José J. Villamil, chairman of the board of Estudios Técnicos in San Juan: “Senator Orrin Hatch (R-Utah) has proposed a $3 billion grant to Puerto Rico, meant to be utilized in conjunction with the creation of a federal Fiscal Control Board and reducing Social Security payments for workers in Puerto Rico. Hedge funds and other bondholders will favor the measure since it essentially protects their investment. This group has opposed granting Puerto Rico access to Chapter 9 of the bankruptcy code, which is not included in the Hatch proposal. Obviously, a $3 billion grant would resolve the immediate liquidity problem and would permit paying the debt service for the following year. However, efforts should focus on achieving justice for Puerto Rico in the Medicare and Medicaid programs. Island residents pay for these programs exactly the same as those of any state, yet the benefi ts received are far fewer. This is clearly a case of social injustice that, were it to be corrected would not only improve the lot of low-income Puerto Ricans, but would also go a long way toward resolving the fi scal situation. What one must ask is what the various proposals in Congress would do to jump start the economy and stop in its tracks the downward spiral that describes its performance over the last decade. Unless this is done, the stopgap measures for dealing with the fi scal problem will achieve very little. The focus of these measures has been fi scal health, not the wellbeing of the Puerto Rican population or the sustainability of the economy in the medium and long term.”
Kenneth McClintock, former secretary of state and lieutenant governor of Puerto Rico: “First of all, our debt doesn’t amount to $72 billion, including $5 billion of water utility debt and $9 billion of electric utility debt, as some have said. The commonwealth is not liable for PREPA’s debt, just as New York Governor Andrew Cuomo has no responsibility for Consolidated Edison’s bonds. Second, debt service for the commonwealth’s actual debt represents less than 16 percent of revenues. If Puerto Rico were to spend 90 percent of its revenues on expenses, the debt plus its expenses are unsustainable. It is more equitable to reduce that 90 percent to 84 percent, a 6.6 percent cut, than to balance overspending by cutting the 16 percent to 10 percent, a nearly 40 percent haircut, which would increase future credit costs. Third, a signifi cant portion of our actual debt, between 33 percent and 40 percent, is due to inequitable treatment by the feds. If we had been a state during the past 25-30 years, our debt today would be $15 billion to $20 billion lower. We need help. First, we need a big brother that will remind us that we can’t afford luxuries that states don’t have-a 1:11 teacher-student ratio, a full-time commonwealth-wide fi refi ghting department, the most expensive workmen’s comp system in the nation, and so forth. These expenses can be brought down without layoffs. Second, some relief from Wall Street to iron out the scheduled debt service payments, which as in PREPA can be achieved through consensual negotiations rather than litigation, in or out of bankruptcy court, where only lawyers win. Third, equitable treatment from the feds— EITC to combat poverty, full CTC to ease family burdens and better treatment under Medicare, Medicaid and Tricare Premium for our vets to combat depopulation and the loss of physicians to the mainland.”
Rafael Cox Alomar, assistant professor of law at the David A. Clarke School of Law at the University of the District of Columbia: “Nothing, as a matter of law or policy, precludes Congress or the White House (and particularly the Treasury) from extending to Puerto Rico appropriate short-term fi nancing facilities within a wider revitalization strategy that must necessarily include an effective legal repertoire under Chapter 9 of the U.S. Bankruptcy Code. Time is of the essence. A humanitarian crisis of grave proportions will soon unfold in Puerto Rico if the political branches in Washington fail to craft an innovative policy for cleaning the island’s monumental fi scal mess. In light of the obvious stalemate in Congress, it is about time the White House and the Treasury step up to the plate and show much more leadership than what they have shown us so far. It is simply not acceptable for the Obama administration to roll out a plan for Puerto Rico (as it did on Oct. 22) only to let it die in Congress. There is much more the Obama administration can do, without congressional action, which it has simply failed to do out of lack of political will and commitment toward the 3.6 million U.S. citizens born and raised on the island. And while it is true that local politicians have recklessly mismanaged the island’s fi nances (as the most recent corruption scandal involving the governor’s brother and some of his closest cronies shows beyond peradventure) it is pretty clear that the fundamentals of Puerto Rico’s colonial relationship with Washington have exacerbated the island’s systemic malaise. There will be no enduring resolution of the Puerto Rican conundrum until the political branches in Washington undo a colonial relationship that stands as an acute source of embarrassment in the eyes of the world.”
The Latin America Advisor features Q&A from leaders in politics, economics, and finance every business day. It is available to members of the Dialogue’s Corporate Program and others by subscription.Will the US Heed Puerto Rico’s ‘Distress Call’?
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