On Tuesday, March 21, 2017, IFL president Andrew Langer sent Speaker of the US House of Representatives, Paul Ryan, a letter urging Congress to make certain that Puerto Rico lives up to its obligatins under PROMESA.
The text of that letter is below:
March 21, 2017
Hon. Paul Ryan, Speaker
United States House of Representatives
(via Electronic Mail)
Re: Obligations of Puerto Rico under PROMESA
Dear Speaker Ryan:
I write to you today on behalf of the Institute for Liberty, regarding the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA).
When you spearheaded PROMESA through Congress last year, you championed it as “the most responsible solution” to Puerto Rico’s crisis, because it established a framework for consensual negotiations between the island and its creditors, and installed an independent Oversight Board to ensure that the Commonwealth could make necessary, but perhaps politically difficult, reforms to its bloated government, underfunded pension system, and public financing practices. The stated purpose of the Oversight Board was “to provide a method for (Puerto Rico) to achieve fiscal responsibility and access to the capital markets.”
In spite of your best efforts, however, we are growing increasingly concerned that the Puerto Rican Government’s failures to abide by the law are putting those goals in jeopardy.
In the nearly nine months since PROMESA was signed into law, the Puerto Rican Government has failed to conduct any negotiations with its creditors under Title VI of the legislation, despite the clear intent of Congress for it to do so. Instead, the Commonwealth has asked the Oversight Board to lobby Congress to amend the legislation to provide yet another extension of the bill’s stay on creditor litigation, which was already extended through May 1st of this year.
Worse, the fiscal plan that the Commonwealth certified last week violates key provisions of PROMESA designed to reform the Puerto Rican Government and provide a modicum of certainty for its creditors. Specifically, section 201 of PROMESA states that the fiscal plan must respect the existing constitutional and legal priority of the island’s obligations. However, the certified fiscal plan does not do this. Instead, the plan makes very few reforms to government spending practices and the Commonwealth’s underfunded pension system, elevating those interests above all of the island’s creditors, including General Obligation creditors designated as Puerto Rico’s highest-priority obligation in the Puerto Rican Constitution.
This plan is seemingly designed to preclude any good faith negotiation with creditors and to drive them instead into a court-supervised Title III debt restructuring. It provides little money for debt service, allocating 94% of the island’s revenues toward other expenditures. The Commonwealth has implied that all of these expenditures fall under the umbrella of “essential services,” despite the fact that is has thus far failed to define what that term means.
If Puerto Rico does not act quickly to reverse course and comply with the law, it will jeopardize the very intent of PROMESA and lock itself out from the markets for generations to come. As both Speaker of the House and steadfast supporter of the PROMESA legislation, we urge you not to let this happen and to demand that Puerto Rico’s leaders and the Congressional Oversight Board conform the letter and intent of the law as passed.
Andrew Langer, President
Institute for Liberty