New York–born Puerto Rican activist David Galarza spent a recent sultry summer Monday picketing a meeting of bondholders by day and meeting with professionals, students, and working people in the evening concerned about the increasingly scary crisis over the island’s $72 billion debt. “I picked up a Freddy Krueger mask on the way down there—a little bit of theater, you know?” Galarza told me. He had come to get a look at Anne Krueger, the former IMF official behind a recent report suggesting solutions to the crisis—solutions that imposed draconian neoliberal “adjustment” burdens on the island’s distressed population—and didn’t hesitate to read her body language as she entered the building. “She looked a little mystified, like she was bewildered that we were even there. She seemed to have an ‘I’m trying to help you people’ attitude.”
Krueger, a former IMF economist, could be said to lack the one-dimensionality of the horror movie icon at least in her IMF role in Argentina, where she apparently was first given that nickname in 2001, only to testify in a New York federal court last year in favor of Argentina against the country’s holdout bondholders, decrying the “negative consequences” of their attempt to collect debts in full. In the case of Puerto Rico, where she was hired by the commonwealth’s government to produce her report with two other IMF functionaries, she once again sent mixed messages. Her ambivalence most likely results from her role, which is to be “fair” while “balancing” the concerns of wealthy investors with everyday citizens who are stuck on the wrong side of the balance sheet, doomed to an ongoing global project of exclusion and increasing inequality.
Investors in Puerto Rican government debt are a mixed bag, including some mom-and-pop mutual funds like OppenheimerFunds and Franklin Advisers, which have been prioritized in the restructuring costs because of the length of their investments and the fact that they paid more for them. But over the past few years there’s been a growing presence of hedge funds, which avoid regulatory oversight and are solely interested in profit, regardless of how a national—or, in the case of Puerto Rico, territorial—economy performs. Vulture funds, their more extreme counterparts, specifically target debt that is distressed or in danger of default in troubled economies, hoping to cash in on settlements after buying the debt for pennies on the dollar. They can paralyze attempts at debt restructuring by insisting on repayment at full face value. Given Puerto Rico’s recent history of privatizing its airport and highway toll collection system, it is vulnerable to further selloffs—even its prized university system—as concessions to the vultures.
Because of all the press rumblings about an upcoming showdown between the high-rolling owners of the island’s municipal bonds and a government that continues to scramble to be allowed Chapter 9 privileges, the gathering at the Citigroup headquarters in Midtown had an air of tension surrounding it, but it turned out to be a rather pedestrian reset of what we already know. Melba Acosta Febo, president of Puerto Rico’s Government Development Bank, restated Puerto Rico Governor Alejandro García Padilla’s themes of shared sacrifice between bondholders, government, and ordinary citizens alike, and then Krueger launched into a frenetic PowerPoint presentation highlighting her supply-side suggestions for economic restructuring.