Editorial: A Colonial Exercise In Puerto Rico
Congress' proposal is not doing anything concrete to help the Island overcome its financial crisis
Finally Congress is taking action in the Puerto Rico financial crisis. A House committee thinks that the problem lies in the Puerto Ricans’ inability to manage themselves. That’s why their proposed solution is the equivalent of hiring a nanny to manage their accounts and watch over them.
The proposal by the Committee on Natural Resources establishes an Oversight Board of five members designated by the White House – four of them would come out of lists provided by the Speaker of the House and the majority leader of the Senate. The Puerto Rico government, both Executive and Legislative, will submit their budgets for the panel’s approval. In case of disagreements – or “errors,” in the project’s terminology – the Board can impose its own spending and taxes plans, determining whether the money goes to the Puerto Rican people or the $70-billion debt creditors.
It is a mistake to think that an economic situation that has been deteriorating for a long time can be reverted only by an iron hand. That possibility has long passed. The reality is that today there is not a tax base that would support a budget complying with the bondholders’ demands and the commitments made with residents.
The draft bill leaves the door open to the possibility of keeping creditors at bay and reduce debt. This would be similar to the Chapter 9 of the U.S. bankruptcy code, but not the same. It is the Board who would make that decision, and four of the five members are chosen by the Republican-led Congress that so far has been more supportive of the creditors seeking their money back than of the struggling Puerto Ricans. The alternative makes Wall Street uneasy, but it is unlikely to happen. The legislative priority thus far has been to defend the bondholders’ interests.
The proposal is not a bailout because no federal funds will be sent to help Puerto Rico. It is a colonial exercise that ignores all the benefits – including tax ones – that the U.S. got from the island; and now, instead of helping, it’s putting more obstacles in the way. It first arbitrarily took away the possibility of filing for bankruptcy, and now it wants to effectively eliminate the power of the local government by designating viceroys from Washington. That is not the solution.
