Puerto Rico’s fiscal and financial history and what the future may bring under the PROMESA regime
My remarks are divided in three parts. First, I provide some background about Puerto Rico’s fiscal and financial history. Second, I explain the intellectual and legal background of the Puerto Rico Oversight Management and Economic Stability Act, (“PROMESA”). And finally, I offer some conjectures about what the future may bring under the PROMESA regime.
Even though this conference is about the future of the Puerto Rican Body, I believe it is important to start off with some history because, as Jeanne Theoharis states in her new book, A More Beautiful and Terrible History, the Uses and Misuses of Civil Rights History, oftentimes there is a wide gap between the “history we get” and the “history we need.”
According to some primary sources, Puerto Rico had little or no public debt at the time of the American invasion in 1898. For example, the Rev. Henry K. Carroll, President McKinley’s Special Commissioner to Porto Rico [sic], states in his 1898 Report on the Industrial and Commercial Condition of Porto Rico that “The finances of the Government, managed by hacienda or treasury department, were so conducted so that no provincial debt was created. Sufficient amounts for the various purposes were included in the estimates, which were then sent to Madrid for approval, and those amounts were collected and disbursed…In only a few instances were towns or cities allowed to raised money by large bonded loans.”
A couple of years later Congress enacted the Foraker Act of 1900, to provide for the organization of a civilian government for the island, among other things. This law allowed the issuance of public indebtedness by the insular and municipal governments of Puerto Rico, provided, however, that “no public indebtedness of Porto Rico or any municipality thereof shall be authorized or allowed to in excess of seven per centum of the aggregate tax valuation of its property.”
A decade and a half later, the drafters of the Jones – Shafroth Act of 1917, which superseded the Foraker Act, initially kept this cap on the amount of public debt that could be legally issued by Puerto Rico. But this provision was amended in 1937 to increase the limit to 10% of the aggregate assessed tax valuation of property and included three additional legal provisions that remain important to this day.
First, the Jones Act stated that “all bonds issued by the government of Porto Rico, or by its authority, shall be exempt from taxation by the Government of the United States, or by the government of Porto Rico or of any political or municipal subdivision thereof, or by any State, or by any county, municipality, or other municipal subdivision of any State or Territory of the United States, or by the District of Columbia.”
This so-called triple tax exemption would eventually make Puerto Rico bonds extremely attractive to mutual fund managers and high-net worth individuals, both in the United States and Puerto Rico, and is probably one of the principal causes of today’s debt crisis.
Second, the Jones Act introduced a methodology for calculating what constitutes “public debt” for purposes of the statutory limit that remains relevant today. According to the Act, “In computing the indebtedness of the people of Porto Rico, bonds issued by the people of Porto Rico secured by an equivalent amount of bonds of municipal corporations or school boards of Porto Rico shall not be counted.”
The public policy rationale for this carve-out, which survives to this day, was that public enterprises were legally incorporated, financially self-sufficient and administratively separate from the regular departments and agencies of the executive branch bureaucracy and therefore their debt should not be included in the calculation of Puerto Rico’s overall debt limit. In addition, it was meant to protect lenders who had their indebtedness secured by a specific flow of revenues from a public corporation from being converted to general unsecured creditors of the jurisdiction in which the public enterprise operates.
Third, the Jones Act also established a specific order of preference for the payment of expenses in the event that revenues turned out to be insufficient in any given year. According to Section 34,
In case the available revenues of Porto Rico for any fiscal year, including available surplus in the insular treasury, are insufficient to meet all the appropriations made by the legislature for such year, such appropriations shall be paid in the following order, unless otherwise directed by the governor:
First class. The ordinary expenses of the legislative, executive, and judicial departments of the State government, and interest on any public debt, shall first be paid in full.
Second class. Appropriations for all institutions, such as the penitentiary, insane asylum, industrial school, and the like, where the inmates are confined involuntarily, shall next be paid in full.
Third class. Appropriations for education and educational and charitable institutions shall next be paid in full.
Fourth class. Appropriations for any other officer or officers, bureaus or boards, shall next be paid in full.
Fifth class. Appropriations for all other purposes shall next be paid.
According to the late José Trías Monge, one of Puerto Rico’s premier constitutional scholars, these provisions were included in the legislation by its coauthor John Franklin Shafroth, ex-governor and then Senator from Colorado, who “copied the provisions of Article V, section 13 of the Colorado state constitution of 1876”.
Of course, this makes perfect sense, if the Colorado state constitution of 1876 was good enough for a sparsely inhabited mining and livestock state in the Western Rockies, it certainly had to be good for the inhabitants of a small, densely populated island in the Caribbean. As we shall see these colonial legal relics have a way of surviving through the ages, however archaic they may appear to be to modern sensibilities.
The 1952 Constitution
In 1950 the U.S. Congress enacted legislation authorizing the people of Puerto Rico to draft and enact a Constitution for the government of its internal affairs. The drafters of the Constitution incorporated into that document many of the restrictions regarding the public debt set forth in the Organic Laws (Foraker and Jones Acts). They maintained the 10% cap on the amount of public debt that could be issued and provided an absolute preference to the payment of general obligation debt for which the full faith and credit of the Commonwealth had been pledged.
Ironically, in this regard, the provisions of the 1952 Constitution are stricter and less flexible than those set forth in the Jones Act, which (1) granted expenses of the legislative, executive, and judicial departments of the State government the same standing or preference as interest payments on the public debt and (2) allowed the governor, at his discretion, to modify the order of preference.
As it reads today, Article VI, Section 8 of the Commonwealth Constitution provides that public debt of the Commonwealth shall constitute a first claim on available Commonwealth resources. For purposes of the Constitution, “public debt” includes only general obligation bonds and notes of the Commonwealth to which the full faith, credit and taxing power of the Commonwealth are pledged and, according to opinions rendered by the Attorney General of the Commonwealth, also any payments required to be made by the Commonwealth on account of bonds and notes issued by its public instrumentalities and expressly guaranteed by the Commonwealth. The term “public debt” does not include other obligations of the Commonwealth or obligations of public instrumentalities that are not expressly guaranteed by the Commonwealth.
Therefore, if during any fiscal year the resources available to the Commonwealth are insufficient to cover the appropriations approved for such year, then priority shall be given to the payment of interest on and amortization of the public debt and then to other disbursements in accordance with priority norms set forth by law.
Those priority norms are set forth in the organic charter of the Puerto Rico Office of Management and Budget. According to that statute, priority shall be given first, to the payment of the interest on and amortization requirements for public debt (Commonwealth general obligations and guaranteed debt for which the Commonwealth’s guarantee has been executed); second, to the fulfillment of obligations arising out of legally binding contracts, court decisions on eminent domain, and other unavoidable obligations to protect the name, credit and good faith of the Commonwealth; third, to current expenditures in the areas of health, public safety, education, welfare, and retirement systems; and fourth, for all other purposes.
The 1962 Amendment
By 1962 the constitutional debt limitation was constricting the ability of the Popular Democratic Party to execute its program of industrialization and modernization. Therefore, the Constitution was amended to eliminate the 10% cap. Instead, Article VI, Section 2 of the Constitution currently states that direct obligations of the Commonwealth evidenced by full faith and credit bonds or notes shall not be issued if the amount of the principal of, and interest on, such bonds and notes and on all such bonds and notes theretofore issued that is payable in any fiscal year, together with any amount paid by the Commonwealth in the fiscal year preceding the fiscal year of such proposed issuance on account of bonds or notes guaranteed by the Commonwealth, exceed 15% of the average annual revenues raised under the provisions of Commonwealth legislation and deposited into the treasury in the two fiscal years preceding the fiscal year of such proposed issuance.
Notwithstanding this Constitutional limitation, the island managed to triple its public debt from approximately $24 billion in 2000 to close to $72 billion in 2015. Indeed, during this period Puerto Rico’s public indebtedness grew at a compound annual rate of 7.6%, while its income (GNP) grew at a nominal rate of only 3.6%. Given that Puerto Rico’s indebtedness grew at an average annual rate two times faster than the growth rate of its GNP during the past fifteen years, it should not be surprising that Puerto Rico’s public debt currently exceeds its GNP.
This dubious feat of financial performance was made possible and enabled, as it oftentimes is, by the collusion between greedy bankers selling the alluring charms of easy money and pusillanimous, shortsighted politicians willing to surrender to them.
In addition, Puerto Rican debt was very popular for a long time among mutual fund managers in the United States because, as we mentioned before, it is exempt from federal, state, and local taxation due to Puerto Rico’s vague political status as a “Commonwealth” of the United States, it is denominated in U.S. dollars, and it always offered somewhat higher yields relative to other municipal bonds.
If a mutual fund manager needed to improve the performance of his funds all he had to do, just like a chef adding a pinch of pepper to a stew, was add a couple million of Puerto Rico debt to his portfolio, and there you have it, fund performance improved essentially overnight.
Politicians in the island, on the other hand, were more than happy to keep borrowing, and to be fair, for decades the borrowed money was put to good use to finance the construction of public schools, hospitals, highways, and other essential infrastructure and public goods.
However, during the last fifteen years or so, most of the money borrowed by issuing long-term debt was used to finance budget deficits, operating expenses, and classic pork-barrel spending. But nobody asked many questions as long as the investment bankers and the rating agencies received their fees, the fund managers got their share of the secret sauce to lift fund performance, and Puerto Rican politicians obtained the money to keep the party going.
Well, the 2008 financial crisis and the Great Recession it triggered put an end to all that. Anxious accountants and jumpy lawyers started poking around and asking some inconvenient questions and, suddenly, over-caffeinated bankers and panicky rating agency analysts were quite unwilling to look the other way.
Unfortunately, commencing in 2009 the Puerto Rican government, in order to conform with the new conventional wisdom, began implementing a series of austerity-type policies consisting of tax increases and expenditure cuts, pension reforms, and decreasing government employment in order to liberate cash flow to service the public debt, actions that would only exacerbate the island’s long-standing economic weakness. Thus, these policies, in a perverse way, may have decreased Puerto Rico’s short and medium-term capacity to pay its debt by amplifying an already prolonged economic contraction.
The Current Crisis
In June of 2015 the Commonwealth finally admitted that its debt burden was unsustainable, after years of relying on accounting gimmicks, forward refundings, back-loaded “scoop and toss” refinancings, swaps, capitalized interest payments, and other short-term, expensive liquidity fixes.
While it is true that Puerto Rico’s capacity to repay its debt ultimately depends on restoring economic growth in the island, there can be no economic recovery without debt sustainability and that, in turn, is not possible without significantly restructuring at least some of the debt.
Given this situation, we would have expected the governor to propose a set of policies to stimulate the economy at the same time he announced the island’s need to renegotiate the terms of its public debt. Yet, to our surprise, the Garcia Padilla administration embraced a set of IMF-like structural adjustment policies that would only weaken the island’s ability to service its debt.
This decision was inexplicable when we take into account that, in contrast with other jurisdictions that could complement those policies with either a currency devaluation to boost exports or loans from emergency liquidity facilities negotiated with international multilateral institutions, Puerto Rico due to institutional and political constraints, cannot devalue its currency nor does it have access to such emergency liquidity facilities. Therefore, the Puerto Rican government sent the signal that is was willing to put on an IMF policy straitjacket without receiving any of the scant benefits that usually accompany IMF conditionality programs.
The Prelude PROMESA: The Chapter 9 Saga
With respect to debt relief, the first thing to notice is that Puerto Rico’s debt is spread across of variety of debtors (18 issuers in total) representing a complex web of claims in an uncertain regulatory and legal framework. This situation makes it very difficult for creditors to work as a class because one set of creditors will worry that any relief they provide the island will simply make it easier for a different set of creditors to recover a larger amount of their claims.
In game theory terms, Puerto Rico faces a game in which there are multiple players, which sometimes have common and sometimes-opposing interests, and not making a deal leaves everyone worse off. In this type of game, the final outcome could be one of any number of possible “Nash equilibria”, which would generate sub-optimal results for all parties involved.
Therefore, if Puerto Rico wanted to address this problem in an orderly fashion it was imperative to develop a rational framework to address coordination and information failures that would have precluded the island from reaching agreement with its manifold creditors on a debt restructuring mechanism that would, over the medium to the long-term, benefit both Puerto Rico and its creditors.
Before PROMESA both the Obama administration and the Puerto Rican government lobbied Congress seeking the enactment of legislation to authorize the Puerto Rican government to allow its distressed agencies, instrumentalities, and municipalities to file for bankruptcy under Chapter 9 of the U.S. Bankruptcy Code.
This Congressional act would have remedied an inexplicable historical oversight, as Puerto Rico is currently treated as a state for purposes of all other sections of the federal Bankruptcy Code; would not have cost the federal government a single cent; and would have allowed Puerto Rican government agencies and instrumentalities to avail themselves of a coherent, well-structured process to negotiate debt adjustment plans with their respective creditors.
However, Chapter 9 was by no means a complete or perfect solution to all of Puerto Rico’s troubles.
Assuming Congress allowed Puerto Rico to avail itself of Chapter 9 under the same terms and conditions as the fifty states, only “municipalities” can file for relief under Chapter 9. The term “municipality”, in turn, is defined as a political subdivision, public agency, or instrumentality of a state.
Thus, at the outset, this limitation would preclude Puerto Rico from filing a petition for adjustment with respect to its general obligation bonds because such bonds are issued by the central government of the Commonwealth of Puerto Rico, which by definition is not a “municipality”.
In addition, a municipality must: (1) be specifically authorized by a state law to file for relief under Chapter 9; (2) be insolvent (usually on a cash flow basis); (3) be willing to put in effect a plan to adjust its debts; and (4) either (a) have obtained the agreement of creditors holding at least a majority in the amount of claims of each class that the municipality intends to impair or (b) have attempted to negotiate in good faith, but was unable to do so, or it has determined that (i) it was impractical to negotiate with its creditors, or (ii) one or more of its creditors is improperly attempting to obtain a preference over other creditors.
Now, even if a Puerto Rico debtor cleared all the procedural hurdles, that did not imply the road was clear for it to negotiate a plan of adjustment with its creditors. The reason is that certain kinds of municipal bonds receive special treatment or protection under Chapter 9. In specific, a bundle of complicated legal issues—with respect to debt guaranteed by the Commonwealth, special revenue bonds (PREPA), and debt secured by statutory liens (COFINA)—would remain open.
In addition, to all the previous complications, obtaining Chapter 9 for Puerto Rico became politically impossible because lobbyists for bondholders had already closed-off access to the Judiciary Committees, both in the House and in the Senate, which have primary jurisdiction over bankruptcy issues. So, if Puerto Rico was to receive some relief from its creditors it would have to be done working through other Congressional committees.
PROMESA and Dictatorships for Democracy
The obvious candidates were the House Committee on Natural Resources and the Senate Committee on Energy and Natural Resources, which have primary jurisdiction over Puerto Rico pursuant to Article IV, Section 3 of the Constitution of the United States, which grants Congress the power to dispose of and make all needful rules and regulations for territories.
Acting under this broad grant of power, Congress created a territorial bankruptcy regime that consists, broadly speaking of two elements: (1) the establishment of an oversight broad with ample powers to impose fiscal discipline on the territory, in this case Puerto Rico, and (2) a court-supervised process for the orderly adjustment of the territory’s debts and obligations. This two-pronged approach to territorial bankruptcy is what Judge Torruella calls the “PROMESA experiment” in his recent Harvard Law Review article. A legal experiment inflicted on the Puerto Rican body that is possible only because of Puerto Rico’s territorial status.
In general, the origins of the PROMESA experiment can be traced to the establishment of financial control boards by state governments to manage financial crises at the city, municipal, and county level, most notably in the cases of the City of New York, Philadelphia, Washington, DC and Detroit among other jurisdictions.
These boards usually take over the fiscal and financial policymaking functions of cities or municipalities, with the objective of making the “politically difficult decisions” necessary to get out of the crisis and that presumably democratically elected politicians were unwilling or unable to make. Needless to say, these boards are extremely unpopular and are frequently accused of antidemocratic practices.
In specific terms, we can point to the writings of two legal scholars: Clayton Gillette, of the New York University School of Law and David Skeel, of the University of Pennsylvania Law School, and currently a member of the Financial Oversight and Management Board for Puerto Rico.
In a paper entitled, Dictatorships for Democracy: Takeovers of Financially Failed Cities, published in 2014 Professor Gillette argues that
Takeover boards with near-dictatorial powers, including those that coerce or displace the authority of elected local officials, may be the most effective means of addressing the shortfalls and consequences of normal politics. The least contentious models of takeover boards allow them to demand compliance with financial plans and budgets designed outside the usual process of local governance. A substantial literature suggests that particular forms of municipal governance can promote fiscal stability. The more contentious model that I propose here seeks to take advantage of that literature, and thus would permit extensive takeover board restructuring of governance to extricate the locality from an entrenched pattern of costly and defragmented decision making. The increased democratic deficit created by such authority certainly presents certain risks, but the temporal limitations on takeover boards and the possibility of city charter amendment means that any restructuring must ultimately receive at least implicit approval of local residents.
This was followed by the joint publication with Professor Skeel of Governance Reform and the Judicial Role in Municipal Bankruptcy, in which the authors argue that municipal bankruptcy proceedings should not be limited to debt restructuring but should also reform the debtor’s governance structure, given that, in their view, fiscal distress is usually a product of governance dysfunction. Furthermore, they argue that just like corporate governance reform is an important component of a corporate restructuring under Chapter 11 of the Bankruptcy Code, it is even more important in the case of a troubled city or municipality, since a distressed city “cannot be liquidated or its ownership rights transferred from one group of stakeholders to another.”
Finally, on March 15, 2016 they published a white paper entitled “A Two-Step Plan for Puerto Rico”, which outlined the main elements of what eventually came to be known as PROMESA. According to Professor Skeel in an interview with The Nation magazine, what Congress “did looks quite a bit like what we were proposing.”
In sum, PROMESA imposes a strong fiscal oversight board over the democratically elected government of Puerto Rico. This Oversight Board has broad powers over Puerto Rico’s fiscal and economic policies, including the power, under certain circumstances, to impose a five-year fiscal plan, have the ultimate say over annual budgets, require the government of Puerto Rico to implement its recommendations, even if the government has previously objected to them, and has the authority to take such actions as it may deem necessary to prevent the enforcement or execution of certain contracts, executive orders, and even certain laws or regulations.
PROMESA also grants the Oversight Board control over a complicated, new territorial debt restructuring process, which combines principles drawn from both the U.S. Bankruptcy Code and the realm of sovereign debt restructuring. Therefore, any benefits to be derived from this new debt restructuring mechanism are fairly uncertain and contingent on the successful implementation a new and untested legal framework.
The Future of the Puerto Rican Body Under PROMESA
The first substantive task for the Oversight Board under PROMESA is to prepare a five-year fiscal plan, in conjunction with the governor of Puerto Rico.
On February 12, Governor Ricardo Roselló presented the third iteration of his Fiscal Plan for Puerto Rico. In general terms, this version of the Plan has three main components: (1) a revision of the base economic scenario taking into consideration the appropriation of federal funds for the reconstruction of the infrastructure destroyed by Hurricane Maria; (2) an austerity plan; and (3) a structural reform program.
The Plan’s basic assumption is that Puerto Rico will receive at least $49.1 billion in federal disaster aid and another $21 billion to be paid out by private insurance companies, for a total of $70.1 billion, a sum equivalent to the Gross National Product of Puerto Rico in 2017. This influx of funds is the basis for the governor’s radical revision of the base economic scenario. The Plan projects a contraction of 11% in the current fiscal year due to the impact of Maria, and then real growth of 8.4%, 3.5%, 2.3%, 1.8%, and 2.1% during fiscal years 2019 to 2023, respectively.
The growth forecast for 2019 has generated a great deal of discussion, but in our opinion that growth rate is feasible if the projected influx of funds actually occurs. In fact, even if we assume that the Plan’s projections are on point, at the end of fiscal year 2019 the island’s real GNP will still be below the pre-Maria level. In other words, if we assume that Puerto Rico’s GNP as of September 19, 2017, was equal to 100, and the economy contracts 11% in FY2018 and then grows 8.4% during the next fiscal year, simple arithmetic tells us that at the end of FY2019 we will still be below the pre-Maria level.
Beyond 2019, however, it is hard to defend the modification of the base scenario in its entirety since it is inconsistent with other elements of the Plan. The combination of the effects of federal aid with a modest fiscal consolidation at the beginning of the projection period has consequences that are not consistent with the consequences of the second phase, after the first few years, when the federal aid dries up and the economic contraction is greater.
It appears that the architects of the Plan are assuming that the reconstruction of the capital stock destroyed by Maria will generate a permanent increase in both the level and rate of growth of the GNP. But there is no reason to assume that we will grow faster simply because we attain the same level of infrastructure that existed the day before Maria. In fact, before the hurricane the growth rate of the real GNP was negative. Yet the government is forecasting that the impact of federal spending will be of such magnitude that it will permanently accelerate the growth rate of the real GNP well above the prevailing trend pre-2019.
The second component of the Plan consists of a fiscal consolidation, including, among other measures, cuts in government spending in the areas of education and health, as well as reductions in appropriations to the UPR and municipalities that will begin in 2018 but will intensify beginning in FY2020, just when the economic stimulus resulting from the reconstruction begins to taper off.
The administration estimates these measures will generate net annual savings of $2.462 billion in fiscal year 2023. According to an analysis carried out by Brad W. Setser, of the Council on Foreign Relations, that number is equivalent to a little more than 3% of the GNP projected for that year—without taking into account the negative multiplier effect resulting from a reduction in public spending, which the Financial Control Board estimates to be 1.3. Therefore, the contraction in the GNP could be a little over 4%. Yet at no time during the fiscal consolidation period does the rate of growth in the GNP turn negative, even during the years when the federal stimulus declines and austerity measures intensify.
The government, then, tries to square the circle by assuming a positive, swift, and significant economic stimulus generated by a series of structural reforms—such as tax reform, energy reform, regulatory reform, and so on—that are slated to begin in 2018 and will stimulate growth to such an extent that they will completely offset the negative effects from the end of the federal stimulus and the implementation of austerity measures.
This scenario is hard to justify, as the Plan identifies no local, endogenous source of growth and appears not to take into account a series of downside risks to the projection. Among these risks, we might note that (1) federal appropriations may be lower than estimated; (2) tax revenues may rise at a lower rate than projected or even decline after 2020, so that the government will be forced to implement additional fiscal-consolidation measures; (3) the impact of emigration on economic activity could be more severe than anticipated; (4) the (negative) multiplier effect of the austerity measures may be underestimated; and (5) the positive effect of the structural reforms may be overestimated.
The second task is to prepare next fiscal year’s budget using the five-year plan as the matrix or base document. With respect to the budget, we can expect several conflicts between the Oversight Board and the territorial government, specifically regarding the scope and extent of labor reform, pay increases for teachers and police officers, tax reform, pension reform, and governance reform, including the elimination and/or privatization of certain government agencies or services.
While those issues are being negotiated, the debt restructuring processes for the Commonwealth, the Puerto Rico Electric Power Authority, the Puerto Rico Highway Administration, and the three principal government retirement systems continue their long and winding path through the court room of Judge Laura Taylor Swain. At the end of the road, the objective of each of these cases is to produce a court certified Plan of Adjustment, which among other things has to be both “reasonable and feasible.”
In general, reasonableness refers to the assumptions and forecasts underlying the Plan of Adjustment and feasibility refers to the likelihood that the debtor will be able to keep operating and meet its financial obligations under the Plan of Adjustment without a significant probability of default.
In the Detroit bankruptcy the Plan of Adjustment was severely criticized for its lack of methodology, its failure to address long-term structural issues such racism, white flight, poverty, deindustrialization, segregation and discrimination, as well as for its lack of benchmarks for determining whether the Plan of Adjustment allowed the City of Detroit to keep providing essential services. We can expect to some of these issues to surface in the context of bankruptcy cases currently sub judice.
In conclusion I want to pose some questions for the audience, which hopefully will set up a constructive discussion of these issues:
- Why does the United States still have “territories” in the 21st century? What does the US government, as opposed to private corporations, gain, if anything, by keeping these territories?
- Under what theory of justice is it justified legally and morally for Congress to discriminate against Puerto Rico in the application of federal programs?
- To what extent can Puerto Rico’s economic and fiscal crisis be attributed to the perpetuation of its colonial status, to what Judge Torruella has described as political apartheid?
- What is the political theory rationale for granting debt service priority over the funding and delivery of essential services to the population?
- Has Puerto Rico reached the limits of what it can do to develop its economy and improve the quality of life of its people within the constraints imposed by its subordinate political status?
- Is it ever appropriate for an unelected body of technocrats to make decisions that will affect the lives of Puerto Ricans for decades to come? Is the “Dictatorships for Democracy” concept morally acceptable?
- Should the court take into account Puerto Rico’s historical colonial status, American racism, and the systemic and structural discrimination against Puerto Ricans in the US political and legal systems when evaluating the reasonableness and feasibility of the Plan of Adjustment for the Commonwealth?
- What participation, if any, should the “people” or Puerto Rico’s “civil society” (however defined) have in this process?
- What strategies for resistance are available to a “discrete and insular minority” that has limited access to both the US political process and its legal system?
- How can the people directly affected by these economic, legal, and political decisions effectively use their voice to influence those decisions?
- Aren’t Puerto Ricans just better off exercising exit?
Finally, in my opinion, if the political process for restructuring Puerto Rico’s debt and developing a fiscal adjustment plan is flawed from the start, the final plan, no matter how nuanced, sophisticated, or brilliantly conceived, is inevitably bound to fail. Deep structural changes cannot simply be “crammed-down” in a democracy, no matter how watered down or subordinated it may be.
Given all of the above, the future of the Puerto Rican body, unfortunately, looks quite uncertain and rather bleak to me.
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