WASHINGTON – Four U.S. lawmakers and Puerto Rican civic, political, and business leaders from around the country met in Orlando Wednesday to rally for extending Chapter 9 bankruptcy to Puerto Rico public authorities, but one speaker questioned the wisdom of throwing support behind such a measure.
The group, which included Reps. Nydia Velazquez, D-N.Y., Luis Gutierrez, D-Ill., Jose Serrano, D-N.Y., and Alan Grayson, D-Fla., represented the Puerto Rican diaspora, or more than five million Puerto Ricans now living in the United States. El Encuentro Nacional de la Diáspora organized the event, which also drew expert testimony from academics, advisors, and commenters to create what it called “a national Puerto Rican agenda” mainly addressing fiscal and health care issues.
The group said the agenda “will guide all Puerto Ricans interested in taking an active role in the solutions, as well as guide elected officials advocating for the interests of Puerto Rico and the diaspora.”
“I see this as a moment in history when Puerto Rican unity across geography and generations is more important than ever,” Gutierrez said referring to influence Puerto Ricans can have while voting together.
Edwin Meléndez, director of the center for Puerto Rican studies at Hunter College in New York, said he “is confident that this is just the beginning of a long journey to mitigate the economic and fiscal crisis in Puerto Rico” and that “Puerto Ricans are united under the need for congressional and presidential action to find multiple solutions” to the current fiscal crisis.
The commonwealth is currently struggling with about $72 billion in debt that Gov. Alejandro Garcia Padilla has continually said is not payable without restructuring. There are already two bills sitting in Congress that would change federal law to allow the island’s municipalities and public entities to enter into Chapter 9. A news release from the conference organizers said the attendees put their support behind these measures.
But Sonia Colon, a senior member and bankruptcy lawyer with the Ferraiuoli law firm who sat on the fiscal crisis panel at the event, said the discussions at the meeting were not as unanimous as the organizers said. She disagrees that Chapter 9 is a necessary solution to the commonwealth’s fiscal problems and likens it to Puerto Rico “putting the cart before the horse” while trying to address its problems.
Colon practices and pays taxes in Puerto Rico, which she said allows her to come at the fiscal issues from the point of view of both a bankruptcy expert and a citizen.
“All this Chapter 9 [discussion] is distracting the public attention,” she said. “They are seeing it as the solution to everything. If we go into Chapter 9, we are going to have a complete loss of confidence in the capital markets.”
Her views differed from former Judge Steven Rhodes’, who oversaw Detroit’s bankruptcy. She said he advocated for a “super Chapter 9” that would apply to all of Puerto Rico’s debt instead of just that held by municipalities and public entities. Rhodes frequently made comparisons between Puerto Rico and Detroit, saying that Chapter 9 was essential to Detroit coming out of its own financial issues, according to Colon.
She said the success of Chapter 9 in Detroit was “very specific to the timing and what was happening” there. If the commonwealth were allowed to follow Rhodes’ advice and consolidate its debt under a super Chapter 9 law, the island would be “walking out of its obligations and not honoring the full faith and credit” behind a number of its bonds, she added.
“We will be out of the market for years,” Colon said. “We won’t get the investment we need to restore the economy and grow it. We don’t have Michigan behind us.”
Instead, Colon is urging Puerto Rico to focus on internal operations like tax collection and streamlining operations, including its many municipalities and agencies. She took issue with the commonwealth failing to provide audited financial reports for the past two years and held up those types of structural deficiencies as proof that something like Chapter 9 will not solve the long-term problems Puerto Rico is facing.
“Crisis is the trigger to change,” she said. “It is a chance to learn.”
