Damaged by Hurricanes and “Vulture” Capitalism, Caribbean Islands Plead for Debt Relief

Last week, just days after Hurricane Irma thrashed through the Caribbean with record-high winds, the Catholic bishop of the island nation of Dominica sent a letter to the managing director of the International Monetary Fund (IMF). Bishop Gabriel Malzaire pleaded with the IMF to temporarily delay debt payments from Antigua and Barbuda and other islands left in ruins by the storm.

“The few dozen small Island States across the world, for example, have neither the size nor developmental history to have been major contributors to current climate change,” Malzaire wrote on behalf of the Antilles Episcopal Conference, the Caribbean conference of Catholic Bishops. “Yet these small Island States are the most easily devastated by rising seas and harsher storms.”

On Monday evening, Hurricane Maria slammed into Malzaire’s home island of Dominica, a Caribbean island nation where 50 percent of children live in poverty. Maria arrived as a Category 5 storm with winds whipping at 160 miles per hour. Prime Minister Roosevelt Skerrit described the resulting “widespread devastation” as “mind boggling.”

As of Tuesday afternoon, Malzaire’s allies in the United States were unable to reach the bishop and their other partners in Dominica, according to Eric LeCompte, director of Jubilee USA, an alliance of advocacy groups and religious communities that pushes for international refinancing and debt relief for the world’s poorest economies.

Meanwhile, Maria has barreled into the US Virgin Islands and Puerto Rico, two US territories currently dealing with debt crises of their own. Last year, Congress responded to Puerto Rico’s financial troubles with a refinancing package that was signed into law by President Obama.

The US Virgin Islands are still recovering from Hurricane Irma, and local government told residents to leave damaged homes behind for shelters as Maria approached.

LeCompte told Truthout that Malzaire’s letter requesting temporary debt relief for Antigua and Barbuda now applies to the bishop’s own country of Dominica, which may have suffered some of the worst hurricane damage the Caribbean has seen this year.

“At this point, Antigua and Barbuda as one country and Dominica as another could both qualify for a temporary moratorium on international debt payments to the IMF,” LeCompte said in an interview.

Like other islands in the Caribbean, Dominica is saddled by significant international debt. LeCompte said the country’s debt level has been unsustainable since at least 2010, and Hurricane Maria could lead to a “full-blown debt crisis.”

For Dominica and Antigua and Barbuda, debt relief is not just about reducing the financial burden of making payments to world bankers. Placing a temporary delay on debt payments is one of the quickest ways to aid a country’s rebuilding efforts after a disaster, LeCompte said. If the IMF and other creditors were to grant a debt moratorium, it would free up millions of dollars for recovery.

“It’s imperative that the IMF, World Bank and other creditors delay payments or grant a debt payment moratorium to provide financing and relief in the face of human tragedy,” LeCompte told a United Nations working group on Tuesday morning.

The IMF did not respond to a media inquiry from Truthout by the time this story was published. Reports surfaced last week indicating that the IMF initially rejected the idea of placing holds of debt payments from Caribbean nations impacted by hurricanes, but LeCompte said those reports took statements from an IMF official out of context.

“We know that they are considering our proposals right now,” LeCompte said of the IMF.

Meanwhile, Puerto Rico and the US Virgin Islands are facing a slightly different quandary. While independent nations like Dominica have received loans from a mix of private creditors and public development institutions like the IMF and World Bank, the US Virgin Islands and Puerto Rico have defaulted on bond payments and suffered from financial mismanagement in the past.

Tourism is a main source of income for Puerto Rico and especially the US Virgin Islands, so new tax revenue will be slow to come by as both territories recover. Observers fear this could push the Virgin Islands into bankruptcy, and Puerto Rico declared bankruptcy earlier this year.

President Trump has said there will be no “bailout” for Puerto Rico’s financial crisis, but LeCompte said the territory may be in a better position than the US Virgin Islands because President Obama signed a refinancing plan for Puerto Rico into law last year.

Citing $70 billion in debt to bondholders and $50 billion in pension obligations to public employees, Puerto Rico filed the largest municipal bankruptcy claim in US history in May under protections established by the federal refinancing law.

The refinancing legislation has been criticized as a top-down exercise in reasserting Washington’s colonial power, but LeCompte says that at least it created a “super-bankruptcy” process that provides a path towards resolving Puerto Rico’s debt. Those benefits were not extended to the Virgin Islands, which owes even more debt per capita than Puerto Rico, according to LeCompte.

“Especially after Hurricane Irma hit, [the US Virgin Islands] are in really bad shape right now,” LeCompte said, adding that advocates are currently focused on making sure federal grant money for disaster relief gets to both Puerto Rico and the Virgin Islands as quickly as possible.

The debt crises in the Caribbean are further complicated by exploitative hedge funds known as “vulture funds” that are already known for predatory behavior in places such as Detroit, Greece and Argentina. These funds buy debt for pennies on the dollar and then aggressively pursue defaulting governments in court.

“As for predatory hedge funds or vulture funds, they don’t discriminate between countries and territories,” LeCompte said. “They can buy debt on the cheap from anyone, whether that is Puerto Rico’s debt or debt in Dominica.”