22 June 2017

Opium Smugglers

Sea of Poppies by Amitav Ghosh, 2009, Excerpt
Neel: ‘Mr. Burnham, I know nothing about this war you speak of.’

Mr. Burnham: ‘The officials in Canton have been moving forcefully to end the inflow of opium into China. It is the unanimous opinion of all of us who do business there that the mandarins cannot be allowed to have their way. To end the trade would be ruinous – for firms like mine, and indeed for all of India.’

Neel: ‘Ruinous? But surely we can offer China something more useful than opium?’

Mr. Burnham: ‘There is nothing they want from us – they have no use for our products and manufactures. But we, on the other hand, can’t do without their tea and their silks. If not for opium, the drain of silver from Britain and her colonies would be too great to sustain.’

Mr Doughty: ‘When I first went out to Canton, as a lad, there was just a trickle of opium going in. The yen for opium would still be limited if not for the perseverance of English and American merchants. It’s happened almost within living memory – for which we owe a sincere vote of thanks to the likes of Mr. Burnham.’ He raised his glass to the ship-owner. ‘To you, sir.’

21 June 2017

Mandarins’ Message to the Opium Merchants

River of Smoke by Amitav Ghosh, 2012, Excerpt
‘So long as you do not take it upon yourselves to forbid the opium but continue to make it and tempt the people of China to buy it, you will be showing yourselves careful of your own lives, but careless of the lives of other people, indifferent in your greed for gain to the harm you do to others. Such conduct is repugnant to human feeling and at variance with the Way of Heaven.’

River of Smoke by Amitav Ghosh, 2012, Excerpt
Opium is a poisonous drug, brought from foreign countries. To the question, what are its virtues, the answer is: It raises the animal spirits and prevents lassitude. Hence the Chinese continually run into its toils. At first they merely strive to follow the fashion of the day; but in the sequel the poison takes effect, the habit becomes fixed, and the sleeping smokers are like corpses – lean and haggard as demons. Such are the injuries which it does to life. Moreover the drug maintains an exorbitant price and cannot be obtained except with the pure metal. Smoking opium, in its first stages, impedes business; and when the practice is continued for any considerable length of time, it throws whole families into ruin, dissipates every kind of property, and destroys man himself. There cannot be a greater evil than this.

20 June 2017

British Empire and the Opium Trade

River of Smoke by Amitav Ghosh, 2012, Excerpt
The drug may come from India, but the trade is almost entirely in British hands. In the Bengal Presidency, the cultivation of opium is their monopoly: few Achhas play any part in it, apart from the peasants who are made to grow it – and they suffer just as much as the Chinese who buy the drug. In Bombay, the British were not able to set up a monopoly because they were not in control of the entire region. That is why local merchants were able to enter the trade. Their earnings are the only part of this immense commerce that trickles back to Hindusthan – all the rest goes to England and Europe and America. It was not the Achhas who started sending opium to China: it was the British. Even if every Achha washed his hands of opium, nothing would change in China; the British and Americans would make sure that opium continued to pour in.’

Flood of Fire by Amitav Ghosh, 2016, Excerpt
Free Trade, the truth was that their commercial advantages had nothing to do with markets or trade or more advanced business practices – it lay in the brute firepower of the British Empire’s guns and gunboats.

19 June 2017

Indian Farmers - Opium Debt

Flood of Fire by Amitav Ghosh, 2016, Excerpt
Their district had been seized by the East India Company a long time ago, but in the beginning the annexation had made little difference and things had gone on much as usual. But with the passage of time the Company had begun to interfere in matters that previous rulers had never meddled with – like crops and harvests for example.

In recent years the Company’s opium factory in Ghazipur had started to send out hundreds of agents to press loans on farmers, so that they would plant poppies in the autumn. They said these loans were meant to cover the costs of the crop and they always promised that there would be handsome profits after the harvest. But when the time came the opium factory often changed its prices, depending on how good the crop had been that year. Since growers were not allowed to sell to anyone but the factory, they often ended up making a loss and getting deeper into debt.

18 June 2017

Opium Series

This series explores opium and its history. Opium is a commodity of notoriety and tremendous value. Wars have been fought over this lucrative commodity, the infamous Opium Wars in China. The fighting in Afghanistan is currently being waged in the province of Helmand, the world’s most productive region of opium. Apparently, it’s still worth fighting over.

Seeds of Terror by Gretchen Peters, 2009, Excerpts
Opium makes up between 30 and 50 percent of Afghanistan’s GDP. It’s essential to recognize the economic miracle the drug traffickers have achieved. From one of the world’s most remote and backward regions, where the transport network and infrastructure is almost completely shattered, they have managed to integrate an agricultural product into the global economy. From importing precursor chemicals to giving loans to thousands of small farmers to providing security for shipments as they move across the border, this is an organizational feat of the highest order. And it’s all about making money. Although the Taliban commanders are deep in the opium trade, they are not the masterminds. This is being run by businessmen.

Opium: A Portrait of the Heavenly Demon by Barbara Hodgson, 1999, Excerpts
Opium: potent and evocative, it is a word with the power to intoxicate both speaker and listener, a word that implies languor, mystery and a sort of sinister beauty. Nothing seems to capture the sensuousness of this word better than the image of the dreamy smoker adrift in his illicit paradise. To consume opium regularly, in any form, is to risk forging an almost unbreakable and deadly bond. Opium is one of the most addictive and debilitating substances on earth, the opium addict has been called slave, fiend and ghost.

Indian Farmers - Opium Debt
British Empire and the Opium Trade
Mandarins’ Message to the Opium Merchants

Golden Triangle

Opium and Afghanistan

Soviet-Afghan War: 1979-1989
Post Soviet-Afghan War
Post 9/11 Afghan War

San Francisco, Clarion Alley

Short film by Media Storm, from the Soviet invasion and the mujahideen resistance to the Taliban and the American occupation, examines thirty years of Afghan history.

How Collecting Opium Antiques Turned Me Into an Opium Addict
24 Sep 2012
Great selection historical photographs and story of Steve Martin’s, no relation to the actor, journey from opium paraphernalia collector to opium user.

Shantaram by Gregory David Roberts, 2003 Exceprts
He brought what I asked for – a steel spoon, distilled water, disposable syringes, heroin, and a carton of cigarettes – and he set the items out on the little dresser. I cooked up a taste of heroin. The dose sat in the syringe for almost an hour. I picked it up and put the needle against a fat, strong, healthy vein in my arm. The damnation drug, the drug that had driven me to commit stupid, violent crimes; that had put me in prison; that had cost me my family, and lost my loved ones. The everything-and-nothing drug: it takes everything, and gives you nothing in return. But the nothing that it gives you, the unfeeling emptiness it gives you, is sometimes all and everything you want.

I pushed the needle into the vein, pulled back the rose of blood that confirmed the clean puncture of the vein, and pressed the plunger all the way to the stop. Before I could pull the needle from my arm, it made my mind like the Sahara. Warm, dry, shining, and featureless, the dunes of the drug smothered all thought, and buried the forgotten civilization of my mind. The warmth filled my body, killing off the thousand little aches, twinges, and discomforts we endure and ignore in every sober day. There was no pain, there was nothing.

Flood of Fire by Amitav Ghosh, 2016, Excerpt 
Then Mr. Chan said, ‘We’re almost ready now, Mr. Reid. When I roast the opium again it will catch fire. The smoke will last for one or two seconds. You must be prepared – you must blow out your breath, emptying your chest so you can draw in all the smoke. When the opium begins to burn I will put it on the dragon’s eye’ – he pointed to the tiny hole in the pipe’s octagonal cup – ‘and you must draw hard.’

Zachary had already emptied the air from his chest: when the flaming pellet was placed on the ‘dragon’s eye’ he inhaled deeply, filling his lungs with the smoke. Its consistency was almost that of a liquid, dense, oily and intensely perfumed; it poured into his body like a flood, coursing through his veins and swamping his head.

As he leant back against the cushions Zachary suddenly became aware of his pulse – except that it wasn’t beating only in his wrist or his neck. It was as if his whole body were pulsating; the drumming of his heart was so powerful that he could feel his blood surging into his capillaries. The sensation was so strong that he looked down at his forearm and saw that his skin had changed color. It was flushed and red, as if every pore had been awoken and irradiated. 

He looked up at the ceiling and suddenly it was as if his eyes had become more sensitive, his gaze more powerful. He could see minute cracks in the wood; his hearing too seemed to have become more acute and the lapping of water was loud in his ears. He closed his eyes, luxuriating in the feeling of weightlessness, allowing the smoke to carry him away, as if on a tide.

13 June 2017

Puerto Rican Debt in the News

Puerto Rico votes in referendum to become US state
12 Jun 2017
The US territory of Puerto Rico has voted to ask Congress to make it America's 51st state. More than 97% of voters favored attempting to join the US over becoming independent or remaining a self-governing territory. However, just 23% of the electorate turned up to cast their ballot amid an opposition boycott, and its results are non-binding. The final decision is also not in their hands but up to Congress.

Puerto Rico files for bankruptcy in last-ditch attempt to sustain public services
05 May 2017
Puerto Rico has filed for a form of bankruptcy in a desperate bid to stave off creditors and maintain essential services to its 3.4 million citizens, nearly half of whom live in poverty. The insolvent US territory owes more than $70bn (£54bn) in public debt. A recession spanning decades – prolonged by the departure of multinational manufacturers, including “big pharma” companies – and the extensive brain drain to the US mainland has left Puerto Rico with arrears worth nearly 70% of its GDP. Unemployment is twice that of the US and millions depend on costly government programs such as Medicaid. On Friday, the Associated Press reported that Puerto Rico was closing 184 public schools in a bid to save millions of dollars.

Puerto Rico Religious Leaders Call for Bankruptcy Ahead of "Vulture Fund" Deadline
25 Apr 2017
Before May, protections expire that shelter Puerto Rico from debt lawsuits and predatory financial groups popularly known as "vulture" funds. The Catholic Archbishop of San Juan and Puerto Rico's Bible Society head are calling on the island's governor and oversight board to immediately activate a bankruptcy process designed by Congress. "If the oversight board and Governor do not act by April 28th, we fear that Puerto Rico could be held hostage by predatory actors and 'vulture' funds." "New austerity programs are being forced on our people and we must now receive the debt relief we are promised. It is immoral and unethical for any person or group to attempt to deny our people access to promised debt relief processes."

Restructuring agreement for Puerto Rico's utility could be in jeopardy
22 Mar 2017
A financial agreement involving Puerto Rico's largest utility may be in jeopardy, which could put the U.S. territory's power grid at risk for outages and hamper efforts to diversify its fuel mix. A restructuring support agreement, or RSA, for the Puerto Rico Electric Power Authority, or PREPA, is set to expire March 31. Unless the RSA is renewed, the territory has no other viable options to meet its bond payment due July 1 of $455 million, which would cause the utility to default and likely trigger power outages across the island.

Joseph Stiglitz, the Nobel Laureate, on Saving Puerto Rico
27 Feb 2017
“The board appointed to oversee Puerto Rico’s debt restructuring is predicted that its proposals would turn the island’s recession into a depression, of a magnitude seldom seen around the world — a decline of 16.2 percent of gross national product in the next fiscal year, comparable to the experience of countries in civil wars, and Venezuela in economic crisis in 2016. Unemployment, already at 12.4 percent, would soar. The plan, which puts the creditors’ interests above those of the island’s economy and people, will create a debt spiral. As in Greece, the debt/gross domestic product ratio will rise, and with it the likelihood of ever-deeper debt write-downs. American taxpayers will lose, too, as they will pay for the costs.”

Puerto Rico Governor Weighs Asking Creditors for More Concessions
27 Jan 2017
Many bond investors have viewed Puerto Rico’s new governor, Ricardo Rosselló, as a likely ally in their fight to get repaid. Now that hope is starting to dwindle. The governor struck a populist tone in a recent public spat with the federal oversight board managing Puerto Rico’s financial rehabilitation. Investors increasingly fear there will be a bankruptcy.

Two of Puerto Rico’s New Overlords Are Accused of Helping Create Its Debt Crisis
16 Dec 2016
A control board, which has veto power over major Puerto Rican budget decisions, was created by Congress in June as the island foundered under $70 billion in public debt. Activists are calling for the resignation of two members of Puerto Rico’s fiscal control board, Ramon Gonzalez and Carlos As Puerto Rico’s debt rose, the island’s elected officials began pushing the burden of repayment onto the public. Beginning in 2009, then-Gov. Luis Fortuño instituted major austerity measures, laying off tens of thousands of public employees. 

Puerto Rico: Huge blackout after power plant fire
21 Sep 2016
A big fire at a power plant has left 1.5 million people without electricity in the US territory of Puerto Rico. The fire affected two transmission lines and caused the collapse of the electricity system across the island. Puerto Rico's Electric Power Authority has been undergoing restructuring and is seeking funds to update what it says is outdated equipment. The cause of the fire is still unclear. The blackout also caused 15 fires across Puerto Rico as a result of malfunctioning generators.

White House Announces Puerto Rico Oversight Board Membership
01 Sep 2016
The White House is announcing members of Puerto Rico's fiscal oversight board established as part of legislation to address the US territory’s debt crisis. The board is responsible for triggering debt restructuring on the island and approving the Governor's budget. Four of the seven board members are Puerto Rican. The legislation additionally put a stay on debt lawsuits against Puerto Rico and granted the island tools to restructure all of its debt. Puerto Rico owes over $70 billion overall and defaulted on $2 billion in debt on July 1. The island is in the midst of a decade-long recession, has an unemployment rate more than double the national rate and nearly half its population lives in poverty.

Obama Appoints Social Security Critic to Fix Puerto Rico’s Budget
31 Aug 2016
Andrew Biggs, an American Enterprise Institute resident scholar and architect of conservative efforts to cut and privatize Social Security, has been named by President Obama to a seven-member fiscal oversight board for the debt-ridden U.S. territory of Puerto Rico. The oversight board is tasked with balancing Puerto Rico’s budget and pursuing all avenues to pay off its massive debt, including cuts to the island’s education, police, and health care systems.

Puerto Rico to default on $779m debt
01 Jul 2016
Puerto Rico announced on Friday that it would default on $779m (£588m) of debt. Debt payments totaling just over $2bn were due on Friday. US President Barack Obama signed a bill into law on Thursday giving the island access to a debt restructuring process and halting any litigation arising from defaults. As part of the US law, the island's finances will soon come under a US federal oversight board. Puerto Rico has been struggling to make payments on its $70bn debt load.

Treasury Secretary Reminds Senate It Has 4 Days Before Puerto Rico Defaults On More Debt
27 Jun 2016
Treasury Secretary Jack Lew sounded the alarm Monday on the looming deadline for the Senate to pass legislation to help Puerto Rico with its debt crisis. The commonwealth owes a $2 billion debt payment on July 1, and its government has said it will default. Without action, Puerto Rico could be exposed to a flurry of lawsuits, which could lead to hospital closures and squeeze the island’s police force, education system and other services. The House has passed a bill to help the island restructure its debt, but the Senate has yet to vote on it.

House Passes Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA)
09 Jun 2016
The U.S. House of Representatives has passed legislation to provide restructuring authority for Puerto Rico’s massive debt and establish an oversight board to address the territory’s fiscal crisis. Puerto Rico faces a debt payment on July 1 of roughly $1.8 billion.

Sanders to Senate Dems: Do You Stand with Puerto Rico or with Wall Street?
23 May 2016
As a U.S. House committee prepares to take up the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) on Tuesday, Bernie Sanders opposes the bill. PROMESA would allow Puerto Rico to restructure $72 billion in debt, while establishing an unelected outside control board to oversee the territory's fiscal matters—a top demand from Republicans. The board would not be subject to any Puerto Rican authority and is bound by PROMESA to make decisions that are in the interests of Puerto Rico’s creditors. Sanders blasted the creation of this "undemocratic board," which he said "would have the power to slash pensions, cut education and health care, and increase taxes on working families in Puerto Rico."

Republicans, Obama Administration Reach Agreement on Puerto Rico Restructuring Bill
19 May 2016
WASHINGTON—House Republicans reached an agreement with the Obama administration to provide Puerto Rico a path to restructure its $70 billion debt load. The bill would offer the island a legal out similar to bankruptcy and wouldn’t commit any federal money, a critical requirement to winning support of conservatives. Puerto Rico has defaulted on different classes of bonds, including earlier this month when it missed most of a $422 million payment, and faces payments totaling $2 billion on July 1.

This Nuyorican Superhero Represents Hope And Solidarity For Puerto Ricans
17 May 2016
Puerto Rico just got a kickass Afro-boricua superhero! Her name is name is La Borinqueña, and she’s on a mission to help the Puerto Rican community unite and fight for social justice. Named after Puerto Rico’s national anthem, La Borinqueña was created by Brooklyn-based artist and writer Edgardo Miranda-Rodriguez in response to the island’s current financial crisis and is intended to be a symbol of hope and solidarity. The cover art for the comic book, due out this fall, features La Borinqueña soaring above fellow Puerto Ricans Sonia Sotomayor, Arturo Schomburg, Lolita Lebron, Felicita Mendez, Hector Lavoe, among others.

Sanders Blasts 'Vulture Capitalists' and Colonialism in Puerto Rico
16 May 2016
Campaigning in Puerto Rico on Monday, Bernie Sanders railed against the "colonial-like relationship" that has allowed Wall Street "vulture capitalists" to profit off the debt-stricken territory's economic crisis. "It is unacceptable to me for the United States government to treat Puerto Rico like a colony during a time when its people are facing the worst fiscal and economic crisis in its history," the presidential hopeful declared in a rousing speech at a packed town hall in San Juan. "What vulture funds on Wall Street are demanding is that Puerto Rico fire teachers, close schools, cut pensions and abolish the minimum wage so that they can reap huge profits off the suffering and misery of the children and the people of Puerto Rico," Sanders said. "We cannot allow that to happen. We will not allow that to happen."

John Oliver explains Puerto Rico’s debt crisis.

Puerto Rico to default on debt payment after talks fail
02 May 2016
Puerto Rico has halted a $422m debt payment due on Monday after talks to ease the US territory's crisis ended without a deal. Governor Alejandro Garcia Padilla said in a televised speech he had issued an executive order suspending payments. A further debt payment of $1.9bn is due in July. Some creditors have argued that the territory has exaggerated its crisis. Congress is in recess until the week of 9 May.

Puerto Rico’s House Passes Emergency Debt Moratorium Bill
06 Apr 2016
Puerto Rico’s House of Representatives early on Wednesday passed an emergency bill allowing the government to halt payments on its debt, throwing into doubt broader restructuring plans to stave off a financial collapse of the U.S. Commonwealth. The measure would allow Governor Alejandro Garcia Padilla to declare a moratorium on any debt payment he deems necessary, and also alter the structure of the Government Development Bank. Garcia Padilla is expected to quickly sign the bill into law. Burdened by a $70 billion debt load it says it cannot pay and a 45 percent poverty rate that has led to a steady exodus of its American citizens to the mainland, Puerto Rico faces economic collapse without a solution that either changes laws and/or involves an agreement with creditors. The introduction of the law had drawn a quick rebuke from creditors who hold the Puerto Rican government’s General Obligation debt.

Plan to Rescue Puerto Rico Advances, Led by House Republicans
24 Mar 2016
Politicians in Washington are coalescing around a financial plan to rescue Puerto Rico, just weeks before an expected major default on bond payments that would spread more turmoil through the island’s shaky economy. The plan would not grant Puerto Rico’s most fervent request: permission to restructure its entire $72 billion debt in bankruptcy. It would, however, give the island certain crucial tools that bankruptcy proceedings can offer — but only if it first comes under close federal oversight. The creation of such a board has been highly controversial on the island, where some residents and officials have called it an act of “colonialism”. If Puerto Rican officials are unable to make the budget balance with existing resources, the oversight board would have the power to do it for them — which could mean cuts in services. Much of the rescue package has been drafted in the House Natural Resources Committee under its chairman, Rob Bishop of Utah. Although the Natural Resources Committee might seem an odd place to resolve an offshore financial collapse, the committee has jurisdiction over America’s territories, which include Puerto Rico.

How Free Electricity Helped Dig $9 Billion Hole in Puerto Rico
01 Feb 2016
The power authority has been giving free power to all 78 of Puerto Rico’s municipalities, to many of its government-owned enterprises, even to some for-profit businesses — although not to its citizens. It has done so for decades, even as it has sunk deeper and deeper in debt, borrowing billions just to stay afloat. Now, however, the island’s government is running out of cash, facing a total debt of $72 billion and already defaulting on some bonds — and an effort is underway to limit the free electricity. The free power dates from 1941. Hearings will begin to determine who and what are to blame for the authority’s larger problems, especially its ancient and inefficient power plants, among the last in North America to burn oil. Culprits are expected to include the authority’s secretive purchasing managers, elected officials who wasted money on natural gas pipelines that were scrapped and an institutional hostility to wind and solar power that is hard to fathom on a breezy island where the sun shines most days.

 Faced with $9M in Debt, Puerto Rico’s Utility Appeals for Restructuring
28 Jan 2016
Puerto Rico’s main electricity provider and its bondholders are continuing negotiations to restructure almost $9 million in debt after failing to meet a deadline Friday that caused a tentative pact reached last month to be terminated. The restructuring support agreement between the Puerto Rico Electric Power Authority and its creditors expired after lawmakers failed to pass legislation by Friday to enable Prepa, as the agency is known, to lower its obligations and implement a new customer surcharge. In a sign of progress, banks that finance its fuel purchases and the utility entered into a forbearance agreement on Sunday that keeps their negotiations out of court through Feb. 12.

Faced with $9M in Debt, Puerto Rico’s Utility Appeals for Restructuring
28 Jan 2016
Puerto Rico’s main electricity provider and its bondholders are continuing negotiations to restructure almost $9 million in debt after failing to meet a deadline Friday that caused a tentative pact reached last month to be terminated. The restructuring support agreement between the Puerto Rico Electric Power Authority and its creditors expired after lawmakers failed to pass legislation by Friday to enable Prepa, as the agency is known, to lower its obligations and implement a new customer surcharge. In a sign of progress, banks that finance its fuel purchases and the utility entered into a forbearance agreement on Sunday that keeps their negotiations out of court through Feb. 12.

Puerto Rico: US calls for creditors to make sacrifices
20 Jan 2016
US Treasury Secretary Jacob Lew urged Puerto Rico's creditors to make sacrifices that would allow the territory to restructure its debt. Mr. Lew said that unless both sides made sacrifices, "there is no path out of insolvency and back to growth." Puerto Rico is in its tenth year of rescission and struggling to cope with $70bn in debt. Negotiations between the Puerto Rican government and creditors have failed. Puerto Rico defaulted on part of its debt at the beginning of January and is on track to miss larger payments in the coming months. Puerto Rico does not have access to Chapter 9 of the US bankruptcy code, the provision that allowed cities such as Detroit to restructure their debts. Puerto Rico, with support from President Obama, is pushing Congress to change that law and grant them permission to use the Chapter 9 provision. In 2015 a US judge struck down a law passed by the Puerto Rican government that would have allowed it to restructure its debt.

Puerto Rico misses second major debt payment as economy struggles
05 Jan 2016
Puerto Rico has defaulted for the second time in five months, as the island struggles with massive debt obligations and a flagging economy. Last week, the island's governor said it would pay most, but not all, of the nearly $1bn it owed. Overall, the island has a total debt load of about $70bn, which Governor Padilla has said the island cannot pay. "This is not political rhetoric, this is mathematic," Mr. Padilla said. "It's very simple, we don't have the money to pay".

Governor Alejandro Padilla has called for the island to be granted bankruptcy rights like those on the mainland. The US Congress is set to debate the issue in the coming weeks. In recent months, the governor has repeatedly warned of a humanitarian crisis that could unfold and has called on the US Congress to extend bankruptcy protections to the island. US states and territories cannot declare bankruptcy under federal law. Puerto Rico's public utilities are heavily debt-burdened, but are not allowed the bankruptcy rights that their mainland counterparts are afforded.

The island has been called the "Greece of the Caribbean”. The flagging economy and uncertainty is driving mass emigration, with an average of about 230 people leaving per day. Unemployment on the island stands at 12.5% - around twice that of the US - and around 45% of people living in poverty. The island faces a bill of around $400m due in February and a much larger $1.9bn bill in July.

Inside the Billion-Dollar Battle for Puerto Rico’s Future
19 Dec 2015
On the surface, it is a battle over whether Puerto Rico should be granted bankruptcy protections, putting at risk tens of billions of dollars from investors around the country. But it is also testing the power of an ascendant class of ultrarich Americans to steer the fate of a territory that is home to more than three million fellow citizens. The investors with a stake in the outcome are some of the wealthiest people in America.

For decades, the island had been borrowing money to pay its bills. Puerto Rico’s bonds were particularly attractive to mutual funds because they were exempt from federal, state and local taxes in all 50 states. But in 2013, after the island’s general obligation bonds were downgraded, they caught the attention of a different sort of investor: hedge funds specializing in distressed assets. These funds began buying up the debt at a steep discount, confident that this was a bet they could not lose. Not only were the bonds guaranteed by the Puerto Rican Constitution, but under a wrinkle of federal law, the island’s public corporations and municipalities — unlike those of the 50 states — do not have bankruptcy as a recourse.  Drawn by the promise of what was a 20 percent return, Mr. Paulson’s firm purchased bonds in March 2014, as did Appaloosa Management, founded by David Tepper; Marathon Asset Management; BlueMountain Capital Management; and Monarch Alternative Capital. Puerto Rico now owes its creditors in excess of $70 billion, as much as a third of it is owed to hedge funds.

Puerto Rico narrowly avoids default
01 Dec 2015
Puerto Rico has narrowly avoided a default by making a last minute payment on its outstanding debt. The Government Development Bank made a $355m (£235m) payment that was due to creditors on Tuesday. Despite the move the territory is struggling to find money for government services and future debt payments. The Governor said the territory is facing a situation where it must decide between defaulting- failing to make the payments on its debt- or cutting public services. Though Puerto Rico is a territory of the US it is not entitled to restructure its debt in the same way that state and city governments are. Representatives from Puerto Rico - including the Governor - have been making the case that the island should be allowed to undertake the same process Detroit used when it faced bankruptcy.

Puerto Rico economy: Government defaults on bond payment
04 Aug 2015
Puerto Rico has confirmed that it failed to make a debt payment at the weekend, in the latest sign of the economic crisis in the US territory. The government said it did not have the funds available to pay more than $50m (£32m) due on bonds. Puerto Rico's governor said in June that the island's debts of more than $70bn were unpayable and that its finances needed restructuring. Economists say that Puerto Rico's financial woes run deep and will take years to sort out .

Puerto Rico has $72bn (£46bn) of public debt. That makes it by far the most indebted territory or state per capita in the United States. Unemployment is at almost 14% - more than double the national average - and over the last decade there has been little or no growth, resulting in the economy teetering on the brink of oblivion.  The island has been losing 1% (around 30,000 people) a year to Florida and other parts of the US. And it is mainly the economically active young who are leaving.