Setting Priorities Straight: Time to Audit Puerto Rico's Debt

By Jeanette Bonifaz

Arriving in Puerto Rico, sounds of the famous “Nuyorican” salsa musician Willie Colon’s music blasted through the airport speakers in stores and restaurants. The first impression of jubilance and glow in the atmosphere, however, contradicted the dire situation that 3.5 million Puerto Ricans currently find themselves in.

The Caribbean island owes $74 billion to bondholders and $50 billion to pension systems, has 45.5 percent of its population living in poverty, and retains an unfair political status that fuels grievances. Additionally, in complete defiance to the values of democracy and accountability, an unelected Fiscal Control Board appointed by the United States Congress under the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) now has de facto authority over Puerto Rico’s finances.

Instead of focusing energy and resources on finding a realistic way out of the crisis, the current administration led by Governor Ricardo Rosselló and his New Progressive Party decided to push for a plebiscite to vote on the status of the island and campaigned tirelessly to promote statehood. After five previous plebiscites proving that obtaining statehood was extremely unlikely, the non-binding plebiscite held on June 11, 2017, served only to give illusory hopes to those holding on to the belief that Puerto Rico’s ills could be remedied by becoming the 51st state. Even if achieved, however, statehood would not act as a magic wand to remedy the island’s problems. A more astute course of action would be to focus on pushing for an independent audit of Puerto Rico’s debt in order to transparently and morally restructure it.

The impending crisis has not only revived debate concerning the island’s status, but on the issues of corruption and inequality as well. Puerto Rico’s median household income is $18,626, compared to $56,515 on the mainland United States, and the average unemployment rate from 2010 to 2016 was 14 percent. The economic and social situation in Puerto Rico is so dire that many residents are leaving the island. According to the Institute of Statistics, 89,000 people emigrated in 2015.

The perspectives of Puerto Ricans are plastered throughout street walls all over the island. Feelings of distrust and anger towards the Board are reflected in works of graffiti that read “Promesa es Pobreza” (PROMESA is Poverty) and “No a la Junta” (No to the Board). Many people in the streets, buses, restaurants, and parks are eager to discuss the economic crisis, the debt, and the future, adamantly expressing their rejection of the Board and the austerity measures it promotes.

Most people underscore the importance of auditing the debt as a first step towards transparency and accountability. As one Puerto Rican, an Uber driver named Elisa, put it, “even if spending cuts are in place and even if the unelected board implements all the austerity measures possible, we would still not have enough to pay the debt. There is a real chance that an audit would reduce the debt to a much more manageable amount.”

Nevertheless, Governor Rosselló signed a law eliminating the commission charged with auditing the debt (The Puerto Rico Commission for the Comprehensive Audit of the Public Credit), claiming any issue regarding the illegality of the debt should be treated in court, not in a commission. He also stated that spending 2 million dollars in the commission was “incompatible” with his administration. While he did not want to spend money on the commission, he was quick to release about 8 million dollars for the plebiscite. This does not come as a surprise as many politicians and people from the private sector could be implicated if illegality is confirmed. Fortunately, a group of concerned citizens and former members of the commission have taken over the job of promoting transparency and accountability of the public debt, a task previously delegated by law to the commission. The group, called The Citizen Front for the Audit of the Debt, works tirelessly as a non-profit organization to demand and oversee an audit.

There are several reasons why auditing the debt is the best course of action. First, it has been proven successful elsewhere. In 2014, France’s Committee for a Citizen's Audit on the Public Debt found that 60 percent of the public debt was illegitimate. Similar audits have success in Spain, Ecuador, and Greece. Second, the people who are paying the debt via cuts to education and healthcare deserve to know what they are paying for. Third, an audit, by definition, would show exactly how the debt was incurred, for what, and whom it benefited. Finally, the now defunct commission found probable cause in a 2016 preliminary report that some of Puerto Rico’s debt could in fact have been fraudulent and recommended continued investigation.

Neither PROMESA nor statehood will solve Puerto Rico’s economic and social crisis. While PROMESA made it possible to protect Puerto Rico from lawsuits and to initiate a process similar to bankruptcy procedures, most of the weight is falling on the shoulders of ordinary citizens like Elisa. The bill practically and symbolically corroborated the colonialist relationship between the United States and Puerto Rico, especially through the establishment of the undemocratic and authoritarian Fiscal Control Board. Cuts to healthcare, education, and public spending in general, at the Board’s request, are only going to make matters worse. Without a debt audit and a restructuring plan that brings the debt to sustainable levels, PROMESA will indeed just lead to more pobreza.

Jeanette Bonifaz is a Latin America Fellow at Young Professionals in Foreign Policy (YPFP). Jeanette earned her BA in International Relations, Latin American Studies, and International Development from American University.