[Editorial] No Time for Goldilocks Economics
As the Puerto Rico Oversight, Management & Economic Stability Act’s (Promesa) financial oversight board muddles toward austerity, there is hardly time for Goldilocks Economics—“this one’s too cheap, this one’s too expensive, this one is just right.” That is the feeling of most creditors observing the process who see the calculation of credible numbers moving at a glacial pace.
The frustration is such that some Republicans on the Hill have called board Chairman José Carrión III on the carpet to get numbers and then proceed to enter Title VI to start closing consensual deals. Time to simmer down now; in his defense, Carrión is steering a rather delicate process underpinned by political implications, and if handled incorrectly, could flame fires that would burn the whole house down.
A veteran tech executive, Javier Ortiz, who recently ended a months-long stint as a member of President Trump’s transition team in Washington, D.C., and is very well-acquainted with the issues in the run up to pass Promesa, told Caribbean Business: “Startups are never easy. What people have to keep in mind is that what the Promesa attempts to do has never been done under U.S. law before and there is a process. The expectation that they would be up to speed on day two and be up and running is not reasonable,” he said.
So, board members are still figuring things out—these are not six wise men and a lady who have divine insight into Puerto Rico’s debt crisis. Some of the people on the Hill who helped draft Promesa point to the undemocratic precepts of the control board as a central concern mandating that the board allow the governor to produce credible numbers and a fiscal plan before ordering any action. Yet they call the board territorial—not federal—because some members of Congress are concerned that a conga line of distressed municipalities would come knocking on the door to ask for similar measures.
Still, there are members of the GOP on the Hill who are concerned about the pace and there is a distinct possibility that oversight hearings will be held to gauge the board’s operation. Attempting to rein in the debt owed to some 18 different creditor groups can be a daunting task.
In fact, one creditor tied to the general-obligation (GO) bondholder group who was asked by this newspaper what he thought of the oversight board’s execution, replied, “I’m all for it,” borrowing a classic line by a former Tampa Bay Buccaneers head coach, referring to his team’s terrible play. The GO bondholders are locked in a brutal campaign with Sales Tax Financing Corp. (Cofina by its Spanish acronym) bondholders. The GOs allege that their full faith and credit constitutional rights to be paid first are being violated by Cofina creditors because they are being paid illicitly. Cofina creditors have been paid in full by the Puerto Rico government because their debt is securitized by sales and use tax money that comes into trustee Banco Popular’s coffers.
If they would have their way, GOs would like to see the Cofina credit spigot shut tight; “pay me first, my credit is better than their credit” has become their credo. The oversight board has yet to take a stance on that brouhaha because it has to put its guayabas in a row—or at least try to bring some creditor groups to consensual deals. But again, they are moving with caution as the deadline for Gov. Ricardo Rosselló’s delivery of a fiscal plan has been pushed out to Feb. 28.
Lost in the confluence of so many interests is the virtual nonexistence of economic development measures coming from U.S. Congress.
In 1997, the control board in Washington, D.C., sought amendments to help obtain Medicaid parity and foot the bill for pension liabilities to provide relief. If the same is done for Puerto Rico, will it lead to sustainable economic growth?