The Bankers Behind Puerto Rico’s Debt Crisis

Centuries ago pirates prowled the Caribbean brandishing scabbards and rifles; today, they wield fat checkbooks on Capitol Hill.

 

Puerto Rico’s economic crisis has now washed the burden of its colonial legacy onto Washington’s doorstep. Congress has been trying to contain the island’s ballooning debt under the hardline austerity program of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). But since the program is governed by a control board run by the same financiers responsible for driving the debt crisis in the first place, the island continues to sink into poverty while its creditors feast on the spoils.

To underscore how Puerto Rico’s revolving door of big finance and politics is underwriting the debt crisis, a report by the AFL-CIO and the community-labor coalition Committee for Better Banks (CBB) traces the career of the head of PROMESA, Carlos M. García, from his role as a head banker of Santander to his current political post overseeing the privatization and pillage of Puerto Rico’s anemic public assets.

Starting around 2008, under the conservative Luis Fortuño administration, García was appointed to head Puerto Rico’s Government Development Bank (GDB) and its Public Private Partnerships Authority, two agencies designed to draw investment capital into the crumbling public sector. Bootstrapping his corporate cronyism with his governmental connections, he led the abrupt liquidation of an infrastructure fund known as the Corpus Account, a public financing vehicle for infrastructure projects aimed at upgrading the island’s dilapidated water and sewage systems to meet Federal Clean Water and Drinking Water Act. CBB argues that, despite the glaring conflict of interest, García had free rein to issue unsustainable bonds from 2009 to 2011, “his former employer, Santander, earned millions as a lead or participating underwriter in these transactions.”

As Puerto Rico’s economy cratered, the crumbling and underfunded sanitation system were left running on a stack of IOUs, and exacerbated the public health emergency sparked by the Zika virus last year, which left countless vulnerable newborns exposed to unsafe water and sewage systems.

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