The protest was massive and peaceful; there was an almost festive atmosphere. Street-theater actor Israel Lugo, a University of Puerto Rico alumnus whose group The Tactical Operations Unit of Police Clowns participated in the hope of cooling tensions and underlining the sadness of repression, felt that “despite the indignation we shared, we were having a day where there was some hope.”
Yet just as the event was coming to an end, a sudden surge of unsanctioned vandalism and police violence left clouds of tear gas choking protesters, media members, and march observers and mediators alike. By week’s end, the governor and the FOMB invoked Title III of PROMESA, beginning a legal process leading to a form of bankruptcy—and intensifying the air of uncertainty over the island’s future.
The Milla de Oro represents the triumph of modernity that US colonialism intended to bring to Puerto Rico in the 1950s and ’60s. A palm-tree-lined boulevard called Luis Muñoz Rivera Avenue, festooned with glass-box buildings housing banks and corporate offices, signaled a level of prosperity that didn’t exist in the rest of the Caribbean. Fifty years later, the island territory is deep in the throes of a fiscal crisis driven by a $70-plus billion bond debt, as well as an additional $49 billion pension obligation to government employees.
The PROMESA board’s original model was the one created in the wake of New York City’s 1970s fiscal crisis, whose financier-driven management solutions greatly aided the rise of Donald Trump as a major real estate player. The one that intervened in the recent Detroit bankruptcy produced debt-cutting settlements, but that debt was only $18-20 billion, and, like the one in New York, it was imposed by elected officials who were elected by local residents. In Puerto Rico, PROMESA, imposed to tame an exponentially larger debt, is viewed as an external force that is symptomatic of the lack of democracy on the island and emblematic of Puerto Rico’s second-class status.
The crowd gathered around the stage on Muñoz Rivera Avenue was unaware that just around the corner on Bolivar Street, masked rogue demonstrators were throwing stones at the main headquarters of Banco Popular, the island’s largest bank, shattering some of its largest windows. Police—including regular forces and the riot squad—reacted slowly, moving into the area and marching en masse toward the main stage down the block. They launched tear-gas canisters and pushed into the crowd as stage announcer Millie Gil, a local media personality, was desperately calling for calm. “Don’t be provoked.… We don’t want the headlines of tomorrow’s newspapers to say that we lost control of a peaceful demonstration!” she pleaded.
But the police, after a negotiated standoff, engaged in continual confrontations with protesters, pushing, striking, and gassing peaceful demonstrators and masked provocateurs alike. Images of vandals, tear gas, and students running under late-day thunderstorms dominated the evening news. It was a tailor-made media op for the rightist statehood party (PNP) government. Governor Ricardo Rosselló held a press conference denouncing the vandalism, but he recklessly lumped the vandals together with the marchers. His tone of moral opprobrium was underscored the next morning in another staged media tableau that showed him helping workers sweep up shattered glass in front of the Banco Popular tower.
The mayor of San Juan, Carmen Yulín Cruz, as well as Representative Manuel Natal Albelo, who was one of the first elected officials to champion the idea of an independent debt audit, quickly denounced the governor’s equation of peaceful protesters with vandals. The ACLU, led by William Ramírez, held a lengthy press conference in which Ramírez, who was still recovering from the effects of tear gas he was exposed to while acting as a negotiator and observer, displayed tear-gas canisters and even rubber bullets that had been used by the police. His statement directly contradicted one made earlier by police Superintendent Michelle Hernández, who denied their use. Ramírez also criticized violations of protocol (including no warnings, and plainclothes officers not wearing badges) and excessive use of force.
In addition, eyebrows were raised when a lawsuit was filed by Banco Popular on the afternoon of the protests and disturbances, naming 42 plaintiffs, including community organizations, labor unions, and “unknown demonstrators.” Ariadna Godreau-Aubert, a human-rights lawyer who is part of a Legal Action Committee that is trying to draw attention to SLAPP lawsuits, or frivolous suits brought to intimidate people who take part in demonstrations, found the suit to be highly irregular and part of a disturbing pattern.
“This suit came out just an hour after the events, and even the president of the Banco Popular said that the lawsuit was made in a preventive way, that they had it ready in case something happened. You can’t have a demand ready in case something happens—lawsuits exist to remedy real damages and include people that caused real damages, not something prepared or speculative,” said Godreau-Aubert. She pointed out that a previous suit against demonstrators engaging in another protest in late April was dismissed because of lack of evidence.
This past Friday, Governor Rosselló signed into law revisions in the penal code that will increase criminal penalties against demonstrators who wear masks, seemingly aimed against students and young protesters; will make it a crime to obstruct construction sites (up to three years in prison), aimed at union protests; will impose a fine of up to $30,000 for interfering with tourist activities, spurred perhaps by the closure of an access road to the airport on May Day, and for obstructing access to or functions in health or government offices or learning institutions.
This last element was particularly relevant because, just days after the governor and the PROMESA board invoked the Title III clause and its modified bankruptcy provision, the education secretary announced that 179 public schools around the island would be closed. While the continued population exodus from the island has pushed down the number of enrolled students, the closures will still heavily affect poor and working-class areas and place on many families an increased burden of extra commuting time to more distant schools. Some schools and parents are already announcing plans to protest.
Title III and Its Discontents
Governor Rosselló’s decision to request the invocation of Title III was met by derision from many political observers, who noted his previous insistence that the island could pay its debt in a restructuring process that would not require bankruptcy proceedings. He has also been harassed by the centrist Commonwealth Party Senator Eduardo Bhatia, who filed an injunction to force the release of a copy of the proposed budget the governor sent to José Carrión, the head of the FOMB, arguing that the island’s citizens are entitled to full transparency. Yet most observers seemed unsure of what to expect—for the moment, the 22 known litigation proceedings against the government to collect debt, which had been frozen, will be absorbed into the framework of Title III. The Puerto Rican government and several financial-sector observers have given reassurances that Puerto Rico will now engage in an “orderly” process of resolving its debts, but no one is quite sure what that will mean.
The pseudo-bankruptcy proceedings, which could take from six months to several years, began on May 17 and are presided over by New York District Court Judge Laura Taylor Swain, an African American appointed by Bill Clinton in 1996. Swain, who spent most of the session establishing rules for arguments—and quirkily banning the use of all colognes and fragrances among those in the courtroom because of her allergies—is faced with a process that has no legal precedent.
The primary order of business for her will be to focus on the fate of the general obligation bonds ($12.7 billion), which are backed by a constitutional provision, and the COFINA bonds ($17.3 billion), which are tied to an 11.5 percent sales tax imposed several years ago. While the matters will be considered “jointly,” creditors from the two sides are warring against each other, each claiming priority.
For Rolando Emmanuelli Jiménez, a bankruptcy lawyer who has become well-known on the island for his explainer lectures and book about PROMESA, the move to Title III was “badly needed, but you don’t celebrate what is badly needed.”
There are many troublesome aspects about the debt-restructuring negotiations: Pensioners remain a potent force and are attempting to claim a higher priority on a debt that adds $49 billion to the already contested $70-plus billion bond debt; the government may be forced to sell off a substantial amount of its properties to lessen the blow of the apparent “haircuts,” or downward negotiation of payouts to creditors; collective-bargaining agreements with unions representing government workers may be suspended to renegotiate contracts; and the “absolute priority” rule in PROMESA for the general-obligation debt may mean it must be paid in full.
Emmanuelli Jiménez sees some silver linings in the process. He thinks the audit report that will be done under PROMESA—even though it will not be anywhere near as thorough as an independent audit—may find that billions of dollars of COFINA debt could be declared “non-priority debt,” which could further postpone payment of it or even result in some of its being eliminated. He also thinks that Swain may be sympathetic to ordinary Puerto Ricans in some of her rulings, since, “as an African American, she knows about marginalization and discrimination.”
“But let’s face it, she’s an imperial judge,” continued Emmanuelli Jiménez, albeit one, “like the Spanish poet Miguel Hernández says, with garras suaves [soft claws].” The problem remains a political one, in which Governor Rosselló, he says, will be limited to “carrying water for the Junta and the judge. The governor has practically ceded control of the immense majority of the issues that have to do with the development of public policy. When the Junta approves the budget the legislature can’t do much because it’s already been certified. The whole democratic process breaks down.”
Another political problem emerged for the Junta last week with the release of a new report, “The Looting of Puerto Rico’s Infrastructure Fund,” by the Hedge Clippers, a watchdog group that, according to its website, is “working to expose the mechanisms hedge funds and billionaires use to influence government and politics.” The report systematically details how FOMB member Carlos García, in his previous roles as a Banco Santander executive and later president of Puerto Rico’s Government Development Bank, diverted $1 billion intended for infrastructure improvement and maintenance to “a series of financial transactions that were intended to bolster the island’s credit rating, but which became tied up in the issuance of billions in new debt.” The same day, Puerto Rico AFL-CIO president José Rodríguez Báez called for García’s resignation.
The Road Ahead: More Austerity Cuts, More Protests
Despite the appearance of an orderly debt-restructuring process, the situation in Puerto Rico remains dire. The problem is that making sustainable payments on the debt requires austerity measures that will undercut any stability that the Title III process promises. The balanced-budget requirement for the next four years, for example, is likely to provoke severe crises, with looming battles over which services—the university, the police, health care—will be deemed “essential.”
“The requirement of a balanced budget could be achieved hypothetically, but only under conditions that will have catastrophic effects,” said Ian Seda-Irizarry, an economist at John Jay College of Criminal Justice, especially given “the explicit vision of the FOMB regarding the need to cut government spending in an economy that is in free-fall and in areas that will not affect everybody equally, with the working class and small businesses bearing the brunt of the adjustment.”
“The new budget goes into effect on July 1,” said Emmanuelli Jiménez. “Most municipalities will be affected, budgets will be slashed, [including] the [proposed $450 million] cuts to the university; the new series of taxes and fines; health care. It’s going to be very difficult for the middle class. Who’s going to be able to pay both the car and the mortgage?”
This past weekend student assemblies in seven out of the 11 campuses, including the main branch in Rio Piedras, rejected a preliminary agreement with government officials to reopen the university gates, prolonging the strike. The proposed university budget cuts still loom—Junta president José Carrión announced on May 12 that the cuts, estimated at $450-512 million over the next eight years, were “non-negotiable”—but the FOMB board has since agreed to meet with students on May 24. Meanwhile, on May 22, Judge Lauracelis Roques Arroyo—who had earlier ruled that the university must reopen to comply with a suit brought by some students who argued that their right to go to classes has been impeded by the strike—threatened interim university president Nivia Fernández with arrest if she didn’t come up with a concrete plan for reopening. The next day, Fernández resigned, along with three members of the university’s governing board.
Another general strike is rumored for June 11, the day a plebiscite to vote on the island’s status is to be held. The plebiscite remains mired in controversy, with commonwealth and independence parties urging a boycott, and zero buzz coming from Washington, where Congress would consider the results.
“The general feeling is always going to be uncertainty, fear,” says first-year law student Carlos Sosa. “We are facing something that could affect all the sectors of the population, not just the students. And that same uncertainty about how it will happen, how fast it will happen, the fear that can be reflected, is a little overwhelming, oppressive. But you can see that there’s a multi-sectoral population united to confront this.”