With the direct intervention of President Obama, the Secretary of the Treasury Jack Lew and the two highest ranking elected officials in Puerto Rico, PROMESA was approved without any significant amendments before July 1st with the expectation, that if it did not happen, the sky would fall. However, several days have passed and the questions remain the same: is the crisis over? Did it stop the lawsuits? Is there certainty about what will happen in Puerto Rico? Will the tax refunds arrive? Are the government suppliers being paid? Has optimism returned?
The answer to all these questions is no, because the only thing PROMESA has achieved so far is deal a heavy blow to Puerto Ricans self-esteem and justify the United States need for a colonial regime in Puerto Rico.
I dont have any doubt that the hasty approval of this law will have negative consequences for Puerto Rico and for the United States.
The two Senators responsible for the issues related to Puerto Rico in the Senate, one Republican and one Democrat voted against it, a bad sign for those who argue that this is the first step in a design to solve Puerto Ricos colonial problem. In less than 24 hours, the powerful chairman of the Senate Finance Committee, Orrin Hatch, sent letters indicating possible law violations and collusions between the federal Treasury Department and the government of Puerto Rico, which in itself bodes ill for the possibility of achieving economic development initiatives in the near future.
As days pass, Puerto Ricans will discover that PROMESA does not solve our crisis, it only deals with theirs. Interestingly, the day after the approval of this measure almost all of the companies that insure Puerto Rico bonds increased their market value. Obama and Lew have stopped talking about us because, as was their strategy, the possibility of the United States being sued for Fridays default was reduced, significantly.
But regarding the problem of lack of liquidity of our government, PROMESA does nothing. The non-payment to government suppliers continues from month to month and PROMESA does not solve it. PROMESA also does not serve the budget deficit of Centro Medico, of the health system or of the special education services, among the many other pressing challenges facing Puerto Rico. In fact, these problems will be aggravated. According to the text of the law, if by midyear the PROMESA board concludes there is a budget deficit, they can order budget cuts in all areas except those regarding debt service to the bondholders. In other words, if you have to choose between cutting funds to Centro Medico, the Department of Education, or the payment to bondholders, the law specifically prohibits cutting the funds to the bondholders.
But the most dramatic is what was validated in the Government of Puerto Rico financial statements, published after the approval of the law: that it is very likely that the government will run out of money in the coming months. The financial statements confirm that the problem will not be solved with more spending cuts because that would mean that many fundamental areas of the government would basically will become unworkable.
Several reports have already been published about how the crisis in Washington DC and New York, that have been presented to us as savior models, after initial enactment of their fiscal board, over time the fiscal crisis of both jurisdictions had to return to Congress because without new financial resources and loan guarantees for market access, the crisis was not solved. Hurry is the friend of disinformation and now, although it appears that there is no hurry, there is also no solution.
Translated by Gabriela Acevedo Gándara. Originally published by El Nuevo Día Interactivo, June 7, 2016