Puerto Rico has a plan to recover from bankruptcy – but the deal won’t make people’s daily struggles easier

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(THE CONVERSATION) Puerto Rico’s bankruptcy problem is complicated — but the various ways 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 some 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 2014, has now reached a potential turning point.

U.S. District Judge Laura Taylor Swain approved a large-scale debt restructuring plan on January 18, 2022, which would reduce Puerto Rico’s debt by $33 billion and help pay off its creditors.

Because Puerto Rico has been a territory of the United States since 1898, the bankruptcy plan unfolded in a unique way that limited residents’ opinion of financial cuts to public programs that directly affect them, angering many Puerto Ricans.

As a scholar of Puerto Rican politics and a Puerto Rican native, I believe that the island’s recently announced debt deal will not make it easier for citizens to find homes, schools, and jobs. 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 worsened over the past two decades, are the result of many factors: years of borrowing to cover budget deficits, weak economic growth, political corruption and a declining population. 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 Oversight, Management, and Economic Stability Act, a law known as PROMESA, which created a new government agency. This agency, the Financial Supervisory and Management Board of Puerto Rico, was 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 – which means council in Spanish. None of the current seven members of its board are 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 raised public concerns about the lack of transparency in the handling 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 pay off 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 school teachers’ pension plans. The financial cuts have also limited Puerto Rico’s Medicaid spending and threatened funding for pension plans and public universities.

Thousands of teachers, earning a starting salary of $1,750 a month, took to the streets to protest. Puerto Rico Governor Pedro Pierluisi announced on February 8, 2022 that teachers would receive a temporary monthly increase of $1,000 starting in 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 not seen in decades.

Since 2016, 523 schools have closed in Puerto Rico. The Education Department plans to close 83 schools by 2026, affecting 18,644 students.

Julia Keleher, Puerto Rico’s former education secretary, is a proponent of school closures.

Keleher was a polarizing public figure — she was also a mainland American official in Puerto Rico — a reminder of the island’s colonial history. Keleher pleaded guilty to federal fraud conspiracy charges for mismanagement of public funds in June 2021.

Puerto Rico’s Department of Education has a new direction. But some specialty art schools, like Central High School in San Juan, continued to close, prompting online petitions for change.

School closures have more broadly sparked significant protests in San Juan from parents, students, teachers and politicians in recent 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 costs compose the latest chapter in Puerto Rico’s 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 Puerto Rico government’s tax relief measures, is creating new gentrification concerns about affordable housing. This is especially true along coastal regions – it can harm Puerto Ricans.

American financier John Paulson is one example of a growing wave of foreigners who have purchased property in Puerto Rico, seeking tax breaks.

This investment was made possible by a new law, which aims to attract wealthy foreigners to the island. It does this by granting new Puerto Rican residents exemptions from paying income tax on all “passive” income, i.e. money from investments, for example.

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The net result is significant local 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 public in Puerto Rico still has the opportunity to push back and push for change, as it continues to do through protests to defend its political demands.

This article is republished from The Conversation under a Creative Commons license. Read the original article here: https://theconversation.com/puerto-rico-has-a-plan-to-recover-from-bankruptcy-but-the-deal-wont-ease-peoples-daily-struggles-176118.

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