It’s a story with years of history behind it. An eventuality which many said is a result of the political and social status of the largest and most populous U.S. territory.
El Estado Libre Asociado de Puerto Rico (in English, the Associated Free State of Puerto Rico, but referred to as the Commonwealth of Puerto Rico) currently faces a monumental debt crisis. The island owes more than $70 billion, more than 68 percent of its gross domestic product.
Puerto Rico’s debt is owned various bond mutual funds, hedge funds and private citizens, most of whom are Puerto Ricans.
Due to exemptions in its tax policy, the island is an attractive bond market for investors. Interest from its municipal bonds is tax exempt. Decades of issuing debt to pay for budgets on top of other questionable finance moves by the Puerto Rican government led to the situation it finds itself today.
Not to mention the disparity in federal health care subsidies that have led to more financial issues as well as one of the largest exodus of people from the island in 50 years. This meant a slowed economy and a shrunken tax base.
As the bonds began to mature in 2015, the government began to announce that it would not be able to make complete payments citing commitments to maintaining services for their people.
This began a series of million-dollar defaults which forced Congress to create a solution for the nation of over 3.47 million U.S. citizens almost a year after the first default. The Puerto Rico Oversight, Management and Economic Stability Act, also known by its (convenient) acronym: Promesa, or «promise» in English.
Signed on the last day of June by President Barack Obama, Promesa establishes, amongst other policies, a financial oversight board that will supervise any and all budget changes and fiscal plans the island’s government develops as it continues to deal with the immense debt it faces.
The new board will also be able to issue subpoenas, seek judicial enforcement and impose penalties. Most importantly, the board has the power to initiate procedures that would allow Puerto Rico to restructure its debt and adjust its payment plan, something that many advocates have been calling for throughout the crisis.
However, many see the board’s power, which supersedes that of the elected government of the island, as another example of colonialist tactics the U.S. has forced onto the island since it took control in 1898.
Advocates, including many right here in Philadelphia, say that with oversight comes control. Before the government of Puerto Rico can do anything to fulfil its responsibility to its citizens, such as provide funding for things like emergency response services and education, budgets will need to be approved by seven board members appointed by the president and suggested by congressional leaders.
Of these seven members, the law only mandates that one member must have a permanent residence on Puerto Rico and own a business on the island.
Supporters say Promesa will help keep the lights on and allow the island to keep these services alive because they won’t be forced to pay bond holders immediately as is mandated in their constitution. It will also keep vulture hedge funds at bay while the board reevaluates the island’s payment plan and financial situation.
The latest default by the island that occurred within the first days of July, would have opened up the floodgates for litigation if the Federal Government had not passed Promesa. Puerto Rico’s governor, Alejandro Garcia Padilla suspended all payments of the debt after Promesa became law.
Opponents say that the fact that Puerto Ricans have no say in who’s on the board (the island’s Governor is only allowed a non-voting position), this constitutes a violation of the sovereignty of the people of Puerto Rico.
Opponents of Promesa also criticize other provisions in the bill such as the lowering of Puerto Rico’s minimum wage to $4.25 an hour for workers under the age of 25. Three dollars less than the federal minimum wage. Also, as a territory, Puerto Rico would not fall under the Labor Department’s new overtime rule.
There’s also the matter of the board’s ability to bypass environmental protections and flag certain energy or infrastructure projects as “critical” without the consent of the island’s elected government.
Edwin Meléndez is the director of the Center for Puerto Rican Studies at Hunter College of The City University of New York. He explains that Promesa was a compromise by Republicans and Democrats to save a sinking ship. It is not the best solution, but it is the best that could be done considering the circumstances.
“There’s no one in the Puerto Rican Community that likes or approves the bill, but it was voted on because the island finds itself in a very critical moment,” he said. “For now, the most we can do is constantly monitor what the outcome of the law is and make sure that what is done is the best for the people of Puerto Rico.”
Both sides agree on the first step, Meléndez said, and that is to solve the debt crisis. He said at this point, the island has to look at what they have to work with and accomplish that first step.
He added that accountability should be on everyone’s mind.
“We can agree to disagree on a lot of points, but we have to do the work we have to do which is to solve the debt crisis,” he said. “Taking into consideration the $2 billion that we were not able to pay this month, it’s easy to see how this current situation just couldn’t continue the way it was continuing. Nobody wanted to make this sacrifice, but given the circumstances it was possible and necessary.”
Last year, a coalition was formed in Pennsylvania by state legislators as well as lawmakers from Philadelphia. PA for Puerto Rico, as the coalition was called, sought to advocate for the island as it dealt with its debt crisis.
Before talks of a financial review board even began in Washington, the coalition sought to bring three things to Puerto Rico, which they said could have been done through an executive order from the president.
The ability for the island to declare bankruptcy and restructure its debt was number one on the list, followed by improving the health care and medicaid situation and boosting the economy through expanded tax credits.
The coalition traveled to the national capital to lobby congress over the fate of Puerto Rico in November of last year. The group is made up of prominent local Puerto Ricans such as City Councilwoman Maria Quiñones-Sánchez and State Representative Angel Cruz.
Quiñones-Sánchez sees the situation the same way Meléndez does.
“Clearly the bill has its problems,” she said. “When you have such a divided Congress, you tend to be bound to make less than perfect bills. However, it does bring back the possibility for Puerto Rico to restructure its debt, something it had the ability to do before it was taken away in 1984 by the federal government.”
In context, the removal of Puerto Rico’s ability to declare bankruptcy is important Quiñones-Sánchez said.The island and organizations like PA for Puerto Rico were not looking to bailout the island. Merely to bring back the island’s ability to file for Chapter 9 bankruptcy, something that it tried to do on it’s own in 2014 for its public utilities companies but was blocked by the Supreme Court.
“The only thing we like about Promesa is that,” she said. “The fact that it keeps the hedge funds away. These are funds that bought up really cheap debt and want to make money off the back of Puerto Ricans.”
Quiñones-Sánchez, along with others, see the situation as an irresponsibility by many players. In the end, the actions taken or not taken, have led to disparity in health care, the closing of schools and lack of funding in pension funds.
“There is no money attached to Promesa,” she said. “The irony of a name like Promesa. It’s not a bailout. There’s no money for health care parity.”
Cruz said he was appalled at how the U.S. Congress handled the situation.
“There has been no other state or territory that has been treated so unfairly as Puerto Rico,” said Cruz. “The crisis demands oversight and a review board, we understand that. The problem becomes when they begin doing more than just putting this board in place.”
According to Cruz, the Puerto Rican debt crisis was framed by Wall Street to look like the island was looking for a bailout. He says that sort of message tainted what was actually going on. Puerto Ricans being treated like second-class citizens.
“I don’t know where they get their information from, but there are people, men and women under the age of twenty-five with children, with families,” he said. “How are they supposed to provide for their families? You’re forcing young folks to move from their home island because they don’t have another choice.”
Cruz believes that the control board is the first step to Puerto Rico finally having an answer to the question that has plagued it since it first accepted American control. Will it ever be a U.S. state?
“I’m not an expert, but I see this as a way that the Congress will begin to get Puerto Rico’s house in order for it to become a state,” said Cruz. “Why else would it make this complicated system of a review board when all Puerto Rico needed was the return of the power of declaring bankruptcy, something it had before?”
Fermin Morales sees the situation similarly to Cruz, until you start talking about Puerto Rican statehood.
“This control board represents a second movement to colonize Puerto Rico more than it already is,” said Morales. “What we’re seeing today is what happens when you are a colony. People are leaving the island in droves. This all began when a law was passed that said Puerto Rico couldn’t declare bankruptcy. This was done to help U.S. corporation that profited from Puerto Rico’s situation.”
Morales is part of a local grassroots organization called the Philadelphia-Camden Boricua Committee. The organization was funded last year in response to the crisis to get local Puerto Ricans up to date on what has been happening and to push for change.
“Our mission is to create awareness in the community that they have been fooling you all along,” said Morales. “We want to do away with the lie that has always been in the mind of Puerto Ricans, that we can’t take care of ourselves because the yankees keep us in their pocket and that we can’t do anything for ourselves.”
Morales and the organization advocate for Puerto Rican independence, the other side of the coin when talking about Puerto Rico’s status. Indeed, it seems as though it is difficult to talk about the debt crisis without talking about its status as a nation.
“It’s something which is curious when you consider the argument of those against the bill,” said Meléndez. “Puerto Rico has always been a territory of the United States. As such, the bill is perfectly legal when you consider that the sovereignty of Puerto Rico has always been at the discretion of Congress. But what this crisis has done is push the argument to the extremes. Now nobody argues for the status quo. People want to see Puerto Rico’s status change.”
To talk about Puerto Rico’s political status is to talk about decades of history both contentious and easily misunderstood. Essentially, Puerto Rico has been an unincorporated territory of the U.S. since the country acquired it from Spain after the Spanish-American War. Those born in Puerto Rico were given the right to be U.S. citizens in the early 20th century and the island was given permission to create its own constitution in the 50s after a referendum.
However, as a territory, the U.S. Government has final say on anything that happens on the island as is established in Article 4 of the Constitution.
“What this debt crisis has done, is bring out the question of Puerto Rico’s status to the forefront of the conversation,” said Meléndez. “This is something that wasn’t the case before. This situation highlights the power the Congress has and what the options are for the Puerto Rican people. This has become more evident with how Promesa was created and how people have reacted to it and therefore how they react to Puerto Rico’s status.”
Robertoluis Lugo Morciglio is a religious leader at the Beit-El Kingdom of God Community in North Philadelphia. He is part of a group made up of Puerto Rican clergy in the city that raise awareness about the situation in Puerto Rico.
“Our goal with this group is to organize awareness for Puerto Ricans,” he said. “It’s not to decide where to go, but to establish the mindset within Puerto Ricans that something needs to be done.”
The group, Pastores x Puerto Rico, has a similar scope to that of PA for Puerto Rico in that it hopes foster conversation and action. However, Morciglio says Pastores x Puerto Rico is more interested in raising cultural awareness to empower the political power of Puerto Ricans.
“The power needs to come from the diaspora here in the states,” he said. “If you look at the history of Puerto Rico, many of the significant moments happened outside the island. So the power of the diaspora is very significant.”
Like the other activist groups, Pastores x Puerto Rico recognizes that the question of status is no longer an issue.
“It’s no longer up for debate whether or not Puerto Rico is a colony,” he said. “It is. Plain and simple. It’s a law now. Once Promesa was signed into law, the government of Puerto Rico was effectively dissolved. Even in the face of gubernatorial elections, you have no more government in Puerto Rico. Why are we even holding elections? Why are we still debating some of the things that we are debating?”
Culture will be the driving point for change said Morciglio. What the new law has enacted, according to him, is a loss of political power on the island. So in order to do anything, Puerto Ricans must realize that they should stand up for their heritage.
“At this point, everyone agrees that something needs to be done,” he said. “What we at Pastors for Puerto Rico are trying to do is not to decide what gets done, but instead fight for the freedom and power to do it. As it stands, Puerto Ricans can’t do anything to dictate where their future will go.”
Morciglio said he believes religion can be a perfect catalyst for bringing together cultural unity. According to him, religion seeks to unite, not to divide. As such, Pastores x Puerto Rico has tried to reach out to all Puerto Ricans.
“I mentioned to my congregation the other day, to my Puerto Rican congregation members, that the Puerto Rican government has essentially ceased to be,” he said. “They were confused. They didn’t understand. What we need to do is educate and inform everyone what is going on in their nation and with their fellow puertorriqueños.”
In the end, Morciglio remains hopeful. Though he has his own personal opinions on how Puerto Rico should solve its status issue and the debt crisis, he believes any change is welcome. He said the island finds itself in the beginning of a new cycle of change in Puerto Rico.
“It won’t happen anytime soon,” he said. “Maybe not for another two decades. But whenever it may be, change is coming and that’s something all Puerto Ricans must decide on. Where will they fall on the argument, won’t matter. What will matter is that they want change. The rest will go from there.”