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It’s High Time Puerto Ricans Learn Who’s to Blame for the Fiscal Crisis

By: Nelson Albino - Apr 13, 2017, 9:54 am
It's High Time Puerto Ricans Learn Who's to Blame for the Fiscal Crisis
Protesters halting classes at the University of Puerto Rico don’t seem to understand the most basic concepts of the island’s fiscal crisis. (Flickr)

EspañolThis week, students at most of the University of Puerto Rico campuses went on strike, paralyzing the semester in protest of a proposed US $450 million funding cut, and demanding an audit of the government’s public debt. As we know, the Puerto Rican government is facing a serious economic crisis that caused US Congress to subject the island to the supervision of a federal Fiscal Control Board with the approval of the PROMESA law.

A few days ago I saw a photo of a student on strike holding a cardboard sign demanding an audit of the debt because the people “deserve to know what services the bondholders lent us.” When I saw that card, I first laughed at its level of ignorance and then felt sorry for it. Those messages end up on social media influencing thousands of people despite being unrealistic and even illogical. Something I should have realized before is that there is a great ignorance about what a bondholder is and what his role is in Puerto Rico.

Since the economic crisis has worsened and become the subject of daily life, the only thing that has been done has been to demonize the term bondholder. The fiscal crisis has become a daily issue in the lives of Puerto Ricans, not because they are now in debt (they have always been in debt), but because they don’t have any money to pay that debt. The people, as the sign of the young student said, have the right to “know what services the bondholders lent” — but that student and others also have the right to know what a bondholder is. The reality is that politicians and leaders with hidden ideological agendas, such as those behind the student strike at the University of Puerto Rico, do not want the Puerto Rican people to know what a bondholder is, because then they would realize who’s actually at fault for the island’s fiscal crisis.

First of all, the Real Academia de la Lengua Española defines a bondholder as a person who holds bonds or fixed-income securities. That definition so far seems very elementary and does not explain much, so we have to go deeper. A bondholder is a person who has lent money to the government through the purchase of bonds, and that is the part that some sectors don’t want people to understand. There is a lot of talk about the term investing, and though the purchase of bonds can be seen as a type of investment, since the bondholder invests money in that bond, the reality is that it’s more than an investment: it’s a benefit. For decades, the government of Puerto Rico has borrowed money by selling its bonds for various things, including providing state services and maintaining bureaucracy. The government has taken over $70 billion in borrowed money to maintain this paternalistic state we have today.

Who ends up paying the debt?

You do, the taxpayer. Because it is not paid by the non-productive class that lives on subsidies from the state — the so-called “subsidy family” — you pay it with income taxes, municipal taxes, sales tax, property tax and large amounts of taxes under which the hard-working and productive Puerto Rican lives. This perverse and malicious concept suggests all bondholders act as “greedy capitalists” who are only interested in collecting their debt and not the interests of the people. It’s like something out of the movies, because there is a group of bondholders who are masters of the public education system, and they are definitely not “evil billionaires capitalists.” The patio bondholder is not a capitalist multimillionaire either, and they have also lost large amounts of money in this crisis too. A government that does not spend is a government that does not have to borrow and therefore does not have to fall into the problems in which the government of Puerto Rico is involved today.

 

Why do I say that the message written on that young student’s sign is ignorant and illogical?

Because a bondholder does not provide any services, the bondholder only lends money to obtain a future interest gain such as the shareholder who buys shares in a company to obtain dividends. The state provides the services and takes the borrowed money to do so. If you have to audit someone, it is the government that took the money and spent it. Under that pretext, then, the bondholders have more moral force to demand the audit than citizens, since they were the ones who lent their money. I recently learned of a middle-class citizen who lost more than US $100,000 in bonds. Is that citizen an “evil capitalist” because he is demanding the money he lent?

Neither the University of Puerto Rico nor students on strike, for example, have moral strength to demand a debt audit, since the famous “university autonomy” has always been a hoax. UPR has always been another government agency, full of “political batatas” and unnecessary expenses to guarantee the comfort of students.

If UPR wanted to survive the crisis, it should have eliminated academic programs that aren’t receiving demand, but if a rector proposes such a thing, someone pops up to say that they’re violating the rights of those who want to study a certain career. Those same small groups demand that the university be free of the influence of the government, but not that it stop receiving the money and taxes of the people.

Yes, UPR is an investment in that sense, but it is not an investment for the people. University education is not a right, it is a personal investment from which the student hopes to profit in the labor market. I agree with the leaders of the strike. We have to audit the debt, but we have to audit it starting with UPR and that is the last thing they want because it would show the amount of money people waste in a university that has never been independent or self-sustaining, and whose academic status falls more and more in world rankings.

If UPR loses its accreditation and dies, the culprits are the strikers. We agree that UPR was arguably the greatest economic development tool in Puerto Rico, but small interest groups sentenced it to death for ideological reasons. From the beginning, I said that the strike is not going anywhere, because times have changed. This is not the year 2010. To begin with, unlike in 2010, most citizens do not support the strikers. This time they are not facing the Governor of Puerto Rico and elected politicians who only care about re-election. This time they face a board composed of unelected people who have a commission they are determined to fulfill.

UPR runs the risk of losing its accreditation, taxpayers save US $450 million, private universities will continue to grow, improving the quality of education, the board will subject the university to Title 3 of the PROMESA law giving way to the sale of enclosures that have long been closed and the university will take years to attain accreditation again.