Some of the same hedge fund billionaires who have profited from austerity across the globe are drawing up plans right now to go after their next target: the people of Puerto Rico.
For almost two decades, Puerto Rico has been stuck in economic stagnation. Now the island faces a deepening debt crisis. Just last week, Puerto Rico’s governor marked a new stage in this crisis, declaring that the commonwealth’s $73 billion in debt was “not payable.”
While a full and transparent public audit of Puerto Rico’s debt is urgently needed to fully understand the scope of the crisis, hedge fund investors reportedly own anywhere from 20% to 50% of that total debt. And a report last week said that these investors are already “drawing battle lines,” planning to take legal action. They want to make sure they get paid — all while Puerto Ricans are likely to suffer under even more severe austerity measures.
Right now, Puerto Rico faces a major turning point. There aren’t any simple answers to the current crisis. It has been decades in the making and owes much to an export-oriented, oil dependent, low-tax and low-wage economic model promoted by Puerto Rican and U.S. governments to the benefit of corporate America.
But one thing is certain: austerity is not the solution.
We need a long term, sustainable and fair development strategy to fix Puerto Rico’s economy for the benefit of working families. Short term austerity measures to secure repayment of Puerto Rico’s debt to bond holders and opportunistic speculative investors like hedge funds will further push the island into economic catastrophe.
Hedge funds aren’t the only ones who will be trying to call the shots if this crisis escalates. But they will play a central role. So-called “vulture funds” have done the same thing in other states that have faced debt crises, including Argentina and most recently in Greece. And while they haven’t made their move in Puerto Rico just yet, we know they’re thinking about taking legal action and are likely to push for massive austerity measures.
What might that look like? Here’s some of what was recommended in a recent report by a former chief economist at the World Bank:
- Lowering Puerto Rico’s minimum wage below the current federal minimum of $7.25;
- Reducing vacation days, overtime hours, and paid sick days for government employees;
- Slashing Medicaid and welfare benefits.
Add all of the above to what Puerto Rico is already facing — 14% unemployment, mass emigration, and an economy that has contracted over the last decade — and you have a recipe for economic disaster.
While there aren’t simple solutions, there is a simple choice to be made right now.
In one version, the billionaire investors end up getting paid handsomely for their risky bets while austerity plunges the Puerto Rican economy even deeper into decline, leading to more emigration and a tailspin that shows little hope of ending soon.
In the other version, all stakeholders come together in good faith and commit to putting Puerto Rico’s working families first, pursuing innovative solutions like transforming Puerto Rico’s inefficient energy sector to use the island’s natural advantages to develop solar and wind.
The choice is clear — and the last thing the people of Puerto Rico need right now are hedge fund investors stepping in and pushing for even more austerity. Add your voice and let’s make sure they hear that message from us right now:
President, SEIU 32 BJ