When President Trump told Geraldo Rivera, that as far as Puerto Rico’s more than $70 billion public debt is concerned, “We’re going to have to wipe that out,” he proposed a solution worth considering.
Four weeks after Hurricane Maria, the death toll is climbing, most of our people don’t have electricity, and too many can’t access clean drinking water.
Even before the devastation wrought by the hurricane, the various indebted components of Puerto Rico’s government were in no position to pay anywhere close to the amount they owed. Puerto Rico’s economy has been depressed for more than a decade, and the island has not been able to generate sufficient revenue to pay off all its debt. Now, given the dire storm-damaged state of its economy, Puerto Rico is more hobbled than ever.
Wherever the blame lies, it is certainly not with the 3.5 million residents of Puerto Rico. They’ve suffered more than enough.
Some of the bondholders are hedge funds and other sophisticated institutions that bought Puerto Rico’s debt at deeply discounted prices. They are in the business of taking risk, and they are good at it. Much of the risk they take on typically pays off handsomely, but sometimes it doesn’t. And when it doesn’t, these institutions are responsible for the risk they voluntarily took.
Small investors who, perhaps naively, invested major portions of their life savings in Puerto Rico bonds, are different. They should be made whole. Some of these small investors live in Puerto Rico and have already had their lives devastated by the hurricane. They need relief now.
When circumstances change, borrowers often pay less than they owe under the arrangements to which they and their lenders initially agreed. Renegotiating and completely discharging debt — either through the bankruptcy process or other methods — occurs all the time.
I, along with religious partners on our island and across the United States, have supported several options for debt relief. After the hurricanes, it’s incumbent that the debt be canceled. Another option we support is for the Federal Reserve to buy the debt at a low price nd wipe it out.
Trump has turned to bankruptcy when necessary. After he encountered difficult circumstances with his debt, he came out ahead as a result of having had lenders who were willing to give him a second chance.
Beyond the shackles of debt, Puerto Rico urgently needs to be released from the many ways that our island has been placed in bondage. We need public policies to develop our economy without fiscal and legal constraints. Our island home can become sufficiently self-sufficient to compete in the global and interdependent economy. These policies should be approved in Congress and the legislature of the Commonwealth of Puerto Rico. To reconstruct, Puerto Rico needs an economy without shackles.
The people of Puerto Rico deserve a second chance and need a new path forward.
Archbishop Roberto O. González Nieves has been the Roman Catholic Archbishop of the Archdiocese of San Juan de Puerto Rico since 1999.