At a time as painful as this one, with the world experiencing a pandemic of such magnitude, it’s worth remembering that Puerto Rico is still in a worse off situation than many other jurisdictions. There is an entire generation on the island that only knows the word “crisis.” These crises include energy, school, health, financial, economic, political, criminal, and civic, among many others that continue to add up to an increasingly long list. As if all this wasn’t enough, there are also disasters that are not man-made. These include two hurricanes, earthquakes, droughts, and now COVID-19, all of which have been layered one on top of the other in less than three years.
Perhaps this is the reason why it’s difficult for us to remember that, just four years ago, Puerto Rico was already facing a series of challenges that seemed insurmountable. By 2015, the alarms went off regarding a government that was running out of cash, not only of that available to pay its obligations but also of its capacity to offer basic services to its residents. It’s also important to remember that before PROMESA was enacted, Puerto Rico did not have the legal ability to find its way out of the fiscal abyss. Puerto Rico lost its legal standing in 1984 when the United States Congress excluded it from the U.S. Bankruptcy Code. Despite the island’s attempt to create its own restructuring law in 2014, better known as the “Quiebra Criolla”, it was the federal government again, this time the U.S. Supreme Court, that put an end to that local decree in 2016.
Hence, PROMESA was conceived to fill the legal vacuum of a Puerto Rico that did not have a framework to refinance its debts. Debts that, in the event of non-payment, would spur a windfall of litigation. But there was a catch. In order to declare bankruptcy, there would be a very important pre-condition: it would only be allowed to do so under the purview of a strong fiscal control board with ample powers to influence all fiscal matters.
Since then, a lot has happened. Today, four of the seven original members of the board are stepping down, and they leave behind a bankruptcy process that is still unbaked, on top of an austerity agenda and government consolidation and privatization efforts that, until now, have not borne fruit. Further, they leave behind a series of restructuring agreements that favor bondholders, and which will most likely not be sustainable in the long run.
Now that the Board will be led by a new cast of actors, it seems necessary to reiterate that PROMESA and its creator, the federal government, have fallen short when it comes to addressing the challenges that Puerto Rico has been going through for many years. It seems necessary to remember that in 2016 the federal government only intervened to provide Puerto Rico with bankruptcy capacity, but not with the tools needed to move the economy. It seems necessary to remember that Puerto Rico was largely unheard while PROMESA was being designed, especially because bondholders successfully persuaded Congress that Puerto Rico was not to be trusted. And it seems necessary to remember that Puerto Rico, as always, became a political football, with the Democrats opposed to the imposition of a fiscal board, and the Republicans refusing to support access to bankruptcy without a strong fiscal control board.
Four years later, PROMESA’s shortcomings are evident. They were since its inception. It’s impossible to pretend that the legal shield provided by PROMESA and a fiscal control board that has been keen on prescribing austerity, would enable, as if by magic, economic growth. That is without taking into account the millions of dollars spent in payments to consultants and lawyers, that could well have been invested in local and permanent hiring, and thus play a part in our economic stability. It’s no coincidence that the future of Puerto Rico continues to be so uncertain and that the fiscal control board’s approval is scarce today.
The federal government has to assume responsibilities that go far beyond addressing Puerto Rico’s unsustainable debt. For decades Puerto Rico has been haunted by enormous poverty and negative economic growth. The federal government only steps in when there is no other way out, when the island is practically on the verge of collapse; and yet, even when they do, it’s insufficient, temporary, and usually has many strings attached. The desire to punish us does not provide room for growth, and far less so to respond to great disasters – such as the pandemic – and many other crises that will inevitably become more catastrophic and frequent with global warming, including hurricanes, droughts, floods, heatwaves, and coastal erosions.
It has long been proven that Puerto Rico has a notable disadvantage in relation to the rest of the United States since it has little or no access to a wide range of federal programs proven to fight poverty and promote economic development. For what it’s worth, Congress has passed a series of legislative patchwork for the island to access certain aid, but even then it has been temporary and limited. PROMESA is no exception.
It’s fundamental that several laws and regulations be amended to include Puerto Rico in federal programs it currently lacks access to. If the pandemic has shown us anything, it is that it’s investments -not cuts- in public services and infrastructure what allow countries and governments to operate effectively during times of crisis. The hurricanes that struck Puerto Rico in 2017 decimated Puerto Rico’s ability to repay debts. With the earthquakes and pandemic of 2020, there is even less room to maneuver.
The house must be in order before considering any debt settlement. To do so, Puerto Rico needs to have a robust economic plan, good leadership in its government to implement such a plan, greater transparency and accountability, and a genuine commitment to listen to civic society. The island needs a radical transformation. Empty promises, be it through perfunctory laws or campaign slogans, will not suffice.
The Spanish version of this column was originally published in El Nuevo Día on October 25, 2020.