Introduction
CNE has analyzed Puerto Ricoā€™s economic and fiscal situation for more than a decade. During that period, we have carefully surveyed and considered the socioeconomic context and the rapidly deteriorating financial position of the island, and attempted to address some of the most pressing problems. Through the publication of a series of research papers and policy briefs, we have proposed what we believe are thoughtful and actionable policy recommendations to multiple stakeholders, both within and beyond Puerto Rico. More recently, given the severity of the current situation we have engaged in advocacy and outreach efforts in Washington, D.C.
As the situation in Puerto Rico reached a critical point, CNE developed the following principles to use as benchmarks for evaluating H.R. 5278 or any other proposal regarding federal oversight of Puerto Ricoā€™s finances and the process for restructuring its unsustainable public debt. These principles are:
1. Any federally appointed oversight board has to respect existing Puerto Rican political institutions and processes.
2. The ultimate responsibility and decision-making authority regarding taxation and public expenditures must rest with Puerto Ricoā€™s democratically elected officials, who must act in accordance with transparency standards and be held publicly accountable to their constituents.
3. Any proposal to restructure Puerto Ricoā€™s debt must treat both creditors and debtors fairly and equitably and provide, ex ante, a clear and feasible path for actually delivering meaningful debt relief.
4. No classes of Puerto Rico debt should be excluded from the restructuring process.
5. New economic growth opportunities will not materialize by themselves even after the implementation of a comprehensive debt restructuring. Therefore, a U.S. House/Senate economic growth task force for Puerto Rico should collaborate with knowledgeable stakeholder groups in the island to develop a long-term economic growth strategy. The design of such a collaborative comprehensive strategy should include short-term measures to spark new investment activity, and medium-term proposals that help rebuild economic institutions, strengthen public governance, and identify strategic investments in particular sectors of the Puerto Rican economy.
6. If Congress is unwilling or unable to act, then it should expressly allow Puerto Rico to legislate its own legal framework to restructure its debt.
We base our analysis of H.R. 5278 within the framework of this set of principles.