Opinion on PROMESA remains divided
As the July 1 deadline for a 2 billion dollar payment to investors approaches for Puerto Rico, opinion on the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), H.R. 5278, remains divided. The latest iteration of the bill provides for an oversight board to renegotiate the country’s debt, provisions to protect creditor and bondholder rights, and measures to prevent taxpayer money being used to “bailout” Puerto Rico. The extent of the control board’s powers and the bill’s lack of accompanying tax reform/economic incentives remain controversial aspects of the bill and the disagreement over the legislation has become quite fierce in recent months.
The severity of the fiscal crisis in Puerto Rico has led many in the U.S to see PROMESA as the only viable way forward for the commonwealth. In an article in the NY Daily News, US Treasury secretary Jacob Lew writes that there is no viable alternative to the bill, and that it is imperative it gets passed. House speaker Paul Ryan is leading the efforts to get the bill through Congress, citing the potential chaos in the American bond market that could result from the territory not fulfilling its obligations. The bill has accumulated conservative support from the likes of columnist George Will and Robert J. McClure of the James Madison Institute alongside other Republican voices. Former Republican state senator from Utah Dan Lijenquist called Governor Garcia Padilla’s budget proposal for the 2017 fiscal year and his cuts in planned 2017 bond payments “despicable and predictable.” In his view, the bill would reestablish the rights of the creditors through its control board. Grover Norquist, President of Americans for Tax Reform, and Tom Schatz, president of Citizens Against Government Waste share a similar opinion. They view PROMESA as the only way to avoid a taxpayer bailout of Puerto Rico and laud the debt restructuring board. However, Norquist and Schatz lament the lost opportunity to include pro-growth tax reform in the legislative package.
The bill has received backlash from Democratic congressman. Prominent democratic representative Luis Gutierrez of Illinois told his colleagues in congress on May 24, “The priorities in this legislation simply do not match my priorities when it comes to honoring the people of Puerto Rico and trusting in their ability to rule themselves.” Senatorial candidate Alan Grayson made similar remarks calling the proposed board a “form of colonialism.”
The debate hasn’t been limited to Congress. Democratic presidential candidate Bernie Sanders opposes the bill, claiming the control board fosters a “colony-like relationship between the U.S and Puerto Rico.” In a letter to fellow democrats sent out on May 23, Sanders excoriated the bill for its support from right wing organizations and large banks. He wrote, “we must never give an unelected control board the power to make life and death decisions for the people of Puerto Rico without any meaningful input from them at all.” Hillary Clinton meanwhile, supports the bill out of the sheer necessity of alleviating the crisis facing Puerto Ricans. Although Clinton does have “serious concerns” about parts of the plan she nonetheless supports its passage.
Within Puerto Rico the bill faces significant opposition. Former Governor Anibal Vila said the board within the bill should really be called “the Omnipresent, Dictatorial, and Colonial Board.” Governor Garcia Padilla meanwhile, concedes that the bill would leave Puerto Rico off in a better position than it is currently, however, he considers the current version to be in violation of the terms of Puerto Rico’s self-governance. Other high profile Puerto Rican politicians, including resident commissioner nominee and representative Jenniffer Gonzalez of the New Progressive Party and Popular Democratic Party senator and former resident commissioner candidate Angel Rosa, likewise do not endorse the bill fully. Primarily out of concern over a perceived overreach in the powers of the board.
Third party organizations have also weighed in on the bill. The Puerto Rico Center for the New Economy (CNE), a think tank centered on economic policy, does not endorse the bill. President Miguel Soto-Class expressed dismay at the implications of the bill. The task force from the HNBA (National Hispanic Bar Association) supports large parts of PROMESA, namely the provisions concerned with debt restructuring, but are still calling for additional changes, including increased participation from residents of Puerto Rico in the activity of the board. A third group called “Bonistas del Patio,” a local group of Puerto Rico bondholders, emphasizes the urgency of passing the bill to ensure a situation similar to that of Argentina’s debt restructuring, which was only recently settled after a 14 year battle, does not happen in Puerto Rico.
The bill is likely going to be debated in the coming weeks in the Senate. There are prominent Senate democrats who want to see the bill significantly altered. Much lies ahead for PROMESA and July 1st is only getting closer.