‘The US Has Played With Puerto Rico’s Economy for the Last 122 Years’ – CounterSpin interview with Julio López Varona on Puerto Rican debt

Janine Jackson interviewed the Center for Popular Democracy’s Julio López Varona about Puerto Rican debt for the March 13, 2020, episode of CounterSpin. This is a lightly edited transcript.

MP3 Link

New York Post (1/13/20)

Janine Jackson: Corporate media devoted some sympathetic attention to Puerto Rico in the wake of earthquakes and aftershocks that further traumatized a population and infrastructure not recovered from 2017 hurricanes Irma and Maria. Less—and less humanistic—attention is going to other central factors of Puerto Rico’s crisis. Last month, Gov. Wanda Vázquez rejected the bankruptcy deal put forward by what’s called the Fiscal Oversight and Management Board, or FOMB, that’s been put in charge of Puerto Rico’s finances, and is negotiating with bondholders over its debt.

“Critical” news coverage accuses Donald Trump of bungling support for Puerto Rico, or points to corruption in the island’s leadership. But neither does anything to illuminate a new way forward that doesn’t reproduce past mistakes and injustices. That doesn’t mean Puerto Ricans—on the island and in the diaspora—aren’t working on creating that new way. Here to talk with us about that is Julio López Varona. He’s co-director of community dignity campaigns at the Center for Popular Democracy. Welcome back to CounterSpin, Julio López Varona.

Julio López Varona: Thank you for having me.

JJ: So I’ve seen a number of journalists saying, “Trump’s bungling coronavirus, just like he bungled Puerto Rico.” It’s almost a punchline, and it certainly sounds like it’s all in the past. But worst of all, for me, it shoves things into an old narrative: the clamoring needy people and the insufficiently benevolent overseer. More than 50 organizations representing various sectors of Puerto Rican society wrote an open letter calling for the debt restructuring deal to be rejected, as indeed it was. Let’s just start with what was so wrong with the plan that that Fiscal Oversight Board put forward.

JLV: I think what’s been wrong with the plans that the Oversight Board has been negotiating for the last three years has been the fact that, as we have said, and economists have said, Puerto Rico needs about 80% or 90% of cuts to be able to have a decent recovery. Those cuts, in many cases, have been only 30%, 40%, and in many cases, those cuts are pushed so that hedge funds and other organizations are able to get more money.

And while this happens, what we see is a continued pattern of austerity, budget cuts, and a ton of measures that are being taken by the government of Puerto Rico to be able to make those payments. Curious that we’re talking today, because two days ago, Puerto Rico defaulted on one of the first loans it actually negotiated about two years ago.

So what we’re seeing is that those agreements that the FOMB are negotiating are not working. Puerto Rico can’t pay them. And what is resulting is a Puerto Rico that has no infrastructure, is not able to recover. Right now, we’re in the middle of a coronavirus pandemic, where we have 11 cases of coronavirus that are supposedly around; we know it’s more, but we also know that the government of Puerto Rico has no way to test them. They’re sending the tests outside.

So we’re in a situation where people are still living in tents in the southern part of the island, where our electrical system is completely, I would say, on the verge of collapse, where our hospitals have been in many cases undersupported—where Vieques has no hospital, for example. And we are once again in the middle of another possible disaster, and we don’t have the capacity to move forward.

JJ: You really wonder how you can imagine you can “austerity” a people into recovery, how that is even imagined that it will work.

Well, people think about debt as a “moral issue”: You took it, you have to give it back. The story of Puerto Rico’s debt is so much more complicated, and the US government role is so much deeper. We have to talk—if we’re talking about how much should be paid back, and who it should come from—there’s something to be said about the nature of the debt itself, isn’t there?

Julio Lopez Varona

Julio López Varona: “For people to actually understand that we need to audit the debt, that we need to understand the debt, and that we shouldn’t be paying any debt that was created illegally, has been a struggle in itself.”

JLV: Yeah, one thing that we have been working on through our Hedge Clippers campaign for the last four years, is this idea that people, when they think about debt, they think about something they have to pay. In the case of Puerto Rico, for I don’t know how much time, we have never really known how much debt we owe, we have never really been able to audit that debt. The audits that have happened have been under the FOMB, which, you know, raises a bunch of questions.

But then we know that there have been debt issuances that happened in 2012 and 2014 that were riddled with illegality, because Puerto Rico was borrowing over its constitutional limits. So the fact that, even in this agreement that came out a month ago, the board continues to offer what we understand, and what even they understand, is illegal debt, makes no sense. I think what’s hard about this is that, because people have this idea in their heads that we live in a capitalist country where if you [get] something, you have to pay it. So for people to actually understand that we need to audit the debt, that we need to understand the debt, and that we shouldn’t be paying any debt that was created illegally, has been a struggle in itself, for us to be able to actually fight back and make the case that Puerto Rico’s recovery goes beyond just saying that we need to pay bondholders.

JJ: You just mentioned it a little bit, this oversight board, the FOMB; it’s this powerful group that was not elected, and there are conflicts of interest that ought to raise questions about how they’re even at the center of this process.

JLV: Yeah, the FOMB, or the Fiscal Oversight Management Board, was created as part of the Obama administration efforts to “support Puerto Rico.” They created this law called PROMESA, which means “promise” in Spanish. And the law was supposed to allow Puerto Rico to enter into bankruptcy, because Puerto Rico was not able to enter into bankruptcy through other means, because Congress took that away in the ’70s. And this law created the fiscal control board, or the FOMB, as a way to have a structure that would oversee Puerto Rico’s finances, and balance the finances of Puerto Rico, for five years, or until the debt was restructured.

What we saw was that these people that they put in place were mostly white men; about six of them don’t even live in Puerto Rico. They are, in many cases, people that were part of the debt issuances. Some of them worked at Santander, some of them worked in the government. Many of them actually profited, or have been profiting. We have one of the brothers of one of the biggest banks in Puerto Rico, Banco Popular, who helped create the debt. So, within the structures that are supposed to balance the budget of Puerto Rico, we have people that are: 1) not Puerto Rican or not living in Puerto Rico, 2) were part of creating or made money out of the debt, and 3) are people that are completely outside of the scope of what a normal Puerto Rican is. These are white, rich men that really don’t understand, and haven’t been in Puerto Rico for the last three years to understand what the struggles of ordinary everyday Puerto Ricans are.

JJ: I wanted to underscore for folks who don’t know all this history, and it’s a lot to know, Puerto Rico has also been excluded from certain regulatory laws. I just learned from Hedge Clippers: In Puerto Rico, unlike elsewhere in the United States, investment firms can act as advisors to the government in the issue of bonds, while at the same time marketing those same bonds to investors. Just in Puerto Rico. Clearly this kind of special legislation has created a situation in which Puerto Rico both is led into particular kinds of problems, but then also doesn’t have the same tools to get out of them.

JLV: Yeah, and I think it goes to show what Puerto Rico has become and is for the United States. Puerto Rico, for the last 122 years, after the United States took Puerto Rico from Spain, has been a place where US citizens can come, can play, can have fun. Right now, many of them come and don’t have to pay any taxes and can invest. The US has played with Puerto Rico’s economy for the last 122 years, so that it serves the purposes of the US in one way or the other. Same thing with the military.

So these policies are not new. They’re just a reflection of our colonial status. And they worry us, because they have an impact on the 3 million people that still live in Puerto Rico, taking into account—and this is a part that people don’t know—that Puerto Rico has lost 15% of its population in the last 15 years. And people are just going away, because they can’t live here.

And while that happens, what we’re seeing is hundreds of people, mostly rich people, that are coming to the island and buying. So this idea of this, like, ’50s—I always think about this like the Havana, Cuba, ’50s, people coming in like the backyard of the US, is very much what’s happening on the island. Like people are living with $7.25 an hour, while others are coming with millions to invest and take over.

JJ: We see that dystopian vision; I think when we talked in 2018, the phrase “Puerto Rico without Puerto Ricans” was being bandied about. But there are, of course, other visions. Clearly, those organizations and groups on the ground are opposed to this particular deal that the FOMB put forward, that was going to make sure vulture funders get paid back while pensioners take a cut. What are groups calling for? What do they want to happen?

JLV: I think the exciting part about what’s happening in Puerto Rico is that people are actually not happy, they are more conscious than ever about our status and our colonial situation. And in many cases, people are scared, and that’s making them organize.

I work very closely with an organization called Construyamos Otro Acuerdo. We also work with Colectiva Feminista, with a ton of the groups that are doing organizing. And what we’ve seen is people that are willing to fight for their rights.

The biggest organizing we are doing right now is around pension holders. Pension holders, in the new agreement, are about to lose about 8.9% of their pensions if they make more than a certain amount of money. And we have been able to organize with pension holders to make the case that this should not be happening.

And the interesting part about what’s happening is that our Republican government—which is what we have right now in Puerto Rico, the governor is Republican, the legislature is led by Republicans—is now opposing the debt agreement, because, in many ways, they are seeing that, you know, they can’t win without pension holders, but also that they should not be giving their power to the FOMB to make decisions about the people of Puerto Rico

So I think within that, there’s been a really interesting movement, also, to talk about the debt, to talk about cancellation of the debt, and bring those issues together.

Like, how can we have a better life for pension holders? How can we have a better life for students that now have their tuitions tripled in public schools? How can we do all those things while we’re paying Wall Street illegal debt?

And I think it’s an interesting moment. That it’s also in the middle of the political fight we have and the elections is helping organizations like Hedge Clippers, Construyamos Otro Acuerdo and others actually make the case that the debt is illegal and shouldn’t be paid, and that we should be protecting our older people, our pension holders and also our younger people, and also everybody that lives on the island, and making sure people have a good life.

JJ: When we saw those protests that led to Ricardo Rosselló’s resignation, there’s a certain amount of envy that one feels at the spirit,  at the organizing, at the energy. And also we hear about mutual aid on the ground, the autogestion, the idea of helping one another. And maybe it’s scary, something we’re feeling on the mainland as well; it’s scary, but you’re also seeing new ideas about how systems might work, about different ways to go forward that don’t involve giving so much of your power away.

JLV: Yeah, and it’s a tricky thing. I think there is—after Hurricane Maria, we saw a ton of groups that just decided that the state wasn’t the place where they wanted to engage. And those organizations, like Casa Pueblo and a ton of others, have been the ones that have led this autogestion movement that really says, “We don’t want to work with the state.”

There are others, like me, that also understand that we need to work with the state, because if we don’t change the economic situation of people in Puerto Rico, it’s going to be very difficult to just make sure everybody’s doing their own thing.

JJ: Right.

JLV:  I think there’s this interesting balance between people that are in the mountains, that are saying, “We’re going to create our own thing, we’re going to harvest,” and how those things are reflected on a broader movement that’s saying the state also has to change.

Like the ousting of Ricardo Rosselló was that great example. It was people just tired of having to deal with everything by themselves, not being able to rely on the government, and actually asking for a change.

And I think the hard part about what we are doing now is, how do we take that energy? How do we talk to the young people that were unorganized and just decided to go to the streets, and actually organize them into saying, “Are we going to deal with the state? Are we going to assume positions of power? And are we going to figure out, how do we improve Puerto Rico?”—beyond autogestion, which is important, but it’s not going to be the solution for everybody.

NYT: Puerto Rico Reaches Deal to Settle $35 Billion in Debt

New York Times (2/10/20)

JJ: Right. Well, I just want to say one final thing about media coverage. I was reading a New York Times story that was talking about what you’ve been mentioning, the cut to pensioners’ benefits. And it said that Vásquez was considering rejecting the deal because, she said, “retirees should get sweeteners too.”

And so the way we’re talking about not having a cut to your benefits for senior citizens and pensioners, that’s called “getting a sweetener.” And to me, that’s just a symbol of how, when a story gets moved to the financial section of the newspaper, sometimes the humanity just drops out.

And I just wonder, in terms of the way reporters talk about, not just the debt, but Puerto Rico — I’ve read so many times, “Puerto Rico ‘can’t catch a break’”— it’s natural disasters, there’s that kind of coverage. I wonder what kind of news coverage you would like to see?

JLV: I think we want to hear more of the stories about how people are suffering. And we want to also hear more of the stories of how people are moving up and creating new political structures and fighting back. At the end of the day, like in the case of the governor, for example, right now we are moving legislation with the New Progressive Party, which is the party in power, and they are supporting our efforts to cancel the debt and protect pension holders.

I think within that, the hard part is, how do we make sure our message is there? How do we make sure that our message is not about quantifying people because they matter in an election, or they matter for bonds?

But I also think that we need to deal with the realities of, how do we make sure that the narrative also talks about people in a way that gives them value, even if it’s not the way we want it to be?

And what we have seen right now—which is the part that I feel is important—is that the FOMB doesn’t have friends. The only friends that the FOMB right now has are hedge funds.

Both the governor and the legislature, 50 groups and the diaspora, are with people in Puerto Rico, are with pension holders, and are talking about #CanceltheDebt. We would like that message to be more human. We would love that message to be about how people are moving up, and how people’s dignity should be at the front of everything.

But we will take any message that actually makes sure that our people are protected, and that we can make sure that Puerto Rico’s for Puerto Ricans, and not for the rest of the people that want to take over.

JJ: We’ve been speaking with Julio López Varona, co-director of community dignity campaigns at the Center for Popular Democracy. You can find their work, including a brand new report about how the New York State attorney general could bring transparency and accountability to some of the creditors and speculators on Puerto Rico’s public debt, at PopularDemocracy.org. That work can also be found at HedgeClippers.org. Thank you so much for joining us this week on CounterSpin, Julio López Varona.

JLV: Thank you for having me.

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