Puerto Rico – the USA’s ‘Greece’

27 July 2015 by Barry Sheppard

The world has been focused on the spectacle of the “troika” of the IMF, the European Commission and the European Central Bank crushing the Greek people. But there are other cases of strong imperialist countries using a “debt crisis” to extract wealth from weaker ones, and also from the poorer non-imperialist countries.

A case in point is the US colony of Puerto Rico. In a New York Times interview, the governor of the Caribbean nation declared that its debt of $73 billion “is not payable Payable A sum of money that one person (debtor) or group of people owes to another (creditor). ”. Puerto Rico missed a 1 July deadline on an instalment of more than $1 billion.

Most of the debt is owed to US hedge funds Hedge funds Unlisted investment funds that exist for purposes of speculation and that seek high returns, make liberal use of derivatives, especially options, and frequently make use of leverage. The main hedge funds are independent of banks, although banks frequently have their own hedge funds. Hedge funds come under the category of shadow banking. , mutual funds or other investment accounts. The hedge funds, also known as “vulture funds Vulture funds
Vulture fund
Investment funds who buy, on the secondary markets and at a significant discount, bonds once emitted by countries that are having repayment difficulties, from investors who prefer to cut their losses and take what price they can get in order to unload the risk from their books. The Vulture Funds then pursue the issuing country for the full amount of the debt they have purchased, not hesitating to seek decisions before, usually, British or US courts where the law is favourable to creditors.
”, buy debt owed by the Puerto Rican government and public enterprises at very low prices (because investors know they are almost worthless). They then demand repayment at full face value.

On 30 June, Puerto Rican officials began negotiations with creditors. Among those attending were former International Monetary Fund IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

official Anne Kruger. Her proposed solution includes: Puerto Rico cutting the minimum wage below the federal level of $7.50 an hour, and slashing subsidies for the University of Puerto Rico.

Protesters gathered outside the Manhattan offices of the financial giant Citigroup, where the meeting took place. One protester interviewed on Democracy Now! said, “I live here in New York. I’m puertorriqueño and my parents and my family live in Puerto Rico … We are saying with one clear voice, ‘no’ to the austerity plans being proposed by Anne Krueger.

“And we are saying ‘no’ to the austerity plans being pushed by the hedge fund owners and the managers and the banksters that created similar situations in Greece, in Spain and even in this country.”

The White House has announced that the federal government will not contribute any money to help. Janet Yellen, head of the Federal Reserve FED
Federal Reserve
Officially, Federal Reserve System, is the United States’ central bank created in 1913 by the ’Federal Reserve Act’, also called the ’Owen-Glass Act’, after a series of banking crises, particularly the ’Bank Panic’ of 1907.

FED – decentralized central bank : http://www.federalreserve.gov/
Bank, said that it also will do nothing because she sees “no risk” that a default by Puerto Rico will spread to the mainland, so it’s of no concern.

This is the Federal Reserve that pumped billions into financial institutions such as Citicorp, and then lent them trillions more, in the wake of the 2008 financial collapse. So we have our own “troika Troika Troika: IMF, European Commission and European Central Bank, which together impose austerity measures through the conditions tied to loans to countries in difficulty.

IMF : https://www.ecb.europa.eu/home/html/index.en.html
” – the federal government, the Federal Reserve and the financial institutions – telling Puerto Rico to “drop dead”.

The squeeze on Puerto Rico by US finance capital comes in the context of a depression in the island group that dates back to 2005.

The poverty level is nearly double that of the poorest US state. The unemployment rate is twice that of the US. Puerto Rico’s health system is on the verge of collapse. Sixty percent of the population rely on federal programs of Medicare, Medicare Advantage or Medicaid.

Under Obamacare, Puerto Rico gets only 60 percent of the funding that states get for Medicare, and 70 percent of Medicaid funding. The shortfall amounts to a half a billion dollars that the cash-strapped country cannot afford to pay for the medical needs of its people.

Puerto Rico is excluded from the Supplemental Security Income program that aids the most vulnerable US citizens. It does not participate in the federal nutrition program. All these and other discrepancies exist because the country is a colony of the US, euphemistically labelled a “territory”.

Puerto Rico was originally a colony of Spain. It was captured by the US in the Spanish-American War of 1898, along with Cuba and the Philippines. This led to the Philippine-US War in which the US killed an estimated 200,000 Filipinos. The Philippines gained nominal independence after the Second World War. Cuba was a virtual US colony until the Cuban Revolution of 1959. But Puerto Rico remained a colony.

In the 117 years since, US companies have taken huge profits from Puerto Rico. For the first 50 years, the US sugar barons benefited from the very low plantation wages.

In the next 50 years, the US government gave US firms big tax write-offs to locate in Puerto Rico. At first, shoe and clothing manufacturers profited. More capital-intensive businesses like pharmaceuticals later moved in. That made Puerto Rico one of the top prescription drug manufacturers in the world. At one point, 13 of the top 20 prescription drugs were made in the country.

In 1996, Congress began to phase out the tax breaks, and with them much of the country’s industry. The tax breaks were fully gone by 2005. Since then, Puerto Rico has been in recession (made worse by the 2008 financial collapse and Great Recession), and forced to rely on loans to keep afloat. Consequently, in the past decade it mainly has been financial vultures sucking the country dry.

Puerto Ricans are US citizens, and are allowed to come to the mainland. They can’t be kept out like Mexicans fleeing poverty, who are forced to enter the US without documents. About 50,000 Puerto Ricans currently do so every year. There are 5 million puertorriqueños living on the mainland, and 3.5 million in the colony.

Puerto Rico simply has no more money to pay the loan sharks. To top it off, because it is a colony, it isn’t allowed to declare bankruptcy like a state or a city such as Detroit. And like Greece, it doesn’t have its own currency.

It’s not clear what the outcome will be. Will it, like Greece, be forced to take out even more loans with interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. to pay previous loans and accumulated interest while implementing even more austerity?




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