A congressional committee unveiled a proposal to address Puerto Rico’s $72 billion debt crisis – a plan that would impose a financial control board over the island, leaving little doubt about who’s in charge – Congress.
The board – with the unlikely name of PROMESA or promise in Spanish – would be appointed by the president but wouldn’t be subject to either the island legislature or the governor, who would be demoted to an ex oficio board member without voting rights. Only one of five board members would be required to reside on the island.
Thus stripped of its autonomy, strapped with mountains of debt it cannot pay and suffering from a 10-year recession, Puerto Rico has hit rock bottom. Naturally, many islanders are furious.
“The establishment of a financial control board would have the effect of amending Law 600, which gave Puerto Rico the right to self government,” wrote lawyer Jaime Picó in El Nuevo Día, the island’s major newspaper. “What’s more, the mere intention to establish a financial control board eliminates all doubt about our colonial status…”.
I confess, however, a limit to my astonishment. For decades hyper partisan Puerto Rico undermined itself via sloppy governance and little financial accountability. It was bound to break badly. Even now, the island cannot produce several years’ worth of financial statements requested by Congress’ Natural Resources Committee, which oversees U.S. territories, stating it needs more time.
In a U.S. Supreme Court case heard last week about whether Puerto Rico agencies or municipalities can seek debt relief via federal bankruptcy – possible up to 1984, after which Congress excluded Puerto Rico from federal bankruptcy law – the lawyer representing bondholders stated that Congress has “always” had a mistrust of Puerto Rico’s finances.
“Congress for a long time has micromanaged Puerto Rico’s debt,” attorney Mathew McGill told the court, explaining why the court ought to reject extending Chapter 9 of the federal bankruptcy code to Puerto Rico.
Congress appears to agree, continuing to misspeak about a “taxpayer bailout.”
“This draft is thoughtful, comprehensive legislation that gives the U.S. territory the tools it needs to deal with its systemic fiscal and budgeting problems — without a taxpayer bailout,” Ryan said in a statement. However, bankruptcy wouldn’t involve taxpayer dollars.
A portion of Puerto Rico’s debt is guaranteed by the island’s constitution, meaning it must be paid or the island would face more lawsuits for nonpayment. Already, nearly one-third of the island’s budget goes to debt payment, a level considered unsustainable.
And so Puerto Rico and its over 3 million people likely will return to a micromanaged financial and political state of affairs not seen on the island since the 1950s.
˜˜Maria Padilla, Editor