Thursday, June 21, 2018

The Young Farmers Behind Puerto Rico’s Food Revolution

Ah, Puerto Rico! Land of rum and iguanas, palm trees and paddleboard yoga. I arrived in San Juan two days ago with every intention of reporting briskly and soberly on the state of food and farming here since Hurricane Maria hit last September.
But even the most sober reporter would be entrapped by this island’s enchantments. Since touching down I have: drunk a cocktail called the Tesla out of a lightbulb at the pert little La Coctelera (where the cocktails are quite performative: The Paper Plane is garnished with a folded airplane); eaten deep-fried fish fritters with mayo-ketchup—the island’s preferred sauce; sat with my feet in the sand reading about Lolita Lebrón, the stylish Puerto Rican nationalist who, in 1954, led an attack in which five U.S. representatives were shot, shouting, “¡Viva Puerto Rico libre!” without once rumpling her French-knotted scarf.
This might all come across as frivolous given recent events, but in San Juan, at least, so much has been rebuilt in seven months that it’s hard to find evidence of Maria’s devastation—but for the occasional inoperative traffic light and the blue pointillist dots of FEMA tarp roofs against the composed pastel city. Of course there is damage one can’t see from bar stools or beaches, and I am en route to meet a 34-year-old named Tara Rodríguez Besosa, cofounder of the Puerto Rico Resilience Fund—an effort to help rebuild the island’s beleaguered farms. Rodríguez Besosa is the force behind an emergent Puerto Rican food revolution, and my plan is to join one of her volunteer brigades tilling topsoil at Huerto Semilla (“seed garden”), an agroecological student-run farm smack in the middle of San Juan, at the University of Puerto Rico’s Río Piedras campus.
When I arrive, the scene is a veritable hive of activity: young farmers, almost all women, bent over hoes, ferrying large bunches of holy basil or laying irrigation tape. Rodríguez Besosa, whose pixie cut and thin limbs give her the appearance of a rangy Peter Pan, stands with a shovel by beds of cilantro, mustard greens, and kale. She is physically striking, making a schools not prisons T-shirt, short black leggings, work boots, and dirt smudges look chic. The effect is partly due to her height—she is five feet ten—and her deep outdoor tan, sparkling eyes, and constant smile. She shovels soil through a sieve, while directing admiring young volunteers and answering her constantly ringing phone: Here’s where to deliver lunch; this is what time the car should meet her in New Orleans in two days; here’s where to send the next brigade.
Restoring Puerto Rican agriculture is a complex and novel project, since the island mostly stopped producing its own food long ago. By a conservative estimate, Puerto Rico imported at least 80 percent of what it consumed before the hurricane. The story of why in the briefest possible terms: Farming declined during Puerto Rico’s days as a Spanish colony, when native agriculture ceded to large colonial plantations. Under U.S. administration, beginning after the 1898 Spanish-American War, Puerto Rico was subjected to a combination of economic restructuring, industrialization, and the growing stigma of being perceived as a rural, peasant island. Surviving farms grew profitable sugarcane, coffee, or, in rarer cases, plantains and other fruits. By the turn of the twenty-first century it was all but impossible to procure anything locally but a very limited set of crops.
This does not perhaps sound so bad—until you consider the high environmental costs of transporting the island’s food. And the poignant lesson of Maria, which destroyed 80 percent of Puerto Rico’s crops in addition to roads, homes, vehicles: that dependence on imports left Puerto Ricans uniquely susceptible, in the face of a natural disaster, to starvation.
“They say that during Maria, Puerto Rico only had enough food for one week,” says Carmen Yulín Cruz, the mayor of San Juan, who rose to international prominence feuding with President Trump over aid. “I hate to say anything positive about Maria. But what the hurricane did was force us to look at the realities of life here and how our dependency on the outside weakens our ability to ensure our people are taken care of. Maria made it evident that we need agricultural sovereignty.”
Sylvia De Marco, a collaborator of Rodríguez Besosa’s and co-owner of a San Juan boutique hotel called the Dreamcatcher—in whose Goddess Suite I’m spending the week—agrees. “After the hurricane, even people who didn’t care about food started to care. It really opened people’s eyes: that we have to depend on our soil, not shipping containers.”
Puerto Rican farming was highly limited before the hurricane. Recovery efforts envision a more diverse crop. Detail of *Papaya*, by Ana Mercedes Hoyos.
Puerto Rican farming was highly limited before the hurricane. Recovery efforts envision a more diverse crop. Detail of Papaya, by Ana Mercedes Hoyos.
Photo: Courtesy of Ana Mercedes Hoyos. Papaya, 1994. Oil on canvas, 23.6ˮ x 23.6ˮ.
Enter Rodríguez Besosa, an artist turned farmer who studied architecture at New York’s Pratt Institute and helped run a gallery in Red Hook, Brooklyn. A decade ago, missing home, she moved back to Puerto Rico. She helped out on her mother’s tiny organic farm to make money while she opened a cultishly popular, illegal, and not at all lucrative bar in San Juan. She quickly detected a problem. “There was one farmers’ market every two weeks, and you had to be up at 9:00 a.m. to get anything. I was running a bar. I wasn’t waking up at nine.” Some small vegetable and meat farms, like her mother’s, existed around the island, but farmers and consumers had few ways of getting together.
Rodríguez Besosa, a natural entrepreneur, decided to fix the problem. She accepted $10,000 in seed money from a friend, rented a warehouse, named it El Departamento de la Comida (“the department of food”) and started driving around selling boxes of local vegetables. “The vegetables I bought had to be not just local but sustainable—agroecological, biodynamic,” she says. Her quick conversion to the dogma of sustainability may be genetic. Her mother was a model and fashion retailer turned farmer; her sister studied biology before taking over the family farm in 2011. “My point was we could not afford to go on farming unsustainably in Puerto Rico,” she says.
The response was enthusiastic. María Grubb, a Puerto Rican who spent about seven years cooking at New York’s Pastis, the Modern, and Maialino before returning to open Gallo Negro in San Juan’s bohemian Santurce neighborhood, says that when her restaurant opened, El Departamento de la Comida was the only place she could find fresh local vegetables. Juan José Cuevas, former chef at Blue Hill in New York City, who moved here in 2012 to take over the kitchen at the Condado Vanderbilt Hotel, agrees: “Tara was doing this when no one was.”
“We detonated something really interesting,” Rodríguez Besosa tells me over a delightful lunch at Huerto Semilla of rice and beans, roasted eggplant, and local lettuces with orange vinaigrette. “We were all over the newspapers. The whole thing erupted. I was like, I have no idea what this is, but, holy shit, it is amazing.”
Her next step was to transform El Departamento de la Comida into a restaurant. She bought an $80 stove, installed it in the warehouse, and let friends and visitors make simple dishes like pumpkin soup and pesto. “We had two to three people in the kitchen. Maybe it was an artist who cooked outside, or maybe it was someone who liked to cook, like Paxx Caraballo Moll”—a Puerto Rican chef getting accolades for the new restaurant–in–a–tiki bar Jungle Bao Bao. Furnished with folding tables and chairs, serving a changing vegetarian menu of whatever local farms harvested, the restaurant quickly became beloved, akin to Brooklyn’s Roberta’s—shabby, a little uncomfortable, delicious.
“Then the hurricane hits us, and bang, we’re gone,” Rodríguez Besosa says. The restaurant flooded, then was repeatedly looted. Stranded in New York for an event while the storm raged, Rodríguez Besosa gathered friends to create her Resilience Fund and pitched in with the ad-hoc Queer Kitchen Brigade, which canned food to send to the island. Rodríguez Besosa brought some of the cans and jars back herself, along with seeds and farming tools—by joining a delegation aboard a Greenpeace ship.
Since November, Rodríguez Besosa has sent farming brigades, in her brightly painted Guagua Solidaria (“solidarity van”), to more than 30 gardens and farms all over the island, distributing seeds, building rainwater collection systems, donating tools, cooking meals, giving acupuncture treatments, and providing general spiritual uplift. She plans to help 200 farms before the campaign ends. “And if you’re growing food in your backyard, you’re included,” she tells me. “If you sell at farmers’ markets, you’re included. If we want to create autonomy in Puerto Rico, it will have to be in different ways. We have to do urban agriculture; we have to do school farms, community farms, backyard gardens.”
Mayor Yulín tells me that Rodríguez Besosa’s role in the island’s future is unique. “Tara is giving agriculture a new face,” she says. “She’s found a way to convey the importance of a new local agriculture at a primal level, with the technology and vision to ensure it’s done in a socially responsible and fair and ethical way. She’s taking something old and making it exciting.”
Rodríguez Besosa isn’t alone; others on the island have rallied to support local agriculture too. The Dreamcatcher’s De Marco offered guests the opportunity to volunteer at a farm called Estancia Verde Luz in nearby Ciales last spring. She tells me, “Our menu is all local, and Estancia Verde Luz was the main farm who sold to us. It was completely trashed in the hurricane. So we had guests help with cleanup. People felt really good to be supporting the economy, and at the same time helping a farm rebuild.” In May, De Marco launched a monthly dinner series called Nuestra Mesa (“our table”) in collaboration with Rodríguez Besosa: four courses of local vegetables, served in the Dreamcatcher’s airy kitchen and patio, attended by hotel guests, locals, and farmers.
An hour and a half east of San Juan, I pay a visit to an Ayurvedic biodynamic farm named Finca Pajuil that Rodríguez Besosa has told me is a model of resilience, replete with rotation planting, rainwater collection, aquaponics—the kinds of things Mayor Yulín says must be part of Puerto Rico’s agriculture.
An unfortunate misunderstanding with my phone’s GPS system leads me to a distinctly un-Ayurvedic pizzeria (I recommend the calzones), but eventually I arrive at my destination, and the bright-eyed head farmer, Jey Ma Tulasi, greets me at the gate—an inexplicable but not entirely unattractive green botanical V painted down the middle of her face. Tulasi shows me where neem and breadfruit trees once divided her land from the road, their disappearance depriving her crops of shade. Still, it’s impossible not to see how many more birds flock to Tulasi’s moringa and banana groves than to neighbors’ backyards, how many more bees buzz in flowers, and how healthy her curving spirals of holy basil and tarragon, aloe and mint make the land. Her little shop sells a homegrown, Ayurvedic version of adobo made with her own turmeric and local sea salt. There is moringa for sale by the bunch, and curry leaves. I’m struck by the hopefulness of the hugelkultur beds—deep garden plots made from fallen trees—which are already thick with pumpkins and sweet potatoes.
Over a final dinner with Rodríguez Besosa at Cuevas’s 1919, inside the Vanderbilt, I note that women seem to be leading this movement. “In terms of activists inside the farming movement, at least half of them are women,” Rodríguez Besosa says. “And more than half the farmers I work with are.”
What follows is one of the more exciting meals of my recent memory: white gazpacho; lobster with eggplant and mozzarella; tuna tartare with caviar; barely cooked tuna with tomatoes; salmon with fresh shelling beans; local goat-cheese ravioli; and a local fish from the snapper family called cartucho—much of which comes from farms and fishermen on the island, whom Cuevas buys from directly.
Cuevas joins us as we share coconut sorbet and a salted caramel–and–chocolate tart. He sees another silver lining in Maria. “Obviously, six months ago things were very bad,” he says. “But six months have given people time to stop, think, and grow things. The Puerto Rican diet of rice, beans, plantains, and root vegetables is very earthy, but it also takes a really long time to grow.” The destruction of plantain groves has encouraged the planting of fast-growing beets, greens, tomatoes instead—ingredients healthy diets demand.
We end the night tasting three homemade jams from a woman who delivers them biweekly: one pineapple-and-mango, one papaya, one guava-coconut. They are faultless. I wonder whether I could find them in New York.
Rodríguez Besosa’s sparkling eyes light up further. Her next project is starting her own farm on land she bought last week. “It’s in a small community in Caguas, 45 minutes south of San Juan,” she tells me, so excited she’s nearly vibrating. “I’ll finally produce my own food on a larger scale.” It’s also the next iteration of El Departamento de la Comida. “This will be a model farm that hosts only workshops using permaculture and agroecology frameworks, and a collective for queer and trans people who want to work the land.” She plans to build a commercial kitchen on-site and use primarily the harvest from the farm itself. Next up, she says, as we chase our jam with petits fours: “our own product line.”
In this story:
Sittings Editor: Yohana Lebasi.
Hair: Adam Szabó; Makeup: Caoilfhionn Gifford.

Tara Rodríguez Besosa is among those leading farm-recovery efforts. Céline top. Marni skirt. Soko earrings.


The Young Farmers Behind Puerto Rico’s Food Revolution

Wednesday, June 20, 2018

How Puerto Rico misses the mark in latest attempt to privatize broken power authority

In its version of a bill to privatize the Puerto Rico Electric Power Authority, the Puerto Rico legislature has improved some on Gov. Ricardo Rosselló’s original proposal, but lawmakers are ultimately failing the Puerto Rican people every bit as badly as Rosselló has.
We’ve criticized the governor’s original privatization proposal for essentially aiming to set up a process that would enable the implementation of politically driven contracts devoid of regulatory oversight.
The amended legislation contains some improvements, but — crucially — it does not say how privatization would solve the two fundamental problems of Puerto Rico’s electrical system: its over-reliance on imported fossil fuels and its crippling debt.
Key improvements in the revised privatization bill:
  • A somewhat greater role for independent regulatory oversight. The independent Puerto Rico Energy Commission would have the authority to accept or reject proposed privatization contracts, although it would still have no authority to amend contracts, and its enforcement role would be subordinate to the Public-Private Partnership Authority, an existing government agency charged with managing the privatization transactions.
  • A requirement that the Puerto Rico legislature approve any sale of PREPA power plants to third parties.
  • A requirement that privatization transactions be consistent with a forthcoming energy public policy and regulatory framework unless a transaction is specifically exempted by the legislature, which has given itself a deadline of 180 days after the passage of the privatization bill to develop this framework.
  • Prohibition on a single company owning the entire generation system.
  • Requirement of an RFP process for generation asset sales.
Unfortunately, the bill retains many flaws from the governor’s original proposal:
  • It lacks any provision for the maintenance of collective bargaining agreements under private contractors, and labor organizations are excluded from oversight and partnership committees. In combination with the recent legislative decision to remove employee protections against dismissal without just cause, the bill has no protection against termination of workers transferred to private entities. These deficiencies undermine some improvements made to the bill, including a requirement that PREPA employees transferred to other government positions retain collective bargaining rights, pensions and benefits; and that private contractors establish occupational classifications, seniority, salaries and benefits equivalent to what employees had under PREPA.
  • It leaves negotiation and enforcement of contracts under the direction of the Public-Private Partnership Authority, an entity effectively controlled by the governor, and it includes no indication that these contracts will prioritize renewable energy, transitioning off of imported oil, enhancing grid resiliency or integrating distributed generation and microgrids.
  • It restructures the Puerto Rico Energy Commission, making it a five-member board whose members must meet certain professional qualifications and are to be selected from a list submitted to the governor. This follows the directives of the federal Financial Oversight and Management Board, and while this structure is reasonable in theory, in practice it gives Rosselló the power to appoint the majority of the commission during the period of the privatization transactions, even though the governor has made clear his hostility to the current commission and to renewable energy.
  • It allows privatization contracts to be exempt from compliance with the integrated resource plan (IRP) at the recommendation of the partnership committee (controlled by PREPA and the Public-Private Partnership Authority) and with the advice of the Puerto Rico Energy Commission. Given that Rosselló would be able to appoint the majority of the commission, it seems likely that the IRP — and any true commitment to sound energy planning — will fall by the wayside.
  • It omits any competitive bidding requirement for the leasing of transmission and distribution-related functions and lacks any requirement that the contract process include a determination by the contracting agency that the vendors chosen meet certain standards: that they do not owe taxes to Puerto Rico, that they have a clean track record with regard to past performance in Puerto Rico, and that they disclose fines and penalties from other jurisdictions and conflicts of interest.
Authors of the legislature’s privatization bill, to their credit, appear to recognize that privatization is a means to an end, not an end in itself. But while their bill requires that privatization transactions comply with a new public energy policy, which is mandated but not yet written, it is nevertheless backwards — and risky — to authorize privatization without good policy in place.
In their intent to hasten private investment in Puerto Rico, the governor and the legislature now are creating policy that fails to spell out what role the public sector will play in the financing of the these transactions. It also fails to explain where future ownership of electricity assets will lie; how development and management of those assets will proceed; whether labor-force decisions will be in the best interest of Puerto Ricans.
We fail to see how the proposed privatization of PREPA would result in a more affordable, resilient, or financially sustainable electrical system. The privatization plan that the legislature has produced has no clear policy vision, lacks a commitment to energy planning, and creates yet more opportunity for politics to interfere in the negotiation and enforcement of contracts.
Cathy Kunkel is an energy analyst at the Institute for Energy Economics and Financial Analysis. Tom Sanzillo is director of finance.

How Puerto Rico misses the mark in latest attempt to privatize broken power authority

BY CATHY KUNKEL AND TOM SANZILLO
How Puerto Rico misses the mark in latest attempt to privatize broken power authority

Tuesday, June 19, 2018

UBS Group CEO on Puerto Rico: 'We could have done things better'

Sergio Ermotti, chief executive officer of UBS Group
Stefan Wermuth | Bloomberg | Getty Images
Sergio Ermotti, chief executive officer of UBS Group
UBS could have done things differently in Puerto Rico, where thousands of the island's residents blame the Swiss financial services giant for the depletion of their life savings, the bank's CEO said in an interview.
"When you go back and you look at the situation, you could always argue that we could have done things better, or some people could have behaved better," Sergio Ermotti told CNBC's Michelle Caruso-Cabrera in an exclusive interview on Monday.
"When there is scope for admitting something went wrong, we do that," Ermotti said. However, if "we believe that there are situations where people are just trying to take advantage of something, then we will fight and we will just try to present facts."
He was referring to the tsunami of arbitration claims that have been filed against UBS by Puerto Rico-based investors for — among other counts — breach of fiduciary duty, negligence and fraud.
The claims came after 2013, when 23 closed-end bonds funds managed or co-managed by UBS Puerto Rico and sold to island residents lost $3 billion in value, or nearly 70 percent, according to data from Securities Litigation and Consulting Group.
Ermotti said there were not obvious warning signs in the years prior to the UBS Puerto Rico bond funds imploding.
"Until 2013, it was very difficult to predict that things could…evolve in such a way," Ermotti said. No ratings agencies, "nobody was waving their flag about the danger of Puerto Rico."
However, a CNBC investigation in December showed that a mere few months after Ermotti took over as CEO in November 2011, it was clear not only to the ratings agencies, but also to UBS, that Puerto Rico's credit was deteriorating.
In a research report that UBS issued in January 2012, the firm identified major risks for investors holding the Commonwealth's debt, including the "slower than anticipated recovery" and "rising debt burden." The 45-page report recommended: "Conservative investors with concentrated exposure to any single borrower in the municipal market should pursue portfolio diversification.
Ermotti says that despite the extremely tumultuous past few years, the financial firm has stayed on the island and is working together with regulators and through arbitration to try and find the best solutions for their clients.
"We are trying to clearly [and] constructively find resolutions," Ermotti said. "The truth of the matter is we are very committed to Puerto Rico."
UBS Puerto Rico is a subsidiary of UBS Americas Financial Services headquartered in Weehawken, New Jersey. At its peak, UBS had the largest wealth management business in Puerto Rico, representing an estimated 20,000 households. By 2012, UBS investors on the island had about $10 billion invested in the bond funds, or roughly 10 percent of the island's gross domestic product.
UBS Puerto Rico has been the primary underwriter of a series of closed-end funds since the mid-1990s. And it managed or co-managed the 23 proprietary closed-end funds that could only be sold to Puerto Rico residents and corporations whose primary place of business is on the island.
Through the years 2004 to 2008, the direct and indirect revenue generated by the bond funds accounted for 42 percent to 53 percent of UBS Puerto Rico's total revenue. Those profits flowed up the chain to the parent company, UBS AG.
The funds had many unique qualities since they were offered in a U.S. territory, rather than a U.S. state. In particular, the bond funds weren't registered with the Securities and Exchange Commission or listed on a U.S. exchange like a typical mainland closed-end fund.
This was because of a recently closed legal loophole that previously exempted U.S. territories from the Investment Company Act of 1940. That legislation, among other things, limited the use of leverage and barred certain types of transactions.
The exemption allowed the UBS funds in Puerto Rico to be levered in many instances 2 to 1, which was the maximum amount legally allowed by Puerto Rico's securities regulations.
The funds also had an immense overconcentration of Puerto Rico-issued securities. Two particular securities, bonds issued by the island's government development bank and bonds issued by a government-run corporation, accounted for more than 90 percent of the net assets in 10 of the UBS funds by the end of June 2013.
The heavy concentration and high leverage of the funds ultimately led to staggering losses for investors in 2013, after Puerto Rican bonds suffered a massive sell-off.
Ermotti pointed out in Monday's interview that prior to their implosion, the closed-end funds were highly profitable for investors.
"The only thing we know, which is not an excuse but is an explanation, is that in the previous 20 years or so, clients and investors made $3 billion of profits [from the funds]," Ermotti said.
The massive decline in value of the funds "led to multiple regulatory inquiries, as well as customer complaints and arbitrations with aggregate claimed damages of USD 2.5 billion, of which claims with aggregate claimed damages of USD 1.5 billion have been resolved through settlements, arbitration or withdrawal of the claim," according to UBS's first quarter 2018 report.
The firm settled with the SEC in 2012 for $26.6 million and in 2015 for $15 million. Also in 2015, UBS settled with Finra, Wall Street's self-policing regulatory agency, for $18.5 million. A year earlier, in 2014, UBS settled with Puerto Rico's local regulator, the Office of the Commissioner of Financial Institutions, for $5.2 million.
The regulators' charges included that the firm misrepresented and omitted material facts about the closed-end bond funds to investors and failed to monitor the combination of leverage and concentration levels in customer accounts, according to the settlement documents.

UBS Puerto Rico did not admit or deny wrongdoing in any of the settlements.

UBS has disclosed in regulatory filings that the Department of Justice is conducting a criminal inquiry into the impermissible reinvestment of the non-purpose loan proceeds, in regard to the Puerto Rico funds. "We are cooperating with the authorities in this inquiry," the filing states.



  • At its peak, UBS had the largest wealth management business in Puerto Rico, representing an estimated 20,000 households. By 2012, island investors had about $10 billion invested in UBS bond funds.
  • The bond funds were highly leveraged and concentrated in securities issued by two Puerto Rico government entities.
  • In 2013, the funds lost $3 billion in value, or nearly 70 percent. CEO Sergio Ermotti told CNBC there were not obvious warning signs in the years prior to that.
UBS Group CEO on Puerto Rico: 'We could have done things better'

Puerto Rico Oversight Board Pushes For Secrecy

Puerto Rico's federal oversight board may be overseeing the commonwealth's finances, but it is doing everything it can to ensure that financial information about the commonwealth remains out of everyone else's sight.
Examples of the attempts of the Financial Oversight and Management Board (FOMB), as the federally appointed board is known, to hide Puerto Rico's financial information are myriad. The group argued that the law overseeing Puerto Rico's restructuring meant that it didn't have to comply with local disclosure requirements, a stance that US District Judge Jay A. Garcia-Gregory smacked down last month.
"Complying with Puerto Rico's disclosure requirements would not impede or frustrate the purpose of [the restructuring law]," Garcia-Gregory ruled. "A citizen's right to access public documents goes hand in hand with [the law's] purpose."

The board has also fought vigorously to avoid handing over drafts of its fiscal plan and the models that underlie them to creditors, arguing that they are protected by deliberative process privilege, which shields policy materials used before decisions are made. While creditors want to seechanges to numbers, data, projections and assumptions, the FOMB argued that it shouldn't have to produce those because creditors will "leverage differences between interim drafts...in order to mount a challenge to the fiscal plan." Which, to be fair, is probably exactly what they intend to do. But why shouldn't they? The court is now forcing them to turn over some of the data.
And even in cases where numbers will ultimately come to light, the oversight board has frustrated, or at least not pushed for, disclosure. An English version of the commonwealth's fiscal year 2019 budget is nowhere to be found. Even the link on the island's fiscal authority's website that says that it links to an English version of the budget, only links to an English cover letter, along with the Spanish budget. It strains credulity to believe that no English copy of the budget exists for review by the commonwealth and the FOMB's various advisors.
This is the one issue where creditors and Puerto Rico residents are not at odds - it is in everyone's interest to have additional disclosure. Creditors, of course, are going to try to eke out as much money from Puerto Rico as they can to pay back their debts. And residents have a right to see how their money has been spent and determine whether the oversight board and the government is working in their interests. Locals cannot just blindly trust the government to after decades of mismanagement have left the commonwealth with an unsustainable debt load.
For its part, the oversight board has shown a reluctance to focus on past wrongdoing, choosing instead to accept the situation as it is and move forward with the debt on the books. Board Chairman Jose Carrion has called an audit of the island's debt a waste of time and said that he is not interested in a finger-pointing exercise.
While that's reasonable, Puerto Ricans may actually be interested in some finger pointing of their own. Even if they see it as a way to get rid of some debt, which is highly unlikely, there's real value in holding people accountable for their actions.  The unsecured creditors committee is trying to do just that by holding its own independent investigationinto financial institutions - an action the oversight board also opposes.
In the end, oversight can't occur effectively if its aim is secrecy, rather than disclosure.
Simone Baribeau covers the territories, hospitals, pensions and industrial development bonds for Debtwire Municipals. She can be reached at Simone.Baribeau@acuris.com.

By Simone Baribeau
Puerto Rico Oversight Board Pushes For Secrecy

Puerto Rico Oversight Board's labor policy hits new opposition

The Puerto Rico Oversight Board moved one step forward on its effort to repeal a labor law, only to run into new opposition from the leader of the Puerto Rico Senate.
The board's struggle to establish at-will employment on the island signals the uphill struggle it faces persuading the local government to go along with a broader array of austerity measures as it seeks to strengthen fiscal management in the Commonwealth.
On Thursday the Puerto Rico House of Representatives voted to repeal Law 80, a 1976 law that allows employees in the private and public sectors to force employers to compensate them after wrongful terminations. In a deal the board reached in late May, Gov. Ricardo Rosselló agreed to repeal the law and, in exchange, the board agreed to end its demand for austerity measures that would limit compensation for Puerto Rico workers.
The leaders of the Puerto Rico House of Representatives and Senate talk with Gov. Ricardo Rosselló.  From left to right Carlos Méndez Núñez, Thomas Rivera Schatz and Rosselló.
The leaders of the Puerto Rico House and Senate, left and center, are struggling among themselves and with the governor, right, on how to handle a Oversight Board demand for island at-will employment.
“The Financial Oversight and Management Board welcomes the legislation on the repeal of Law 80 adopted by the Puerto Rico House of Representatives today,” the board said in a press statement Thursday. “We believe this is a valuable step towards a more vibrant business environment that will help create jobs, attract new investment, and boost the growth of Puerto Rico’s economy.”
On May 30 the Puerto Rico Senate had approved a measure that would have introduced at-will employment only for employees entering the workforce in the future. The board had demanded the repeal for all employees.
On June 4 board executive director Natalie Jaresko sent a letter on behalf of the board to Puerto Rico Rep. Jorge Navarro Suárez explaining what the board would do if the House failed to repeal Law 80. Jaresko said that “at a minimum” the board would revert to the April fiscal plan and submit a budget consistent with the fiscal plan.
Jaresko said this would mean the board would reduce the number of mandatory sick and paid leave days and eliminate: a public employee Christmas Bonus appropriation; requirements for the bonus for private sector as well as public sector employees; an annual appropriation of $50 million for municipal economic development initiatives; a multiyear $345 million economic development and reform implementation initiatives fund; and an annual $25 million appropriation for University of Puerto Rico scholarships.
The Puerto Rico House voted to repeal Law 80 with certain conditions. First, for employees with more than 15 years tenure at a firm Law 80 would continue until 2021.
Second, the government would provide money to a fund to compensate employees who are wrongfully terminated or simply laid off.
The fund would provide up to $9,500 to employees who are wrongfully terminated. According to the governor’s Friday announcement, the fund would draw $100 million from a $345 million multi-year allocation for economic development. The governor and the board agreed to this allocation in the May compromise.
On Thursday after the House repeal of Law 80, the governor said in a written statement that “he will continue his dialogue with the president of the Senate, Thomas Rivera Schatz, and with the majority delegation of that body to approve the measure that ensures the benefits guaranteed in the agreement with the [Oversight Board].”
On Saturday, according to the El Vocero news website, the governor said at most $60 million would be needed for the fund. Also on Saturday according to the same news outlet, Rivera Schatz said he would oppose the new House-approved package of labor reform measures.
“Normally, [the disagreement between the Puerto Rico House and Senate] would go to a conference committee that would iron out any discrepancies,” wrote attorney John Mudd in his Control Board Watch blog. “However, the budget, which must be approved by June 30, is dependent on its repeal. If not, the board will reinstate the previously approved fiscal plan with deep cuts on the budget including the elimination of Christmas bonuses. A total mess.”

By 
Robert SlavinPuerto Rico Oversight Board's labor policy hits new opposition

Friday, June 15, 2018

Puerto Rico crawls toward full re-electrification [ Radio ]

Santa Ortolaza lives on a verdant hillside in the mountains of Orocovis, in the center of Puerto Rico. When Hurricane Maria made landfall and the lights went out, she and a neighbor turned on a battery-powered radio and told stories of past hurricanes in the dark. Zinc metal sheets flew outside her windows and wind-blown debris stripped paint from her home’s exterior. She didn’t sleep much that night.
In the morning, she saw the storm had knocked down trees and utility poles, blocking the one road down the mountain. But all her chickens had survived and she was fine, too.
She’d lived through other hurricanes. She knew power might be out for a bit, as in past storms. It’s just how it worked here.
But days turned into weeks, and weeks into months, and still the power didn’t return. Hurricane Maria devastated Puerto Rico’s power grid. About 80 percent of transmission lines were downed, leaving most of Puerto Rico’s 3.3 million people in the dark for months.
Worse, the recovery was moving at a glacial pace.
But even as Puerto Rico’s one utility struggled to turn the lights back on, people on the island and beyond started to talk about rebuilding a better grid. One that could, perhaps, serve as a model for other utilities, states, and countries with aging infrastructure.

The grid

Puerto Rico’s modern grid is owned by the state. It was built starting in the 1940s. First, it used dams for power. Then the government built power plants along the island’s southern coast. The plants used oil from Venezuela, just 500 miles away by an easy sea route, to make energy.
Gary Soto is the operations manager for PREPA. He works to keep the grid operating, but during Hurricane Maria the whole grid went offline – a complete blackout. He says it’s not the first time that happened on the storm-prone island, and not the last, but it’s been a particularly difficult restoration process. Behind him is an analog grid schematic, which hasn’t been updated in decades. (Irina Zhorov/WHYY)
There was a problem, though. Most of the people lived — and still live — in the northern part of the island. Fewer than 40 miles separate the north and south coasts. But the middle, where Ortolaza lives, is crinkled by steep mountains.
The utility strung transmission lines across the mountains. They made power in the south and it traveled by cable to the people in the north.
“We have for electrical purposes, two islands,” said Luis Aviles, who teaches law at the University of Puerto Rico and ran PREPA, the Puerto Rico Electric Power Authority.
The grid’s very design made the system vulnerable.
But it worked. People had reliable power. So did a rapidly growing manufacturing sector: first garment factories, then pharmaceutical companies, driven by tax incentives from the United States.
It didn’t last. Congress phased out the tax incentives starting in the 1990s. Right after that, the recession hit. Many manufacturers fled to greener tax pastures. PREPA now had fewer customers paying for power, and its finances were being seriously mismanaged, often for political gain.
Today, the power authority is $9 billion in debt.
“And then you have to upkeep that infrastructure, which by now is like 40 years old. And you don’t have revenues to do that,” said Aviles. “It’s a perfect storm. And then we got the hurricanes.”

Maria hits

Maria made landfall as a Category 4. The aging grid couldn’t withstand it. Towers collapsed on the mountaintops where they had precariously perched, cables snapped, transformers blew up. The destruction was vast.
When the winds settled, workers realized there wasn’t enough equipment stockpiled, not enough staff. The mountainous terrain, often accessible only by helicopter, complicated everything. For months, much of the island stayed dark.
On the hurricane’s six-month anniversary, I drove from San Juan about 90 minutes to the center of the island. Once you get off the highway, the roads turn winding, narrow. Barricades squeeze the roads further where mudslides have taken a bite out of the asphalt. At first, the gravity of the destruction is not immediately apparent – your eyes have to adjust to the chaos, as if to darkness. Then you can pick out the cables strewn across the road and hanging, severed, between trees. Poles lean in every direction.
In Puerto Rico, crews are still fixing utility poles and stringing lines in areas that have been without light for nearly nine months. (Irina Zhorov/WHYY)
Santa Ortolaza was still waiting for utility workers to reach her.
A power grid is one of the most complex infrastructure systems in the world, and yet its absence can be felt in the simplest, everyday routines.
“I’ve got all these things I can’t use,” Ortolaza said. The washer, for one, she explained. Standing in a shirt pocked with stains, she listed off the other ways her life had changed in the six months she’s lived without power. She eats less fresh produce because her fridge isn’t cold. She warms water for baths on the stove. She uses solar-powered lawn ornaments to supply light while she bathes. She’s in bed by 7 or 7:30 PM.
“What else am I going to do? There isn’t much,” she said.

An opportunity?

As people like Ortolaza stressed and learned to live without the utility’s power, the rhetoric in the capital and on the mainland turned, in some ways, optimistic.
The destruction of the grid was so immense that some people saw an opportunity.
“The first thought most certainly was, you know, ‘Gosh, here we are unfortunately in a situation where we are as close to a blank-slate situation than we ever thought we actually would be,’” said Julia Hamm, head of the Smart Electric Power Alliance, an organization that promotes renewable energy. For years, her group has led a thought experiment called The 51st State Initiative. It’s not about statehood; rather it’s about dreaming up a better way to manage a power grid without the baggage of existing grids.
A few months after the storm, based on some of the Initiative’s ideas, Julia helped write a report that sketched out how Puerto Rico could build back a better, more resilient grid. One of the major proposals is to add clean energy, like solar and wind, and decentralize the grid.
A way to do that is build smaller grids within the main island grid. Perhaps one for a hospital, one for a small city, a remote town. Each would have its own power source, which could be renewable energy.
When the main grid is working, these smaller grids could connect to it and even supply some power to it. If the grid goes down, the microgrid could disconnect from this larger network and provide power to the people who are within its service area.
As the utility struggled to restore power, some people unknowingly put that plan into action.
Across from Santa Ortolaza’s powerless house, a school is running off its own grid. Solar panels slope towards the sun on the school’s roof, pumping energy into a battery the size of a small refrigerator.
A local company donated the panels, and Sonnen, a German power storage company, provided the batteries to store the energy and power the school.
The school’s principal, Alberto Melendez Castillo, said with the new setup the school will save nearly 30 thousand desperately needed dollars annually. And the school will be prepared for future storms.
“If another event like Maria comes, we’ll have power so the students can have classes with light, can eat fresh food, can drink cold water, cold milk,” Castillo said.
The school serves low-income kids from the mostly rural area. Castillo says he wants it to function as an emergency center for the community, a place where parents can come charge vital equipment and stay connected.
Other small microgrids have popped up or expanded on the island. But if Puerto Rico really wants to build a modern grid, it’ll cost roughly $17 billion.
For now, PREPA’s priority has been turning the lights back on. That means dollars being spent now aren’t going to rebuilding better. They’re remaking the same thing that was there.
“There probably is some money being spent today to fix the current equipment that if we really re-envision Puerto Rico’s power system going forward, that might need to change anyway and be redone to something else,” said Hamm. “But there’s really no other alternative, right?”

Help me.

From the school I wind back down from the mountain. My phone doesn’t work because communications lines are down, too. Miraculously, I don’t get lost, and in 40 minutes I’m in the town of Orocovis. I end up at the house of Maria Esnidel Melendez Colon.  Here, it’s easy to see the grid is not some abstract thing.
It’s life.
Colon runs a pair of generators 24 hours per day, and pays $900 a month for fuel. Her mother uses an oxygen machine powered by the generators.
“We never would’ve expected that this would take so long,” she said. It “makes one desperate.”
She goes into her mother’s room. Olga is sitting up in bed, surrounded by hissing medical equipment. She’s almost 97. That means she lived through San Felipe in 1928, the last really big hurricane to hit Puerto Rico, and the electrification of the island.
When we approach her bed, she whispers, “Ayudame.”
Help me.
Nine months after the storm, about 8,000 people are still without power.
Minerva Ortolaza holds a rechargeable bulb her sister, Santa, uses to light her house. The Ortolazas didn't have light for months after Hurricane Maria hit Puerto Rico and they had to change their routines to make do. (Irina Zhorov/WHYY)

Puerto Rico crawls toward full re-electrification