Sunday, September 22, 2019

Puerto Rico: Radical Transparency for Economic Recovery

By on July 11, 2019

Editor’s note: The following was first published in the July 11-17, 2019, issue of Caribbean Business.

The past few weeks have been very difficult for Puerto Rico. Widespread allegations of corruption have been levied at the island’s Government. The allegations—under investigation by the FBI and other Federal and U.S. State agencies—come at a terrible time. They reinforce an unfortunate bipartisan perception in Washington that the island government has been unable to root out a corruption problem decades in the making.

The island is still reeling from the impact of Hurricane Maria almost two years past. Billions in federal recovery funding, crucial for meeting economic recovery goals, have yet to be released, in part because of concerns on how the funding will eventually be used. Puerto Rico still desperately needs funding for widespread repair of critical infrastructure affected by years of neglect and hurricane damage. But the federal government is unable to bear the full cost, and thus expects private capital to have a substantial role. These private investors are understandably reluctant to invest in an island mired in federal investigations without the backstop of the federal government. Puerto Rico is in an endless hold, where federal lack of trust in the local government prevents the disbursement of recovery resources that will unlock the private investment that the U.S. citizens in Puerto Rico desperately need.

The only solution is Radical Transparency for Puerto Rico. During recent congressional testimony, I addressed one transparency initiative in particular: the creation of an Office of a Federal Coordinator for Recovery for Puerto Rico to speed up disbursement of recovery funds. A growing bipartisan group of us—public officials, investors, developers, federal executives, lawmakers—have brought this option to the U.S. Congress, the U.S. Senate, HUD (the U.S. Department of Housing & Urban Development) and other federal agencies. The concept is simple: Anytime the government of Puerto Rico considers projects funded with federal recovery funds, the federal government has a senior representative at the table to fully understand how these funds are awarded. Nothing more, and nothing less.

The Federal Coordinator is not another bureaucratic step—it is a catalyst, with visibility deep into P.R.’s procurement process, determining whether federal funds are allocated appropriately and transparently to deserving stakeholders. If the government of Puerto Rico takes active steps to find and expose corruption, the federal coordinator would act as an advocate, reporting that information to the federal government, external stakeholders, business leaders, media and capital providers. Likewise, if the federal coordinator discovers that contract awards are less than fully transparent, the office would again report such activity to federal agencies, the Senate, Congress, the media and capital providers. It would be up to those stakeholders to apply corrective action. This federal coordinator would work closely with the Financial Oversight & Management Board (FOMB) and the federal agencies providing recovery funds for Puerto Rico. Implementing this “sunlight pressure”—a concept welcomed by private citizens and the vast majority of P.R. government employees—is a necessary solution for the island’s problems.

As Machiavelli and Churchill correctly said: “Never waste the opportunity afforded by a good crisis.” History has provided Gov. Rosselló the perfect opportunity to regain the trust of the federal government by unconditionally “opening the books” of the government’s procurement processes, applying sunlight pressure to historically opaque, shadow processes that have existed for decades. The governor can welcome, with open arms, full federal overwatch of all recovery funds for the island. Everyone knows this will not be easy, but it will be the right thing to do. In doing so, we can still create the bright economic future that all of Puerto Rico deserves.

—Noel Zamot is the president of Atabey Group, an advisory firm focused on ethical investment in emerging markets. He is a son of Puerto Rico, a former business executive, retired Air Force colonel and combat veteran. He previously served as the Revitalization Coordinator for the Financial Oversight & Management Board for Puerto Rico. He has twice testified before Congress on rebuilding the island’s power grid, and the need for widespread structural reform of the Government of Puerto Rico.

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