Should Congress Impose Direct Rule over Puerto Rico?

For the past few weeks, Puerto Rico has been subjected to a multitude of actions by our political class and the oversight board related to the handling of our current debt and fiscal crisis that would make left-wingers such as Nicolás Maduro proud.  The actions being undertaken are a response to the current policy clash between the government of Ricardo Rossello and the Fiscal and Oversight Management Board about the host of fiscal plans to be adopted by the commonwealth.  As the island heads to its next fiscal year, and the island is still recovering from the disaster of Hurricane Maria, the actions undertaken raise an important question.  Does the obvious problem in governance in the commonwealth require an extreme action like repealing Law 600 and Congress imposing direct rule?

The Commonwealth of Puerto Rico currently is indirectly ruled by Congress.  The 114th Congress approved the Puerto Rico Oversight, Management, and Economic Stability Act, better known as PROMESA, which imposed an unelected seven-member panel to oversee the adoption of a fiscal plan that returns the government of Puerto Rico to fiscal health.  However, the vision of PROMESA acting as the legal remedy for the crisis has been dampened by events – delays in adopting a credible and reliable fiscal plan, the continued legal fights in the courts, and the aftermath of Hurricane Maria.

Many believed that the Oversight Board would bring transparency and trust to actions related to Puerto Rico's fiscal and debt problems.  However, the board is thinking of approving a fiscal plan without a reliable baseline, such as the lack of audited financials since fiscal year 2015.  The board also has continued its practice of no transparency, withholding important documents and information from the public at large, particularly regarding to the crafting of the commonwealth fiscal plan.  Board actions such as not negotiating with bondholders in good faith, taking most of the government entities through bankruptcy procedures, and its refusal to include more debt service in the new fiscal plan have damaged the trust that Congress, bondholders, the private sector, and many in Puerto Rico had in the board.

While criticisms of the indirect rule of the board are long and continuing, the actions of the government of Puerto Rico, particularly under the administrations of Alejandro García Padilla and Ricardo Rossello, is the most worrying.

The default position of the government of Puerto Rico during this crisis has been its outright refusal to pay or even negotiate with bondholders.  Gov. Padilla's famous words of dismissal to rating agencies – "me vale" – set the tone.  The current Rossello administration came to power promising to bring the island to fiscal health and pay bondholders.  But words and actions, particularly those of last week, once again showed the world and Congress that this is not the case.

Last week in the Senate of Puerto Rico, members of all political parties voted unanimously, 25-0, to end commonwealth funding to the oversight board.  This vote clearly violates Sec. 107 (b) of PROMESA.  Whether it passes the House and gets signed by the governor is another story.  But do the politicians who voted for this understand the possible consequences?  If this bill becomes law, the board will surely go to court and probably will win.  Will Puerto Rico then refuse to release the funding?  Will Puerto Rican politicians risk the court taking over state bank accounts?  No more money for the board means no money for the bankruptcy Title III proceedings keeping the island government operational.

This cheap political action has been the standard ever since Congress approved Law 600, allowing Puerto Rico to adopt a constitution for self-government.  Indeed, one might argue that allowing Puerto Rico more autonomy indirectly permitted the indebtedness and questionable policies that led to the crisis we are in at this moment.  Moreover, with the fiscal board adopting actions right from the island playbook, like refusing to pay and lack of financial transparency, there is a complete breakdown in direct local and indirect federal governance in the island.

Last week, a friend who is a liberal arts college professor on the island, in response to my tweet arguing for congressional direct rule, wrote to me that he made the same argument to his students.  The majority of liberal arts students are left-wingers, and he told me nobody said a word in response, knowing full well what his argument meant.  Frustration has set into the minds and hearts of every Puerto Rican to the extent that such an argument solicits no response even from the most ardent left-wingers in college.

In the ancient Roman republic, in times of crisis, the Roman Senate took the extraordinary step of appointing a temporary Praetor Maximus, or dictator.  Maybe, in this continued chronic failure of governance, an equivalent action is needed for the enchanted island.

Ojel L. Rodriguez, AKC (@ojelrodriguez) is a freelance writer and graduate from King's College London.

For the past few weeks, Puerto Rico has been subjected to a multitude of actions by our political class and the oversight board related to the handling of our current debt and fiscal crisis that would make left-wingers such as Nicolás Maduro proud.  The actions being undertaken are a response to the current policy clash between the government of Ricardo Rossello and the Fiscal and Oversight Management Board about the host of fiscal plans to be adopted by the commonwealth.  As the island heads to its next fiscal year, and the island is still recovering from the disaster of Hurricane Maria, the actions undertaken raise an important question.  Does the obvious problem in governance in the commonwealth require an extreme action like repealing Law 600 and Congress imposing direct rule?

The Commonwealth of Puerto Rico currently is indirectly ruled by Congress.  The 114th Congress approved the Puerto Rico Oversight, Management, and Economic Stability Act, better known as PROMESA, which imposed an unelected seven-member panel to oversee the adoption of a fiscal plan that returns the government of Puerto Rico to fiscal health.  However, the vision of PROMESA acting as the legal remedy for the crisis has been dampened by events – delays in adopting a credible and reliable fiscal plan, the continued legal fights in the courts, and the aftermath of Hurricane Maria.

Many believed that the Oversight Board would bring transparency and trust to actions related to Puerto Rico's fiscal and debt problems.  However, the board is thinking of approving a fiscal plan without a reliable baseline, such as the lack of audited financials since fiscal year 2015.  The board also has continued its practice of no transparency, withholding important documents and information from the public at large, particularly regarding to the crafting of the commonwealth fiscal plan.  Board actions such as not negotiating with bondholders in good faith, taking most of the government entities through bankruptcy procedures, and its refusal to include more debt service in the new fiscal plan have damaged the trust that Congress, bondholders, the private sector, and many in Puerto Rico had in the board.

While criticisms of the indirect rule of the board are long and continuing, the actions of the government of Puerto Rico, particularly under the administrations of Alejandro García Padilla and Ricardo Rossello, is the most worrying.

The default position of the government of Puerto Rico during this crisis has been its outright refusal to pay or even negotiate with bondholders.  Gov. Padilla's famous words of dismissal to rating agencies – "me vale" – set the tone.  The current Rossello administration came to power promising to bring the island to fiscal health and pay bondholders.  But words and actions, particularly those of last week, once again showed the world and Congress that this is not the case.

Last week in the Senate of Puerto Rico, members of all political parties voted unanimously, 25-0, to end commonwealth funding to the oversight board.  This vote clearly violates Sec. 107 (b) of PROMESA.  Whether it passes the House and gets signed by the governor is another story.  But do the politicians who voted for this understand the possible consequences?  If this bill becomes law, the board will surely go to court and probably will win.  Will Puerto Rico then refuse to release the funding?  Will Puerto Rican politicians risk the court taking over state bank accounts?  No more money for the board means no money for the bankruptcy Title III proceedings keeping the island government operational.

This cheap political action has been the standard ever since Congress approved Law 600, allowing Puerto Rico to adopt a constitution for self-government.  Indeed, one might argue that allowing Puerto Rico more autonomy indirectly permitted the indebtedness and questionable policies that led to the crisis we are in at this moment.  Moreover, with the fiscal board adopting actions right from the island playbook, like refusing to pay and lack of financial transparency, there is a complete breakdown in direct local and indirect federal governance in the island.

Last week, a friend who is a liberal arts college professor on the island, in response to my tweet arguing for congressional direct rule, wrote to me that he made the same argument to his students.  The majority of liberal arts students are left-wingers, and he told me nobody said a word in response, knowing full well what his argument meant.  Frustration has set into the minds and hearts of every Puerto Rican to the extent that such an argument solicits no response even from the most ardent left-wingers in college.

In the ancient Roman republic, in times of crisis, the Roman Senate took the extraordinary step of appointing a temporary Praetor Maximus, or dictator.  Maybe, in this continued chronic failure of governance, an equivalent action is needed for the enchanted island.

Ojel L. Rodriguez, AKC (@ojelrodriguez) is a freelance writer and graduate from King's College London.