Politics Progressive groups call for Puerto Rico Fiscal Control Board to be abolished

17:56  15 september  2021
17:56  15 september  2021 Source:   thehill.com

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A coalition of progressive groups on Wednesday called for Congress to abolish Puerto Rico's Fiscal Control Board, which they say has deepened economic strain for the U.S. territory's residents.

a sign in front of a building: Progressive groups call for Puerto Rico Fiscal Control Board to be abolished © Getty Images Progressive groups call for Puerto Rico Fiscal Control Board to be abolished

Leading the call is the Center for Popular Democracy, which released a 76-page report calling the Board's 5-year tenure a failure.

The Fiscal Control Board was created in 2016 as part of PROMESA, Congress's response to the island's fiscal debt crisis.

"Although Congress passed PROMESA to provide much-needed relief to Puerto Rico in the midst of a crushing debt crisis, the Board has used its power to impose devastating austerity measures and negotiate unsustainable debt restructuring plans that enrich Wall Street and hurt Puerto Ricans," reads the report.

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Under the legislation, control over the island's budget was essentially handed over to the Board, an unelected panel that ultimately responds to Congress.

The legislation was controversial from its inception, particularly among progressives in Congress who reluctantly supported it, given few other options at the time.

The Board's consistent prescriptions of fiscal orthodoxy and austerity have created tension with those progressives, many of whom see Puerto Rico's current fiscal balance as a window to reverse PROMESA.

"Under the Board's watch, Puerto Rican communities are contending with decimated public services, limited resources to rebuild their homes and businesses, and a struggling economy that cannot support them," reads the report.

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A key component of Puerto Rico's debt crisis was its public works debt, particularly that of the Puerto Rico Electric Power Authority (PREPA).

While Puerto Rico's elected legislature rejected privatization of PREPA, the Board required the move as part of debt restructuring.

PREPA was famously ineffective - a condition laid bare by the lack of power grid resilience during hurricanes Irma and María - but the transition to the new, private energy provider, LUMA Energy, has been a rocky one, galvanizing critics of privatization.

"While the Board forces sweeping service cuts on residents of Puerto Rico, it is leading a debt restructuring process projected to cost a total of $1.6 billion through 2026, the entirety of which is funded by Puerto Rican taxpayers," reads the report.

At the center of Puerto Rico's fiscal crisis were its bond debt and unfunded pension liabilities.

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The Board's main task was to restructure the estimated $74 billion debt, which bondholders argued took precedence over other obligations.

Because of Puerto Rico's unique sovereignty arrangement with the United States, there is controversy over whether Puerto Rico could be forced to liquidate assets to pay its private bond debt.

Still, the Board and the island's government have prioritized negotiations with bond holders to reduce debt payments, rather than risking open confrontation in court.

Progressives, who believe bond holders played an active role in creating the fiscal crisis, believe the Board is showing undue leniency in debt negotiations.

"Rather than rein in Wall Street speculation, the unelected Board has overseen a slow and expensive debt restructuring process using a bevy of high-paid consultants and lobbyists," reads the report.

The six-chapter report details the historical causes behind Puerto Rico's debt, going back to the island's colonization, and delves into PROMESA, austerity measures, debt restructuring, and comparisons to other public bankruptcy-like processes, like Detroit's municipal bankruptcy.

The report also includes a list of policy provisions, which include eliminating the Board and revoking most of its actions, and passing the Territorial Relief Act, a bill proposed by Rep. Nydia Velázquez (D-N.Y.) in 2019 to write off the debt of territories hit by hurricanes.

A companion bill was led in the Senate by Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.).

The report also proposes passing another bill championed by Velázquez, the Puerto Rico Self-Determination Act, which would create a status convention to propose options to modify the territory's sovereign status.

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