Puerto Rico deserves a better Promesa

Washington’s lawmakers insist that Puerto Rico’s only hope to avoid a total economic collapse is the Promesa bill, which passed in the House of Representatives yesterday and now goes to the Senate for a vote. Supporters say the bill will address the debt crisis through an appointed board that would determine Puerto Rico’s fiscal decisions, forcing it to meet its debt obligations or, if it cannot, give the U.S. territory access to bankruptcy proceedings.

But instead of saving Puerto Rico, if Promesa remains unchanged, it could sink its economy and shipwreck the island’s working people.

Promesa, which in Spanish means “promise,” does not provide for the use of federal dollars to get the island back on its feet and consistently places creditors ahead of working people by suggesting harmful austerity measures.

This is not a promise to Puerto Rico and its people, but to a GOP-dominated Congress and to Wall Street. This is unfair to millions of Puerto Ricans who, for decades, have suffered under failed federally conceived economic models that keep most of its people poor and its government in perennial debt.

Even defenders of the legislation acknowledge it could severely harm workers. For example, Promesa proposes a sub-minimum wage of $4.25 for workers under 25. Proponents say no Puerto Rico governor would ever enact this measure. But without guarantees, it signals to young workers that they are better off leaving; that repaying debt requires wage cuts. An amendment that would have removed this measure was struck down in the House vote. This is a mean-spirited and dangerous measure straight out of the leveraged buyout playbook.

The bill also clouds the future for tens of thousands of workers in the public sector, the island’s largest employer despite massive service cuts. Workers have continued to pay into pension funds while the government has vastly underpaid its share. The Commonwealth’s largest pension fund has a $30.2 billion leak and will likely run out of money next year.

While Promesa has some helpful measures, such as ending creditor lawsuits, these would only last until its federally appointed fiscal control board sets priorities for payment.

And then there is the crucial question of the legality of significant portions of Puerto Rico’s debt. An independent audit board set by Puerto Rico's legislature or the courts could confirm preliminary assessments that part of the debt was acquired in violation of the Commonwealth’s constitution and laws. An amendment to Promesa preserves the ability of the commission to audit the debt, but requires verification of its findings by a fiscal oversight board without requiring the board to pursue, respond to or support those claims. This can compromise critical leverage in negotiating better terms with creditors, including “vulture” hedge funds.

Promesa backers contend this version of the bill is the only one that can pass. They say that if nothing is done before Puerto Rico defaults on payments of $2 billion next month, creditor lawsuits will rain upon the island, freezing credit lines and leaving it unable to finance operations.

It doesn’t have to be that way. The U.S. Treasury can extend to Puerto Rico an emergency credit line to continue operations and meet its next round of payments. The administration could allow the Securities and Exchange Commission to investigate investment and retirement funds that aggressively acquired Puerto Rico’s debt and sold it back to the public without fully disclosing how risky it was.

These steps won't solve the problems underlying the crisis. But they may force Puerto Rico’s creditors to the negotiating table and, in a crucial electoral year, persuade Congress to write a better bill – one that restores bankruptcy proceedings for Puerto Rico and includes adequate funding for federally mandated programs as a revenue source. They would also create a more robust political space to address long-term inequities that keep Puerto Rico from attaining a stronger, fairer and more sustainable economy.

We owe a better solution than Promesa to generations of Puerto Ricans on the island and in the states who have generated trillions of dollars in profits for the United States, and we urge the Senate to make changes that will allow Puerto Rico to keep functioning and to pay its debt. As is, Promesa is far worse than doing nothing. We cannot allow Congress to sink Puerto Rico’s economy in order to save it.

Hector Figueroa is president of 32BJ of the Service Employees International Union.