Congress is likely to establish a financial control board in Puerto Rico
Last week, the possibility of a financial control board for Puerto Rico was the main focus of debate at the House Committee on Natural Resources’ Subcommittee on Indian, Insular and Alaska Affairs’ hearing. Prompted by the financial crisis in the US territory, the subcommittee heard opinions on how to proceed.
“If we would have done what I wanted to do 15 years ago we would not be in this mess,” said Don Young, the chairman of the Natural Resources Subcommittee, referring to the proposal he gave 15 years ago on making Puerto Rico a state. He went further in his statement saying that Congress neglected Puerto Rico for over 100 years. This statement was emphasized by the Puerto Rican Resident Commissioner Pedro Pierluisi, who said that the root cause to the Puerto Rican migration and economic problems was a result of decades of neglect from D.C, which should have treated it more like a state. For Pierluisi, Puerto Rico should have gotten a better treatment in federal programs, and according to him, it would have been able to overcome these problems. However, he believes the creation of a financial oversight board will be able to make order in Puerto Rico’s finances.
Eric LeCompte, the Executive Director of Jubilee USA network, said that “this is not only a debt crisis, this is a humanitarian crisis.” According to him Puerto Rico is facing a humanitarian crisis that needs to be solved as quickly as possible. Moreover, he emphasized on how the cuts that have been done on public services have affected the livelihood of many Puerto Ricans. For now the data shows that more than 40% of Puerto Ricans live below the poverty line, due to the extension of the different reforms that led to massive layoffs. For LeCompte the solution to the problem would be Chapter 9. However he agrees the board will be helpful in achieving this, with more responsibility from the government and more participation of local people in economic decision making. Others like Moers Mayers, from Kramer Levin Naftalis & Frankel LLP, which is representing holders of more than $1.6 billion in bonds issued by the Puerto Rico Electric Power Authority, believe in a different approach. According to Moers, bondholders should be able to vote on the restructuring plan, because to them, Chapter 9 is used “to crash bondholders.” Moers Mayers insisted instead on a creation of a D.C-like control board and economic reforms, which according to him will help the current Puerto Rico situation by making cuts and reducing the deficit,in order to put the economy back on its feet.
With the situation in Puerto Rico only deteriorating with time, and a looming end-of-March deadline, expect Congress to follow through on the idea of a financial control board.