The Government Development Bank, which has served all these years as something like a central bank, did not have the funds to pay bondholders.
While true that Puerto Rico is without the funds needed to pay its debts, that does not mean we should only victimize the government.
Since the recession began in 2006 and especially now that the territory has defaulted on its debt, different groups — such as labor unions, student movements and bureaucrats — are trying to make themselves look like victims when they are actually the ones largely responsible for the crisis. To understand this better, let’s summarize how each of these groups are guilty:
First, we have labor unions.
Within the Government of Puerto Rico, there are different labor unions, such as the Union of Electrical and Irrigation Workers (UTIER) and the Independent Union of Employees for the Aqueducts and Sewers Authority (UIA). These two labor unions are the strongest, and paradoxically account for the employees of two government companies taking up large portions of the public debt, along with the Puerto Rico Electric Power Authority (PREPA), which is a monopolistic state enterprise providing electricity to the island.
But PREPA is bankrupt, with a debt of nearly US $10 billion.
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Even though PREPA’s debt was generated in part by irresponsible decisions made by the administration, some of the blame should be placed on the fact that the corporation’s leadership had to borrow money to meet collective agreements made with union workers.
PREPA Union President Angel Figueroa Jaramillo began to blame “energy theft” on the corporation’s lack of money. In other words: when he found no one else to blame for his negligence, he blamed taxpayers.
Also, the corporation provides electricity to government buildings, meaning the government agencies in those buildings owe them money. Not only is the corporation not generating revenue, but it is forced to borrow millions of dollars to pay the high salaries of unionized employees.
Taxpayers are forced to pay abusive costs for energy that barely cover the wages of bureaucrats and union members — most of whom are not worthy of the privileges they enjoy.
High payroll, then, is one clear reason for Puerto Rico’s debt problem. The government is the largest employer on the island — making up 60 percent of the working population — and the government should reduce that number in order to reduce public spending.
Student movements are also guilty
It is extremely ironic that leftist student movements blame hedge funds for the University of Puerto Rico’s money problems when the vast majority of students have subsidized education plans that allow them to go through undergrad at whatever pace they want. Lots of students go through college without producing anything for the island’s economy. All they do is consume, while the people pay for the university’s maintenance with their taxes.
Many of these students have their tuition largely subsidized by American taxpayers through Pell Grants. They arrogantly paralyze the university’s campuses through strikes and in turn, prevent other students trying to graduate from focusing.
Most of them live their lives as if they have already earned their degrees, with new cars and college fraternity dues, all of which is funded with their money from FAFSA scholarships. They consume but don’t produce, and therefore have not contributed to the island’s economic crisis.
Finally we have bureaucrats
In addition to charging high salaries in exchange for little work, bureaucrats neither allow nor give way to the free market. The Puerto Rican government borrowed money not only to pay high salaries, but also took loans to finance useless bureaucratic programs that have often resulted in prison time for corrupt politicians.
These bureaucrats — along with government employees and student movements — are to blame for the crisis on capitalism. The government claims the people have to pay for services without mentioning that they already paid for them through taxes.
Now that Uber recently announced that it will make its debut in Puerto Rico, a new taxi drivers’ labor union has joined the list of obstacles that prevent Puerto Rico from digging itself out of this crisis. Taxi drivers say they just want Uber to comply with state regulations, but they actually want Uber to fail and leave the island. They want to protect their monopoly, which is, of course, also subsidized by taxpayers, making them a part of this huge government spending.
Once again I say: Puerto Rico lacks capitalism and entrepreneurship. It is the only way the island will move forward. Politicians, bureaucrats, unions, student movements and all those who oppose freedom and the free market must take responsibility, and step out of the way.