June 9th will always be remembered as a historic day for Puerto Rico. For the first time, the three branches of the United States government were all synchronized to deal with the fiscal crisis of Puerto Rico
President Barack Obama exercised his leadership by clearly supporting HR 5278 to assure the votes of the democratic legislators. That same day that HR5278 was going to House a vote, the Federal Supreme Court resolved the controversial case of Sánchez Valle, making it clear that Puerto Rico’s sovereignty lies solely on Congress.
It is clear that, as a result of the Supreme Court decision, the United States are sending a message that the approval of PROMESA does not go against the legal-political relationship between Puerto Rico and the United States shown in Law 600.
Conscious of the consequences that the island would have had to face if the fiscal and economic problems were left untouched, Congress approved the HR 5278 without much opposition. The legislation that received the support of the democratic legislators, including all Puerto Rican legislators, excluding Congressman Luis Gutierrez, is not perfect but does provide two fundamental components that attend to the fiscal crisis of Puerto Rico: the restructuring of the debt and the reorganization of public finances.
The establishment of a Fiscal Oversight Board (FOB), will also help Puerto Rico return to the financial markets, which is necessary to bring back fiscal and macroeconomic stability to the island. The FOB imposes control and fiscal discipline, which will stop the political class from continuing the wrong fiscal remedies of excessive spending and new taxes that hurt so much the consumer and the private sector.
Also, but it will help create an organized process of restructuring the debt, avoiding the chaos that could incite judicial lawsuits from the creditors. These two components will create the basis so that the FOB is able to advance with the process of the fiscal and operational restructuring of the local Government, implementing necessary means of efficiency and management for the country.
A collective reflection
Nevertheless, the only way we can take advantage of this situation as a people is by undergoing a collective reflection.
We should all reflect on the reasons behind the status of Puerto Rico at the moment, how we got to where we are, and why we haven’t been capable of finding a proper solution to this locally manufactured crisis. It is only after this reflection that we can move towards national reconciliation that will later let us reconstruct the country.
It is almost obvious that the FOB will not be a magical wan to resolve all of our problems, but instead an instrument that can only be successful if we all work as a team to implement the structural reforms that Puerto Rico needs. Economic development, an essential component for the island to be somewhat more functional, should be the responsibility of the private sector and everyone else that has something to contribute to this important process.
Starting today, the private sector should start to gather all of the proposals that have been presented but ignored by the different governments of the island, in order to design the economic development plan. The conditions are perfect so that the private sector and the FOB can work together in a dual process of financial reconstruction and economic rehabilitation of Puerto Rico.
Following are five recommendations to maximize the functions of the FOB:
- Political parties should create a committee that provides support and input to the FOB in its role to restructure the debt and the public finances.
- The private sector should organize and create a multisector group to work in coordination with the FOB and should make an economic plan with short, medium and long term objectives. Local businesses should organize their projects and new investments that could help reactivate the economy.
- Organizations that represent the pensioners of the Government should prepare alternatives to rehabilitate the two retirement plans (central Government and teachers) that face a combined actuarial deficit of $40,000 million.
- Local bondholders, clearly affected by the devaluation of bonds, should present alternatives to restructure that debt that is of greater impact to local creditors.
- The finance sector (banks and cooperatives) should prepare to finance projects and new investments that will arise from the gradual process of stability of the fiscal and economic situation. Investments will be key to accelerate the recuperation of the economy.
I am sure that the events that have just transpired will give us a new opportunity to rethink and construct a new Puerto Rico. That responsibility lies in all of us, and we should all assume it with outmost responsibility.
