CONGRESSIONAL LETTER TO PUERTO RICAN OVERSIGHT AND MANAGEMENT BOARD.
CONTEXT: In 2016 Congress created PROMESA (Puerto Rico Oversight, Management, and Economic Stability Act) and appointed a seven-member commission (known in Puerto Rico as La Junta) to administer a resolution to Puerto Rico’s $73 billion debt. The Oversight Board was given far reaching powers. It must oversee and monitor the island’s budget and may institute hiring freezes, prohibit the Commonwealth from entering into contracts or sell off any of its assets. The Oversight Board’s powers supersede the authority of Puerto Rico’s elected officials who are subservient to its mandates. Since its inception the Board has enacted sweeping austerity measures on the Puerto Rican people affecting their pensions, schools and health and education resources. In the summer of 2019, Puerto Rico experienced the largest public protests in Puerto Rican history against the corruption by Governor Ricardo Roselló’s administration. He was forced to resign on August 2, 2019. Since that time Puerto Ricans have continued to demand more of a voice in their government. This letter to the Oversight Board, penned by thirteen members of the Senate and House of Representatives outlines specific demands.
_______________________________________________________________
Congress of the United States
Washington, DC 20510
September 24, 2019
The Financial Oversight and Management Board for Puerto Rico
PO. Box 192018
San Juan, Puerto Rico 00919-2018
Dear members of the Financial Oversight and Management Board:
We write to you in support of the hundreds of thousands of Puerto Ricans who took to the streets
to demand accountability from their government and compelled Governor Rosselló to step down.
His administration’s corruption and deeply offensive comments toward women, people,
people of color, and victims of Hurricane María were unacceptable, and we are encouraged by
his resignation.
It is clear, however, that this historic and inspiring mobilization goes far beyond one individual.
The people of Puerto Rico seek democratic control over their future, and called not only for the
resignation of Governor Rosselló but for the end of the Financial Oversight and Management
Board’s (FOMB) control over the economic decisions of the island. We agree with the demands
of the Puerto Rican people who came into the streets: Puerto Rico must no longer be treated as a
colony.
During this moment of popular struggle for responsive and legitimate governance, we urge you
to reverse the crippling austerity imposed on Puerto Rico. At a minimum, the uncertain process
of succession and the fragility of Puerto Rico’s political institutions must not be exploited to
strengthen the unelected power over the day-to-day lives of the people of Puerto Rico.
We remind you that more than half a million residents have left the island since 2010, and the
pace of emigration has only increased since Hurricane María. Thirty thousand Puerto Ricans
still live under the post-hurricane blue tarp tents provided two years ago. The island has already
suffered a lost decade with no economic growth. Despite inadequate federal assistance and dire
unmet needs throughout the island, the most recent Fiscal Plan insists on cutting Puerto
Rico’s public health and education programs. This includes hundreds of millions of dollars in
proposed cuts to Medicaid and to the University of Puerto Rico. The FOMB also proposed a 10
percent cut to the pensions of retired public servants who paid for these benefits through years of
hard work, and secured a tentative agreement of 8.5 percent in cuts. It is unacceptable to reduce
the retirement security of those who paid for these benefits through years of hard work.
The FOMB’s Fiscal Plan also focuses on producing a significant fiscal surplus, prioritizing the
demands of Wall Street vulture funds over the needs of the Puerto Rican people. The anticipated
surplus has more than doubled since the FOMB’S first Fiscal Plan was published, despite there
being few changes to the board’s underlying assumptions. Rather than being used for social or
public investment to alleviate the suffering on the ground and boost the island’s sagging
economy, the surplus is likely to end up in the hands of hedge funds and bankers in order to
repay debt that was, in large part, bought on the secondary market for a fraction of their value at
maturity.
The terms of the deal with creditors are far more generous than what FOMB’s own long-term
estimates indicate that Puerto Rico is able to pay. The unrealistic predictions and debt-
restructuring proposals will only serve to undermine the future of Puerto Rico’s economy.
Greedy vulture funds should not be allowed to reap huge profits at the expense of ordinary
Puerto Ricans.
Additionally, we are troubled by increasing evidence of the FOMB’s internal mismanagement
and conflicts of interest. The FOMB’s own budget, paid for by Puerto Rico’s taxpayers, amounts
to $300 million a year–an astounding figure for an institution promoting far-reaching austerity. By comparison, the US. Congressional Budget Office’s annual budget for providing
economic analysis of the entire United States is $50.7 million. If the budget matched the
as a share of the economy it is tasked with analyzing, it would receive $85 billion
annually.
We understand that the vast majority of the FOMB’s funds go toward fees for lawyers and
consultants who are not subject to any disclosure requirements. In what appears to be blatant
disregard for confict-of-interest norms, McKinsey Company, which has received more than
$50 million in advisory fees from the FOMB, is also a holder of Puerto Rican debt and stands to
make millions on any potential restructuring deal for investors.
FOMB members are reported to have been involved in government institutions that contracted
billions of dollars of debt; served as officials in banks that underwrote that debt; and currently
maintain familial relations to some of the largest financial institutions in Puerto Rico. Under
federal statute, board members are required to provide financial disclosures and reveal any
conflicts of interest. However, we are deeply concerned by the apparent failure to comply with
the law. The 2017 financial disclosure documents of Chairman José B. Carrión, for example, list
not a single dollar amount he received from third parties as compensation. Board member Carlos
M. García similarly failed to disclose compensation amounts. These incomplete disclosures
make the full scope of possible conflicts of interest impossible to assess.
Additionally, as the Puerto Rican people seek to compel transparency and accountability from
decision makers, we believe the FOMB should heed this call. We ask that by October 7, 2019,
you provide the undersigned members of Congress with:
● A detailed explanation for the increasing fiscal surplus available to creditors despite the
absence of significant changes in the FOMB’s economic assumptions, as well as the
board’s economic rationale for cuts to health, education, and pensions.
● An analysis of the expected impacts of the FOMB’s proposed budget cuts to health and
education expenditures on Puerto Rico’s economic growth trajectory, outmigration, and
inequality.
● All documents related to the FOMB’s consulting arrangements with entities, such as
McKinsey Company and Citigroup Global Markets Inc., who could financially benefit
from an eventual debt repayment deal.
● Materials related to the FOMB’s policies on conflicts of interest and other internal
measures to avoid financial capture by special interests.
● A full accounting of each member’s professional or familial ties to any institutions and
persons who hold Puerto Rico’s debt or maintain contracts with the FOMB, and thorough
financial disclosures of each board member, including details of outside compensation.
We ask that until an independent investigation about conflicts of interest is completed and all
FOMB members are cleared of any conflicts of interest, debt payments and negotiations on debt
repayments be paused.
For far too long, the federal government has treated the American citizens of Puerto Rico
unfairly. Puerto Rico has suffered from decades of economic neglect, crushing debt,
devastating austerity, a catastrophic hurricane and humanitarian crisis that led to some 3,000
estimated deaths, many of which were avoidable- a result of the inadequate federal emergency
response.
The people of Puerto Rico have spoken. They reject austerity and call for democratic
governance, broadly shared economic growth, and self-determination aspirations
fundamentally at odds with both the policy prescriptions and the internal functioning of the
FOMB. We thank you in advance for your prompt and detailed response to our inquiries, and
consideration of our call for the immediate reversal of austerity and cuts to social and public
spending on the island.
Sincerely,
Bernard Sanders
United State Senator
Mark Pocan
Member of Congress
Elizabeth Warren
United States Senator
Edward J. Markey
United States Senator
Kirsten Gillabrand
United States Senator
Alexandria Ocasio-Cortez
Member of Congress
Pramila Jayapal
Member of Congress
Jeffrey A. Merkley
United States Senator
Richard Blumental
United States Senator
Cory Book
United States Senator
Robert Menendez
United States Senator
Adriano Espailat
Member of Congress
Jesús G. “Chuy” García
Member of Congress