Tuesday, October 03, 2017

PROMESA Bishes: Obama Imposed Austerity on Puerto Rico...,

nakedcapitalism |  With that said, here’s a handy dashboard from the Puerto Rican goverment that shows the status of various systems on the island. In this post, I’m going to focus on the two systems that are in the worst shape: Power, at 5% coverage of the island, and water, where coverage differs by region: Metro, 57%; Norte, 29%; Oeste, 20%; Sur, 67%; and Este, 50%. But first, I’m going to look at one factor that differentiates the “natural” disaster of Maria in Puerto Rico from others on the mainland; then I’ll show how that factor affects the power system, and then cascades to affect the water supply. 

That one factor is, of course, finance. One difference between New Orleans (Katrina), Florida (Irma), and Texas (Harvey) on the one hand, and Puerto Rico (Maria), on the other, is that only Puerto Rico is under an austerity regime, imposed during the Obama administration. José A. Laguarta Ramírez described this regime (PROMESA) at Naked Capitalism in 2016:
The U.S. House of Representatives approved PROMESA on the evening of June 9, following a strong endorsement by President Barack Obama. The bill, which would also impose an unelected and unaccountable federal oversight board and allow court-supervised restructuring of part of the island’s $73 billion debt, now awaits consideration by the Senate…. Puerto Rico is not the only place, under the global regime of austerity capitalism to face predatory creditors and the imposition of unelected rulers —as illustrated by cases like Argentina, Greece, and post-industrial U.S. cities such as Flint, Mich.— but its century-old colonial status has made it particularly vulnerable and defenseless.
The House vote followed a concerted, carefully timed media push by the Democratic establishment, on the premise that “despite its flaws” PROMESA represents a bipartisan compromise that is, in Obama’s words, “far superior to the status quo.”
PROMESA’s oversight board, which will be staffed by San Juan and Washington insiders with the bondholders’ best interests at heart, is sure to continue to impose draconian austerity measures that have already slashed much-needed social services.
Of course! Austerity! Why did nobody think of this before? Mark Weisbrot in the New York Times:
This board, to which President Barack Obama appointed four Democrats and four Republicans, has now approved an austerity regimen that, if things go according to plan, envisions a second lost decade — in other words, no economic growth from 2005 through 2024. But the plan [reminscent of the austerity imposed on Greece] doesn’t take into account the impact of such austerity, which would add more years of decline. And there’s more: All the budget tightening over the second decade, including cuts to health care and education, would pay only about $7.9 billion of Puerto Rico’s $73 billion debt.
That means that creditors’ lawsuits, which have already been filed, could inflict additional damage and worsen the quarter-century of economic stagnation that is now in the cards. Hedge funds hold much of Puerto Rico’s debt, and since May their claims have been under consideration in a bankruptcy-like proceeding — also under the Promesa act — that does not look any more promising than the oversight board’s plan.
(One of Trump’s earlier tweets — September 25 — read: “Texas & Florida are doing great but Puerto Rico, which was already suffering from broken infrastructure & massive debt, is in deep trouble.” So it’s pleasing to see that the Democrats’ tender concern for the hedgies and vulture funds is shared across the political spectrum.)

Now let’s look at the effect of this thoroughly bipartisan austerity on the Puerto Rican power system.