AFL-CIO Report: Santander bank exec looted Puerto Rico’s infrastructure fund
A key question all Puerto Ricans must ask – should banks like Santander be held accountable for their role in Puerto Rico’s debt crisis? |

WASHINGTON, D.C. — Amid rallies by community members in Puerto Rico and Boston outside Santander banks, the AFL-CIO released a new report detailing how former Santander executive Carlos M. Garcia diverted a $1 billion fund dedicated to essential water and sewer projects into a series of financial transactions that ultimately pushed the Government Development Bank (GDB) into insolvency.

According to the report, while Garcia looted the infrastructure fund to support the issuance of billions in GDB notes and sales tax-backed bonds (known by Spanish acronym COFINA), his former employer, Santander, made millions as an underwriter.

“Carlos Garcia’s reliance on constitutionally dubious COFINA capital appreciation bonds as the fiscal solution to Puerto Rico’s debt crisis when he ran the GDB put all Puerto Ricans at risk. Garcia should not be allowed to mortgage our future to the banks again like he did in 2009,” said Jose “Lole” Rodriguez Baez, President of the Puerto Rico Federation of Labor, AFL-CIO. “Banks like Garcia’s former employer Santander that helped drive a mountain of bad debt deals for Puerto Rico should be paying us back for the all the money they took from us, not the other way around.”

Key findings from the report authored by the Puerto Rico Federation of Labor in partnership with the Hedge Clippers campaign and the Committee for Better Banks found:

  • As a private and public bank executive Garcia used a revolving door between Santander and the GDB that created conflicts of interest. These compromise his ability to implement a fair fiscal program that addresses the humanitarian needs of the Puerto Rican people as a Junta member and raise questions about the legitimacy of Puerto Rico’s debt.
  • In one of his first moves at the GDB, Garcia used the $1 billion infrastructure fund to recapitalize the GDB, pay bondholders and cover deficits. A later transaction in 2011 left the infrastructure and pension fund with toxic COFINA capital appreciation bonds that are unlikely to be repaid.
  • Santander is one of the largest COFINA bondholders petitioning the Junta to not forgive Puerto Rico of its toxic debts. Garcia testified on Capitol Hill in 2016 and appeared to, like Santander, support the constitutionality and segregation of COFINA bond obligations and the use of Puerto Rican’s sales tax to pay them back.
  • Garcia’s failed formula of prioritizing payment to Wall Street creditors, cutting public spending, and allowing the private sector control of critical public programs didn’t work for Puerto Rico between 2009-2011 and will not work today. Puerto Rico needs direct stimulus, which is unlikely unless banks like Santander and executives like Carlos Garcia are held accountable for their role in helping drown the island in unpayable public debt.

Local labor and community leaders have called for Garcia to resign from his current position on the PROMESA Board, saying Garcia’s conflicts of interest raise troubling questions about whether the very individuals involved in creating and profiting off of the debt should be allowed to insist that others must now pay it off.


Carolyn Bobb
Carolyn Bobb

Carolyn Bobb is Press Secretary at AFL-CIO.