Puerto Rico's Sovereign Debt Crisis

Here is an article about a possible jail sentence of up to 1 year and 1,000 dollar fine for politicians in PR if they dont obey the orders of the board. This is going to end up badly. https://morningconsult.com/2016/03/puer … penalties/

It is possible rhat some will disobey and become martirs, specially some in the independant party.

Can you imagine a senator or representative being jailed for not obeying the will of the board and instead representing the people?
Can you imagine the entire senate going to jail for not pasing a law that the board wants?

This rule and others are not going to be easy sells.

While I agree some of these guys should be in jail for what they have done in the past, I am not sure about the suspencion of democracy this rule and others represent.

Representing the will of the people, as opposed to representing self interest? Now, they've never done that before, why start now?

They start now because it looks good. That is the reason they do everything they do. Also, it allows them to skirt responsibility for the predicament they put themselves and the people in.

mac00677 wrote:

Representing the will of the people, as opposed to representing self interest? Now, they've never done that before, why start now?

LOL, seems I misspoke, you are correct.

People made a mistake electing a bunch of self interest bozos and they are making awful decisions. But the people elected them, we should either get them out of office, put them in jail, or live with their actions, we the people elected them and under a democracy they are ours to keep until next election or we impeach them or jail them.

While I understand all your good points, I don't like that the principle of democracy is being thrown out and a board with the power of a despot is being put in place no matter if it is necessary because of the elected self interest bozos. I am speaking of the principle, I don't care about the polititicians. This is similar to putting a despot in charge (hide the few virgins we have).

The board may or may not help Puerto Rico. It could end up helping the bonists more than the people of PR. We really don't know how is going to go and whichever way they rule, their power is absolute!!!!!

The sad part of this is that they will use this as an excuse to drag the process. In the meantime the island problems will not be addressed.
I'm sure if there is no federal oversight, local politicians will find a way to miss appropriate the funds to please their personal interest.
This is the reason most of them get in trouble with the federal government. They ask for federal funding for an specific project and use the money for others that will benefit them.
Unfortunately this is a common pattern in the island. Then they want to call uncle when they are accused of federal fraud. Even governors had been accused of this practice. Remember a few years back the "lost" funds for HIV treatment given by the federal government? Or even recent the Health department miss use of funds for paying preventing care for the elderly?
PR had unfortunately proven that needs supervision due to inept politicians.
Yes, I agree they we're elected but still, we need a solution now, not 10yrs from now. And if that means having a board to make sure the money is used correctly we will have to live with it.
You ask the common folk out there and the only thing they care is for results. More employment and better health care, even if we need "uncle sam" to  watch over.

Unfortunately Adlin, you are 100% correct.
Our current and Past set of politicians need micromanagement and vigilance otherwise they will steal ALL the cookies of the cookie Jar.

From what I am hearing the target seems to be mainly concentrated over future growth opportunity which is fine if we are willing to wait 10 to 15 more years while our festering wound is giving us blood poisoning.

Let me paint a picture:
Mr. Universe with all his bulging muscles has been sick for the last 10 years or so, now is almost decrepit, in bed and his sores has given him blood poisoning. We need to treat the poison first (debt), then nurse him to health (stabilise the economy and people exodus), then we need to start him exercising and growing his muscles back over many years (economic growth). If we do it in the wrong order, the patient dies.

All I see is mainly going over stabilisation and growth which is going to take a long time (10 - 15 years), in the mean time the blood poison (debt) is killing us so we will not last long enough to get the growth. If this is what the board decides to do, we got a problem since their power is absolute, the absolute part is what I do not like.

Rey, I agree with you regarding the absolute power. But until the people stop electing the same candidates and stop voting for parties instead of candidates. The island will need the the vigilance and management so the money don't keep "disappear ".
That this will set a worry some precedent, YES! But if this is the way the island will see some resemblance of help I welcome it.
I'm sure they will make decisions that will not be 100% in benefit of the people but hopefully it will bring some help to the common folks. Remember the vast majority of the people that lives in the island have relatives in the states that votes. Our votes are very significant on a lot of states. So the politicians in Washington do take that into consideration.
Only time will tell us if this was a good decision or not....

Fingers crossed that you are right adlin.
As to how and for whom people vote, I am not sure if that will ever change, we have a long, long history of selecting lousy leaders and the same for a good chunk of latin america.

Yup! Take a look at how many driveways get fixed during election year and how many new "jobs" are given away. Unfortunately that is how the voting swing in the island.
I'm not sure if you ever hear of "converse Guillo" phrase. This was the major of Yauco way to "give back" to the people. He used to give away shoes and construction materials. Specially during election year. He was in office for over 14 years. I will say, he did a lot of good to the town, but even today, that's a common practice in small towns.

Well tomorrow they are supposed to officialy release the draft of the agreement. I am sure all hell is going to break in the news department with everyone having their own interpretation. Regarless, it still has to be voted on sometime this summer, which means that we still have a few more months before the roosters come home. Once in place the politicians will do what they can to slow down its implementation and block what they can without ending in jail.
Fingers crossed

PS have not heard from our two expat lawyers in a long while. They used to post a bit about this issue.

I'm going to assume, a board with authority over dishonest and irresponsible spending, without checks & balances, would only have authority over financial laws, and not "any law it wants passed", Rey.

We will know a little more tomorrow

If there's something we know is tha "PR does it better "
PR lo hace mejor!!

Let's the fireworks begin!!

I want to read the draft

Here is a copy of the draft http://naturalresources.house.gov/uploa … _draft.pdf

By the way that is the draft submitted by the republicans which does not seem to have a lot of support from the democrats.
Some of the key sticking points
A) board is too powerful according to democrats and has more power than the goverment of Puerto Rico
B) it has no debt restructuring, the board is to decide if it is needed or not and to what degree.

It looks to me like the republicans and democrats are fairly far appart on how to help Puerto Rico, who knows when they will be able to pass some legislation and who knows when PR will start seeing some relief since the restructuring of the debt may not be in the cards.

Thanks for the draft copy.  As proposed, the board has very broad powers, no doubt it will undergo a lot of revision - will be interesting to see what the outcome will be. 

What committee is this in? What congress reps can we contact to express interest in and our views on this?

We know this will be a political football - but 3.5M people have a vested interest in the outcome.  We can a least contact our congressmen and voice our concerns.

Gracias por la informacion.  Estoy practicando el español.

Hi Sitka, for most of your questions about who to contact I have no answers. As to the 3.5 million people affected, the people in Puerto Rico do complain a lot but mostly in private and in small groups, rarely do you see them organise into extremely large groups with the ability to move mountains, due to the lack of organising a decent protest and the inability to vote in the US elections, they get the shaft and are forced to smile and pay for the vaseline.

They realise that their own politicians are crooked and yet they continue to vote in lousy politicians, but the vast majority of the population is poor and easily moved to vote for somebody that will help them get a job, pave their driveway or move a telephone pole. Those  that want to vote a little more intelligently are out numbered by those willing to sell their vote. It is a shame and they need to be educated better. Not many would sell their daughters to a whorehouse but are willing to sell their country to a bunch of corrupt politician. They don't seem to realise that getting a buck today can cost them thousands in a few years, and the lost of their language, their culture, their lands.

They need to be educated and not necessarily with nice words. I may become very unpopular when I get to PR as I intend to get involved and call a spade a spade. It will probably not change anything but at least I plan to try to make good arguments.

Frogrock, you are doing good with the Spanish.

Well now it is up to the governor who gets payed or not.
See article http://mobile.reuters.com/article/idUSKCN0X31GJ

This will be very controversial and will drag for a while. The government is creating laws and changing constitutional items without asking the people. They summited a bill overnight and have it approved in hours. This is the risk you take when one party controls the government. The other party do not have enough votes to make a difference. I'm not favorite of one of the other, but there should be checks and balances so one part don't abuse power. We will see how this will play out in the next few weeks.

Not agreing or disagreeing, but something to think about:

There is also the opposite sometimes where the checks and balances cause compete gridlock of the government because they can't agree to anything and people suffer.

If the board comes in, you have a bunch of outsiders, hopefully with good intentions, making decisions with out the people or government, but affecting everyone, for better or worse.

At this stage, parties, and boards are going to make decisions without discussion and involvement of the people. This could be good or bad or both.

We are so late in the game that everyone is looking for ways to create political pressure to get what they want put in place. At least the elected politicians in PR have an obligation (which they may or may not follow) to look up for the people, the board does not have that obligation, theirs is to balance the budget regardless of who suffers or how much they suffer. They mAy be biased, don't know toward the bond holders, if that is the case, the people are going to suffer.

I think that either way the people is going to pay for it at the end. There are multiple issues that brought the island to where it is now. There are hard decision to be made, politicians don't like to make them if affects their image. This's where a board comes in, government is over staff, over spend and over their heads. I understand about fears of loosing jobs and control but the government will have to be trim. Yes the board may or may not favor the investors or don't have a buying with the people. That will be something to consider, as of today, it has been proven that the local government can't manage efficiently. Are we going to continue relaying on them? Sometimes these are hard decision to be made.
I speak to my family in the island, even they have no trust on the politicians. Maybe this will be a good thing for the island and will help. Only time will tell.

Very well said

Here's a link to progress being made on the Puerto Rico Rescue Bill:

Puerto Rico Rescue Bill Nears Completion in House Committee

The one thing I don't like about all of this, is the delay before significant forward movement can occur.
There are a lot of people living on $1,000 dollars a month and having a hell of a time, sometimes unable to pay their bills or medicines, rate hikes and the current or new taxes will make it even more difficult. Some can not escape the island, specially kids, disabled and the elderly, so some will end up homeless and hungry. As more programs are cut and more people are lay off, the problem will get worse. A lot of those people in the government have few skills of interest to the private sector and some are over 50, making it more difficult for them to land any of the very few jobs available. They do not have 5 years to wait for the economy to create jobs that they can take.

The draft released at the end of march was not liked by anybody except those that wrote it. Now they are trying to work out the kinks, but that will take several rounds, then they have vote on it, maybe make more changes and re-vote. Then those in the board have to be selected, moved to the island for a time, then they need to do an audit and you know some will slow that down because there could be repercussions to those that were stealing so they want to slow it down and see how to patch it up. Finally the board will have information to start making decisions, and PR government is not going to like it, so more negotiations and more delays. Then it is off to the courts because the bond holders and PR will not agree and it will be up to the court to mandate a specific set of payment arrangements, then PR is going to protest and the bond holders are going to protest so it is back to the court for more going back and forth.

Mean time the new taxes and any additional ones and rate hikes are going to continue to hurt and more people will continue to leave.

By the time anything substantial starts to happen, it will be fall 2017 and then we need to wait at least 6 months to see how those changes are affecting the economy and the money available. Then more adjustments and another 6 months and we are looking at late 2017 or early 2018 before we start to see real progress or massive demonstrations in the streets.

I don't like all the delays, people are suffering.

My question is, will restructuring really work?

I'm not familiar with the nuances of PR's financial crisis, but on the surface I get the image of a runaway train. Bankruptcy is a dirty word, but wiping the slate and starting over fresh seems like the most immediate and effective way to get something done. The bond-holders would get stiffed, but they've been stiffed already.

During this type of bankrupsy, they would likely loose 15-25%, the rest would have to be payed. Also there would likely be a period at first of no payments, probably a year to 18 months. But to get that PR would have to cone up with a sure way of making all the payments from that point on.

It would be nice to do a full wipe but that is very unlikely.

Correct me if I'm wrong, but wasn't Washington's policies largely responsible for getting PR in its mess?  Or was it just coincidence that FNMA and FDMC pulled out of PR after the big debaucle from defaults on mortgage-backed securities?

lgustaf wrote:

Correct me if I'm wrong, but wasn't Washington's policies largely responsible for getting PR in its mess?  Or was it just coincidence that FNMA and FDMC pulled out of PR after the big debaucle from defaults on mortgage-backed securities?

PR's problems are 99% self-inflicted by corrupt politicians and incompetent bureaucrats - just like Chicago and Illinois.  Sorry, cannot blame DC much on this one.

So FNMA and FDMC pulling out of PR had no impact on the economy? I would think it would have had a big impact on home values since few could afford to buy property.

Wrong: you have been corrected.

Lets not forget two items:
1) PR entered a recession about 10 years ago when they (Clinton and Congress) removed the tax incentives and all those companies left
2) Most of the debt was incurred AFTER the recession started.

Yes the corrupt politicians had a hand on the problem, also the fear of suicidal politics, drove politicians to do things for the people that they could not afford.

So it was a combination, but it started with the companies leaving the island and all the unemployment that resulted.

The US and PR both have corrupt politicians. The corruption existed before during and after and will likely be there 300 years into the future, it is the name of the game played in all countries of the world.

Let me explain it this way .... You work at Walmart doing 40 hours a week and scrapping by on the salary. Then Walmart reduces your hours, but your bills are not reduced, so you start charging your credit card without hope of ever getting the hours back and the limits on the card are reached and the interest goes up, and the bills are now bigger than before, so you try to get bankruptcy in order try to get back into a budge that will let you survive.

ReyP wrote:

Lets not forget two items:
1) PR entered a recession about 10 years ago when they (Clinton and Congress) removed the tax incentives and all those companies left
2) Most of the debt was incurred AFTER the recession started.

Yes the corrupt politicians had a hand on the problem, also the fear of suicidal politics, drove politicians to do things for the people that they could not afford.

You must agree then that it was irresponsible borrowing without the means of repaying and probably no intention to do so.  Plus, the borrowed money was squandered leaving the country bankrupt and nothing to show for it (3rd world infrastructure).  Don't even start trying to give these crooks cover by blaming politicians in Washington.  Listen, PR was and is a debt junkie and got itself in this fix by not solving the fundamental flaws with its economy and instead choosing to kick the can down the road through borrowing.  Illinois and the City of Chicago are right behind it.

Again, I'm not a politician. All I know is what I love about PR is the same thing others will love: the culture and the history. Whatever can be done to capitalize on those gifts will benefit everybody. I walk around VSJ and I see these magnificent structures falling into ruin and wishing I had all the money in the world to renovate them to their former glory. There is so much potential there. I looked at lots of properties that had such charm and character. but because I don't live there now and couldn't oversee the project, plus having limited capital I just had to sadly walk away   I ended up buying another apartment that still needed work, but was manageable. And I love it. I will buy another if I can, and renovate it after the move. Anybody who comes up with a plan to help make that happen would be someone I could get behind.

SawMan wrote:

Don't even start trying to give these crooks cover by blaming politicians in Washington.  Listen, PR was and is a debt junkie and got itself in this fix by not solving the fundamental flaws with its economy and instead choosing to kick the can down the road through borrowing.  Illinois and the City of Chicago are right behind it.

LOL the way you put it is funny, but correct.

PR tried to live the american dream, keep living the same way as before it lost all the income, supplement the lost income by issuing debt, steal some of it, help some friends, resurface a driveway for votes, etc.

Politicians knew that by borrowing the money, and by leaving office after that somebody else was going to face the bill collector. But this is also happening today in the US, How many trillions is the US in the hole? Who is going to pay that back?

A lot of governments spend more than what they take in, shave some of the top and put it in a foreign bank for retirement and the mistresses, then let the next generations deal with the debt. Mean time they are friends of the people and continue to rob the people behind their back. This is not just PR, same in US, UK, China, Russia, and just about every country.

Still the whole thing started after the companies left which caused a lot of unemployment and a large imbalance on the taxi base.

Also lets not forget that not long ago, banks in the US made a LOT of bad loans, then congress bailed them out, same for the auto industry. All those that needed the bailouts, did so due to their own actions. We are still talking about it in congress, are banks too big to fail?

Corrupt politicians have been stealing from the people since before we left the caves.

lgustaf wrote:

Again, I'm not a politician. All I know is what I love about PR is the same thing others will love: the culture and the history. Whatever can be done to capitalize on those gifts will benefit everybody. I walk around VSJ and I see these magnificent structures falling into ruin and wishing I had all the money in the world to renovate them to their former glory. There is so much potential there. I looked at lots of properties that had such charm and character. but because I don't live there now and couldn't oversee the project, plus having limited capital I just had to sadly walk away   I ended up buying another apartment that still needed work, but was manageable. And I love it. I will buy another if I can, and renovate it after the move. Anybody who comes up with a plan to help make that happen would be someone I could get behind.

You are doing your part based on the above. The people have very little savings to take on risks like that and they may loose their job which puts at risk those investments and their primary residence.

There is also lack of vision on their part.

One thing that causes a lot of the political issues is that people don't study their politicians properly before they are put in office and fail to keep a good eye on them while in office.

With a population of over 3 million, we should be able to fill the streets of San Juan with at least a 200,000 strong march, but we don't. We protest by party, by union, by barrio. Most protest have just about 20 to 200 people. Who is going to take us seriously?

In Ukraine, people would wait outside their equivalent of congress and throw politicians they don't like into one of those trash dumpsters. It is funny.

If the people do not keep an eye on the politicians, if we do not protest, if we reelect them over and over again, if we don't throw them in Jail, they have a free hand and are not accountable because the people are not holding them accountable.

THAT is the root of the corruption issue in the island.

We have not finished the audit for 2014, and it is now 2016. It is a mess, documents are missing, some are forged and officials at organizations are delaying the release of the document that have been asked for. It is not just the politicians, the heads of multiple organizations are in the corruption also. The corrupt politicians put them there and without proof, good luck removing them before they retire.