Puerto Rico is $72 billion in the hole and struggling to pay loans leaders took out to keep their nation afloat. Meanwhile, hedge funds and bond firms are throwing their hands up in the air and filing lawsuits against the island nation.
As if this were not foreseen by investors when they cut high-interest checks to Puerto Rico. As if there were no other way to recoup the loans.
I’m calling out OppenheimerFunds, a unit of Springfield-based insurer MassMutual Financial Group, and Franklin Templeton over aggressively suing for payment after the nation defaulted this summer. Lawyers for the groups have said they cannot see any other way to recoup funds, but that’s only because they’ve rejected Puerto Rico’s plan to restructure debt and pay it back within a time frame that won’t destroy the country.
Corporations should not be doing business like they’re Paulie in GoodFellas.
“Now the guy’s gotta come up with Paulie’s money every week, no matter what.
Business bad? ‘Fuck you, pay me.’
Oh, you had a fire? ‘Fuck you, pay me.’”
Wal-Mart joined the pile-on in Puerto Rico earlier this month when the giant retailer sued the country over a tax increase on imported goods — a move made by the nation’s government to increase coffers and pay back creditors. The import tax was a 2 percent, but will now shoot up to 6.5 percent. Wal-Mart’s lawyers are calling this an “astonishing” tax and have asked a federal court to rule the tax hike unconstitutional and nix it.
I can already hear some of you: Hey, Puerto Rico shouldn’t have mismanaged its money. Its leaders need to be responsible and pay it back.
I concur, but the initial terms for repayment were ludicrous from the start — something the financial analysts at bond and hedge fund firms certainly knew. The reasons for Puerto Rico’s financial disarray and why MassMutual decided to grab the nation by the nipples and twist are complex.
The Puerto Rican economy has been on the ropes for years. After changes to the American tax code made Puerto Rico less of a haven for rich folks seeking to protect their coins from Uncle Sam, the government fell on hard times. Then the Great Recession hit. For almost 10 years, the government has been trying to sustain the country by taking out high-interest loans to pay back debt and plug budget holes in the hopes that the economy would turn around. That didn’t happen and now creditors are demanding payment. In June, for the first time, Puerto Rico’s Gov. Alejandro Garcia said the debt is “unpayable.”
The Puerto Rican government has been making efforts to pay back its debt. In the fall the country released a Fiscal and Economic Growth Plan that outlined the government’s plan for economic recovery through 2022. The plan calls for simplifying the tax code, cutting support for municipalities, higher education, and health care; scaling back capital improvement projects, undertaking administrative reorganization, and restructuring debt to prioritize which creditors get paid, when and how much. It’s a controversial plan in Puerto Rico. Opponents say it is too easy on big banks and businesses.
Springfield-based MassMutual could help the island nation restructure its debt and rebuild its economy, but the insurance giant — one of Puerto Rico’s largest creditors — has instead decided to shake the nation upside down until its money falls out.
MassMutual, you made nearly $800 million in profits last year. Be a decent part of society and renegotiate the terms of Puerto Rico’s debt in a way that doesn’t strip-mine the nation’s people.
Investing in countries shouldn’t be an attractive option because the government has lots of assets that can be repossessed and income that can be garnished. This reasoning is a moral affront and a loogie in the face of anyone trying to rebuild its economy.
And Wal-Mart, Puerto Rico’s largest private employer, get a grip. While import taxes vary across the world, the standard seems to be around 10 percent on imported goods, still far below the 6.5 percent Puerto Rico is trying to recover. A nation full of people is more important than a pile of pennies — which is what this tax increase would amount to for Wal-Mart. The corporation made $130 billion in profits last year.•
Kristin Palpini can be contacted at editor@valleyadvocate.com.
