On Wednesday, Puerto Rico's Financial Oversight and Management Board declared a form of bankruptcy in a federal courtroom. The US territory is drowning in over $73 billion in public debt, along with $49 billion in unfunded pension obligations. Supreme Court Justice John Roberts has appointed US District Court Judge Laura Taylor Swain to preside over the complex bankruptcy process.
Two months ago, Sputnik reported that Natalia Jaresko, the former Ukrainian finance minister who presided over a catastrophic collapse of the Eastern European country's economy between 2014 and 2016, had been appointed executive director of Puerto Rico's Financial Oversight and Management Board, with an annual salary of $625,000.
During 2015, the single full year of her term in office, Ukraine suffered nearly a 10% drop in GDP (and a 32% drop when measured in dollar terms), a sharp spike in utilities prices – in accordance with IMF advice, rising poverty, the collapse of Ukraine's currency, and a host of other problems. While in office, the former investment banker also worked on restructuring Ukraine's debt, while working out a partial write-off of Ukraine's $18 billion in privately-held government debt.
Reporting on her appointment to the post in Puerto Rico in March, US media indicated that Jaresko had been tapped in part due to the 'success' of her work in Ukraine.
But there is one caveat, observers noted. Ukraine's population of 43 million is over ten times that of Puerto Rico's 3.4 million, while the island's debt is almost double that of Ukraine's.
Egor Smirnov, an observer for independent Ukrainian news portal Versii.com, stressed that Puerto Ricans have his sympathies, since officials like Jaresko are familiar with only one form of 'treatment' – austerity.
"That is, things like the elimination of the minimum wage, the sale of public buildings and assets, firing teachers and closing schools, the reduction of holiday pay and benefits for workers, an increase in sales taxes and electricity prices," the analyst wrote. "The latter is something we are painfully familiar with in Ukraine. At least Puerto Ricans are lucky as far as the weather is concerned. Otherwise they too would face skyrocketing prices for heating."
Furthermore, Smirnov noted, if between 2021-2040 Ukraine's nominal GDP exceeds $125.4 billion, or grows above 4%, Ukraine's creditors will receive a 40% cut from that growth. And this will go on for 20 years!"
Even more intriguing, the journalist wrote, was the fact that 'vulture fund' investment group Franklin Templeton was believed to have been a major holder in Ukrainian and, and that this same fund is now eyeing Puerto Rico.
Between 2013 and 2015, the fund was estimated to hold up to 30% of Ukraine's debt, and according to Bloomberg, the restructuring overseen by Jaresko helped ensure that 12% of Franklin Templeton's total revenues in 2015 came from Ukraine.
"And if you go to the Franklin Templeton website, it becomes obvious who the vulture fund is 'pecking at' now –Puerto Rico, where since March 22, 2017, the debt restructuring is being managed by our Natalia Jaresko."
Jaresko, according to Smirnov, will do everything possible to pull maximum profits for investors out of Puerto Rico's bankruptcy process. "Of this I have almost no doubt. Therefore, I sincerely wish our fellows in misfortune that they at least make the funeral of their economy fun. As we say in the countryside, 'if you have to go, go out with a bang.'"
