The plan for Puerto Rico's $129 billion collapse: cut 33% of its debt

[sandensea]

After years of wrangling with its creditors, Puerto Rico disclosed a plan Friday for resolving the biggest governmental bankruptcy in United States history, by cutting $129 billion in debts to about $86 billion — a reduction of 33%.

The plan hatched by a seven-member federal oversight board is now before a federal judge, who will decide any disputes. There are sure to be plenty — the various parties are tangled in an unprecedented financial collapse.

Puerto Rico’s inability to pay its debts required Congress to create a new law, called Promesa, that allowed a territory to essentially seek bankruptcy protection.

If the plan survives the challenges ahead, it could be a model for how struggling states deal with their financial problems in the future. Illinois, New Jersey and others are weighed down by heavy debts, particularly their pension obligations.

But like Puerto Rico before Promesa, states cannot declare bankruptcy — it would require congressional action to extend a version of that framework to them.

At: https://www.nytimes.com/2019/09/27/business/puerto-rico-bankruptcy-promesa.html

Puerto Ricans protest deep budget cuts imposed in 2017 by a control board - a junta, as it's called in the region.

Many in Puerto Rico have been calling for a debt restructuring, as the only viable way to emerge from bankruptcy.

[Farmer-Rick]

1. Sounds suspiciously like austerity to me

Your elected representatives takes away your pensions, after you have done all the work to earn it of course, and boom we are out of debt. Isn't that what bankruptcy is used for by corporations? To steal their workers pension funds?

You may suffer. A large chunk of citizens may barely have enough to buy food because you know they thought they had a pension. But no elected official who created the possibly illegal debt is ever held accountable. No filthy rich capitalist have to pay their fair share in taxes. It's a win win for the conservative politicians and the handful of filthy rich. Not so good for the folks who in their old age won't have enough to survive. But who really cares about them.

[sandensea]

2. Could very well be the case

Debt restructuring could either be like the kind Néstor Kirchner obtained for Argentina in 2005:

A substantial haircut (70% in that case), with no policy strings attached - and in return, bondholders can have their near-worthless bonds double in value and actually paying out again.

Or like the kind Ukraine got in 2015:

A minor haircut (20%), and chock-full of austerity cuts that do little to address the root cause of the debt crisis: unrestricted capital flight and rampant tax evasion.

Which of course is what predatory elites in these countries don't want addressed in any way.

So guess which one had the blessing of the IMF and Washington, and which one was frowned on - to the point of using vulture funds (and a senile, bribed Wall Street judge) to try to sabotage it.

My guess is, just as you suggest, Puerto Rico's will be a lot more like Ukraine's. And we all know how that's working out for them (full-blown depression).

[Farmer-Rick]

3. The IMF itself stated

They didn't realize how devasting budget cuts (austerity) on a weak economy would be. So what do they think pension reduction and elimination, where workers and retirees have less money to spend, does to a weak economy?

Maybe they should just give the filthy rich another tax cut. That seems to have magical powers to fix the economy especially in the minds of wealth hoarders, pampered heirs and royalty.

[sandensea]

4. +1

The International Misery Fund and the GOPee seem to have that very same goal: reshaping governments into mere cash cows for their respective countries' elites.

Feigning surprise and concern all the way, while fleecing you at every turn, is just ConMannism 101.

Assuring you recovery is "just around the corner" as they push you further and further down, is another big part of it.

[Farmer-Rick]

5. So true.