Fas Alzamora Supports Amendments to Moratorium Act
While the House amendments to the law that allows the governor to declare a debt moratorium face an uphill battle in the Senate, Popular Democratic Party Sen. Antonio Fas Alzamora threw his hat behind the bills.
On Monday night, the Puerto Rico House of Representatives passed a bill that would exclude general obligation (GO) and Sales Tax Financing Corp. (Cofina by its Spanish acronym) bonds from the law that allows the governor to declare a debt moratorium.
However, Gov. Alejandro García Padilla immediately advised lawmakers in a statement that he plans to veto the bill if it reaches his desk. “We have been clear in explaining the delicate situation of the country,” he stated.
Popular Democratic Party (PDP) Rep. Rafael “Tatito” Hernández came up with amendments to the recently enacted Puerto Rico Emergency Moratorium & Financial Rehabilitation Act to help save “the reputation and good name of Puerto Rico.”
House Bill 2864 was passed to exclude from the proposed debt moratorium “all bonds and notes outstanding or to be issued that are guaranteed by the full faith and credit of the Commonwealth of Puerto Rico and all bonds and notes outstanding or to be issued that are guaranteed by the securitization of certain revenues of the issuer under a Trust Agreement established for those purposes are excluded from all the provisions set forth herein.” The legislation also protects deposits from the island’s 78 municipalities.
In addition, the House passed another measure, H.B. 2866, which seeks to preserve the stability of local cooperatives, or savings & loans, by adopting some of the dispositions in the Dodd-Frank Wall Street Reform and Consumer Protection Act, which brought about substantial changes to federal financial regulation after the Great Recession. The bill would ensure that deposits by cooperatives be paid first should the GDB be put into receivership, in an effort to protect their deposits
Fas Alzamora said in an interview with Caribbean Business that he agrees with Hernandez’s contention that the government should not include general obligation debt or debt that is sustainable such as Cofina debt, which is guaranteed by the sales and use tax, in the moratorium. He also said he believes the debt that was recently restructured at the Puerto Rico Electric Power Authority should not be part of the debt moratorium.
“I think the government has put the most effort to deal with the fiscal crisis…but I don’t support including the general obligation bonds in the negotiation to restructure debt because it would be in violation of the constitution,” Fas Alzamora said.
General obligations are guaranteed by the good faith and credit of the commonwealth constitution.
He said that including such debt will put Puerto Rico in the position of having a “double discourse” at a time when it is criticizing Congress for wanting to impose a strong fiscal control board to oversee island affairs arguing that it is unconstitutional and undemocratic. “This is bringing the wrong message. We can not say that when we are violating our own constitution,” he said.
Amid allegations that the moratorium law is unconstitutional, PDP Rep. Luis Vega Ramos said a reading of the constituent assembly record showed that assembly members did not include anything in the Constitution about a moratorium because they deemed it an “inherent power of the government” to decide to stop paying the debt in the event of an emergency. The late Justice Secretary Víctor Gutiérrez made the remark in the Constituent Assembly proceeding as he argued that the government does have the power to declare a debt moratorium.