Slate Money: The Puerto Rico Edition – Episode Summary

Date: April 13, 2019
Host: Felix Salmon (Axios)
Co-hosts: Emily Peck (HuffPost), Anna Shymansky
Special Guest: Natalie Jaresko (Executive Director, Financial Oversight and Management Board for Puerto Rico; Former Minister of Finance, Ukraine)

Overview

In this special edition of Slate Money, Felix Salmon and co-hosts Emily Peck and Anna Shymansky are joined by Natalie Jaresko to discuss the business, financial, and structural crises in Puerto Rico. Drawing on Jaresko’s extraordinary international experience—from managing Ukraine’s finances during war and revolution to overseeing Puerto Rico’s post-hurricane recovery—the episode explores the complexities of debt restructuring, reform, and the daunting realities of rebuilding in the face of crisis.

Key Discussion Points & Insights

1. Natalie Jaresko’s Path to International Finance Leadership

• Background & Personal Journey
  Jaresko details her upbringing as the child of immigrants in suburban Chicago, her education in accounting and political science, and her move from the U.S. State Department to prominent international financial roles.

  “My father equated government with communism... I studied political science behind his back.” (02:05 – 04:00)

• From Ukraine to Puerto Rico
  She recounts moving to Ukraine as chief economist for the U.S. Embassy post-Soviet Union, moving into private equity (Horizon Capital), and, after the 2014 revolution, being asked to serve as Ukraine’s Minister of Finance.

  “They offered me Ukrainian citizenship, and I took the job on December 2, 2014.” (08:05)

2. Debt: Use, Abuse, and Restructuring

• Philosophy on Debt
  Jaresko distinguishes productive debt from misused debt, both in national and personal contexts.

  “Debt can promote growth, and debt can be very positive... It’s when it’s used to finance operating deficits that it becomes inappropriate.” (09:31)

• Ukraine’s Debt Crisis
  Upon taking office post-revolution, she inherited catastrophic finances and recounts IMF-led restructuring needs:

  “…there was less than a month’s worth of reserves in the central bank… a free fall off the financial cliff, fiscal cliff.” (07:13)
  “The IMF defined our economic options... Out of the $40 billion gap, $15 billion had to come from the private sector.” (12:14)

• Why Not Just Default?
  The group debates the “why not pay nothing” argument:

  “Markets respect those who respect contracts... Not paying anything, I think, is extremely harmful.” (11:14)
  Anna adds:
  “When you have friendlier restructurings, you have a much quicker return to growth.” (12:42)

3. Enacting Reform: Austerity, Ownership, Rule of Law

• On Austerity & Reform
  Jaresko rejects the “austerity” label, emphasizing the need for hard fiscal choices and designing programs for the most in need.

  “The choice literally becomes... you’re gonna tell [the press] you’re refusing your 1.5% cut for the soldiers on the front....” (14:14)

• Program Complexity in Ukraine
  She describes the mountain of reforms and conditions imposed by multiple international actors—including the IMF, US, and EU—many of which focused not on cuts but on market-oriented change (e.g., gas price liberalization).

  “We increased prices 400%. Can you imagine what that looks like to people?” (16:40)

• Rule of Law: Ukraine vs Puerto Rico
  Jaresko compares fragile, still-developing Ukrainian legal systems with the U.S.-modeled legal foundation in Puerto Rico.

  “Puerto Rico is blessed with US federal court systems... Ukraine’s court system is only now beginning reform.” (18:19)

4. Oversight and Collaboration in Puerto Rico

• Jaresko’s Role
  Now on the “other side” (as the oversight entity), she negotiates fiscal plans and reforms with the Puerto Rican government rather than simply receiving external conditions as in Ukraine.

  “It is a collaboration and a negotiation on what the spending envelope should be and how that spending should occur.” (19:48)

• Transparency & Fiscal Control
  Emphasis on making spending more transparent and outcome-oriented, not solely increasing or decreasing budget figures.

  “Maybe we should re-look at how we’re spending the money... Maybe more money should go to teachers or nurses...” (26:54 – 28:37)

5. Sustainability, Demographics, and Long-Term Economic Health

• Cofina Debt and Population Decline
  Discussion of the sustainability of restructured sales-tax-backed debt versus the island’s shrinking population.

  “The Kofina debt restructuring... is and was sustainable as done, based on what the demographic projections show...” (23:23)

• Structural Reforms as Essential
  Jaresko reinforces that debt deals and budgets alone can’t revive Puerto Rico—jobs, public safety, education, and health are the true levers to stanch outmigration and restore growth.

  “You could balance the budget, restructure the debt—even get rid of it. That doesn’t make this economy competitive.” (25:12)

• PROMESA and Limitations
  The PROMESA law focuses on debt and budgets, not explicitly on economic growth or competitiveness.

6. Hurricane Maria: Catastrophe and Opportunity

• Scale of Destruction
  Jaresko describes Hurricane Maria as “the worst thing I’ve ever seen,” fundamentally distinct even from war, with every meter of the island affected.

  “When there’s no water on day three, you can’t buy water... This was an extraordinary devastation and no one could have been ready for it.” (31:48)

• Federal Funding ‘Windfall’
  Paradoxically, disaster aid and insurance constitute a massive, multi-year fiscal stimulus. If used well, this is an opportunity to modernize infrastructure and create growth, but the effect is temporary.

  “There's going to be a 10 to 15 year period where Puerto Rico’s going to receive the equivalent of one times GNP...” (31:48)
  “The greater silver lining... $80-90 billion could build a 21st century infrastructure in Puerto Rico. If used well...” (33:00)

7. Puerto Rico’s Electricity Grid: Repair, Resiliency, and Privatization

• Transitioning Power (PREPA)
  Rebuilding aims for a grid that is resilient (ready for future hurricanes), cleaner, and less expensive. The model is mixed: generation is privatized, while the grid itself is publicly owned but privately managed.

  “The grid will remain publicly owned, but will be privately managed and operated... so rates don’t become even more expensive.” (37:00)

8. On Criticism and Personal Resilience

• Public Criticism in Puerto Rico
  Jaresko contrasts support she received as a reformer in Ukraine with frequent, polarized criticism in Puerto Rico.

  “...we’re getting criticized at the board from both sides... I think we’re probably doing the right thing.” (39:00)
  She stays motivated by tangible progress and individual improvements to people’s lives, such as restitution of police backpay and funding for rape kit analysis.
  “I take solace in fixing some of these problems and helping to create a system that long after the board is gone will make good decisions for the people.” (40:51)

Notable Quotes & Memorable Moments

• On the tough balance of debt and fairness:

  “No, I don't think it's a game of minimizing. You want to do what's sustainable. Look, there is a contract there, and markets respect those who respect contracts...”
  — Natalie Jaresko (11:14)

• On structural reform as the key to long-term prosperity:

  “You could balance the budget and you could restructure the debt. You could even get rid of the debt. And that doesn't make this economy competitive.”
  — Natalie Jaresko (25:12)

• On the difficulty of reform in a crisis:

  “If you have to start making those [budget] choices, you have to focus on outcomes... it's how you spend the money just as much as it is how much you have to spend.”
  — Natalie Jaresko (28:54)

• On the opportunity presented by disaster aid:

  “If used well, $80-90 billion could build a 21st century infrastructure in Puerto Rico... There is a small silver lining in the fiscal stimulus, but it's temporary.”
  — Natalie Jaresko (33:00)

• On her motivation despite criticism:

  “I take solace in fixing some of these problems and helping to create a system that long after the board is gone will make good decisions for the people.”
  — Natalie Jaresko (40:51)

Important Timestamps & Segments

• Jaresko's personal background and career arc: 02:05–08:16
• Ukraine’s post-revolution financial collapse and IMF intervention: 07:13–12:30
• On the philosophy of debt restructuring: 09:27–13:44
• Enacting reforms & ‘austerity’ in war conditions: 14:14–17:13
• Comparing rule of law: Ukraine vs. Puerto Rico: 17:41–18:19
• Puerto Rico’s fiscal challenges and demographic decline: 21:14–26:16
• Structural reform, competitiveness, and PROMESA’s limitations: 25:12–29:57
• Impact, aftermath, and opportunity of Hurricane Maria: 30:22–35:25
• Electricity system privatization and grid resiliency: 35:25–38:32
• Addressing criticism and finding meaning in public service: 38:32–41:29

Numbers Round (41:29–44:14)

• Natalie Jaresko: 3.2 million – Puerto Rico’s current population; hopes to maintain/stem decline.
• Emily Peck: 500 million trillion km – Distance to the photographed black hole.
• Anna Shymansky: $34.5 million – Pay for Gregory Garabonts, the highest-paid bank CEO (Axos Financial).
• Felix Salmon: 20 – Percentage point median government debt increase in low income countries since 2013.

Tone & Style

Candid, insightful, and deeply informative—both technical and accessible, with occasional humor and personal anecdotes. The conversation flows naturally while diving deep on policy, finance, and the human stakes of reform.

Summary

Slate Money’s “Puerto Rico Edition” is a masterclass in the intersection of international finance, disaster recovery, and public sector reform. Via Natalie Jaresko’s unique perspective and the thoughtful queries of the hosts, listeners gain a nuanced, practical understanding of Puerto Rico’s fiscal crisis and possible routes forward—tempered by realism, but not devoid of optimism for what structural reforms and effective leadership can accomplish.