Janine Jackson interviewed the Center for Popular Democracy’s Natalia Renta about the Puerto Rican debt deal for the January 28, 2022, episode of CounterSpin. This is a lightly edited transcript.


Janine Jackson: “Puerto Rico received approval from a federal judge on Tuesday to leave bankruptcy under the largest public sector debt-restructuring deal in the history of the United States.” That’s how a January 18 New York Times report begins. It’s been nearly five years, the paper explains, since the “financially strapped territory declared it could not repay its creditors.” The executive director of the unelected Fiscal Oversight and Management Board declared it “truly a momentous day,” and a “new day for Puerto Rico.”

How new, exactly, is the question of many who don’t see this debt deal as fundamentally changing the story for most Puerto Ricans, because that story has everything to do with the more than 100-year colonial relationship to the United States, and their enforced inability to determine their own economic future. Nor does it upend the notion that increased austerity is somehow, despite what you see, ultimately the way to shared prosperity and well-being.

Those with a different vision include our guest. Natalia Renta is senior policy strategist at the Center for Popular Democracy. She joins us now by phone from Washington, DC. Welcome to CounterSpin, Natalia Renta.

Natalia Renta: Thank you so much for having me.

JJ: The reception to this restructuring plan has to do with our understanding of debt. The picture we get from stories like this one in the Times, and many others, is Puerto Rico racked up a tremendous debt, and they’re now being gifted with forgiveness of most of it. That sounds like beneficence even beyond what’s maybe appropriate to ask for. That’s because for most people, debt means: You took something and enjoyed it and now you have to pay. Them’s the rules.

But history shows us that some debts are odious, are unfair from the start. So maybe I’d like to ask you to start with the nature of the debt that we’re talking about here. Why, in simple terms, is Puerto Rico facing so much debt? How did it come to be?

NR: Thank you so much for that question. I agree that that has been the dominant narrative around Puerto Rico’s debt. And there are a lot of root causes to Puerto Rico’s debt. But one overarching part of this narrative is the fact that Puerto Rico has been a colony of the United States since 1898. And it hasn’t had the opportunity really to develop its own economic future, economic plan, without the United States’ imposition.

So there are a few things to point to that contributed to the debt. One is that the nature of colonial relationships is that they’re beneficial to the country that holds the colony, right? So Puerto Rico’s economy was very much structured for a few decades around tax incentives for multinational corporations to set up shop there. And those tax incentives started to be phased out in 1996, and they were phased out in 2006 completely.

But the effect of that just goes to a more fundamental issue. It’s not just like, oh, we should just bring back those incentives. It really goes back to a fundamental issue of the Puerto Rican economy being run by outside interests.

And another example is the Jones Act, whereby consumer goods in Puerto Rico are way more expensive than they need to be, because there’s a law in the United States that requires everything that comes into Puerto Rico to come from US-flagged ships.

Another issue I’d like to highlight is the fact that it had become clear that Puerto Rico was in a position where it couldn’t pay back its debt, before this big announcement in 2015 by the then-governor, and there were predatory financial interests that took advantage of that. So there were financial actors, including some big banks and big hedge funds, that were involved in a debt issuance in 2014. Its terms were very bad, and other debt issuances in the past were also terms that were not beneficial.

It’s a complex issue. Obviously there are a lot of different actors at play. But it definitely complicates the narrative of, oh, it’s just Puerto Rico borrowing too much money that it can’t pay.

JJ: The New York Times piece that I was citing gives a single paragraph amidst this kind of celebratory coverage that says, oh, by the by, “Critics have also demanded an audit of how the large debt was incurred, and demanded that those responsible face prosecution or other accountability.” That was one paragraph out of a 28-paragraph story, by my count. But an audit, a question of how this debt was accrued, would seem to be the first thing that you would need to do before you start celebrating the reduction of it.

NR: Yes, and that actually has been a public demand by Puerto Ricans for many years. And it also highlights a fatal flaw in the PROMESA law. Just to give a little bit of background, PROMESA was a federal law passed in 2016, and it created tools to restructure Puerto Rico’s debt. But it came at the cost of an unelected and unaccountable fiscal control board.

So this is a seven-member entity. Its members are appointed by the president. Most of them come from lists from Democratic and Republican leaders of Congress. So this is a seven-member board that Puerto Ricans have no say over. And the members of the board are not accountable to Puerto Ricans. And this law gave them a lot of power over Puerto Rico.

So there are two main things that they’re empowered to do. They represent—they’re supposed to represent—the interests of Puerto Rico in the bankruptcy proceedings in court. And they also have final say over fiscal plans and budgets, which means that they can block the implementation of laws that the Puerto Rico legislature passes. It means that they can impose austerity measures to build up the money to pay bondholders. So they have a lot of power.

And, meanwhile, you have the people of Puerto Rico, who have been calling for an audit of the debt. So the fact that the board proceeded with this debt restructuring without having a comprehensive audit of the debt is an example of how it’s not responsive to Puerto Ricans. But further down the line, under immense pressure, they actually filed papers in court saying that billions and billions of the debt was actually issued illegally, and they also started some lawsuits against the financial actors involved in the issuance of the debt.

But they didn’t fully pursue those claims. And now with this restructuring deal, those claims go nowhere. And this deal that was just announced, that the judge confirmed on the 18th of January, actually leaves Puerto Ricans paying billions of dollars to bondholders over this debt that hasn’t been audited, that was legally challenged in court. But there was no resolution to that issue.

Instead the board kept negotiating and negotiating with bondholders. until they’re actually getting a good deal back. And one thing to note, also, is that there were a lot of predatory actors involved within the bankruptcy who, once Puerto Rico had already said, like, we can’t pay back this debt, some of these, even after Hurricane Maria, decided to buy some of these bonds, because they were at such low prices.

JJ: Right.

NR: So some of these hedge funds that are termed “vulture funds” because of their predatory practices, they negotiated with the board and negotiated with the board to get a good deal. So when we talk about the debt being cut, some of those cuts aren’t real cuts to some of the bondholders who bought them at a steep discount.

But the issue of auditing the debt, it’s just one instance that you see that the board was not being responsive to public demand, right, even though they’re supposed to be representing Puerto Rico on the bankruptcy proceeding.

JJ: And when we say the board, we’re talking about the Financial Oversight and Management Board, which some people, many people, call La Junta. And as almost a detour, some of the members actually of that board have links to the entities that were involved in creating the debt in the first place. There’s lots of reasons to question whether or not this board is truly responsive to Puerto Ricans.

NR: That’s right. That’s right. There have been a lot of conflicts of interest identified for some of the board members, and some of the former board members, and some of their highly paid consultants. So I think we, Puerto Ricans and others, are right to be skeptical of where alliances truly lie.

JJ: Also, Natalie Jaresko, executive director of the board, told the New York Times in this piece, “This period of financial crisis is coming to an end.” And I just wonder how you hear such a declarative statement, in terms of what’s really going to happen as a result of this deal. The ongoing crisis that has driven, for example, so many people to leave Puerto Rico over the last decade or so, is that ending?

NR: Yes, I would have to disagree with her statement. One figure that the board has touted is that they came out and they said, 80% of the debt is being cut. And I’ve seen that in all of the mainstream coverage in the US of the debt restructuring deal. But that figure is actually highly misleading. And the judge herself, in her confirmation order, said that the debt of the central government was actually just being reduced by 31%.

And that is not actually being felt equitably across the board, right? So there are some bondholders who are receiving less cuts, and some people who are owed money that are getting a much higher cut. And those include small local businesses who have lent their services or labor to the central government, with those being cut more.

But when they say 80%, they’re not counting the $7 billion in upfront cash some bondholders are getting. And an up to $3.5 billion that some bondholders could get, depending on if the revenues of the sales tax exceed expectations. And the sales tax in Puerto Rico is 11.5%, which is way higher than anywhere else in the United States.

JJ: Wow.

NR: And sales tax is widely understood as a regressive form of taxation, because it’s felt different across the income and wealth spectrum, right? If you have less money, you feel an 11.5% tax a lot more. So that’s a big myth I want to debunk, this figure of 80% that doesn’t take into consideration all these billions of dollars that bondholders are receiving.

And then a big constituency of this deal that was just confirmed are retirees and pension-holders. So I have to say that we did have a big win in Puerto Rico by pension-holders who organized, and now people who retired from public service for the central government of Puerto Rico are not going to see a proposed 8.5% monthly cut that the board was trying to impose on pension-holders making over a certain amount per month, over $1,500 a month in pensions.

So eliminating that cut was a huge victory. And, again, it goes to show that the board, when it is responsive, it’s only responsive under immense pressure. They kept saying, oh no, we can’t possibly eliminate this cut. If we eliminate this cut, the judge can’t confirm this plan. Like you said earlier, the pain needs to be shared, everybody needs to take a cut, which, you know, is also misleading, because pensioners had already seen cuts pre-PROMESA, when the government had decreased their benefits in part to pay bondholders that they were prioritizing over their pension obligations. So that’s a huge win.

However, the current employees of the government are still going to see drastic cuts, really, to their retirement at the end of the day, because cost of living adjustments are frozen and have been frozen since 2007–2008, and because they’re changing from a defined benefit, meaning if I worked X number of years, I’m going to get X amount per month. So they’re freezing those defined benefit plans and changing them to defined contribution plans, which means it falls onto the employee’s own money that they earn, taken out of their paycheck, really, to fund their retirement.

So at the end of the day, when current employees retire, their benefits are going to decrease a significant amount. So I wanted to highlight that as well, while also, you know, often we don’t celebrate our wins enough, and this is a huge deal that current retirees are no longer facing this 8.5% cut on their monthly pension benefit.

JJ: Absolutely. I think it’s very important to acknowledge the impact of activism in this case. Even here, though, the language cues say so much. The New York Times piece cited that. They said, “activists and elected officials did notch a big victory,” which I love—”activists and elected officials,” pitted against whom, exactly?

But what I honed in on this is in the piece, they say they did manage to get the board to back away from these plans to cut pensions for retired teachers and other government workers. And it said, “Many Puerto Ricans feared that such cuts would exacerbate poverty among older people.” And I’m like, ya think? You know, like that’s a fear that people had, that cuts to pensions might exacerbate poverty.

And yet in the same story, statements like that of David Skeel, the chairman of the FOMB, who says flat out, “It’s not going to lead to more cuts.” Those kinds of statements are just out there, declarative. It’s not like Skeel “hopes” or “imagines” that this deal won’t lead to cuts. He’s just saying it won’t lead to cuts. But meanwhile, the reason for fighting the pension cuts was that people had this fear, this emotional feeling, that it might lead to poverty. The language just makes me a little nutsy.

NR: Yeah, it’s very detached. And again, it just shows how far removed they are…

JJ: Yeah.

NR: …from the real lives of real Puerto Ricans, and what the real state of affairs is on the island.

JJ: And I would ask you about that, because there’s so much energy, and so many people that are missing from elite media’s narrative, and we complain about that narrative for many reasons, what it gets wrong. But it’s also who it leaves out, and it would leave you more depressed than perhaps you might need to be, because there is a lot of pushback, there is a lot of activism, and there are certainly plenty of people who have an idea of a different way forward than this plan talks about.

NR: Definitely, definitely. And we’ve been talking about bondholders and retirees, but also, at the end of the day, we’re talking about the central pot of money that the central government uses for all sorts of things that impact all Puerto Ricans, in terms of the public services available and also investments in public institutions.

Since the board has come in, a lot of public schools have closed. The budget for the University of Puerto Rico has been slashed, and there have been a lot of hikes for energy use. So we’ve been talking about people who the central government owes money to, but at the end of the day, this is an issue that touches on everyone living on the island, and reverberates beyond that with people in the diaspora, living all over the States and beyond.

JJ: Let me ask you, finally: The naturalness with which elite media talk about unelected overseers, not even all of them living in Puerto Rico, some with important conflicts of interest, negotiating with bondholders who’ve been incentivized for years toward exploitation, that’s presented as kind of the grownups talking, you know, and of course they should decide the future; and it’s very unnerving.

But as you’ve said, there’s a tremendous amount of energy that’s fighting that narrative. And I wonder, would these issues be addressed, or to what extent do you think they would be addressed, by the Self-Determination Act, and if you could tell us a little bit about that, and the impact that that might have.

NR: Sure. So the Puerto Rico Self-Determination Act is a piece of federal legislation that has been introduced, both in the House and the Senate, that basically would create a way for Puerto Rico to chart its preferred political path forward. It would create delegates who are elected by Puerto Ricans to negotiate with a commission in the United States about, like, OK, what are the different options, and what are different transition plans, importantly, to get to all those different options?

So you can have an option for complete independence without any formal political connection to the United States. You can have what’s called a free association, which basically means Puerto Rico would be independent, but it would have a bilateral treaty where you can have different arrangements, and a closer connection to the United States. Or statehood. And often left out of the conversation is like, OK, people sort of envision, from one day to the next, arriving at a new political future, but really talking about what a transition would look like, what it would look like at the end of the day. And then it would leave the final decision to a final vote in Puerto Rico, based on those different options that have been pre-negotiated.

So I think for a long time, since the early ‘50s, there’s been this idea that, oh, OK, now Puerto Rico is not a colony anymore. Now we’re this commonwealth. We’re done with that.

But I think both the fiscal control board, and I think also the federal response to Maria, has really shifted the narrative around Puerto Rico, and the understanding that at the end of the day, it is a colony of the United States. How else would you describe the United States being able to pass a law that imposes an unelected and unaccountable seven-member entity that can block laws passed by the local legislature, that can negotiate on its behalf but not be accountable in the bankruptcy proceeding that’s going to affect the future of Puerto Rico for the next decades?

So I think the veil has been lifted in the last few years, and I think there’s good momentum to pave a better future, and one that actually has Puerto Ricans in the driver’s seat.

JJ: Obviously, what we interpret as forward movement has to do with a vision, and it’s often unspoken or not spelled out. And it’s clear that for some people, the picture of Puerto Rico—the vision—is a place where US citizens can go and play and maybe buy a business at a cut rate, like, that’s the goal. Some people have said, “Puerto Rico without Puerto Ricans” is what some people want. And so for US listeners or readers who don’t really understand, that can be presented as the positive way forward.

We only hear those voices of Puerto Ricans who want to stay there, who want to stay there and live and thrive and want their children to stay and live and thrive, they’re kind of sprinkled in as human interest quotes, or “color.” But those people have a vision, too, for the future of Puerto Rico, and elite media are not as interested in that. If we heard in a regular way from Puerto Ricans who live in Puerto Rico, who want to live there and thrive there, what would they be adding to news media, and what would you like to see journalists do differently?

NR: I have to say, this issue of displacement, it has been happening for a while. Puerto Rico has lost a huge percentage of its population in the last 15 years. And meanwhile, as you mentioned, there are some wealthy investors who are coming to Puerto Rico to take advantage of some tax incentives, to live on a beautiful island, and there’s been an effect of displacement. And there are a lot of Puerto Ricans on the island who are living and creating their own vision of Puerto Rico, right?

Like, there’s a resurgence in a local agriculture movement. There used to be a lot of agriculture in Puerto Rico. Since industrialization, that has been largely phased out. Now there’s a resurgence of, OK, let’s grow our stuff locally. We have all of this land that we can grow things on year-round, instead of importing all of this expensive produce from the United States.

There’s a movement to have more sources of solar energy. After Maria happened, the electricity was out for a very long time for a lot of the island. And there was this Casa Pueblo, this entity did have energy, because they were solar-powered. And they were a huge hub in the community, who were actually a source of support. And there were all sorts of mutual aid movements that came up, especially after Hurricane Maria.

So there is a lot of activism and vision and just creation happening at the very local, grassroots level. So there’s definitely hope that moving forward, that vision and that creation will prevail.

JJ: We’ve been speaking with Natalia Renta, senior policy strategist at the Center for Popular Democracy. They’re online at PopularDemocracy.org. Natalia Renta, thank you so much for joining us this week on CounterSpin.

NR: Thank you for having me.