Editorial: A “Promise” for Puerto Rico
This is a first step for Puerto Rico to renegotiate its gargantuan debt
La crisis de la Isla del Encanto requiere urgente medidas. Crédito: EFE
Washington has finally recognized the urgency in Puerto Rico’s financial crisis with the House of Representatives and the White House reaching an agreement to help the island. The bill is not the ideal way to alleviate the external pressures being put on Puerto Ricans or start a path to economic recovery, but it’s a start.
The agreement basically helps Puerto Rico restructure its debt of more than $72 billion, an unpayable sum given the state of its economy. The island recently defaulted on a $422 million payment, while another deadline approaches on July 1. The Puerto Rico Oversight, Management, and Economic Stability Act ‒ PROMESA, which means “promise” in Spanish ‒ offers a way to reduce the debt.
This is precisely the part that creditors fear the most. They demand to be paid first, and that only then should the island be allowed to pay such expenses as pensions for the elderly. That is why they are lobbying in Congress, and launched a publicity campaign opposing a Puerto Rico “bailout.” The accusation is misleading, since in order to appease Republicans it was clearly stipulated that no federal funds may be used.
This condition is one of the problems with PROMESA. While the debt needs to be stabilized immediately, the long term solution to Puerto Rico’s dilemma is strengthening its economy. The exodus of millions of Puerto Ricans to the U.S. mainland in search of better opportunities has significantly reduced the island’s tax revenue. Already, 45 % of the country’s population lives under the federal poverty line.
It is unfortunate that no agreement was reached on awarding the island Medicare parity with the states and steady funding, or on expanding earned income tax credits (EITC) for low-income people and additional child tax credits (CTC) which would benefit Puerto Rican families. There have been no proposals to encourage investors, who are currently recoiling because of the crisis.
PROMESA still asks for the establishment of an oversight board chosen in Washington to supervise the island’s finances, although unlike a previous version of bill, it gives the governor more autonomy. That said, the creation of this committee remains a bad idea.
We hope that the Senate will accept this proposal, which in the long run will allow Puerto Ricans to renegotiate their debt in a way that fits their interests.
