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Puerto Rico feels fiscal crunch all the way down to the pews

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As Puerto Rico’s government marches on toward a critical financial deadline regarding its $72 billion “unpayable” debt, the local Catholic Church, too, has been increasingly feeling the fiscal crunch all the way down to the pews, and there are hopes for a jubilee as espoused in Scripture.

People walk past a closed store in San Juan, Puerto Rico, in July. As Puerto Rico's government get's closer to a critical financial deadline regarding its $72 billion "unpayable" debt, the local Catholic church, too, has being increasingly feeling the fiscal crunch all the way down to the pews. Photo: CNS /Alvin Baez, Reuters
People walk past a closed store in San Juan, Puerto Rico, in July. As Puerto Rico’s government get’s closer to a critical financial deadline regarding its $72 billion “unpayable” debt, the local Catholic church, too, has being increasingly feeling the crunch. Photo: CNS /Alvin Baez, Reuters

Even this city’s central parish, located in one of the island’s few financially sound municipalities, is struggling.

“I’m not an economist,” Fr Delroy Thomas Scott, pastor, told Catholic News Service. “But we hear of how many people have left for the U.S. … so naturally, there are fewer coming to the Eucharist” and donating to the parish.

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He also spoke of families’ harsh economic situation, despite the local boom: “Despite our town’s boasting about progress, salary increases to municipal employees, etc., there are still many families in precarious situations.”

Father Scott echoes other pastors, all of whom expressed concern over the economic questions facing the island.

Others, such as Archbishop Roberto Gonzalez Nieves of San Juan, have shown diverse opinions about the effects of the crisis. His recent column in Time magazine was tinged with pastoral, political and solidarity overtones.

“The Bible itself provides us with a concept that seems perfect for the situation our island now finds itself: the jubilee,” he wrote citing a passage from Leviticus that speaks of debt forgiveness. “The jubilee is meant to prevent the poor from becoming too poor and serves as an economic clean slate that mirrors the forgiveness and new beginning proclaimed in the Gospels.”

Eric LeCompte, executive director of the Washington-based Jubilee USA Network was in Puerto Rico in mid-August working with church, political business and organised labor leaders to develop a solution to the financial crisis which “invests in people” and ends deep spending cuts in education, health care and employment.

It is an idea that the Catholic Church in Puerto Rico welcomes.

“I applaud the Jubilee USA Network, which is fighting for debt forgiveness for Puerto Rico and working to bring about a global jubilee – debt relief in times of crisis,” wrote Archbishop Gonzalez, “but also long-term structures that prevent the next crisis. Now is the time for a jubilee for Puerto Rico.”

The archbishop cited “mismanagement, bad luck and [Puerto Rico’s] unique colonial status as neither a sovereign country nor a U.S. state” as the root causes of the financial woes.

Economic experts also have pointed to the same challenges as ingredients contributing to Puerto Rico’s complex situation.

Financial analysts have said Puerto Rico’s crisis has been brewing for at least 40 years. “Structural problems,” “institutional credibility”, and “circular debts” are some of the buzz words repeated within economic circles as direct causes of the current state of affairs, chipping away at the government’s image politically, economically and socially.

“Options typically available to indebted governments are not available to ours,” wrote Archbishop Gonzalez. “And because Puerto Rico is not a U.S. state or city, we aren’t eligible for U.S. bankruptcy protection …”

A lack of information, and at times false information offered to creditors and local residents, has made for tense and distrusted government relations. The increased use of loans to pay debts had become a norm that dead-ended at the present financial cliff long predicted by nongovernmental voices.

Most of Puerto Rico’s debt is owed to “vulture funds”, companies that assume risks presented by unstable debtors by buying the debts for pennies on the dollar. These secondary financial markets commonly operate privately and are usually based in fiscally safe-haven countries and push the debtor entities to repay what they owe in full.

In addition, corruption has been a negative force frequently covered by the media.

“Puerto Ricans are too docile,” said Fr Francisco Larran, pastor of St Rose of Lima Parish in San German. “Government corruption is a factor widely reported but soon forgotten, you know, under the rug, and so we go from scandal to scandal.”

Those scandals have marked the two major political parties that alternate in administering the island. The most recent involved $7 billion the territory received through the American Recovery and Reinvestment Act in 2009.

A report covering the 2009-2012 term by the incoming administration of Gov. Alejandro Garcia Padilla highlighted expenses such as a $6 million publicity bill; 135,000 lost jobs (including 30,000 in public service); a record 16 per cent unemployment rate; 40,000 business and personal bankruptcies; a 28 per cent decline in the construction industry; a 28 per cent hike in commercial electricity costs (48 per cent for industry); and a record 91 per cent student failure in academic achievement tests.

A large chunk of ARRA funds are still unaccounted for and a Senate investigation has started three times since 2013 with no results to show.

Aug. 30 was the deadline Puerto Rico faced to present a fiscal readjustment plan for the next five years based on recommendations from the International Monetary Fund. The date is a step ahead of several crucial end-of-September economic complications: empty coffers for public medical insurance plans and water and electric power utilities, plus federal funding cuts to Medicare and other programs.

Garcia appeared on local television on 28 June saying: “The debt cannot be paid. There is no other option. I would love to have an easier option. It is not politics, it is math.”

After the sudden scramble his message caused in financial sectors, his first proposal was to consider the possibility of structuring a local bankruptcy system. Despite federal courts expressly denying the so-called “creole” bankruptcy’s constitutionality, Puerto Rico continues to pursue that avenue.

Supporting this option, there is a growing push in Washington to pass legislation supporting it. However, Congress has rejected the idea, opting to wait for the recovery plan before it even considers allowing bankruptcy.

Several prominent economists, however, have argued that achieving bankruptcy will not solve the “real causes” of the crisis, such as the island’s political status, innate sociological idiosyncrasies, and outdated economic procedures. Many align with Pope Francis’ tying the world economic crisis to “unfettered capitalism” and defining it as “the failure of global capitalism to create fairness, equity and dignified livelihoods for the poor”.

Puerto Rico has already dabbled in unfettered capitalism as an economic solution. Such a strategy, already tried and failed in many Latin American countries, including Pope Francis’ own Argentina, pushes neoliberal economic manoeuvres spearheaded by turning over governments’ income-producing assets to private capital. Unwise to past failures in that direction, the local government has already relinquished toll roads and the international airport in exchange for upfront cash.

Nevertheless, Archbishop Gonzalez supports the bankruptcy plan.

“Although not a perfect solution, bankruptcy protection would provide a fairer, transparent system for resolving Puerto Rico’s debt burden and creating the fiscal space we need to grow our economy and serve our people,” he said.

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