Monday, May 20, 2019

[Editorial] La Promesa de Maria

By on March 15, 2019

Editor’s note: The following originally appeared in the March 14 – 20, 2019, issue of Caribbean Business.

The House Natural Resources Committee is back in town—once again—to scrutinize Puerto Rico’s recovery in the aftermath of the 2017 hurricanes and the effects of austerity measures and debt restructuring under the Puerto Rico Oversight, Management & Economic Stability Act (Promesa). Talk about confounding variables in two perfect storms.

The congressional committee will kick off its Promesa de Maria Jamboree on Friday, March 15, with a Community Listening Session open to the general public, with members of the Financial Oversight & Management Board (FOMB) in tow. Although the listening session is an orchestrated town arena—3-minute turns by those invited—to understand the plight of island residents as Puerto Rico crawls toward frugality in the face of slow-moving disaster-relief funds, the issues surrounding Promesa’s challenges in the realm of austerity are game, too.

The congressional gig is the first in a series of events scheduled for the representatives—Raúl Grijalva (D-Ariz.); Gregorio Kilili Sablan of the Northern Mariana Islands; former committee Chairman Rob Bishop (R-Utah); Nydia Velázquez (D-N.Y.); Darren Soto (D-Fla.) and Puerto Rico Resident Commissioner Jenniffer González (R-Orlando)—who will be on the island March 15-18.

All of this is playing out against the backdrop of a recent decision by the First Circuit Court of Appeals in Boston, which declared that the selection of the members of the FOMB violated the Appointments Clause of the U.S. Constitution. The First Circuit Court decision has been interpreted by members of Gov. Ricardo Rosselló’s administration as evidence of flaws in Promesa that, they say, should lead to amendments.

Although Gov. Rosselló told this newspaper that there is a real fiscal crisis being addressed under Promesa, the FOMB oversteps its bounds in an attempt to run the government. The governor believes language in the law should be changed to explicitly outline that the O-Board “should focus on the Title III bankruptcy issues, the renegotiation of the debt and see how more capital can reach Puerto Rico. It should not attempt to run the government—creating obstacles on a number of matters has been of great detriment for the people of Puerto Rico—and I think it has provoked the failure of the FOMB experiment.”

While there are some people on the Hill who coincide with Rosselló on Promesa’s flaws, he ought not get his hopes up pertaining to amendments coming down the pike any time soon. The true sentiment on the Hill is encapsulated by one committee aide, who told Caribbean Business that there are several options—including an appeal to keep the status quo and a possible renomination of the existing board, thus avoiding a nomination fight.

The third and fourth options were explained with this: “Trump nominates new people—I can see the benefit to that. I think the creditors and a lot of the stakeholders would advocate for that. However, the problem with that is every single one of those who are new are going to face a nomination fight…. That is running against the 90 days very easily. For a White House that has been very hesitant to put its fingers on Promesa, I do not really see them doing that. And then, the fourth one—they don’t do anything, and they just let everything fall apart. In which case, you don’t have an Oversight Board; you have a Title III process that mandates and depends on an Oversight Board existing. So, Title III would kind of go away and Promesa would fail, and so you’re kind of back at an Argentina-like scenario.” All that, after spending $300 million to date on legal fees.

The cover story in this edition on the empowerment of women through the Business Briefcase for Women initiative driven by First Lady Beatriz Rosselló is significant. Although the program is just getting off the ground, importantly, it is underpinned by right-minded thinking to empower people in the creation of jobs and the export of services that can help local businesses grow beyond these shores.

The thinking driving those initiatives is the important thing. Banking on changes to Promesa from a U.S. Congress that sees that law as President Trump’s problem now, probably will not get us anywhere. Better to concentrate on job-creating initiatives and legislation on the Hill—Medicare parity now, for instance, would pump several billion into Puerto Rico’s economy. Changes in tax laws to make Dividend Received Deductions (DRD) extensive to U.S. companies receiving dividends from affiliates in Puerto Rico would make it more attractive for those U.S. companies to invest here. As it stands right now, those U.S. companies receiving dividends from affiliates here do not qualify for deductions on that money, which could be as high as 80 percent.

The congressional delegation would have done well to stay in Washington, D.C., and read about the challenges that board faced in the 1990s. It would help jog their memories to recall that it was not until economic development initiatives were included that the district’s turnaround began. It behooves U.S. Congress to help Puerto Rico become competitive again.

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