One year after PROMESA, Puerto Rico’s politics have been transformed
A little more than one year ago, PROMESA was signed into law to create a Financial Oversight and Management Board for Puerto Rico to help negotiate and oversee the debt restructuring process. Last week the Oversight Board made a move that illustrates its profound influence on Puerto Rican politics. The Oversight Board voted to reject the Puerto Rico Electric Power Authority’s Restructuring Support Agreement, in a move that shocked islanders. This $9 billion restructuring agreement has been in the works for three years. Those three years represent numerous talks between creditors, politicians, and PREPA, not to mention revisions, rewrites, and a significant amount of man hours into creating a deal that was backed by the bondholders.
The board’s rejection of the agreement is a testament to its powers of intervention into the islands’ politics. Many on the island have expressed displeasure over the Oversight Board’s decisions in the past, but currently the PREPA bondholders are the loudest detractors. After the decision, the group said: “We do not understand the Board’s decision to block this deal after more than three years of cooperative, good faith negotiation by all stakeholders, exhaustive third-party review and explicit statements from the Chair of the Congressional Committee that drafted PROMESA that the law wasn’t intended to give the Board the power to take this action. At this stage we remain open to working with the Oversight Board but are considering all options.” The board’s refusal to back the RSA led to PREPA filing for bankruptcy-like protections on Sunday. It is likely that the board will now oversee the bankruptcy process, giving it increased power over the one of the islands’ most important agencies.
On Monday, July 3, the Oversight Board announced that it had approved and certified a budget for the 2018 fiscal year in compliance with PROMESA. The budget was technically finalized the previous Friday at a very tense meeting between the legislature and the board. The meeting was especially tense given the nature of cuts the budget proposes for the legislature. The new budget cuts $13 million from the legislature, which will cost 500-600 employees their jobs. The legislature seemed uncertain about the budget, but decided the decision was ultimately the governor’s, Ricardo Rosselló. The passing of the budget by the board represents the first time in the recent history of Puerto Rico that the budget is not determined by a an entity elected by the people. The budget makes deep cuts, and many considered its passing to be a serious blow to Puerto Rican autonomy, and a colonial intervention. The cuts remove funding for some important local subsidies like local milk production. It also leaves unclear still is whether it will reduce working days for the legislature or do away with Christmas day bonuses. The fact that these two important issues remain up in the air is a sign for many that the board isn’t working for them, but as a colonial imposition.
When the budget was made public, the number of cuts were deeper and more serious than were expected by many. According to an editorial in El Nuevo Dia, the budget confirms how much power the board actually has, and plays into fears that the board is able to, and will, make more and deeper interventions in the future. Their editorial paints a picture of the grim reality of Puerto Rican politics. The Oversight Board is an outside entity with significant sway and influence over the future of Puerto Rico. The board has been long criticized for a lack of transparency, which was further instanced when the budget made cuts in unexpected areas. PROMESA has created a situation where Puerto Rican politics have been taken out of the hands of Puerto Ricans and given to a board who may have other interests and loyalties besides the well being of the already struggling Puerto Ricans.
In fact, Open Space, a non profit group dedicated to transparency in government has openly criticized the board for lacking transparency over the member’s finances. The idea being that potentially, the board members may have conflicts of interest based on economic interests, and that lacking transparency, it is hard to trust that their actions are always for the good of Puerto Rico.