CNE: PROMESA has fallen short of its goals 5 yrs. after enactment
Five years after the approval of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), the objectives, achievements and successes attained fall short, the Center for a New Economy concluded in the latest edition of its “CNE Review.”
In it, the CNE examines PROMESA since its enactment in June 2016, makes an inventory of its successes and failures and reiterates the proposal presented back in 2016 in Washington D.C., and which is still an alternative to the Financial Oversight and Management Board (“FOMB”).
On one hand, according to CNE’s analysis, since the enactment of PROMESA, Puerto Rico has benefited from the suspension of litigation demanding repayment and a moratorium on debt payment, and has attained certain control, transparency and visibility in government spending.
However, five years later, approximately two-thirds of the bond debt has not been restructured; critical projects for economic development have not been approved; the audited financial statements are still three years past due; the move to budgeting on a modified accrual (or accrual) accounting basis is a work in progress; and the government’s budget is not yet balanced, as it cannot yet include debt service, the San Juan-based think-tank concluded.
In addition, the CNE believes that the FOMB’s insistence on implementing spending cuts, instead of eliminating tax exemptions and increases in collections, has generated anxiety and uncertainty among the population and may have permanently damaged important institutions for the economic development of Puerto Rico such as the University of Puerto Rico.
“So, as we stated in 2016, the economic, political, and social costs associated with the colonial PROMESA experiment have been extremely high and explicit, while any benefits we may have derived from it have been small and most remain quite uncertain and contingent,” according to the analysis.
CNE agrees with Appellate Court Judge Juan Torruella who said PROMESA has been “Congress’s fourth try at cutting through the Puerto Rican Gordian knot in its interminable attempt to colonially rule Puerto Rico and its people” and, in CNE’s opinion, it has failed.
CNE also coincides with the judge when he said it was time for the United States “to accept that its relationship with its citizens who reside in Puerto Rico is an egregious violation of their civil rights. The democratic deficits inherent in this relationship cast doubt on its legitimacy and require that it be frontally attacked and corrected ‘with all deliberate speed’.”
In addition, CNE recommends that Puerto Rico take a step forward to begin reforms that are already overdue to restore credibility, improve governance, effectively implement accountability and transparency measures, and promote greater civic participation.
Part of the debate promoted by CNE in its analysis includes bringing back to the public forum the proposal that the organization presented in February 2016, in Washington D.C., and that continues to be relevant as a measure to promote the stability and sustainability of public spending and debt.
“Fiscal Responsibility laws can be promoted and implemented locally to reform the governance of key institutions to help ensure the long-term solvency of the government,” the CNE said.