Saturday, August 18, 2018

[Editorial] Hold or fold?

By on May 29, 2018

Editor’s note: This editorial originally appeared in the May 24-30, 2018, issue of Caribbean Business.

Poker is commonly described as a game of cards that combines gambling, strategy and thespian skill. The players bet according to the hands they hold—those who hold a really great hand, up the ante with their bets.

This was explained to me by a friend named Wiki: “With the exception of initial forced bets, money is only placed into the pot voluntarily by a player who either believes the bet has positive expected value or is trying to bluff other players for various strategic reasons. If all but one player folds in any round, the remaining player collects the pot without being required to reveal their hand. If more than one player remains in contention after the final betting round, a showdown takes place where the hands are revealed, and the player with the winning hand takes the pot.”

In truth, Poker is much like the games unfolding in negotiations, or lack thereof, between Puerto Rico’s various creditor constituencies under the Puerto Rico Oversight, Management & Economic Stability Act (Promesa). At the Promesa table, creditor constituents who believe the hands they hold to be supreme—whether they are constitutionally guaranteed General Obligation credits or Cofina (Sales Tax Financing Corp.) bonds backed by the sales & use tax (IVU by its Spanish acronym)—place their claims in court hoping mightily they will prevail in the ultimate showdown.

Yes, in Promesa, as in Poker, players also call each other’s bluffs—as happened most recently when Gov. Ricardo Rosselló’s administration folded on their refusal to strike down Act 80. The repeal of Act 80 turns the island into an “At Will” employment jurisdiction, in which workers have few protections against wrongful dismissal and lose stipulations for guaranteed severance pay. In softening his stance, Gov. Rosselló is now seemingly aligned with the territorial control board in the repeal of Act 80 as a cornerstone measure in labor reform, which the territorial control board considers sacred for job creation. Veremos.

You see, there is a showdown ahead with another player at the table, Senate President Thomas Rivera Schatz, who is holding firm in his stance that he will not fold on this one because “it is a bad idea, no matter where it comes from.”

Rivera Schatz’s stance as the caped crusader for Puerto Rico’s workers rings a bit hollow though—as this is the same Senate President who under then-Gov. Luis Fortuño helped pass Law 7 in 2009 to slash public jobs—pescando votos.

His public remarks run contrary to those made by FOMB Executive Director Natalie Jaresko who, during a roundtable discussion with journalists that included this newspaper, said the governor told her the Senate President is on board with the elimination of Act 80. Someone is not being entirely truthful, but the truth is always the first casualty as pertains to debt restructuring.

Now, Rosselló is telling all who will listen that it is of paramount importance lawmakers pass his budget boilerplate to keep the board from imposing its own version. It seems the governor’s plea is falling on deaf ears because the leadership in both chambers of Puerto Rico’s legislative assembly remain steadfast in their lawmaking for votes. In so doing, they pretend Promesa did not suspend Puerto Rico’s Republican form of government.

Sadly, if Act 80 is the only thing accomplished in the two years after Promesa was passed, Puerto Rico will be far removed from the marks it was to meet when this odyssey began. In a nutshell, Promesa and its enabled board was to have made swift work of balanced budgets. Has it been lost on everyone that the budget does not include the furlough of government workers that these players so vehemently fought over several months ago. The budget also reduces its surplus by some $650 million over six years.

This is not exactly what the Representatives on the Hill had in mind when they invested all their political chips in passing Promesa nearly two years ago. Say the solons on the Hill, Promesa thus far has failed to produce any of the results they envisioned.

At this writing, for instance, Senate Finance Committee Chairman Orrin Hatch (R-Utah) lamented that Promesa “had failed to prevent a tidal wave of litigation as was promised,” and chastised the Rosselló administration for remaining “largely opaque.”

Hatch, too, speaks with a forked tongue, as his remarks came on the heels of the presentation of the Puerto Rico Empowerment Act of 2018 (S. 2873), legislation intended to provide the island with tax relief he says could total as much as $3.5 billion. The true impact of that funding will be known when he finally scores the bill and the offsets in the language are defined. The funding is merely life support in the grander scheme of things—not two nickels to rub together in an economy that needs to create tens of thousands of jobs.

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