Last week
Puerto Rico officially became the largest bankruptcy case in the
history of the American public bond market. On May 3, a fiscal
control board imposed on the island’s government by Washington less
than year ago suddenly announced that the Puerto Rico’s economic
crisis “has reached a breaking point.” The board asked for the
immediate appointment of a federal judge to decide how to deal with a
staggering $123 billion debt the commonwealth government and its
public corporations owe to both bondholders and public employee
pension systems.
The
announcement sparked renewed press attention to a Caribbean territory
that many have dubbed America’s Greece. The island’s total debt,
according to the control board, is unprecedented for any government
insolvency in the U.S., and it is certain to mushroom quickly if no
action is taken. Detroit’s bankruptcy, by comparison, involved just
$18 billion — one-ninth the size of Puerto Rico’s.
Within days,
Supreme Court Chief Justice John Roberts, acting under a provision of
the Puerto Rico Oversight, Management, and Economic Stability Act
(known as PROMESA), which was enacted last June, appointed federal
judge Laura Taylor Swain from the southern district of New York to
take over the Puerto Rico case. A former bankruptcy court judge who
was appointed to the federal court by President Clinton, Swain
famously presided over the long criminal trial of employees of the
Bernie Madoff Ponzi scheme.
Few press
reports on Puerto Rico’s troubles, however, have bothered to
examine the deeper issues behind this crisis.
First, the
colonial relationship that has prevailed between the U.S. and Puerto
Rico since 1898 is no longer viable. Puerto Rico is the largest
overseas territory still under the sovereign control of the United
States, and it is the most important colonial possession in this
nation’s history. That relationship produced uncommon profits for
American subsidiaries on the island for more than a century, even as
the federal government kept claiming that the Commonwealth of Puerto
Rico, created in 1952, was a self-governing territory. But now, with
a Washington-appointed board directly overseeing the island’s
economy, and with a pivotal Supreme Court decision last year
affirming that Congress continues to exercise sovereign power over
Puerto Rico, the mask of self-governance has been removed.
Full
report:
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