debt

A cadre of potential 2020 Democratic candidates are introducing legislation to give Puerto Rico financial relief that’s desperately needed.

Senators Elizabeth Warren (D-Massachusetts) and Bernie Sanders (I-Vermont) introduced the US Territorial Relief Act of 2018, joined by Senators Kamala Harris (D-California) and Kirsten Gillibrand (D-New York).

When last year’s hurricanes devastated Puerto Rico, Grit Post reported that it could take six months to restore power to the island. We were wrong: ten months on and the island still is suffering from blackouts. What a year ago seemed a shocking figure has since been surpassed.

The hurricanes weren’t the only cause of the power crisis, however. It was partially caused by the same neglect that has been on display since the disaster. PREPA, the Puerto Rico Electric Power Authority, was running on fumes in 2016 and failed to deal with its $9 billion debts.

PREPA’s financial disaster was wholly indicative of how Puerto Rico as a whole has suffered under crippling economic conditions and staggering debt. NPR explicitly drew a connection between this financial storm and the literal storms of Irma and Maria.

Puerto Rico owes a staggering $70 billion. The vast majority of that debt is owned by average investors.

While evaporating tax breaks and a serious brain drain problem helped create the crisis in Puerto Rico, the most well-known factor might be the Jones Act. The Jones Act requires any shipment of goods between two American ports to be conducted by American-made ships with American crews. This means no foreign vessels can respond to a crisis in Puerto Rico. That is the context the Jones Act is most commonly discussed in.

But shipping cargo via American ships costs about double what it costs to ship on Dominican lines. That leads to a total loss in shipping costs of $570 million per year. While the same conditions are true in Hawaii and to some extent Alaska, both states have two things Puerto Rico lacks: a more robust economy and the right to vote.

Forgiving Puerto Rico’s debt won’t give it the strong economy or the representation that Alaska and Hawaii have, it would at least take the boot of Congress off the island’s neck as it continues to struggle almost a full year after Maria.

As for the losses, the Intercept reports, most would fall on hedge funds who picked up cheap “junk bonds” in search of a quick payday. For some investors, a compensation fund is established by the bill to help individual stakeholders.

Though unsympathetic, the so-called “vulture funds” are politically powerful, so chances of passing the Territorial Relief Act may seem long, but for Puerto Rico it’s just one more long shot in a history of long shots to try to save their home.

 

Katelyn Kivel is a contributing editor for Grit Post in Kalamazoo, Michigan. Follow her on Twitter @KatelynKivel.

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