitions for change.
The school closures have sparked larger protests in San Juan from parents, students, teachers and The politicians during the last years. Many working-class students had to travel farther to reach open schools outside their communities, disrupting their learning experience.
Gentrification is intensifying in Puerto Rico
Rising housing prices compose the latest chapter in Puerto Rico’s multi-layered financial saga.
The housing problem coincides with Puerto Rico attracting foreign investors with new tax breaks.
Economic development experts have argued that the arrival of new investors, combined with the tax relief measures of the government of Puerto Rico, create new gentrification concerns on affordable housing. This is especially true along the coastal regions â it can hurt Puerto Ricans.
American financier John Paulson is one example of a growing wave of foreigners who have purchased property in Puerto Rico, seeking to receive tax breaks.
This investment was made possible thanks to a new law, which aims to lure wealthy foreigners to the island. It does this by granting new Puerto Rican residents exemptions from pay income tax on all “passive” income, i.e. money from investments, for example.
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The net result is locally significant resistance to foreign investors.
Now that a judge has approved Puerto Rico’s debt restructuring, austerity measures can no longer be changed on paper. But the Puerto Rican public still has a chance to push back and push for change, as they continue to do by protests defend their political demands.