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Relief and Anger in Puerto Rico as Congress Acts on Debt

Another big concern in Puerto Rico is a provision that would allow the local government to temporarily lower the minimum wage

After months of pleading from the government of Puerto Rico, the U.S. Congress agreed on Wednesday, May 18, 2016, to help the territory restructure its massive public debt, photo: AP/Ricardo Arduengo, File
2 years ago

SAN JUAN, Puerto Rico — After months of pleading from Puerto Rico’s government, the U.S. Congress has agreed to help the territory restructure its massive public debt. But it comes at a steep cost: a degree of lost sovereignty with the imposition of a fiscal control board as well as a potential lower minimum wage for young workers on the island.

Those provisions in the bipartisan measure are aimed at staving off a chaotic wave of defaults on the island’s $70 billion public debt. But they stoked some anger Thursday in Puerto Rico, where people have endured a decade of a steadily worsening economy and many resent the uneven relationship with the U.S. mainland.

Yet the deal brought relief to others, who feel it could help Puerto Ricans rebuild the economy while providing sorely needed control over their government.

“This should have been done a long time ago,” said José Jeaudoin, a restaurant manager. “It’s been proven for many years that Puerto Rico does not know how to run itself. Any time the government takes control over something, it doesn’t work or it goes broke.”

In this April 30, 2015, file photo, Puerto Rico Gov. Alejandro Garcia Padilla delivers his budget address for the next fiscal year at the Capitol building in San Juan. Photo: AP/Ricardo Arduengo, File

In this April 30, 2015, file photo, Puerto Rico Gov. Alejandro García Padilla delivers his budget address for the next fiscal year at the Capitol building in San Juan. Photo: AP/Ricardo Arduengo, File

The bill calls for the creation of a seven-member control board appointed by Congress and the president that would oversee some court-ordered debt restructuring. It would also require Puerto Rico’s government to submit budgets and create a plan to achieve fiscal responsibility and eventual access to financial markets. The board also would be responsible for maintaining the legal rights of creditors and shoring up pension shortfalls for an island whose public pension obligations are underfunded by more than $40 billion.

U.S. law blocks Puerto Rico’s public agencies and municipalities from declaring bankruptcy and restructuring debt under a judge’s supervision.

“The situation is desperate,” said Valerie Franklin, a souvenir store owner. “Right now, we’re just working to pay taxes. We’re just surviving.”

Supporters say the bill would help strengthen Puerto Rico’s sputtering economy, which has stagnated in part since the end of U.S. tax breaks for manufacturers that set off a vicious downward economic spiral that in turn prompted hundreds of thousands of Puerto Ricans to move to the mainland.

The House Natural Resources Committee could vote on the bill as early as next week. If approved, it would go to the full House and then move to the Senate. Some of the House’s most conservative Republicans appear willing to support the deal, but senators have not said yet whether they will pass the House bill or write their own version.

The goal is to pass the bill before Puerto Rico defaults on a $2 billion debt payment due July 1, the largest yet. The island already has missed three previous payments, including a $367 million one due earlier this month.

Gov. Alejandro García Padilla said that if the bill is approved without any changes, it will protect Puerto Rico from any lawsuits following the anticipated July 1 default. But he intends to fight some of the bill’s provisions, including the one that would set up a fiscal control board whose members, he noted, would not be elected by the public.

“The board’s powers are excessive,” he said. “We have to keep fighting.”

García Padilla envisions a board with a supervisory role that would allow Puerto Rico’s government to have final say over its finances. He said the measure’s current provisions “are not consistent with our country’s basic democratic principles.”

Other government officials echoed García Padilla’s concerns, including Eduardo Bhatia, president of Puerto Rico’s Senate. He asked Puerto Ricans to rise up and reject the bill, calling it disproportionate and anti-democratic.

To those who think they can sacrifice democracy to obtain economic stability, know that in the end you’ll have neither.”

— Eduardo Bhatia, president of Puerto Rico’s Senate

Another big concern for some government officials and young adults in Puerto Rico is a provision that would allow the local government to temporarily lower the minimum wage, authorizing businesses to pay $4.25 an hour to first-time employees under age 20. The bill states that the age can be automatically extended to 25 and that the lower wage can be paid for up to four years if requested. The island’s current minimum wage varies from $5.08 to $7.25 an hour.

Critics say workers can barely survive on the current minimum wage, given the rising cost of living in Puerto Rico.

“I think it’s terrible,” said Jaileen Trinidad, a 23-year-old restaurant hostess. “We’re educated. I have my bachelor’s degree. … It would affect me greatly because my baby depends on me.”

Puerto Ricans fear that lowering the minimum wage would further fuel an exodus to the U.S. mainland instead of helping create more jobs locally.

Gabriel Hernández, a 19-year-old food delivery worker, said the measure would prevent young people from building a secure future.

“They wouldn’t be able to get ahead, to make money to buy a car, to buy school supplies, to buy a house,” he said.

But it’s unlikely the minimum wage provision will change. The bill was revised during weeks of negotiations and it now has the support of U.S. House Speaker Paul Ryan, House Democratic Leader Nancy Pelosi and Treasury Secretary Jacob Lew.

Disagreements over how the board would be appointed had held up negotiations. The bill would allow the president to select all but one of the board’s seven members from lists provided by congressional leaders. Anyone that the president picked from outside the list would have to be confirmed by the Senate.

As U.S. legislators prepare for another round of debates, Puerto Ricans like artist Richard Daal are eager to see the bill approved.

“The government here has demonstrated that it doesn’t have the capability or the dexterity to manage the island,” he said. “It’s like a business. If you don’t manage it well, someone else should take over.”


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