PROMESA, the Puerto Rico Oversight, Management, and Economic Stability Act, was enacted by Congress to help Puerto Rico get out of its current debt crisis. Part of the law is the establishment of a fiscal oversight board: a group of seven people who are responsible for making sure that the government of Puerto Rico follows through on its financial responsibilities and helping to restructure the $70 billion plus in debt currently facing the Island.
The board has met twice, both times in New York City. The first time, the board chose Jose Carrion III to serve as the chair of the board. Carrion lives and does business in Puerto Rico, and his selection as chair was accepted by most observers. During that meeting, the board asked Governor Garcia Padilla to prepare a “turnaround plan” — a plan for turning Puerto Rico’s economy around and getting the Island on a path to sustainable economic progress.
The second meeting looked at the governor’s plan. The governor presented an emotional address arguing that “any reduction in spending implies intolerable effects in aggregate demand, and will further throw Puerto Rico into a death spiral that will directly affect creditors’ recoveries across the board.” He promised to provide “vast amounts” of information and insisted that Puerto Rico must have money from the federal government in order to be able to pay off debts. The plan predicts that things will get worse.
The plan, which you can see by clicking the link above, lists the following core principles:
Video of both meetings is available at the board’s website.
Since the second meeting, the board has asked for a continued stay on creditor lawsuits. In other words, they want to make sure that the Island’s creditors can’t sue Puerto Rico for the money owed to them. Time and money could easily be taken up in such lawsuits, making it much more difficult to manage the current debt or to get back on a positive economic path.
Otherwise, the board is gathering information and preparing for action.