Politics, Business & Culture in the Americas
Web Exclusive

What the U.S. Congress Owes Puerto Rico

Reading Time: 3 minutes A federally-appointed oversight board is calling for deeper cuts to essential services; the island should get something in return.
Reading Time: 3 minutes

Arturo de la Barrera CC by SA 2.0 February 11 2013 (Wikicommons)

Reading Time: 3 minutes

The inaugural meeting of Puerto Rico’s fiscal control board lasted just 26 minutes. The seven unelected technocrats deputized in September with overseeing nearly every facet of the island’s economy met in a boardroom a few blocks from Wall Street to select a chairman and decide which of Puerto Rico’s institutions would come under their watch. Their most recent meeting, on Nov. 18, wasn’t so simple. 

Puerto Rico is in the grips of an economic crisis, but also a humanitarian one. Shuttered schools and storefronts and a critical shortage of doctors have strained the island’s remaining 3.5 million residents, many of whom face rising electricity and healthcare costs and few prospects for employment. A fire at a power plant in September that left a majority of the island without power for several days highlighted the extent to which Puerto Rico’s electricalwater and sewer infrastructure is crumbling – and the lack of funds available to make necessary repairs. 

The board tasked with rectifying the situation, the result of a bill passed by Congress in June, met for the first time on Puerto Rican soil on Friday. Though the meeting was ostensibly “public,” it was open only to the media – regular citizens were asked to tune in via webcast as the body decided what essential services would face further cuts in order for the island to reduce its $70 billion in outstanding debt.

Those who did tune in would have seen board members largely reject Governor Alejandro García Padilla’s 10-year plan for righting Puerto Rico’s economy. They asked García to resubmit a plan with deeper cuts to services like education rather than relying on federal assistance that they said would not be forthcoming. On Monday, García, who in October said that further austerity measures would throw Puerto Rico into an economic “death spiral,” refused to comply.

That leaves the fate of the unpopular control board’s requests up in the air, at least for the time being. A new governor, Ricardo Roselló, is set to take office on Jan. 1. The pro-statehood son of a former governor, Roselló is in favor of slashing government agencies and is widely seen as more palatable to the control board’s members. 

But the truth is that Roselló will have little say over the commonwealth’s finances. For the first time since Puerto Ricans won the right to elect their own governor in 1950, it will be unelected, federally appointed officials who will oversee the island’s economy (not to mention its central government, utilities companies, pension system and other agencies). 

That doesn’t sit well with many on the island or in Puerto Rico’s sizable diaspora. Many see the federal appointment of the board as an affront to the island’s democracy and sovereignty. Protests have been ongoing since even before the board’s creation following passage of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) in June. 

Furthermore, the control board’s limited scope makes it unlikely to be a harbinger of the recovery that the island’s residents need. The board’s mandate is to oversee debt restructuring and ensure timely repayment, not help the island implement policies to foster economic development and small business growth that would help it avoid another crisis.

Some observers are also concerned over potential conflicts of interest on the board – one member was a former employee of the Government Development Bank, which is now under the board’s jurisdiction, while another worked at Banco Santander, which underwrote more than $2.5 billion of the debt the board is tasked with restructuring. 

While some hope that the technocratic makeup of the board will help Puerto Rico deal with its fiscal crisis in the manner of a corporate bankruptcy,  the island will need more than austerity, privatization and debt repayment to improve residents’ lives.

While oversight board member Ana Matosantos said in no uncertain terms that the island should not count on the federal government for financial assistance, there is plenty that Congress can still do. It can start by issuing Puerto Rico exemptions to the Jones Act, which requires that all goods entering the island be carried aboard U.S.-flagged ships staffed almost entirely by U.S. crews – or face steep tariffs. The result is that the island is forced to pay a premium on everything from foodstuffs to oil and natural gas, raising the cost of living well beyond any of Puerto Rico’s Caribbean neighbors. A new spate of tax incentives for businesses could help replace the 80,000 jobs that were lost as federal incentives for sectors such as the pharmaceutical industry were fully phased-out in 2006. 

Congress has stripped Puerto Rico of its sovereignty in the name of short-term fiscal discipline – it should therefore take the lead in helping the island reinvigorate its economy in the long term. Otherwise, the “death spiral” might just prevail.

García is an editor for AQ.



Leani García is social media and production editor of Americas Quarterly and policy manager for Americas Society/Council of the Americas. Follow her on Twitter @LeaniGarcia.

Tags: Control Board, Puerto Rico
Like what you've read? Subscribe to AQ for more.
Any opinions expressed in this piece do not necessarily reflect those of Americas Quarterly or its publishers.
Sign up for our free newsletter