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A pesar del contundente golpe que PR v. Sánchez Valle le acaba de propinar al ELA, aún hay voces que niegan la realidad de las consecuencias de la opinión. Héctor Ferrer, al que distingo y aprecio, salió de la reunión del PPD del viernes y dijo así:


Ferrer, en tanto, precisó que la reformulación del ELA se fundamentaría en una relación no colonial ni territorial, y que se basaría en la soberanía del pueblo, buscará ampliar al ámbito de gobierno propio de los puertorriqueños, preservarla ciudadanía estadounidense y, al mismo tiempo, la identidad nacional puertorriqueña, y promoverá desarrollar la presencia internacional de la Isla.


El problema con esta visión es que la Juez Kagan le cerró las puertas a ésta interpretación cuando dijo a las páginas 16-17 de su opinión en Sánchez Valle:

All that separates our view from petitioner’s is what that congressional recognition means for Puerto Rico’s ability to bring successive prosecutions. We agree that Congress has broad latitude to develop innovative ap­proaches to territorial governance, see U. S. Const., Art. IV, §3, cl. 2; that Congress may thus enable a territory’s people to make large-scale choices about their own politi­cal institutions; and that Congress did exactly that in enacting Public Law 600 and approving the Puerto Rico Constitution—prime examples of what Felix Frankfurter once termed “inventive statesmanship” respecting the island. Memorandum for the Secretary of War, in Hear­ings on S. 4604 before the Senate Committee on Pacific Islands and Porto Rico, 63d Cong., 2d Sess., 22 (1914); see Reply Brief 18–20. But one power Congress does not have, just in the nature of things: It has no capacity, no magic wand or airbrush, to erase or otherwise rewrite its own foundational role in conferring political authority. Or otherwise said, the delegator cannot make itself any less so—no matter how much authority it opts to hand over. And our dual-sovereignty test makes this historical fact dispositive: If an entity’s authority to enact and enforce criminal law ultimately comes from Congress, then it cannot follow a federal prosecution with its own. That is true of Puerto Rico, because Congress authorized and approved its Constitution, from which prosecutorial power now flows.

En síntesis, la autoridad última sobre PR la tiene el Congreso. Más aún, en el argumento oral del caso, la Juez Kagan preguntó a la abogada del Solicitor General, el representante del Gobierno Federal en la vista, lo siguiente:

JUSTICE KAGAN: Do you think it’s not possible, Ms. Saharsky I mean, putting aside whether Congress has done it here, but you think it’s simply not possible for Congress to confer sovereignty in the sense   that would matter for the Double Jeopardy Clause?

MS. SAHARSKY: Well, it certainly could by making it a State




MS SAHARSKY: or by making it independent.


JUSTICE KAGAN: But but but not short of that.


MS. SAHARSKY: We think that that would just be fundamentally inconsistent with the constitutional design. . .


Ésta es la posición oficial del Gobierno de Obama. Más aún, en el Report by the President’s Task Force on Puerto Rico’s Status éste dijo a la página 26:

Third, consistent with the legal conclusions reached by prior Task Force reports, one aspect of some proposals for enhanced Commonwealth remains constitutionally problematic—proposals that would establish a relationship between Puerto Rico and the Federal Government that could not be altered except by mutual consent This was a focus of past Task Force reports The Obama Administration has taken a fresh look at the issue of such mutual consent provisions, and it has concluded that such provisions would not be enforceable because a future Congress could choose to alter that relationship unilaterally (Congress similarly could elect to enact legislation violating a treaty with a foreign country or to legislate over the opposition of one or more States )

En síntesis, EL ELA ES UNA MENTIRA y no se puede mejorar. Lo que hay es estadidad o independencia. Y por si acaso, el antes mencionado informe de Casa Blanca dice a la página 25 lo siguiente:

Free Association is a type of independence A compact of Free Association would establish a mutual agreement that would recognize that the United States and Puerto Rico are closely linked in specific ways as detailed in the compact Compacts of this sort are based on the national sovereignty of each country, and either nation can unilaterally terminate the association.

Así que no se dejen confundir, la libre asociación, república asociada o como quieran llamar a la “soberanía” no es más que la independencia con un tratado con USA que cada parte puede terminar unilateralmente.

PS: El PNP que se ponga a educar al Pueblo sobre las MENTIRAS del ELA. Yo se que la campaña para la Gobernación es importante pero este documento lo debe hacer la Comisión Estadista, no este servidor.



The Road to Hell is Paved with Good Intentions


Lin Manuel Miranda's 100 Miles Across

Lin Manuel Miranda’s 100 Miles Across

On Last Week With John Oliver last night, Lin Manuel Miranda and John Oliver made an impassioned plead in favor of Congressional help to Puerto Rico. Since I am not a fan of musical theater, my wife, who would give a kidney for tickets to Hamilton, had to explain who Lin Manuel was, I saw the video and recognize his incredible talent.  It is clear that they both are sincere in their plead for the island. It is also clear that they do not have all the information on the PR Debt Crisis.


The bad guys in their narrative are the hedge funds or as they call them, vulture funds. These are funds that go into distressed businesses or municipalities and buy their bonds at a discount. In the case, for example, of the Puerto Rico Government Development Bank bonds, they are selling at around 18 cents on the dollar. This is equivalent of a 34% interest rate. Of course, PR will likely default on them on May 1.


Hedge funds come in all colors and sizes. Some want to be paid 100 cents on the dollar, others are willing to take a haircut (a cut in the price and hence the interest rate paid) because they would still make money. For example, in the PR Power Electric Company’s deal, where bondholders are taking haircuts, there are hedge funds. Hence, to say they are the enemy is disingenuous.


Another misconception is Chapter 9. If you hear Mr. Miranda or Mr. Oliver, it seems the panacea to all of the island’s problems. However, Chapter 9 DOES NOT APPLY to the Government of Puerto Rico or to ANY state government. It applies to MUNICIPALITIES, which is defined as the more common cities of a state or its political subdivisions. In Puerto Rico’s case, much of the debt was issued by political subdivisions. Still, Chapter 9 does not provide much relief as I further explain.


According to the Government Development Bank Quarterly Report dated May 7, 2015, PR’s GO debts total $23.804 billion. PR’s GO’s have the protection of the island’s constitution which requires that in case of a lack of funds in the budget, they be paid before anything else. See, Article VI, section 8 of the Constitution. That leaves us with $48.400 billion as potentially subject to Chapter 9. However, 11 U.S.C. § 109(c) requires that state law specifically allow a municipality or public corporation to file for Chapter 9 protection. If Law 71-2014, the Recovery Act, is any indication of the legislature’s intent, municipalities, the GBD and its subsidiaries, the Fideicomiso de Niños, the Commonwealth’s Retirement System and its instrumentalities, the Judicial Retirement Fund, the Agency for Municipal Financing, AFI, COFINA, the Teacher’s Retirement Fund, and others were excluded from filing for its protection. Therefore, one can conclude that the legislature would not allow them to file for Chapter 9 protection. If one excludes these parties bonds, one is left with only $24.914 billion that could file for Chapter 9 protection, leaving $47.290 unprotected. See pages 56 and 64 of Government Development Bank Quarterly Report dated May 7, 2015.


Moreover, 11 USC § 109(c) requires that a municipality be insolvent in order to file for Chapter 9 protection. But COFINA is not insolvent. Hence, even if PR law allowed it to file, it could not. In addition, § 109(c) requires that the parties negotiate in good faith. Ms. Melba Acosta, head of the Government Development Bank testified in a case in February 2016 in Federal Court where WalMart was challenging a PR tax and admitted, under oath, that the FIRST time PR had met with its creditors was January 29, 2016. Hence, this good faith negotiation has not yet been met.


These and other reasons are why PR is pushing for a Super Chapter 9 where it would restructure all of its debt. That, however, has a snowball’s chance in hell of being approved since no STATE can do this and would be a terrible precedent for General Obligation bondholders. If Congress gives this to a territory, why would it not provide it to the states? And the 10th Amendment would not be a bar since it would mirror Chapter 9 by making it a state decision to take advantage of the law.


Another inaccuracy is the mention of firing teachers as a hedge funds idea. Happens to be that it is part of the Government of Puerto Rico’s Krueger report, which in typical IMF fashion, favors wholesale firing of employees and lowering of minimum wage. AGAIN, THIS IS NOT HEDGE FUNDS’ IDEAS BUT RATHER AN OFFICIAL GOVERNMENT REPORT. As to the hospital that had its electricity disconnected, there is no mention that the lack of government payments was what forced the default. PR’s Government claims it cannot pay its bond debt, but it is not paying its suppliers to the tune of $2 billion. In addition, there is no mention of the fact that the last 4 administrations have more than doubled the debt in order to finance its budgetary deficits or that the island has 120 public agencies. Nevertheless, Puerto Rico has been able to pay TENS OF  MILLIONS  to their restructuring advisors and spin-doctors without complain.  See:  Professional Services Contracts for the Government Development Bank 1/1/2013-4/26/2016 (And this is just for the Government Development Bank, does not include the TENS OF MILLIONS already spent over at PREPA, PRASA, and other agencies)

Finally, and more importantly, the fact is that the PR economy has not grown in quite a while. Without economic development, PR cannot pay its debt. At the center of this morass is the status, which Mr. Miranda seems to want to ignore. Interestingly, since the 1930’s Luis Muñoz Marín proclaimed that the status was not the issue but rather improving the economy. More than 70 years later the economy is worse than ever. The status IS the issue.


Puerto Rico is in dire problems, yes, and help is needed, yes, but as Sergeant Joe Friday used to say, “just the facts, just the facts.”




Previous Last Week With John Oliver where he mentioned Puerto Rico

The Constitutionality of the Fiscal Responsibility and Economic Revitalization Law of Puerto Rico

The Governor sent to the Legislature the “Law of Fiscal Responsibility and Economic Revitalization of Puerto Rico” that creates a Fiscal Supervision and Economic Renewal Board. Aside from the undesirability of this Board, there are certain parts of the statute that are clearly unconstitutional and would very likely be struck down by the PR Supreme Court when challenged in Court. Here is my take on the constitutional conflicts in the law.

Article 201 creates the Fiscal Supervision and Economic Recovery Board of Puerto Rico. It is created as a governmental instrumentality with its own legal personality, fiscal autonomy and administratively and independent from the Commonwealth, whatever that may be. The Board is exempted from the following state laws:

  • The PR Government Personnel law;
  • The PR Labor Relations law for the public service;
  • The PR law for hiring of Professional and Consulting Services for Government Agencies;
  • The PR Government Accounting law;
  • The PR law to Regulate Certain Government Contracts for Financing and Lease of Movable Property;
  • The PR Office of Budget and Management law
  • The PR Law of Uniform Administrative Procedures;
  • The Law of the Institute of Statistics;
  • The Government Transition law;
  • The PR Government Ethics law;
  • The Independent Prosecutor’s law.

Being exempt from PR personnel laws, the hiring of professionals and consulting services etc., is questionable. Those employees affected by political firings still have a cause of action pursuant to the doctrine of Rutan v. Republican Party of Illinois, 497 U.S. 62 (1990) and Branti v. Finkel, 445 U.S. 507 (1980) as violations of the First Amendment. In addition, those affected by the legal guarantees of hiring of professionals, budget and management etc., could also be in violation of Article II, Section 7 of the Puerto Rico Constitution that guarantees citizens the equal protection of the law. This section protects against classifications that are irrational or arbitrary, see A.A.R. Ex Parte, 2013 TSPR 16. It prohibits unjustified unequal treatment, see, Partido Acción Civil v. ELA, 150 D.P.R. 359, 378 (2000). Moreover, “the equal protection clause guarantees that taking in consideration the purpose and reach of the law, to be treated in a similar fashion by the State.” As stated before, if suppliers of services to the state are not to be treated equally by the Board, they do not have equal protection in violation of the Constitution.

In addition, the Board’s exemption from the Administrative Procedures Act could be unconstitutional since it would make its decisions unreviewable, which case law in PR frowns on, see, Comisión de Ciudadanos al Rescate de Caimito v. G.P. Real Property, 173 D.P.R. 998 (2008).

Article 203 deals with the Board’s operations. The Board will establish its own rules to determine when its meetings will be open to the public, but at all times “adequate records” will be accessible to the public as to all of the Board’s business. This last sentence could create constitutional issues since according to PR case law, all documents of the Government of Puerto Rico are considered public documents and therefore accessible to the public. It is incumbent on the Government to demonstrate which documents are not accessible to the public and why. See, Santiago v. Bobb, 117 D.P.R. 153 (1986).

Article 208 deals with the process for the approval of the Economic Development and Fiscal Plan. On or before the end of the second trimester of fiscal year 2016 (December) or once all the members of the Board have been named, whatever is last, the Working Group must present to the Board (not the Governor), for its review and approval a proposal for the consolidated Five (5) Year Economic and Fiscal Growth. The objectives of this plan must be:

  • Establish structural reforms with the purpose of reestablishing economic growth and the competiveness of the Commonwealth;
  • Eliminate the financing gaps and reduce the debt of the Supervised Entities to sustainable levels;
  • Regenerate the institutional credibility of Governmental entities by optimizing the process of formulating and executing budgets and the transparency of information.

These three objectives require comment. If PREPA and PRASA are exempted from Board supervision, how is it going to establish the reforms needed for economic growth and competitiveness of PR? Is this objective precisely what the Executive in PR’s constitution supposed to do? Isn’t budget formulation a duty of both the Executive (Art. IV, section 4, paragraph 8 “He shall present to the Legislative Assembly, at the beginning of each regular session, a message concerning the affairs of the Commonwealth and a report concerning the state of the Treasury of Puerto Rico and the proposed expenditures for the ensuing fiscal year. Said report shall contain the information necessary for the formulation of a program of legislation” and of the Legislature (Art. III, section 17). Although delegation of the Executive power has been deemed constitutional, Domínguez Castro v. ELA, 178 D.P.R. 1, 49 (2010), it was in the context of reviewable decisions. Inasmuch as we see the law has no provision for judicial review, its constitutionality is highly questionable. In addition, a 5-year plan can be replaced by the incoming legislature. Hence, this part of Article 208 raises Constitutional questions.

Article 208 gives the Board will have 30 days to review the Plan and if it complies with the three aforementioned requirements, it will be approved. If not approved, it will be sent back to the Working Group, which will have 20 days to review it and make changes and sent to the Board again. Once it is approved by the Board, it will be submitted to the Governor by the Working Group and if approved by him it will become an Executive Order and the plan will be known as “The Economic and Fiscal Development Plan”. Those areas that require legislative action will be submitted to the Legislature. If the Working Group thinks the plan must be amended, it shall be submitted again to the Board for approval. Since an Economic and Fiscal Development plan that includes issues of the budget has to be started in the House, Article III, section 17, it seems to me that this procedure for the creation of the Plan circumvents the Legislature and deprives it of the powers it has been specifically conferred by the Constitution and hence of dubious constitutionality.

Article 210 calls for a the Treasury Department to present reports to the Board within 30 days of the end of each trimester of the Fiscal Year and the Board shall evaluate if each Overseen Entity has complied with the Plan or adjust the budgets. In the case of the Public Corporations, this will be done by its Governing Board. If the Fiscal Supervision Board does approves the reports, then 15% of the 2.5% of its budget which has been retained will be released, then 20% etc. In other words, 2.5% of each agency’s budget is sequestered to guarantee compliance with this law. In law 66, however, a similar process was done and several agencies, including the GDB and Treasury did not comply and no sanctions were imposed by the Office of Management and Budget, which is the entity who will have the reserved budget. An Overseen Entity can request reconsideration of the Board’s findings but there is no procedure to have these decisions reviewed by a Court system which creates the Constitutional tensions I mention above. In addition, it deprives the Legislature of the power to control the budget, also in conflict with the Constitution.

In synthesis, there are several sections of the Board law that create constitutional conflicts. In addition, it creates a totally new bureaucracy to the tune of at least $12,000,000 a year, with no governmental controls and partial immunity from suit. This is a recipe for fiscal irresponsibility and the squander of our very limited public funds to do the job that Constitutionally belongs to the Governor and legislatively to the Office of Budget and Management. Far from providing certainty and confidence to the investors, this is more of what has brought PR to its knees, governmental irresponsibility and dissipation.