bankruptcy

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Four Puerto Ricans Named to Island Fiscal Oversight Board

promesa board
The four Puerto Rican members of Puerto Rico’s fiscal oversight board (from left) Ana Matosantos, Carlos M. García, José Ramón González and José Carrión.

The seven members of the fiscal oversight board that will run Puerto Rico’s affairs were announced this week, and four are  Puerto Rican.

The board – officially known as the Financial Oversight and Management Board for Puerto Rico – comprises four Republicans and three Democrats. They are the unelected people who will run Puerto Rico’s affairs for the next five years or so as they attempt to untangle the island’s $72 billion debt problem.

“These officials have the breadth and depth of knowledge that is needed to tackle this complex challenge and put the future of the Puerto Rican people first,” Obama said in a press release.

Rep. Luis Gutiérrez of Chicago.
Rep. Luis Gutiérrez of Chicago 

In a letter to board members, Chicago Congressman Luis Gutiérrez, who is Puerto Rican and an opponent of the fiscal board, asked each “to make a public commitment to the Puerto Rican people that you will conduct your work on the control board transparently and in the mother tongue of the people who will be deeply impacted for years to come by your decisions.”

In a surprise to many people – and a nod to island political sensibilities – four of the  board members are Puerto Rican, all with banking, finance, equity fund or bankruptcy experience. But Gutiérrez declared no faith in the move.

“Just because many of the members of the Junta de Control are Puerto Rican does not inspire trust in Puerto Rico, because some of the worst injustices committed against the Puerto Rican people in recent years have come from officials who are Puerto Ricans themselves,” he wrote.

Here are the board members:

  • Andrew G. Biggs – A resident scholar at the American Enterprise Institute and an expert on Social Security. (Republican)
  • Jose B. Carrión III – President and principal partner of HUB International CLC, LLC, insurance brokers.  Carrión also has experience in workers’ compensation. (Republican and Puerto Rican)
  • Carlos M. García – Former president of the Government Development Bank of Puerto Rico, the “bank” that helps government agencies, municipalities and public corporations obtain financing and which itself is now broke. He also was affiliated with Santander Holdings, the Spanish banking giant. (Republican and Puerto Rican)
  • Arthur J. González – Senior fellow at New York University School of Law,  formerly a judge on the U.S. Bankruptcy Court for the Southern District of New York and New York school teacher. (Democrat)
  • José Ramón González – CEO and president of the Federal Home Loan Bank of New York with previous ties to Santander and First Boston. (Democrat and Puerto Rican)
  • Ana J. Matosantos – President of Matosantos Consulting and previous budget director of California. She also has health and veteran affairs experience. (Democrat and Puerto Rican)
  • David A. Skeel Jr. –Professor of corporate law at the University of Pennsylvania Law School with experience in reorganization and finance. (Republican)

The fiscal control board not only is expected to establish payment plans to whittle down Puerto Rico’s bond debt but also essentially restructure the economy, which is in the 10th year of an economic recession that has boosted migration levels to the states to historic proportions, particularly Florida.

Big tasks that lie ahead are jumpstarting the private economy, now choked with overregulation; dealing with public underfunded pensions, representing over $40 billion that’s not included in the $72 billion debt tally; a public health crisis that is apart from the Zika virus contamination; and a public education system that has significantly fewer students, prompting school closings.

˜˜Maria Padilla, Editor

Puerto Rico Debt Crisis Enters Critical Phase

San Juan cruise ship
A cruise ship passes through San Juan Bay. Puerto Rico’s finances have become unmoored. / PR Tourism Co.

Puerto Rico’s debt situation reaches a critical point May 1, the date a $425 million debt payment comes due.  Of course, the island – already spending about one third of its budget to pay debt, at great cost to government services – has no money. It has $72 billion in debt and an economy that will be in recession for 10 years come May, a trend quickly becoming known as “the lost decade.”

Congress has proposed a plan that calls for a financial oversight board, controlled mainly by outsiders, to which Puerto Rico objects, although it looks likely to remain part of the bill since trust between Washington and San Juan has seriously eroded. There are other parts of the bill that Puerto Rico finds objectionable, such as a two-tiered minimum wage (a mostly Republican idea that voters are beginning to see enacted elsewhere, such as Democratic New York).

In recent days the Wall Street Journal and the New York Times each have editorialized in favor of a more tempered proposal, one not so influenced by the hedge funds that bought Puerto Rico bonds at big discount late in the game and are looking for a big payday. Neither newspaper, however, would do away with the financial control board, which would be similar to the one Washington, D.C. labored under for several years. Each paper considers the debt restructuring provision of the bill too lengthy and onerous.

Puerto Rico and Puerto Ricans living stateside have been lobbying for extension of federal bankruptcy laws to Puerto Rico that would be applicable to certain heavily-indebted agencies (not the entire island, as has been misrepresented).

This is where the Florida connection comes in.

The WSJ warned in its editorial, titled “Puerto Rico on the Brink”: “Republicans can do nothing, watch Puerto Rico default and slide into a deep recession while Democrats exploit the issue. Adiós to Florida’s 29 electoral votes and Marco Rubio ’s Senate seat.” About 1 million Puerto Ricans reside in Florida, nearly rivaling the Cuban population.

Cue the NY Times (“Only Congress Can Rescue Puerto Rico”): “If Congress does not act now, Puerto Rico’s financial crisis could drag on for years. The island’s government would have to cut more public services, and more of the island’s 3.5 million people would seek a better life on the mainland.” Over  112,000 Puerto Ricans migrated to the states from the island in the first 10 months of 2015.

Stay tuned.

˜˜María Padilla, Editor

Another Record Migration Year for Puerto Rico

The San Juan airport. / photo PR Tourism Co.
The San Juan airport, also known as the Luis Muñoz Marín International Airport. / photo PR Tourism Co.

NEW  figures point to another year of record migration from Puerto Rico to the United States in 2015. In the first 10 months of 2015 about 112,500 more people left the island than arrived in Puerto Rico, according to a recent report by Ricardo Cortés Chico in El Nuevo Día, Puerto Rico’s main newspaper.

The figures do not include the last two months of 2015, but even so they already top the 84,000 people who reportedly left the island in all of  2014,  reflecting a stagnant economy and government belt tightening in order to make payments on $72 billion in debt.

The people movement – based on the passenger traffic through the island’s principal airports in San Juan, Aguadilla and Ponce – is believed to be an indicator of migration.

The 112,500 outmigration would indicate that more than 11,000 people are leaving the island each month.

The 2015 migration also equals the entire population of some island towns – combined. The exodus “would be comparable to the nearly complete disappearance of the populations of  Arecibo and Cataño,”  Cortés Chico wrote.

Puerto Rico has reported more outmigration than immigration since 2006, considered the start of an ongoing economic recession.  In fact, the long recession will hit 10 years in May. But beginning in 2011, about 50,000 or more people have left the island each year, accounting for a conservative outmigration of 250,000 in that five-year period, based on Pew Hispanic Research data.  El Nuevo Día‘s report is based on data from the federal Bureau of Transportation Statistics.

Florida is the No. 1 destination for outbound Puerto Ricans, surpassing the traditional Puerto Rican migrant center of New York. In fact, the Florida now counts over 1 million Puerto Ricans, more than any other state, thanks also to the migration of Puerto Ricans from the Mid Atlantic corridor to the Sunshine State. Central Florida has the highest concentration of Puerto Ricans in the state.

PR outmigration 2005- 2014
From January through October 2015, another 112,500 people are reported to have left Puerto Rico for the states. / Pew Hispanic Research 

Puerto Rico continues to negotiate payment of its $72 billion debt with creditors as well as Congress,  where the island is pushing to be included under federal bankruptcy laws. Congress, however, is intent on creating a financial control board to oversee the island’s financial affairs.