Jacob Lew, U.S. Secretary of the Treasury, recently visited Puerto Rico to get a first-hand view of the economic situation there. “This is not a crisis of the future,” he discovered, “it is a crisis that is already upon us, and we must act now to address it before it is too late.”
In an article for the New York Daily News, Lew describes hospitals that can’t get life-saving medications for babies in the critical care unit without paying cash up front, schools without the resources to screen windows against disease-carrying mosquitoes, and electrical systems that can power lights or computers but not both. He tells about his visit to a business district where 80% of the businesses have closed.
Then he calls upon Congress to pass PROMESA, a bill that will provide Puerto Rico with a way to restructure debt under the supervision of a fiscal oversight board.
“Some argue that the legislation should be defeated because it favors creditors while leaving workers behind,” Lew acknowledges. “This is simply not true.”
Lew points out that the very investors populist rhetoric claims PROMESA panders to have actually spent millions of dollars trying to defeat the bill. There are as many people arguing against PROMESA because it favors pensioners over creditors as there are people arguing that PROMESA doesn’t protect pensioners sufficiently.
There is a difference, though. Traders who bought Puerto Rican bonds at a discount are hoping that chaos ensues in Puerto Rico, necessitating a federal bailout and giving the most persistent creditors a chance to gain a profit on their investment. Those who argue that PROMESA is against the interests of the workers are imagining that their persistence in working toward a more progressive bill will result in a proposal that might have some greater degree of abstract fairness. But as Lew reports, Puerto Rico is in great need right now. There is no time to work toward a perfect solution… even if all the stakeholders could agree on a definition of perfection.
“The bill puts all of Puerto Rico’s liabilities on the table and is the only effective way for Puerto Rico to get back on its feet. It has no special carveouts or bailouts for creditors,” Lew writes. “Today, public workers in Puerto Rico have little to no protection for their pensions. While the bill ensures all creditors will share in the sacrifice, it also mandates adequate funding to support the pensions of hundreds of thousands of individuals. That is a protection that Puerto Rico’s workers do not have without this legislation.”
Lew agrees that there are some provisions in the bill that he does not like, and admits that PROMESA is a compromise that can’t be expected to please everyone. But he also recognizes that a compromise is the only real possibility at this point, and that further delay will not improve Puerto Rico’s position.
“In the absence of this bill,” says Lew, “Puerto Rico’s future will be in the hands of its creditors — not its people.”