The article is based on two false premises. First, it appeals to the idea that we should give Puerto Rico a pass because it’s poor. But Puerto Rico is not poor. Its GDP per capita is above Italy, and right below Spain and New Zealand.[1] It’s not a third world country where you can say there is a humanitarian basis why they shouldn’t have to pay back money they borrowed.

The other point in the article is simply that these funds are not the original debt holders. But what difference does that make? If your neighbor owes you $100,000, and refuses to pay, I might buy the debt at $50,000 in return for the hassle of collecting it. Is there something wrong with that? Should the debt be forgiven merely because of that?

The article overlooks that legal rules alter primary behavior. People alter their decisions about lending based on what might happen, legally, if the investment goes sideways. The original lenders, who put up money that allows Puerto Rico to pay for various things, did so within a legal regime where it knew Puerto Rico couldn’t declare bankruptcy. They might not have lent the money at all otherwise. Moreover, in general lenders make lending decisions knowing that they can sell bad debt to collection firms or third parties. Eliminating the legal rights of those third parties alters the lending decisions of the primary actors going forward.

[1] I’d go so far as to say that it’s doubtful the author would appeal to Puerto Rico’s poverty if this was a debt owed by Italy, because the reader wouldn’t be as sympathetic. Which frankly is not a very nice thing, viewing Puerto Rican differently than Europeans who are identically situated economically.