Sunday, September 16, 2018

Remaking Puerto Rico's Economy: Structural Adjustment and Austerity


I was reading the Wall Street Journal's weekend edition this morning and came upon this article addressing Natalie Jaresko's efforts to "remake" Puerto Rico's economy:
Matt Wirtz (Sep 15-16, 2018). Remaking Puerto Rico's Economy. The Wall Street Journal, B6. 
Ms. Jaresko is a member of the Atlantic Council
http://www.atlanticcouncil.org/about/experts/list/natalie-jaresko

She worked at the US State Department from 1989-1992, under Bush Sr.

She is a co-founder and former chief executive officer of Horizon Capital. Horizon Capital aims to "transform the business landscape" in Ukraine (http://horizoncapital.com.ua/).

You can read a little more about her investments in Ukraine here

I wonder whether her stint as Ukraine's finance minister helped her capital fund transform Ukraine's landscape?

Ms. Jaresko "restructured" Ukraine's finances in 2016 as the country's finance minister:
Josh Kovensky (2017, March 24). Jaresko, ex-finance minister, to head Puerto Rico debt rescue. Kyiv Post, https://www.kyivpost.com/business/jaresko-ex-finance-minister-head-puerto-rico-debt-rescue.html

Jaresko was Ukraine’s finance minister from December 2014 to April 2016, restructuring the country’s debt and negotiating a $17.5 billion lending program with the International Monetary Fund that runs through 2018.
Now she is Puerto Rico seeking to work her magic there.  I had to wonder: how did she get to Puerto Rico from Ukraine?

It turns out that she had to win a "key legal ruling establishing her authority over the island and brokered deals with bond owners who own 40% of the island's municipal bond debt"(Wirtz, 2018, B6).

Ms. Jaresko is tasked with the "oversight board" that will addressing such ills as "bloated" public-sector employment. Her board has been in tension with the island's local government (see here).

The oversight board was instituted with PROMESA, the federal rescue legislation for the island. According to Reuters, section 205 of the law limits the board's authorities to recommendations (here). The extent of the board's authority and leverage seems to be disputed.

The good news is that her testimony to congress Nov 2017 here emphasized the need for federal aid to re-build Puerto Rico's infrastructure and was not entirely focused on structural adjustment and austerity.

However, structural reform elements were evident in principle 6 of her testimony:

Principle 5: Pension reform, corporate tax reform, and other structural reforms necessary to improve the business climate must remain priorities in the fiscal plan.
Pension reform typically means reduction or elimination of pensions for rank-and-file everyday workers.

Corporate tax reform almost always means less taxes. By the way, those tax cuts typically don't affect or benefit limited liability corporations (LLCs) that are small and mid-sized. Tax cuts typically help the biggest corporations as we've seen with Trump's so-called reforms.

Other structural reforms necessary to improve the business climate are singled out as priorities. What types of structural reforms would those be? Usually these reforms include loosening labor and environmental protections.

Often they also include removing barriers to horizontal and/or vertical integration of ownership, as we are seeing in the media industry as ownership across media forms is centralized.

These so-called "reforms" are precisely those that are promoted by "economic hit men" according to Perkins in the video linked below, Confessions of an Economic Hitman

I have to wonder how Ms. Jaresko ended up running Puerto Rico's financial "reform" and whether she represents the interests of the economic hit men rather than the long-term economic, environmental, and social welfare of its people.

Is she an economic hit woman?

I can only hope that she uses her position to argue for socially and environmentally sustainable re-organization rather than economic extraction....





10 comments:

  1. There were 4600 killed. It is genocide and vulture capitalism

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    1. https://www.counterpunch.org/2018/09/14/marias-missing-dead/

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    2. SEPTEMBER 14, 2018
      Maria’s Missing Dead
      by JEFFREY ST. CLAIR

      Hurricane Maria. Photo: NASA.
      They knew it was coming. They knew when it would hit. They knew how strong the winds would be and how much rain the storm bands would unleash. They knew how high the surf might surge. They knew it would take out Puerto Rico’s decrepit power grid. They knew the island’s archaic water system would fail. They knew there would be landslides, burying roads, cutting off towns and isolating villages. They knew bridges and small dams would collapse. They knew backup generators would run out of gas. They knew hospitals and clinics would lose power. They knew tens of thousands of house would be destroyed, leaving families homeless for months. They knew there would be deaths and thousands of injuries. They knew children would be separated from parents, the elderly and infirm left alone. They knew there would be shortages of food, water, and medicine. They knew that Puerto Rico, struggling under crushing debt, imposed austerity and the cruel legacy of colonialism, was even less capable of dealing with the immediate aftermath of a super-storm than was Houston or New Orleans or Miami. They knew and yet they did nothing.

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    3. Hurricane Maria gave plenty of warning. Despite being under siege from Trump’s budget cuts, NOAA had meticulously tracked the storm since it first formed as an ominous wrinkle in the broiling waters of the eastern Atlantic off the coast of West Africa. They tracked it as it migrated across the Atlantic, incubating in 85-degree waters until it coalesced into a tropical depression near the Lesser Antilles. Then within 24 hours, Maria morphed from a tropical storm into a powerful hurricane, fueled by the most “explosive intensification” ever documented in the Atlantic Basin. On September 19, Maria entered in the Caribbean Sea, after smashing across the island of Dominica packing 165 mile per hour winds, the fiercest ever to hit the island.

      The first tentacles of Maria lashed Puerto Rico on September 20th. Over the next 24 hours, some parts of the island were drenched by 40 inches of rain, eight inches more than Houston received over three days during Hurricane Harvey. The power went out within a few hours, plunging the island into the largest blackout in US history and the second largest in the history of the world. For months, people in rural villages were forced to drink water contaminated by toxic waste, rotting animal corpses and raw sewage.

      George W. Bush was swiftly vilified for his callously lethargic response to the swamping of New Orleans after Hurricane Katrina. Yet within a mere two weeks, Congress had appropriated $60 billion in emergency funding for Katrina

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    4. Hurricane Maria gave plenty of warning. Despite being under siege from Trump’s budget cuts, NOAA had meticulously tracked the storm since it first formed as an ominous wrinkle in the broiling waters of the eastern Atlantic off the coast of West Africa. They tracked it as it migrated across the Atlantic, incubating in 85-degree waters until it coalesced into a tropical depression near the Lesser Antilles. Then within 24 hours, Maria morphed from a tropical storm into a powerful hurricane, fueled by the most “explosive intensification” ever documented in the Atlantic Basin. On September 19, Maria entered in the Caribbean Sea, after smashing across the island of Dominica packing 165 mile per hour winds, the fiercest ever to hit the island.

      The first tentacles of Maria lashed Puerto Rico on September 20th. Over the next 24 hours, some parts of the island were drenched by 40 inches of rain, eight inches more than Houston received over three days during Hurricane Harvey. The power went out within a few hours, plunging the island into the largest blackout in US history and the second largest in the history of the world. For months, people in rural villages were forced to drink water contaminated by toxic waste, rotting animal corpses and raw sewage.

      George W. Bush was swiftly vilified for his callously lethargic response to the swamping of New Orleans after Hurricane Katrina. Yet within a mere two weeks, Congress had appropriated $60 billion in emergency funding for Katrina

      Delete
  2. It is a little hard to believe that anyone working in Ukraine with the economy can be very trustworthy. What kind of person does these sorts of things.

    Financial and economic jargon is such that only the initiated can tell what the case is except that loans and debts seem to take first place in economic reforms.

    Even though my son has a PhD in Economics from Harvard, I doubt he could figure out the actual truth about "Trump's so-called reforms". Aren't reforms almost always of the "so-called" variety since they inevitably benefit some and harm others.

    Perhaps the fifteen hundred years during which the Catholic Church considered usury a terrible sin should be reconsidered! By urury was meant any interest at all. "Metal breeding metal" according to Dante and Aristotle.

    Fifteen hundred years is a very long time to consider a behavior an evil. In order to regain harmony with the Church the lenders had to return the interest money. It was not sufficient as with most sins to merely go to confession. Worth some reflection.

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  3. "Tax cuts typically help the biggest corporations as we've seen with Trump's so-called reforms." But wasn't that the intention? I don't know if it was only the biggest though. Not sure what empirical data causes you to down grade the reforms to so-called reforms. If he had raised taxes would that be real reform? Are you pro socialist? So much criticism of Trump that genuine criticism which might actually be helpful is lost in the flood of people's just venting. And so much of that involves mind reading.

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    Replies
    1. Nasty teacher hating little fascist. Racist hates kids. Hates millenials. Hates women. Hate teachers. This little fascist bug lived off the taxpayers teat its whole life. Spouts hate. Little psychopathic librarian.Anything taxing corpoate billionairs is socialism to this evil little bug William St George

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    2. You are being very hard on yourself, Kelly. You sound just like Anonymous. Like Anonymous you do not have much going in the area of reading comprehension. But what the heck.

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    3. And the operative troll, constantly baits and begs the question.

      Delete

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