Hillary Clinton’s decisive victory over Bernie Sanders in the Puerto Rico Democratic primary on Sunday was not surprising. She won for the same reason she enjoys strong support from blacks and Latinos in the States: Previously established political networks that get out the vote, and the loyalty to local leaders and elected officials, translate into her margin of victory. Despite his more progressive policies, Sanders is not strongly enough embedded in this ground-level political discourse.
Yet the positions they take on Puerto Rico represent two competing strands in the fight to save the island from Republicans in Congress, who want to impose conservative, pro-business economic growth models, and hedge- and vulture-fund owners, who want to have their way with Puerto Rico’s wealth and people. Clinton reluctantly endorses a debt-restructuring bill that would impose a fiscal-oversight board with colonial powers; Sanders favors emergency action from the Treasury Department in the form of loans and access to Chapter 9 bankruptcy.
There is a general consensus for many of the parties involved in the rapidly unfolding drama known as the Puerto Rican debt crisis that July 1 represents the clock striking midnight, the point at which we enter the potential chaos of unbridled bondholder lawsuits and even more draconian government cuts in services to the unincorporated territory inhabited by 3.5 million US citizens. At that point, Puerto Rico is expected to default on an $800 million debt payment of general-obligation bonds, which will spur the owners of that debt—whose payment is given priority over other governmental expenditures by the island’s Constitution—into legal action. This was ostensibly the impetus for the House Committee on Natural Resources to release the final version of the Puerto Rico Oversight, Management and Economic Stability Act, a k a PROMESA, on May 18, a bipartisan effort that drew sharp responses from various interest groups on the right and left.
The debt-crisis battle features a dizzying array of combatants: First are the bondholders, who are roughly divided into hedge- and vulture-fund owners mainly invested in what is called COFINA debt, which is secured by a share of the island’s 11.5 percent sales tax; and other hedge fund and mutual-fund owners, who own general obligation (GO) bonds.
The latter group, represented by the lobbying efforts of the Koch-brothers-backed America Future Fund, Main Street Bondholders and 60 Plus organizations, supposedly consists of “average” Puerto Rican and US senior-citizen bondholders. But as The New York Times wrote last December, “Puerto Ricans own less than one-fifth of the island’s debt,” and “most of the group’s revenue comes from a few large, anonymous contributors.” Koch-affiliated groups are not happy with the PROMESA bill because it requires restructuring of the GO debt, even though it is backed by Puerto Rican constitutional guarantees, and they have voiced loud displeasure.