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Puerto Rico Control Board: A Dangerous Increase of Colonialism or Vital Protection from Wall St.?

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As Puerto Rico is set to default today on a key debt repayment, President Barack Obama has signed into law the so-called PROMESA bill that puts in place a federally appointed control board with sweeping powers to run Puerto Rico’s economy. The legislation’s supporters say it will help the island cope with its crippling debt crisis by allowing an orderly restructuring of its $72 billion in bond debt, but critics say it is a reversion to old-style colonialism that removes any semblance of democratic control by the people of Puerto Rico over their own affairs. We host a debate between Eric LeCompte, executive director of Jubilee USA Network, which has backed the PROMESA bill, and José La Luz, a longtime labor activist who opposes it. “If we didn’t act by today, the vulture funds were being invited to the party, and Puerto Rico was about to become the next Argentina,” says LeCompte. “The truth is that this colonial junta is nothing but a glorified collection agency for the hedge funds and the vulture funds,” counters La Luz.

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StoryJan 19, 2022Judge Approves Puerto Rico Debt Restructuring, But Unelected “Junta” Could Remain for Years Longer
This is a rush transcript. Copy may not be in its final form.

JUAN GONZÁLEZ: President Barack Obama has signed into law the so-called PROMESA bill, which will establish a federally appointed control board with sweeping powers to run Puerto Rico’s economy. While the legislation’s supporters say it will help the island cope with its historic debt crisis by allowing an orderly restructuring of its $72 billion in bond debt, critics say it’s a reversion to old-style colonialism that removes any democratic control by the people of Puerto Rico over their own affairs. On Thursday, the president signed the legislation as an important first step in helping the island regain financial stability.

PRESIDENT BARACK OBAMA: Through some amazing work by our Treasury Department, our legislative staff and a bipartisan effort in both the House and the Senate, we finally have legislation that at least is going to give Puerto Rico the capacity, the opportunity to get out from under this lingering uncertainty with respect to their debt, to start stabilizing government services and to start growing again. It’s not, in and of itself, going to be sufficient to solve all the problems that Puerto Rico faces, but it is an important first step on the path of creating more stability, better services and greater prosperity over the long term for the people of Puerto Rico.

AMY GOODMAN: Earlier this week, the Senate voted 68 to 30 in favor of the PROMESA bill, just days before Puerto Rico was expected to default on a more than $2 billion debt payment, which it has today. New Jersey Senator Bob Menendez led the opposition to the bill.

SEN. BOB MENENDEZ: It is a vote to authorize an unelected, unchecked and all-powerful control board to determine Puerto Rico’s destiny for a generation or more. It is a bill to force Puerto Rico, without their say, to go $370 million further in debt to pay for this omnipotent control board, which they don’t even want. It is a vote to cut the minimum wage down to $4.25 per hour for young workers in Puerto Rico. It’s a vote to make Puerto Ricans work long overtime hours without fair compensation. It’s a vote to jeopardize collective bargaining agreements. It’s a vote to cut worker benefits and privatize inherently government functions. It’s a vote to close schools and shutter hospitals and cut senior citizens’ pensions to the bone. It’s a vote to put hedge funds ahead of the people. And it’s a vote to sell off and commercialize natural treasures that belong to the people of Puerto Rico.

JUAN GONZÁLEZ: That was Senator Bob Menendez of New Jersey. Democratic presidential candidate and Vermont Senator Bernie Sanders also spoke out against the legislation. Meanwhile, Democratic Senator Dick Durbin of Illinois spoke in favor of the PROMESA bill.

SEN. DICK DURBIN: What’s the alternative if we vote no? And you’ll hear a lot of members saying, “Let’s just vote against this and put an end to it.” The alternative, if we vote no, is to give the bondholders, those who are holding the debt of Puerto Rico, all the cards July 1st. All the cards. They can then go to court and force their hand for payment on these debts. And Puerto Rico, which is struggling to provide basic services, will have even more money taken away from them. What is a disaster situation will become disastrously worse if we vote no and do nothing. This oversight board, for all its flaws, has the power to stop that from happening, has the power to enter into voluntary negotiation on the debt of Puerto Rico. And if they can’t reach a voluntary agreement, they have the power to go to court for restructuring on all of the debt that faces that island. Now, that is significant. I hope it doesn’t reach that point; I hope there is a voluntary negotiation. But to say that we are going to protest the creation of this board, by voting against the creation of the board and this outcome that I’ve described, is to throw this poor island and the people who live there into chaos.

AMY GOODMAN: That’s Senator Dick Durbin. Also this week, in Puerto Rico, demonstrators in opposition to the PROMESA bill have established an ongoing protest camp outside the U.S. Federal Court in the capital city of San Juan.

Well, for more, we host a debate. In Washington, D.C., we’re joined by Eric LeCompte, the executive director of Jubilee USA Network, which has backed the PROMESA bill. And here in New York, we’re joined by longtime labor activist José La Luz, who’s an opponent. He organizes, promotes and advocates for worker rights in Puerto Rico and the United States. La Luz has retired from the American Federation of State, County and Municipal Employees, or AFSCME, and now works as an adviser to the AFSCME affiliate Civil Service Employees Association.

We welcome you both to Democracy Now! Well, the bill passed, so, Eric LeCompte, your thoughts today?

ERIC LECOMPTE: Well, essentially, the legislation is incredibly important. There can be no economic growth in Puerto Rico before the debt is restructured. Unfortunately, without this legislation, Puerto Rico had no protections to pay pensions, to pay teachers and to pay social services. So it’s incredibly important.

I know your listeners are very aware of the Argentina situation and what happened when a group of vulture funds essentially held that South American country hostage for nearly 16 years. Puerto Rico was about to become the next Argentina. The same types of vulture funds today, if the legislation did not pass, would have swooped in, bought the debt, for pennies on the dollar, and held Puerto Rico hostage. Where Argentina was, is a relatively wealthy country, as it caucuses with the G20, we’re talking about an island, Puerto Rico, where 60 percent of the people live—of the children live in poverty, where 45 percent of the people live in poverty. The rates are just staggering. They’re unbelievable. And what happened with this legislation passing is the vulture funds were told they’re not allowed to come to the party. So we prevented Puerto Rico from becoming the next Argentina. This is absolutely crucial to understand.

It’s also absolutely crucial to understand that because the president signed this legislation yesterday, last night the governor of Puerto Rico was able to declare a debt moratorium and announce that the pensions that have been being taken from for years to pay the debt are now going to be able to pay back, that social services are going to be paid on the island, that there’s going to be protections for children and reducing poverty. So, even though there are concerns with the legislation and we’ve worked in the legislative process and been able to address many of these concerns, we haven’t been able to address all of them. But we knew that there was no alternative, and if we didn’t act by today, the vulture funds were being invited to the party, and Puerto Rico was about to become the next Argentina.

JUAN GONZÁLEZ: José La Luz, what about that? Your thoughts, and this issue of whether the vulture funds have been stayed by the legislation passed by the Senate?

JOSÉ LA LUZ: The truth is that this colonial junta is nothing but a glorified collection agency for the hedge funds and the vulture funds. In fact, everything that Eric explains is precisely the reason why this is such a bad piece of legislation. There is absolutely no protections, no provisions to protect pensions, collective bargaining rights, worker rights. There will be a sub-minimum wage. But the most serious consequence of this is that this takes us back to the days immediately after the U.S. military occupation of the island, before the Foraker Act. This is a very, very serious, very seriously flawed piece of legislation.

We are deeply disappointed that Jubilee USA, a Catholic organization, which has been known consistently for its defense of, you know, working families in other parts of the world, has taken such a position. We suspect it may have something to do with the relationship that Mr. LeCompte himself has with the archbishop of San Juan, Roberto González, who terminated the pensions of the Catholic schools’ employees unilaterally, who shut down Catholic schools. So, this is in fact something that paves the way for a feast, for a field day for the hedge funds and Wall Street. And it has serious and grave consequences, because now we will witness a sustained, consistent and escalating resistance of people in Puerto Rico, which will have serious consequences in terms of the relationship with the United States. I think that Mr. LeCompte must realize that his organization has made a very serious, serious mistake in supporting this piece of legislation.

AMY GOODMAN: Eric LeCompte, your response?

ERIC LECOMPTE: Well, I agree with some of the concerns that José raises. I don’t think he understands the legislation. I don’t believe that he’s read the legislation. I think that we’ve seen a lot of compromises to address the particular issues he’s raising, but we have to understand—we do work with the religious leaders in Puerto Rico, and we do believe the religious leaders—the Catholic Church in Puerto Rico, the Pentecostal leaders, the evangelical leaders, the head of the Bible Society—have been the real hero in this. For the last year, they have been the most outspoken group about the effects of the debt crisis, the growing tragedy where nearly 60 percent of kids live in poverty. When we talk about a liquidity crisis, when we talk about legislation not passing today, that means a lot more than the choices that teachers are making in Puerto Rico about whether or not to turn on the computers today or whether or not to turn on the lights today. It means more than law enforcement getting cut. It means more than healthcare getting cut in the face of the Zika virus. We have to understand that right now in Puerto Rico, for the past few months, at the central hospital, sick kids at the only newborn, neonatal special care unit have not been able to get direct access to dialysis. They haven’t been able to get access life-saving drugs. Kids in the center there can’t get access to chemotherapy drugs, because they don’t have credit. They can only do cash on demand. And as limited as the credit crunch was becoming already on the island, if the legislation didn’t pass, we were going to see things even become more worse.

Now, with the archbishop of Puerto Rico, who’s been very outspoken about the legislation and concerns about the legislation, who worked on both sides of the aisle, with representatives like Nydia Velázquez and José Serrano, who came to bat on this legislation, we know that they have had the best interests of their people at the heart of this. They have been the ones most outspoken about the crisis, and we’ve worked with them closely for a year, working on every possible solution. And our work doesn’t end today. There’s still a lot more work to do. But we’ve worked on solutions at the Federal Reserve, the U.S. Treasury, the White House, and then put pressure on Congress to act. I think it’s really important that we need to understand what Archbishop Roberto González, the Catholic Bishops Conference and the religious leaders said in Puerto Rico. The legislation has to pass in order to stop the humanitarian crisis. It has to pass and move forward in order to reduce child poverty. At the same time, they reminded all of us that the problems in Puerto Rico and this current crisis is a direct result of the island’s colonial status. And in order to stave off the next crisis, we have to address the colonial status on the island. But we have to also understand that without passing this legislation, the vulture funds would have swooped in. Without passing this particular legislation, there would have been no protections to pay pensions, to pay teachers, to pay firefighters. Essentially, what we would have had in Puerto Rico was a great invitation for the vulture funds. In terms of, I think, some of the concerns that we have—

AMY GOODMAN: I’m going to interrupt for a minute, because we have to break. But when we come back, we’ll also, of course, get response from labor activist José La Luz. Eric LeCompte is executive director of Jubilee USA Network. We’re talking about the passage of the PROMESA bill that President Obama has signed off on, today Puerto Rico defaulting on its $2 billion debt repayment. We’ll be back in a minute.


AMY GOODMAN: “Tiburón,” “Shark,” here on Democracy Now!, Rubén Blades and Willie Colón. This is Democracy Now!, democracynow.org, The War and Peace Report. I’m Amy Goodman, with Juan González. Our guests are Eric LeCompte, executive director of Jubilee USA, and labor activist José La Luz, joining us in New York. Juan?

JUAN GONZÁLEZ: Yeah, I wanted to ask José also, taking over from what Eric LeCompte just said, this whole issue of the chaos that would have resulted, supposedly, if this bill had not been passed—Maria Cantwell, in her debate, in her remarks on the Senate floor, as well as Bob Menendez, said number one is, you’re deluding yourself if you think there’s not going to be legal challenges. The bondholders and the vulture funds are not just going to sit back. They’re going to challenge the constitutionality of this law, and there seem to be significant grounds. For instance, a Congressional Budget Office report even questions what kind of an agency this is. The legislation says it is created by Congress as an agency of the Puerto Rican government. The Congressional Budget Office says, no, this is an agency of the federal government, not of the Puerto Rican government. There’s a host of issues that the bondholders are going to challenge anyway. The only difference is, at this stage, as, Eric, you mentioned, that the governor has put a moratorium on the debt and will now be able to make regular—regular expenses of the Puerto Rican government. But as soon as the control board comes into power, he’s not going to have any more power; the control board will determine everything. So this could be virtually the last act of the current governor of Puerto Rico, this moratorium that he did today. So I wanted to ask José, what about this whole issue of this law had to be passed before July 1, or there would be chaos in Puerto Rico?

JOSÉ LA LUZ: As recently as last night, the president of the Senate, Eduardo Bhatia, indicated that there will be, in fact, litigation occurring, precisely because of the very reasons you pointed out to. Senator Orrin Hatch has requested an investigation by the Securities and Exchange Commission about the role of Treasury Secretary Lew. There are many questions that are unanswered here. A citizens inquiry commission discovered in its findings that as much as $30 billion of the debt may be illegal, because it exceeded the ceiling provided by the Constitution of the Commonwealth. So there are many, many questions. But one of the fundamental things here is that there is no guarantee that in fact there will be restructuring. It requires a supermajority of five, and four of the seven will in fact be right-wing Republicans, whose main interest, undoubtedly, will be that the creditors get paid. These are their friends in Wall Street and in the hedge funds. So I don’t see what legislation Eric is referring to.

I find this repugnant, Eric, essentially coming from an organization that has distinguished itself for being an advocate for the poor around the world. And colonialism is repugnant in all of its forms and manifestations. You, my friend, will have blood on your hands if this results in the kind of unrest that we witnessed in the 1970s, because I will tell you with very certainty that the people in Puerto Rico, once they discover the serious implications of this, will not tolerate it. And this imposes only harsher austerity measures on the Puerto Rican people of the situation that is already very bad. This is, in fact, a classic case study in what Naomi Klein calls the shock doctrine. The economic hit men started operating in Puerto Rico from the vulture funds since the moment that Puerto Rico inexplicably was removed from bankruptcy protection in 1984, and then the government kept borrowing. Puerto Rico had no tools for economic development. This bill contains no measures to restore economic growth and development, none whatsoever. Yet Senator Sanders offered a legislation that addressed the question of economic growth and economic development, something similar to what FDR did in the 1940s, with Eleanor Roosevelt and Rex Tugwell’s support, that created a Puerto Rico Economic Reconstruction Administration. Nothing of that sort exists in this legislation. It’s all about austerity, harsh austerity measures that will affect the most vulnerable in Puerto Rico.


ERIC LECOMPTE: When you read the legislation, you realize that there are some amazing and powerful anti-austerity measures that have been placed in the legislation, including what we have been able to amend to the legislation so that any economic growth plan, any recommendations, must take into account reducing child poverty on the island. This is incredibly important. Also with the legislation, we were able to protect the work of the debt audit committee, that’s led by labor partners on the island, the Chamber of Commerce. But to find out where the debt comes from, what are the questions about the debt, is the debt legitimate or not, that’s going to go forward because of this legislation. We have to understand that’s really important. I think one of the great concerns that the religious leaders have had on the island, and we’ve certainly expressed in every debt restructuring plan we’ve worked on around the world for the last 20 years, is that, going forward, there needs to be greater public budget transparency. The debt audit commission is key to this.

But we also agree that the oversight board is not the actual answer for this. There’s no way to talk about the oversight board in Puerto Rico without talking about Puerto Rico’s colonial status. And it’s also true the religious leaders acknowledge that reality and are very saddened by that. But they knew that, going forward, passing this legislation, in order to get votes on both sides of the aisle, had to do this. Now, with acknowledging the oversight commission’s status and the issues of colonialism on the island, I think it’s really important to understand what the legislation actually says about the oversight commission. Even though we don’t believe it’s an efficient way to install public budget transparency, this is not like the control board we had in D.C., in New York, or we still have in Detroit. This particular oversight commission is in addition to the political process. It doesn’t circumvent the governor. It doesn’t circumvent the legislative process. It does add an additional approval and monitoring process to the budget. But with that said, I mean, we very much understand the concerns about any kind of oversight commission. That’s why we’ve supported the public budget transparency initiatives of the debt audit. It’s why we believe there needs to be legislation that passes in the Legislature in Puerto Rico to have a higher degree of accountability.

But I think, most importantly, what we really need to understand is that these are some of the best and most powerful debt restructuring tools we’ve ever seen passed by the U.S. Congress. In fact, some of the provisions, whether negotiations are done in a voluntary way or whether they’re forced, this is even better than Chapter 9 or Chapter 11 in the United States, because it forces all sides of the problem to come together for negotiation and to come with a negotiated solution. It also forces—

JUAN GONZÁLEZ: But, Eric, if I—

ERIC LECOMPTE: —any vulture funds that may exist not to be at the table, because three-quarters of all creditors, when they agree to a solution, it binds all the creditors.


ERIC LECOMPTE: So it’s incredibly powerful, these tools.

JUAN GONZÁLEZ: —if I could interrupt you for a second. When you talk about the voluntary negotiations, these are voluntary negotiations not between the people of Puerto Rico and the bondholders. These are voluntary negotiations between the control board, six of whose seven people don’t even have to live in Puerto Rico, and the bondholders. So these are voluntary negotiations between two entities that are not part of the Puerto Rican nation, or, I mean, so just calling it—

ERIC LECOMPTE: No, that’s not how the legislation actually reads. I mean, just to clarify—and certainly understand what you’re saying—but in terms of how the legislation actually operates, when we talk about voluntary negotiations, that’s between the government of Puerto Rico and that’s the creditors. Now, if a voluntary negotiation happens—and this is significant, because all the bondholders are going to be forced into these negotiations—a final plan does need to be approved by the control board, but they’re not the ones that are actually negotiating it. The legislation, in its outset, has strong protections for pensions. It has strong protections for social services. And it also notes that in any negotiation we can’t see these types of services cut.


JOSÉ LA LUZ: The entire labor movement—Eric, I don’t know what planet you’re living in. From the AFL-CIO, SEIU, AFSCME, the United Food and Commercial Workers, all of the unions here in the U.S. and in Puerto Rico rejected this—rejected this. So I don’t know what legislation you are referring to. All of the social advocacy organizations, except your friend the bishop, the one that terminated the pensions for the school employees, accepted this. And I want you to understand something very clearly. You, you, my friend, will be held accountable to the Puerto Rican people. And I can say—I can say that no Puerto Rican that agrees to serve on this board ought to feel safe. I can say that, because the rage that the Puerto Rican people will express as they discover the consequences of this legislation is such that you have no idea of what—of what this will turn into. And I tell you one thing: I find that repugnant, repugnant, that Jubilee USA, which is an organization associated with a pope that we admire because of his defense of the poor and working families, has taken this position in what is now the Greece of the United States. This is the Greece of the United States. And you now are responsible, as much as any of your friends that supported this legislation. I am really, really sorry that your organization endorsed this thing, Eric, really sorry.

AMY GOODMAN: How do you account for Congressmembers Nydia Velázquez and José Serrano, José, who are both Puerto Rican-born? How do you account for their support for this?

JOSÉ LA LUZ: Well, I tell you Luis Gutiérrez was adamantly opposed to this, because it has no safeguards for pensions, no protections for pensions whatsoever. I don’t know what law Eric is reading here. That’s why the entire labor movement rejected this thing. And Luis Gutiérrez was very emphatic. This is repugnant because it’s colonialism. It’s raw and crude colonialism. And when you speak of colonialism in this day and age, this is an invitation. This is an invitation for people to take any measures, you know, to get rid of colonialism. And so, I think that Nydia and José Serrano will have to answer to the Puerto Rican people in due time. I believe they are good people. They have been consistent supporters of Democratic rights. But on this one, they got it wrong. This junta, this junta, which is nothing than a colonial junta, usurp fundamental democratic rights of the Puerto Rican people. And this is very perverse.

JUAN GONZÁLEZ: Well, let me interrupt. I want to ask Eric about one other aspect of the legislation, which has to do with the critical infrastructure portion, which I don’t understand why it was even in the legislation to begin with. But it basically allows, especially with the electric company, which I’ve always called the crown jewels of Puerto Rico, the Puerto Rico Electric and Power Authority, a government-owned electric company—it seems to pave the way for the privatization and the selling off of the assets of the electric company in an effort to modernize and bring in new investments. And it also, the legislation, as Senator Menendez said, allows all kinds of existing environmental laws and regulations to be waived in the process of expediting the modernization of the electric power generation in Puerto Rico. Do you have any concerns about that aspect of the legislation?

ERIC LECOMPTE: Well, we certainly have concerns that are related. With respect to Senator Menendez, we believe that he was, in his floor debate, actually referring to a much earlier version of the legislation, where it talked about selling off portions of the Vieques wildlife refuge. It was one of the many provisions that we were successful in getting removed in this particular legislation. I think, you know, some of the greater issues, overall, around this, it does have to do with implementation and how the oversight commission moves forward. We do have very specific concerns about the legislation. Where we respectfully disagree with José, that the pensions are respected, number one, to be paid back, and the pensions also have very strong language to protect them in the legislation. Our biggest concerns about the legislation remains that the new overtime protections could be delayed in Puerto Rico, and we do have certain concerns about certain powers that the oversight commission has. I mean, with that said, I think what we do understand from this legislation, that right away this has stopped Puerto Rico from becoming the next Argentina. We’ve stopped vulture funds. We’ve essentially created a precedent where we say debt is paid first. We’ve stopped 16 lawsuits against the government of Puerto Rico. And we’ve made sure that vulture funds aren’t coming to the table, and that teachers, firefighters and social services are paid first.

AMY GOODMAN: We’re going to have to leave it there, but of course we’ll continue to follow this. I want to thank Eric LeCompte, executive director of Jubilee USA Network in Washington, and José La Luz, labor activist who organizes, promotes and advocates for worker rights in Puerto Rico and here, overall, in the United States.

This is Democracy Now!, democracynow.org, The War and Peace Report. When we come back, history is made. Two trans candidates win their primaries in their respective states, Utah and Canada, going on to the—and Colorado, going on to the major election in November. And we’ll talk about the Pentagon’s historic decision allowing trans people to openly serve in the U.S. military. Stay with us.

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