Wednesday, July 18, 2018

US Treasury Secretary arrives in Puerto Rico in coming days

By on March 16, 2018

SAN JUAN – U.S. Treasury Secretary Steven Mnuchin will keep the promise he made several weeks ago that he will visit Puerto Rico, when he descends upon the island in the coming days for several meetings with Gov. Ricardo Rosselló and high-level officials in his administration.

Mnuchin’s visit comes at a critical juncture, on the heels of contentious public debate between Rosselló and U.S. Treasury over the disbursement of a Community Disaster Loan (CDL), that the governor has criticized for being tied to conditions and triggers—the island’s liquidity must drop below $800 million—much too onerous and contrary to the spirit of an appropriations bill approved by U.S. Congress in October.

“The visit will take place in the coming days and the secretary will be meeting with the governor, some folks in government and some members of the oversight board,” one source with ties to the Trump administration told Caribbean Business. “We believe the visit will help to manage congressional expectations that Secretary Mnuchin came and sat down, and U.S. Treasury still has a position that if you [U.S. Congress] want us to give money unencumbered to Puerto Rico, you are—under Article IV—authorized to direct us to do that; otherwise we are going to operate under current authority that means that we ‘may’ lend the money and we intend to lend if they [the Rosselló administration] fall under $800 million.”

Puerto Rico governor to Congress: Treasury is hindering access to disaster loan program

In a missive to Congressional leadership at the end of last month, Rosselló took exception to U.S. Treasury’s decision to tie CDL fund disbursement to triggers that stipulate Puerto Rico’s liquidity must drop below an $800 million threshold.

The governor insists that: “Congress acted swiftly in late October to grant the Commonwealth of Puerto Rico immediate access to federal loans through the CDL program to compensate for loss in tax or other revenues, whether temporary or permanent, which imperils the Government’s ability to maintain public services. Despite Congress’ swift actions, the UST [U.S. Treasury] has failed to timely advance the loans and has imposed conditions inconsistent with the CDL program’s very purpose.”

Two sources on Capitol Hill told Caribbean Business that Rosselló is incorrect in his assertions that the Additional Supplemental Appropriations for Disaster Relief Requirements Act enacted Oct. 26 is a mechanism to provide immediate access to those funds.

“I think there is a belief in Puerto Rico that U.S. Congress and the Federal government are all powerful and will say what needs to be done in Puerto Rico. And the truth is much more nuanced than that,” said one of the sources with ties to the administration.

“I believe that the [Trump] administration will do whatever Congress directs them to do and, to date, Congress has given the authority to the administration and the Treasury Department, in conjunction with the Homeland Security Department, to consider providing loans to Puerto Rico that will total up to $4.7 billion. Under rules that they will come up with, meaning Treasury and Homeland Security—and it did not direct them to do that…it said, ‘you may do that,’” the source added.

The law actually stipulates: “That notwithstanding any other provision of law, the Secretary of Homeland Security, in consultation with the Secretary of the Treasury, shall determine the terms, conditions, eligible uses, and timing and amount of Federal disbursements of loans issued to a territory or possession, and instrumentalities and local governments thereof….”

Gov. Ricardo Rosselló and U.S. Treasury Secretary Steven Mnuchin met in Washington at the end of February. (Courtesy)

“In fact, the language in the appropriations bill is very specific—it used to read: ‘shall’ do this and now it says you ‘may’ do this. And it is much more nuanced than that,” the second Trump administration source added.

Treasury later made it clear that Puerto Rico would only see $2 billion from that appropriation.

The administration sources told Caribbean Business that the secretary is committed to following the law as written, where Congress provided authority to loan money to Puerto Rico, should Puerto Rico need money. “And there is no wavering in the Trump administration on that. And there is no wavering in Congress, whether Republicans or Democrats—should Puerto Rico need the money, the federal government will be there for its fellow Americans.”

Another source on the Hill with ties to the GOP noted that “the government of Puerto Rico has missed on their own forecasts as to when it is going to run out of money or not. And to date, since the hurricane [Maria] the government of Puerto Rico has not run out of money so there has never been a need for Treasury and the Department of Homeland Security to step in.”

U.S. Treasury Disinclined to Yield on CDL Issue

A Republican source on Capitol Hill told this newspaper that members of Congress, Democrats and Republicans alike, view the governor’s letter as a disingenuous attempt to inject fear on Americans, “when he knows better and he has been told directly that there will never be a time when Puerto Rico is not going to be able to pay its bills because Congress and the administration have already agreed that they are going to do that.

“You must never forget that Article IV of the U.S. Constitution gives Congress plenary power over the territories and Congress relies on timely and accurate information from the governor and from the [island’s fiscal] oversight board.”

When approved in October, the Appropriations Act authorized $36.5 billion in disaster relief funds to support recovery efforts in the aftermath of hurricanes Harvey, Irma and Maria. The disaster relief package included approximately $4.9 billion in loans under the CDL program for Florida, Texas, Puerto Rico, and the U.S. Virgin Islands.

The Associated Press reports that $23 billion in direct aid has been appropriated and the Federal Emergency Management Agency has spent about $6 billion for Puerto Rico since the hurricane, but billions of dollars are pending, including $1.5 billion in congressionally appropriated money that was promised last month in community development block grants for the island’s Housing Department.

Mnuchin reportedly will be participating in G-20 talks in Buenos Aires on Monday and Tuesday, and head to Santiago, Chile, afterward.

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