Thursday, April 18, 2019

[Editorial] This Debt Is Your Debt

By on March 21, 2019

Nothing is a foregone legal conclusion when it comes to the Puerto Rico Oversight, Management and Economic Stability Act

Editor’s note: The following originally appeared in the March 21 – 27, 2019, issue of Caribbean Business.

If American folk singer Woody Guthrie had been around to witness the restructuring of Puerto Rico’s massive $72 billion debt under the Puerto Rico Oversight, Management & Economic Stability Act (Promesa), the lyrics to his iconic “This Land is Your Land” could very well have been titled: “This Debt is Your Debt.”

The opening lyrics might read something like this:

This debt is your debt, this debt is my debt,
From the boards of Wall St. to the bankrupt island,
From the halls of Congress to the O-board mandates,
This debt was made by you and me.

If politicians were honest, that would be the tune being sung in the hallowed halls of U.S. Congress because there is still plenty concern that decisions pertaining to Promesa will raise the specter once more that Puerto Rico’s towering debt might belong to the sovereign United States. It was a concern prior to the drafting of Promesa as it wound its way to the final text. One U.S. House Natural Resources Committee aide, who is well-acquainted with the Promesa process, told Caribbean Business that concerns over being stuck with the island’s debt load underpinned much of the work that went into providing Puerto Rico with a law that would provide mechanisms for bankruptcy-like proceedings and help the island eventually achieve market access.

The concern over Puerto Rico debt coming to the doorstep of the U.S. Congress was not exclusively a congressional concern. “Well, I would say they are as concerned today as they were during the Obama administration, and the reason I say that is that there is never a wholesale change of people at the federal level from administration to administration,” says Javier Ortiz, who is the executive director of FixPuertoRico.org, an advocacy group dedicated to educating people about Puerto Rico issues. “So, because of that, many of the same folks who were working on the issue during the Obama administration are probably some of the same folks who are working on the issue today.”

Those concerns came to the fore in the case of Altair Global Credit Opportunities v. United States, in which compensation of $3 billion from the United States is sought. Distress traced to language in the decision by Federal Court of Claims Judge Susan Braden, who stipulated: “The court has determined that the Takings Clause claim alleged in the…complaint is not an action against the Oversight Board; instead, it is an action against the United States.”

Many observers on the Hill were fast to downplay the judge’s decision, pointing to the staying of her own opinion and her removal from the case for stating an inclination to find the U.S. government responsible for the bond impairments. Nothing is a foregone legal conclusion when it comes to Promesa.

In effect, Title V, intended to be an engine to expedite critical projects, is now a rudderless section as Revitalization Coordinator Noel Zamot resigned, leaving in limbo some $8 billion in works that had already been given the Good Housekeeping seal of approval. That opened the flank for the director of the Puerto Rico Public-Private Partnerships Authority, Omar Marrero, to downplay the importance of Title V as he touted the importance of the agency he heads in rebuilding a better Puerto Rico. Marrero ignores that Promesa remains in effect.

The truth is hard to find in the harangue between the Rosselló administration and the proconsuls on the O-board because mistrust by the Trump administration reigns supreme. “People talk about the potential for graft or the potential for other less-than-savory activities,” one source on the Hill told Caribbean Business. “So, we could Monday-morning quarterback all day long; meanwhile something needs to happen today. So, what needs to happen today, I think, is a little different because Congress said it needed to be different when they created Promesa.”

The combination of mistrust in the federal realm and the existence of an O-board has people in the Trump administration suggesting that oversight of the tens of billions coming down the pike should be done through the FOMB. “Federal officials, career people, political people, call them what you may, are not familiar, as a whole with the concept of a fourth branch of government that has the ability to set the budget, spending and transparency over those dollars for any jurisdiction. It is a function of people learning to use tools that are already in place. Meanwhile the federal government has dollars that they have to send to Puerto Rico, but they need to do that in a way that is transparent,” the Capitol source added.

Perhaps, the people in the federal realm and those in Puerto Rico who resist the congressional mandate of the fiscal control board have difficulty understanding the concept of a fourth branch of government because our Democracy only has three branches of government. Thus, the sovereign that resides to the north is right to be concerned over $72 billion in debt.

Puerto Rico’s sovereignty issues raise concerns over responsibility for debt load

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