The Puerto Rico Supervision, Management, and Economic Stability Act ( PROMESA ) is a US federal law establishing a supervisory board, a process for restructuring debt, and accelerating procedures to approve key infrastructure projects to combat the Puerto Rico government's debt crisis. Through PROMESA, the US Congress established an unelected Fiscal Control Board (FCB) to oversee debt restructuring. With this protection, the governor of Puerto Rico, Alejandro GarcÃÆ'a Padilla, deferred payments due on July 1, 2016. FCB's approved fiscal austerity plans for 2017-2026, cut deeply into the Puerto Rican public service budget - including cuts for health care, retirement, and education - to pay creditors. In May 2017, with debts of $ 123 billion in debt owed by the Puerto Rican government and its companies, FCR requested an "immediate" nomination from a federal judge to "decide how to handle" "the biggest bankruptcy case in the history of the American public bond market.
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The United States attacked Puerto Rico, then an autonomous Spanish colony, during the Spanish-American War. Puerto Rico was handed over by the Spanish to the end of the conflict in accordance with the Paris Treaty of 1898. The Foraker Act of 1900 made Puerto Rico subject to applicable US Federal law with the exception of the Internal Revenue code and established the government with the governor and the executive council appointed by the President US. The law also establishes a bicameral and judicial legislative system with a representative house selected by Puerto Rican residents. This action prohibits public debt from civil government and various municipalities exceeding seven per cent of their aggregate tax rate. The currency of Puerto Rico is also converted to US Dollars.
Maps PROMESA
Jones Act
In 1917, the Jones Act was also known as the Jones-Shafroth Act establishing a civil government with new import and export taxes and regulations. The key to this law is the implementation of duty-free municipal bonds threefold. This means that local bond interest is not subject to federal, local or state taxes, causing the desperate Puerto Rico government to economically buy bonds to finance public services. The Jones Act also grants US citizenship to all Puerto Rican people, but does not entitle the Puerto Ricans to vote in the US presidential election (see: The federal vote in Puerto Rico). In this institutionalally-implemented structural dependence was strengthened in 1952 when the Puerto Rico government built its own constitution, officially deeming the island as Estado Libre Asociado de Puerto Rico (literally "Racial Free State of Puerto Rico") also known as the Commonwealth. from Puerto Rico. Unlike the name "Free State" may seem to suggest, this does not give Puerto Rico any significant political and socio-economic autonomy that stands apart from the US forces that control the territory. The constitution contains a language that limits the fiscal 'misbehavior' by suggesting that island public debt should be prioritized before any other expenditure for basic public services takes place.
After politically establishing Puerto Rico as an official colony and dominating economic infrastructure with neoliberal industrialization process, US helped create Puerto Rico's debt problems with allowing sustainable economic stagnation. After the 1945 Operation Bootstrap, where the agricultural economy was transformed by the industrialization process, The Great Emigration of the 1950s in Puerto Rico became part of a larger migration pattern in which workers from colonized parts of the world or ' backward 'move to metropolitan countries looking for better socio-economic opportunities. Realizing that the Puerto Rican economy is dwindling in public debt and lack of growth, congress passed Sec 936 in 1976, providing large tax breaks to the export sector in Puerto Rico. It is considered a key tool for economic growth on the island, as investors, especially pharmaceutical companies and other manufacturers, who get incentives due to tax breaks, bring income to the island and generate jobs. (Davis 2015) However many criticize the use of tax breaks on the island, sponsors it as an uncertain profit leading to the monopoly of the company. In 1996, President Clinton signed a law that would remove Section 936 over a ten-year period, and in 2006, it was completely repealed. This revocation sends Puerto Rico to the Ten Year Recession (combined with the start of the 2008 US Recession) where more than half of manufacturing jobs are lost, GDP falls 13%, and municipal bonds become addicted to the Puerto Government Riko. This is because the company, is not given an incentive by the lack of tax relief, whether the location is closed or moved, causing people to lose their jobs or to move with them. The is forced to rely on borrowing money with an interest rate of about 785% -1000% that does not have to be repaid until several decades later. What's worse is that "Vulture Hedge Funds" invest in either 'weak' or 'default' debt by selling and trading bonds in the secondary market. The Hedge Fund takes advantage and makes a profit from a debt situation by buying low-cost 'low-cost' bonds, and gets a larger amount by forcing the full payment of the purchase value. (Davis 2015) As public debt in Puerto Rico increases, the situation becomes a human rights issue: the loss of basic government services has led to extreme poverty, food insecurity and lack of access to health and education services.
According to Nelson Denis, in response to this socio-economic situation, many native Puerto Ricans continue to leave the island in the hope of a better future; the emigration rate is estimated at about 50,000 per year. As a result, of Law 20 and Law 22 passed in 2012 to revoke the personal income tax liability for new Puerto Rican residents (non-indigenous voters who choose to move to Puerto Rico from the US) and to revoke liabilities for capital investors (< span> especially industrial or manufacturing sector ) to pay capital benefit tax. This makes Puerto Rico a tax haven for US landlords wanting to invest in the manufacturing industry, but continues to ignore the problem of structural dependency and economic stagnation that has led to a large amount of unpaid debts.
Overview
PROMESA allows the island government to enter the bankruptcy restructuring process and stop litigation in case of default. In particular, the establishment of the Puerto Rico Risk Management and Management Board known as "La Junta" (a shortened form of "La Junta de Control Fiscal"), operates as an automatic act of creditors to enforce claims against the government. Puerto Rico. The supervisory board is to facilitate negotiations, or, if this fails, to bring a court-controlled process such as bankruptcy. The Council is also responsible for overseeing and monitoring of sustainable budgets. The President appoints all seven members of the council, six of whom are selected from the list of individuals recommended by congressional leaders and have previous ties to the lucrative industry in Puerto Rico. The Governor of Puerto Rico (or appointed) serves ex officio as an eighth member with no voting rights. PROMESA authorizes the supervisory board to designate territorial or territorial equipment as a "closed entity". Once set, the closed entity is subject to the PROMESA provisions. On September 30, 2016, the supervisory board established the Commonwealth of Puerto Rico and other territorial instruments as a closed entity under PROMESA. As a closed entity, Puerto Rico is required to submit a fiscal plan. The fiscal plan should provide methods for achieving fiscal responsibility and access to capital markets, and:
- provides an estimate of revenues and expenses in accordance with agreed accounting standards and is based on -
- applicable law; or
- a special bill requiring enforcement to achieve a reasonable projection of the Fiscal Plan;
- ensuring important funding of public services;
- provide sufficient funds for the public pension system;
- provides for the elimination of structural deficits;
- for the fiscal year covered by the Fiscal Plan where living under subparagraphs III or IV is ineffective, providing a continuing debt burden;
- improve fiscal governance, accountability and internal controls;
- enabling the achievement of fiscal targets;
- create independent earnings estimates for the period covered by the Fiscal Plan;
- includes an analysis of debt sustainability;
- provide the capital and investment expenditures necessary to foster economic growth;
- adopt the appropriate recommendations submitted by the Supervisory Board under section 2145 (a) of this title;
- includes additional information as deemed necessary by the Supervisory Board;
- to ensure that assets, funds or resources of a territorial intermediation are not lent to, transferred to, or used for the benefit of a territory covered or other territorial intercession of a protected territory, unless permitted by the territorial constitution, approved under sub-section III, or the Qualification Modification approved under sub-section VI; and
- respect for legitimate legal priorities or legitimate rights, which may apply, in the constitution, other laws or agreements of a closed territory or include territorial intercession in force prior to June 30, 2016.
On October 14, 2016, Puerto Rico proposed a proposed fiscal plan to the supervisory board. On November 23, 2016, the supervisory board released an initial assessment of the fiscal plan proposed by Puerto Rico. The regulatory board requested that the fiscal plan be amended to include the following:
- Define and incorporate key aspirational goals, benchmarks, and metrics for a ten-year vision for Puerto Rico. This aspirational vision should encourage Puerto Rico to stabilize its current economic, social, demographic and financial situation, enhance economic resilience, sustain public finance, support long-term, durable growth, meet basic needs and restore opportunities for the people of Puerto Rico. ;
- Exclude any funding from the extension of the Affordable Care Act as well as income from an extension of Act 154 earnings after the expiration (unless the assumption is accompanied by a certain charge). The Council supports efforts to extend funds for the Affordable Care Act and Medicaid Parity for Puerto Rico, but consistent with the PROMESA Act Council should ensure that the Fiscal Plan is based on existing legislation or specific bills.
- Incorporate a baseline forecast revision to reflect pay-go funding for pension benefits and current employee contribution segregation starting no later than 2018; and
- Include a debt restructuring proposal as well as an analysis of debt sustainability.
On November 29, 2016, the Governor of Puerto Rico responded to the supervisory board's assessment of the proposed fiscal plans of the Commonwealth.
With basic services at the risk of privatization, and funding for scarce pensions, education and health care, PROMESA is trying to reallocate more public funds to restructure its $ 72 billion debt. At the end of January 2017, the council formed under PROMESA gave the Puerto Rican government until 28 February to present a fiscal plan (including negotiations with creditors) to resolve the issue. It is important for the Commonwealth to reach a restructuring agreement to avoid processes such as bankruptcy under PROMESA. Moratorium on lawsuits by debtors extended to 31 May.
Recently elected Gov. Ricardo RossellÃÆ'³ hired an investment expert Rothschild & amp; Co in January 2017 to help convince lenders to take a deeper loss than they expected on Puerto Rico's debt. The company is also exploring the possibility of convincing insurance companies that have secured some bonds against default, to contribute more to the restructuring, according to reliable sources. The governor also plans to negotiate a restructuring of about $ 9 billion in utility-electric debt, a plan that could result in "in contention with insurance companies." Political observers have pointed out that his negotiations with utility power debt show Rossell's intention to take a tougher line with creditors. Puerto Rico has received the authority of the federal government to reduce its debts by legal action and this can make lenders more willing to negotiate than engage in lengthy and expensive legal battles.
Composition of Fiscal Control Board
On August 31, 2016, President Obama appointed seven councilors.
In March 2017, Natalie Jaresko, former Minister of Finance in Ukraine, was appointed as executive director of the council.
Criticism
Critics point out that the law continues to treat the island as an anomaly, either as a state or municipality, failing to provide a path for statehood or independence, and not dealing with underlying economic problems such as high unemployment, lack of opportunities, welfare problems, and brain drain. The supervisory board will have the power of broad sovereignty to effectively reject the decision by the Puerto Rican legislature, the governor, and other public authorities, under the constitutional authority of the federal government to "make all necessary rules and regulations" about the US territory. For this reason, the council has been criticized for being both colonial and anti-democratic. According to Nelson Denis, the United States' political and economic activity in Puerto Rico has created a structural dependence, economic stagnation, and growing debt problems that led to the creation of this fiscal plan.
Many critics put forward the fact that the meeting was not held to discuss the legitimacy of debt-lending schemes, but instead looked to use the capitalist economic framework to restore Puerto Rico to a state of economic growth.
New unions, environmental organizations and political parties (eg the Puerto Rican People's Working Party) have criticized the influence of the PROMESA control board on Puerto Rico's socio-economic and political infrastructure. Whether they strike peacefully, gathered in front of the corporate media to oppose propaganda-ridden journalism at PROMESA, or to interfere with the blockade at the entrance to the first PROMESA board meeting, the protesters were filled with striking pepper spray, arrest and militarism.. The militant treatment of the social activists in Puerto Rico who oppose US colonialism has taken place since the time the colony was founded, and has only taken on new sophisticated forms over the centuries.
In 2017, after the Federal Board of Supervisors presented his plan, Joseph E. Stiglitz and Martin Guzman indicated that PROMESA "carries more problems than solutions" and that the designated Council does not have "an understanding of basic economics and democratic accountability". Since the Board's plan predicts a 16.2% decline in GNP for the next fiscal year with further reductions to follow and prioritize payments to creditors, "social (and) economic disaster" is "all but collateral (d)". Stieglitz and Guzman proposed that measures to promote economic growth rather than payment should be central to a viable plan for resolving the crisis.
Due to the US grip on Puerto Rico's political economy and upholding the next neoliberal economic framework, many critics argue that PROMESA is using Puerto Rico's economic instability as a means to gain greater control of the socio-economic and political autonomy of local governments in Puerto Rico.
In 2017, Barry Sheppard wrote in Green Left Weekly that in 2014 when "the island's debt to US financial lenders reached $ 73 billion," the predatory capitalist bought debt cheaply, demanded that it be paid in full and that the law "creates elected financial council of seven people with sweeping power over the island's economy "reaffirmed by the US Supreme Court with Sonia Sotomayor disagreeing.
References
External links
- juntasupervision.pr.gov - the official site.
- "Puerto Rico Supervision, Management and Economic Stability Act (PROMESA)". S.2328 . Public law. Natural Resources House (HNR). June 30, 2016. 114-187.
- "PROMESA Information Release" (pdf) . HNR. Ã,
Source of the article : Wikipedia
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