Good morning. Thank you all very much for joining us today. We are going to talk about a very serious and urgent situation confronting puerto rico, the home of 3. 5 million americans. The territorys economy as we read every day has been declining for a decade. It has accumulated huge debts that it cant possibly pay. Puerto rico owes 72 billion to investors, about 46 billion to Pension Funds. Started missing bond payments in january and is expected to default on nearly 2 billion payment due july 1st. That is roughly 100 of its Gross National product. Thousands of residents are leaving the island for the mainland every month to look for jobs and better public services. The exodus is accelerating. In this context, congress and the Obama Administration have come up with compromise. The bill would establish a financial control board to oversee the island government and help restructure its debt in federal court. Require the government and the board to adequately finance Pension Funds that are close to empty today. It would temporarily stay or pause lawsuits by prejudice against the islands government which starts its work. Remains to be seen of course who will be appointed to this board. The president would pick four from lists provided by Republican Leaders in the house and senate and won the president would pick to the democratic leaders. The bill has already generated some criticism, including from creditors, and for Different Reasons from labor unions. Others recognize the problems and the flaws but believe this is the best possible formula to address the crisis and recognize that time is running out. In any event, theres a lot of ground to cover about this complex and grave situation. Fortunately, we have three superb experts who closely tracked puerto rico for many years and have kindly agreed to share their insights and perspectives with us this morning. Barry bosworth is a senior fellow at the Economic Studies Program at brookings institution. He served as president ial adviser and specialist on fiscal and monetary policy, Economic Growth, Capital Formation and Social Security. He also has taught at berkeley and harvard and his many publications include an analysis of the puerto rico economy. We are pleased once again to have barry with us at the dialogue. Rafael cox is professor of law at the University District of columbia and is a prominent puerto rican lawyer and in 2012 was candidate for position of candidate resident commissioner alongside governor padilla. He studied at cornell, oxford and graduated from Harvard Law School as part as long puerto rico with reichardt and echevarria. We are happy to have rafael with us this morning. Jose peralta formally served as assistant secretary for private sector within the office of department of homeland security. He currently is deputy chair of the Global Alliance for trade facilitation. Jose has also served as direct. Director of the americas at the u. S. Chamber of commerce and executive director of the association of american chambers of commerce in latin america. He graduated from the university of puerto rico and completed his doctoral studies at the university of michigan. And we are thrilled to have jose with us as well who is really followed this question very closely. We are going to follow a questionandanswer format this morning. Im going to pose questions to our speakers and after a few rounds, we are going to open it up and invite your comments and questions and look forward to a very productive and interesting exchange. Before getting started, i want to acknowledge and thank very much the work of my colleagues here who runs the rule of law program at the dialogue for coordinating the session and all his efforts to make this possible. And also the assistant Program Assistant in the rule of law program at the dialogue and also coauthored a very good paper blog post for the dialect dialogue called puerto rico, and delicate path to solution. Thank you all for all of your support and help. Lets begin with you, barry. There is a lot of ground to cover and a lot of questions. You have been following puerto written about it a lot. If you could just give us your sense of the real what we need to understand to know why this is happening. What are the real origins, main causes of this. How have we gotten into the situation we are currently in . How do you see the roles of the different players . Could this have been avoided . Youve been watching this story for many, many years. How have we gotten to this point . Mr. Bosworth i think there are a multitude of causes of what happened. One thing that emphasizes people think its too recent. Its been going on a long time, basically since the mid1970s. Puerto rico had a remarkably good governor after the end of world war ii they made enormous progress. They used to be called the asian tigers. They were compared with them. And they did extremely well from the end of world war ii up to 1975. But they started from abject poverty. People dont have enough credit for help or the best for how people dont understand how poor puerto rico was when it started up. It did it primarily for by encouraging Puerto Ricans on an overpopulated island had half the population went to the mainland and half of them got jobs basically an expert oriented industry. They were a lowcost supply of labor inside a u. S. Tariff wall. Before 1975, it was very high. When the u. S. Been made all the trade liberalization, this care of wall collapsed. Puerto rico was no longer a lowcost source of manufacturing labor. It was a highcost source of manufacturing labor and it was inevitable the sector was going to be declining just like it has on the mainland. Because its taken over by lowercost countries , particularly in asia. I think that part of it was inevitable. The big engine for growth went away. They were never able to diversify the economy in a way that would give further opportunities. It turned into a political game here in the u. S. I think two big events were organized labor that upset in got upset in the 1970s about all the jobs moving to puerto rico. They convinced the federal government to extend the u. S. Minimum wage to puerto rico. So the federal minimum wage applies to puerto rico. Remember puerto ricos income was one third of that of the United States. Like having the minimum wage three times higher than here. Much higher than the rest of the caribbean area. So tourism is very hard to be profitable in puerto rico. Youd rather go to one of the other islands where it is more attractive and cheaper. It doesnt have a lot of options. The Companies Got mad because they did not have the same competitive advantage anymore, so the government gave them a tax loophole and basically puerto rico turned into a tax game of income shifting, corporations played games, and income to the island so they did not have to pay tax. But it did not generate employment. It was just a subterfuge. It was later phased out to about 2006. A lot of people think thats where the problems started. But they started way earlier. Puerto rico has been declining steadily since 1975. It is true things got much worse in the Great Recession and it has had no recovery unlike the , rest of the economy. The rest of the economy does not think it has been adequate. Puerto rico has this long relative decline. The question is what to do about it. I think that is the big problem. We do not have an Economic Program of what we think would work in puerto rico that would make it economically competitive. Thats enough over there. Thank you. Rafael, would you want to add anything to that . In your view, do politicians, political figures, share some of the blame or responsibility, you know, from the factors he has laid out . Thank you very much for the question. The first thing i want to do is thank the interamerican dialogue for placing puerto rico on the agenda. It is not just a domestic issue as Congress Might believe. The puerto rico conundrum is an International Issue both in its very nature and scope. After all, puerto rico is not merely a u. S. Territory. Puerto rico is a caribbean and latin american nation. I want you to take that away from this panel. To answer michaels question, the first thing i want to emphasize is the geopolitical chronology. Barry mentioned the Second World War. Puerto rico had a prominent role in the United States cold war strategy during the postSecond World War. And that has changed. The United States has actually been rather neglectful and in the bash indifferent towards puerto rico from the 1970s and most important from the 1990s on. That is also something that is crucial to understand. Now, the question michael poses is, if there is a correlation between puerto ricos political status and our current fiscal and economic crisis. Im going to rephrase that question. Im going to say the correlational relation between puerto rico says colonial condition and the current crisis. Why am i using the adjective colonial . Im using the adjective colonial because the cat is out of the bag. For the First Time Since 60 years ago when the United Nations removed puerto rico from the list of independent territories at the best of the eisenhower administration, for the first time the United States and political branches have finally admitted to the world that puerto rico remains a colony. Nothing of note happens in the 1950s. Basically, puerto rico remains a territory subject under the u. S. Constitution. This goes back to michaels question. What is the consequence of the legal reality, what is the consequence of the colonial condition on puerto ricos fiscal and economic implosion . The consequences have been grave. First of all, the most obvious consequence is puerto rico, unlike any sovereign country about the world and unlike the 50 states, puerto rico cannot declare any municipalities for corporations insolvent or bankrupt. Puerto rico cannot do that. Puerto rico has no Legal Authority under the colonial arrangement to declare itself bankrupt. It has no Legal Authority to negotiate binding the agreement with any of its creditors. Puerto rico either has to see congress permission or the supreme courts blessing as it is trying to do with the case currently pending before the supreme court. So thats the first obvious consequence of puerto ricos colonial condition. Now, what are the other consequences question mark how do they relate to the implosion . The answer is in order for puerto rico to jumpstart its economy, bearing in mind that puerto ricos most difficult challenge is not the debt load. The most pressing challenge is the utter absence of Economic Development and growth. The correlation between the debt burden and Economic Growth is so asymmetrical that it makes it impossible for puerto rico to pay off its debts. That is fundamental. In order to jumpstart our economy, to be more competitive in the global scene, puerto rico really needs a set of tools. That set of tools are unavailable under the current colonial condition. Puerto rico has no control over its fiscal policy. Puerto rico has no control of its trade policy. Puerto rico has no control of its monetary policy. Puerto rico has no control of the environmental regulations, communication regulations, air and space regulations, puerto rico has no control even of its own health care policy. Health care represents 2 billion a year worth of cost for the puerto rican government and puerto rico really a very hard time charting a path forward when it controls none of those economic variables. Those variables and triggers are controlled by congress and puerto rico has no meaningful representation in congress. We only have a nonvoting delegate. So in a nutshell and to summarize, yes, the colonial condition makes it harder for puerto rico to chart a path forward. And i believe this is the most propitious moment in recent history for puerto rico to articulate the total package. That is negotiate with the political branches in washington a way out of the fiscal crisis by negotiating a decolonizing timetable to address the pink elephant in the room, that most want to put aside. That is puerto ricos undignified colonial condition. Thank you. Lets turn to you. Youve also been extremely engaged and focused on puerto rico for a number of years. How did we get to this point . Youve been in washington. Are there steps that might have been taken, policy measures in washington, to try to stem where we are at today . Thank you for the question michael. Thank you for being here. Before i begin, i want to acknowledge the role of my colleagues in the Diaspora Network of professionals here in washington working to support Civil Society environment and in puerto rico. There are several missing links in the conversation. This is a great example of the kind of networks that can support solutions. Im going to take your question. Im going to talk a little bit about what happens in puerto rico. There are things that can be done in washington and my copanelists have eloquently explained the macro situation and the political situation regarding the colony and whether we believe thats the case or not. But i want to talk about the institutional problem in puerto rico. Most people, when they look at the causes of puerto ricos crisis, we want to summarize in economic terms. We are talking about an economy that has lost competitiveness. The government overspends to compensate for shortcomings regardless of the behavior of the Business Cycle and other microeconomic factors. That is a recipe for disaster. When you combine some economic mismanagement in the way that these financing mechanisms were issued and structured not to mention shortsighted fiscal policy because of the political cycle, the budget process which is a bit chaotic as you can imagine. And some of the questions that have emerged about the lack of transparency in how the government does its accounting. All of these things have been mentioned several times. I want to highlight the factor that unites all of these various things. It is the question of the quality of institutions and in puerto rico. Who makes decisions, even in the context and lets assume we control the colonial issue and are able to fix it. We have to have a set of leaders and decisionmakers making decisions for the longterm. Puerto rico has an institutional problem in the sense that puerto rico has for many years and many years. It has been ruled by coalitions that compete with each other for electoral competition as opposed to productive coalitions, the the ones that led puerto rico out of poverty. There has been no productive coalition in puerto rico since the which is remarkable 1970s, considering nobody has had to rethink how the economy works. There has been no such coalition governing puerto rico in that point. In that sense, the other component of the problem of institutions is in puerto rico Political Parties act as mechanisms for recruitment and movement abilities. Puerto rico doesnt have a fully functioning Civil Service that creates incentives for Public Officials to behave in a way that leads to better or improving excellence in the way they manage. It is determined by the way parties recruit elite and the way parties move people off the channel and tube leadership positions which means loyalty is fundamentally attached to the party and not to the fundamental Political Economic system. That is a recipe for this coalition. This uncertainty on the political status creates a vested interest in maintaining the system that lets the party survive in its current form without seeing the need to revisit economic incentives which should be the basis for a productive coalitions. We have a fundamental vicious cycle in the way the institutions work and the way in which the structure of incentives that decisionmakers have to make longterm and shortterm decisions about of course shortterm decisions and that of course leads to credibility problems we can talk about a little later. Barry, lets go back to you and talk a little bit about this pending bill. To what extent, in your view, does this really address some of the problems . Is it a bandaid . Some critics have said it is a bailout. You know, where do you come down on this and is this given where we are today and the urgency of the situation i think all of us see, is this the best sort of formula at this time . What is your sense of this bill . First of all, the bill is not a bailout. One of the things that has created some tension in all of the negotiation is the refusal of the federal government to put up any new money in resolving the situation in puerto rico. Theres no bailout in that sense. Unless you wanted to say it is going to be a bailout by debt bondholders who are not going to get paid. I think it just recognizes reality. If they dont pass this bill, on july 1, the last major element of puerto rican debt will go into default. Default can be an extremely unruly process because at that point, courts get in. If you look at what happens in the u. S. , one of the bondholders will sue. Everybody in this room must be aware of what happened with respect to argentina when it tried to negotiate an agreement debtors and a couple people dissented and a judge stepped in and said youve got to pay them first. That is the sort of threat that would happen but in an even more complicated situation in argentina. You have to accept some sort of a notion of an Oversight Board of some kind. I also think the idea that puerto rico could be left to do it itself is just not realistic. These are going to be very painful measures to take in trying to resolve the fiscal problems. And i think it is realistic to have outside support. The basic structure is the best you can get. Then you look at the details. Congress got 20 part apart congress got torn between the conflicts between concern for people in puerto rico and bondholders. Many of the provisions are just impossibly contradictory. So i think the real problem is its not workable. It is not going to act fast enough area a lot of it will depend on this board with two and one. I think a lot of that depends on what Congress Puts on the list. If they put the list together composed of people who are bondholders or representatives of bondholders, i dont see the basis for making a deal. Everybody is going to hold out and have their representative on the board who will slow everything down, delay decisions, and nothing can get done. If you dont have a cohesive board, i dont think its going to work. So i think the complaints in puerto rico that it doesnt represent them are unrealistic. Thats what happens when you default on a debt. Its kind of painful. We went through it in the district of columbia, new york city, philadelphia and detroit. This is not a new thing. The outsider comes in, sets up a board and tries to resolve the issue. I am worried that this is just not going to work. It is going to delay too long. I think the underlying problem is puerto rico is in a state of economic, really pretty rapid decline. If you were an investor, would you put any money into a business in puerto rico under the circumstances with so much uncertainty . I dont see them resolving the uncertainty. On the lead hand, i think it is the best youre going to get. But its not going to work. Is the situation going to continue . Could it go on . What happens . Im reluctant to answer the question in public. I think Puerto Ricans have been making the right decision. They have been immigrating. Under current circumstances, there is no resolution of the economic crisis in puerto rico. The trouble is not everybody can emigrate because what is happening right now is the Housing Market is collapsing. So its going to be very hard for middle income people. It is like the debt crisis here the United States. You couldnt move because you couldnt get rid of your house. That is becoming a growing problem on the island. I think it is very attractive for retired people. They will stay. Younger people at the top and bottom, it is a very uniform problem. They have no Job Opportunities. And in our society, if you dont have a job, you cannot exist. I think you people have no choice but to continue to leave the island. Its a very sad circumstance, but i dont see that we have a solution that is workable. I dont think people on the debt side realize puerto rico just cant pay. Come on, this debt is 100 of their National Income plus another 40 billion in unfunded pension liabilities to Public Workers. Public workers. The Public Workers also have to get realistic. They are not going to get their pensions. Most of them are covered by Social Security like everybody else on the island here that the best theyre going to be able to do. They had two pensions and they are now going to get one. I see a huge magnitude of that debt right now in the neighborhood of at least 50 . I dont think puerto rico i think they can cover their current budget with no debt payments, no reinvestment. And so how do you turn things around economically if you cant commit to any new Investment Opportunities . I think that is a very dismal outlook. I would like to be more optimistic, but i dont see how you make this bill work. Do you want to give us the pessimistic view . [laughter] we dont want to be too upbeat. Also, if you could address how this is viewed in puerto rico. Is it unrealistic . How is it playing out . First of all, i appreciate the observations. I see them differently however. We need to look at the human dimension to this. First question most people have is a control board for what . A control board acting solely as a collection agency, what will be the economic policies the board will engineer to spur growth in puerto rico . During my previous remarks, i suggested that puerto ricos fundamental challenge is not the debt burden but it is its lack of Global Competitiveness to create wealth and spur Economic Development. Having a control board composed of folks who have no relation whatsoever with puerto rico. Out of Seven Members, only one will have residence in puerto rico. That doesnt mean he or she will be puerto rican. It means that he or she might have a business relationship to puerto rico. Were going to have a bunch of folks with no connection whatsoever to puerto rico, who have not identified themselves with the common man and woman in puerto rico making very important choices. Those choices should be made by elected officials, not by a board that has no accountability to the people. Theres going to be a lack of legitimacy. Those people in puerto rico will not acknowledge the board as representing him or her. I believe the United States of america, where the foundation of foundational principle of the republic is concerned by the governed, that comes from the magna carta in the 13th century. A board in fact will unify the puerto rican constitution without the consent of the people of puerto rico. There is a fundamental problem with the board. And one wrong doesnt fix another wrong. Yes, i agree with most folks that the restructuring chapter is a step in the right direction, bearing in mind the colonial condition as i said earlier. Bearing in mind the fact that we cannot declare ourselves insolvent or bankrupt. Yes, we need a restructuring mechanism and the bill does provide for a restructuring mechanism. As regards the board, there is a distinction to be drawn between the board presented for puerto rico and the board established in the 1990s. Dont overlook the nuances. Nuances are seminal. The board established in the 1990s put in place not just austerity measures, but it also put in place liquidity facilities. The u. S. Treasury set up for set up liquidity facilities to finance shortterm obligations. The federal government guaranteed the district. Puerto ricos unfunded engine liabilities over 30 billion. The districts unfunded liability in the 1990s was between 3 billion and 5 billion. Nonetheless, there were liquidity facilities put in place for the district. And those are not available for puerto rico. You need to put this into a geopolitical perspective. It seems the u. S. Political branches are sending a message to puerto rico meaning you are on your own. We will not be trying to give artificial respiration, artificial oxygen to this territorial, colonial arrangement. You guys should start thinking in terms of your own sovereignty. It seems there is a political message that we need to decipher. To conclude, the way the fiscal board is being presented sets a very bad precedent. And it has been presented in a rather faulty way it seems to me. Thank you. If you could talk about a little bit about the board and how you see this. Also, if you could add if this crisis is now an opportunity to start rethinking some of them questions of the fundamental questions. Is it realistically the best you could do to kind of deal and just manage the current crisis. I concur with my copanelist in the sense they disagree with each other. [laughter] i will mention a very basic point about the board. By the way, the question of the euphemism of the fiscal oversight control board, all of these things. I think theres something more to it than semantics. I think that there are fundamental flaws in the way the bill looks and the way the Oversight Board works. For example, there is no procedure for debt restructuring. There are questions about what happens after february 2017. Can bondholders wait it out and then sue . You could have a situation like argentina. There is no path to explain what happens after the board ends. As you were saying, it is a mechanism for ensuring repayment. If we think about what puerto rico is facing, we are talking about the place facing a tremendous problem of liquidity. In most economic systems when you have a system that does not have liquidity, somebody has to provide liquidity. This goes to your point about what happened in washington, d. C. The lenders to be of last resort. This is fundamental economics. We are not seeing that in the context of puerto rico. Puerto rico is a territory and that is a federal response ability. Why is that not happening . We have to talk about politics and washington. The issue with the board i see that is fundamental, aside from the internal inconsistencies of the board, is puerto rico has a credibility problem. Puerto ricos politicians and institutions cannot make credible commitments to maintain budget balance or fiscal accounts and make the cuts it needs to make. It is the question about shortterm decisionmaking. In most places in the world that have gone through the kind of restructuring Puerto Rico Needs to go through, when they got the money from the i. M. F. , there were conditions attached. There were advisors that reigned in foreigners with no attachment to the countries where they served. And administered a bitter pill. The bitter pill of reform based on what needs to happen to restructure and economy. This board at least in name should serve as a mechanism, a some sort of outside, external oversight that administers the bitter pill. In puerto rico there is a redibility problem. The ability to maintain, to stick to a certain policy path. My problem is when those imf conditions were attached, not only did they provide liquidity, they also provided Technical Assistance and a path forward. And how is it youre going to move things forward . Most economic decisionmaking is not done by economists in puerto rico. How can you have a path forward . Where is the Technical Assistance to help folks restructure their budgets and fiscal accounts . And produce measures that are economically sound but go towards productivity measures. We are not seeing that. Puerto rico badly needs that type of assistance. Thank you. I see a lot of people in this room have a lot of expertise and good thoughts about puerto rico. Why dont we open it up now . Please just identify yourselves, be brief. Either pose a question or make a comment. No need to disguise your comment as a question. In the back there, please. Maybe take a few if that is ok. Good morning. My question is if you had to describe a profile, not a name, i dont want specific names but if you could describe which are what your ideal board makeup would be, can you give me the profile of the Seven Members of the board . What would be the background, their expertise, and how that would shape up given that we do not want a board of just politicians or just economists. What would that ideal makeup be . Microphone. Puerto rico was very successful in the 1950s. It was building a superhighway that lead nowhere. In the 1960s, i was studying economics at the university of puerto rico and we are arguing it wasnt sustainable back then. We knew it was a speedway to nowhere. A friend once commented that puerto rico is like a kept woman kept in the basement. Her own children are the Political Parties. As long as it was attractive the u. S. Was happy to keep her there. Shes no longer as attractive. Theres no attraction there. So what do we do with this now and what do we do with the children . Institutions are not trustworthy because Puerto Ricans have made them untrustworthy. Why have puerto rican voters tolerated this . The deficit is theres of citizenship and lack of citizenship and supervise when the Puerto Ricans are doing in their name. On economics, we have depended for 60 or 70 years for wealth being imported, not the creation of wealth in puerto rico. There is not a class of entrepreneurs in puerto rico. What are we doing to great wealth in puerto rico . Your point is the economic decisions are made by lawyers and politicians, not by economists. Not that economists know better, but they do know better than lawyers. [laughter] i have two questions. How would the economic crisis affect the independent movement or independent sentiment in puerto rico . The fact that a crisis going on, do they want to be more independent or make their own decisions . When it comes to jumpstarting the economy, you talked about the exodus of thousands of Puerto Ricans. It is a brain drain and exit is of a badly needed labor force. How is the puerto rican government going to try to bring back the people that have left . So they can jumpstart the economy properly. Thank you. One quick point and then we will go another round. Thanks for putting this together. Great panel. I have two quick questions. The first for mr. Bosworth and the rest for the panel. Weve talked about the restructuring of the process. The stay on litigation, etc. Austerity. But a lot of Puerto Ricans come down on the fundamental issue of democracy. And whether it is right to ask them to suspend democracy. Do you see that as an esoteric, philosophical argument . Or are there outside folks that see the value in that . A related comment, question, how is it that republicans that are for small government and limited federal roles in local issues can just come in and take over as they are doing in puerto rico . Is that a contradiction or is it just rhetoric . Are there Economic Issues of not having buy in from the people if they are opposed to the board as many see an undemocratic. Thank you. The question was directed to you. You can nominate yourself for the board by the way. [laughter] i think there are some guidance for the board. One of the big sources of uncertainty in the financial situation of the government is its very difficult to determine what is the tax raising capacity of the government . Like here in the district of colombia, they discovered that huge amounts of tax revenues were not being collected because deals had been made with private entrepreneurs in the city. What they did was they discovered all those, they reversed them and they they got a big surge of revenue, admittedly in a booming economy. So theres a big need for this board to have some financial expertise, some people who are knowledgeable about budgetary decisions. I dont think its hopeless in puerto rico. I think the government has some competence. I do think though they need a reassessment of the tax situation and need to bring in some outside experts on taxes. From my perspective theres far too many loopholes. I would say the same thing about any government tax system i because i think the same thing here on the mainland. But i think they need some tax experts. And the rest of it i think, you try to be as diversified with peoples background as possible. I dont like the idea of a board that is made up a list from congress that much. Brain drain, i dont fully agree. The surprising thing about the puerto rican immigration is how balanced it is. People at the bottom are leaving because there are no Job Opportunities for lowwage people, low skilled people in puerto rico. They go to the mainland. Maybe the minimum wage is low but they can get a job. And at the top, yes, people have been leaving, particularly most recently because of medical technicians. They are leaving in large numbers because there are very good Job Opportunities on the mainland. And the financial situation with Health Care System has become quite untenable. I understand the suspension of democracy, but thats what happens when you cannot pay. You just realistically cant expect that you can sit down and make all those decisions in a timely fashion. What are we going to cut . Whos going to pay more tax . You just cant do it. Puerto rico has demonstrated they cant do it. It has had this problem. Its not new. Its at least 15 years of intense problems, when the budget, the debt began to spiral out of control in the early 2000s. So you know you cant handle it alone. Its asking too much in a community that split almost 50 50. You think american elections remain close . They are nothing compared to puerto rican elections. The last one, what did it take , like six weeks or more try to resolve the one . People are deeply split over which party should make these decisions. They dont agree. They hate each other in that respect, much like democrats and republicans on the mainland. So i think its inevitable, as in so we try to have a board process that is as fair as possible. Its not permanent. Its a temporary thing trying to restore order, get a reasonable degree of structure to the decisionmaking and then get out. I think the deadlines are a little unrealistic. They are too tight. They are going to have to be extended a little bit. But puerto rico government will return to running everything, but in the meantime, im surprised. I did not understand even though i lived here, the extent to which the control board took over even very small decisionmaking. They ran the schools. They did everything. And i think its inevitable in trying to restructure and limit expenditures to revenues and balance the two. Its a tough task. Theres going to be a lot of screaming if they do their job well. But we all come out of this. New york city went through an extremely painful process when the State Government stripped them of a big bunch of their revenue back in the 1970s. And i think it was a terrible Economic Situation for a decade, but they did recover. Its a painful thing to do. I hope they do it as fast as possible. Yes, im going to start by answering the question and the premise of the absence of democracy. Obviously, i agree with that 100 as i mentioned earlier. Then you have alejandros question regarding the diaspora. Obviously, we dont want to see our best and brightest leave. On average, we have 120 Puerto Ricans hopping on a plane daily. Last year we lost 84,000 Puerto Ricans who came to the mainland, and thats one of the consequences of the current economic implosion of the puerto rico. Diaspora will not receive until we have an Economic Development strategy, not austerity measures on their own. Its one of the more surprising things ever to see the u. S. Call on chancellor merkel within the context of the crisis trying to persuade the German Government to ease on austerity for greece and allowing measures and sort of nonsecular measures integrate them in the greek context and then have them with a completely different context of order with puerto rico. With regard to alejandros second question, the economic crisis, yes. There will be more effervescence with regards to solving the conundrum. At the moment, it is not unusual choosing between status formula. But obviously theres a very , strong consensus in puerto rico for the First Time Since the 1950s that the current arrangement is rotten and something must be done to fix that. Ramon made a series of comments, and he raised two questions. He said why people keep voting the way they do in puerto rico and the reason is because the election law in puerto rico is fundamentally rigged. It perpetuates a monopoly by the two principle Political Parties. Unlike what happened in the Dominican Republic or what happens in chile, what happens in brazil, what happens in other countries around the world, what happens in germany or spain, in puerto rico there is no possibility for political alliances among the very the Political Parties. Winner takes it all, and basically uses for the most part political power as a way of actually perpetuating itself in power by financing with public funds its political machinery. Thats fundamentally one of the downsides of our system, plus the financing of politics leads to corruption. It is hard to fix it in puerto rico in the colonial condition. The decision of the supreme court, right, opening of the doors of this in the mainland also applies to puerto rico. That is the law of the land and includes puerto rico. The question having to do with a profile of the board members, as far as i am concerned, that is a conversation we need not have now. Because as far as im concerned, the conversation we should still be having is how to structure the board. The way it has been premised, its not satisfactory to me or to most Puerto Ricans. The board must be the result of a joint effort by the local elected officials in puerto rico and congress, the same way we came up with a mechanism, congress came up with a mechanism after the Second World War where both the puerto rican people have some sort of participation and congress have participation in drafting an arrangement. But in the context of this bill, you need to have buyin by the people of puerto rico through their elected officials to have legitimacy, and thats not happening as it stands right now and thats something most order puerto rican political movements will oppose as this goes to the floor. Thats the conversation we should have right now. The board as it stands now is not inevitable. It is not inevitable. Those of us who are against the proposition that you can have a dictatorial board basically put an end to democracy in puerto rico we are going to fight to , fight. We will keep fighting the fight. On the house floor, in the senate, in the white house. And when the whole dust settles, then we have the conversation. Who should be sitting on the board, right . What other members of congress are pushing for the idea of restructuring the board . I mean, do you have the champions in congress . Senator Bernie Sanders has vehemently opposed the board as it stands today. Senator bob menendez on the senate. Right, on the board. Obviously, there is a consensus that we need restructuring. Restructuring includes obligations which means chapter nine will be enough. But the board as it stands really is going to hinder rather than help puerto rico in the long run. And thats a fight we need to make right now. Thank you. Im going to attempt to answer all of the questions. Let me group of them because i think the questions are related to each other. I do think democratic legitimacy is very much a question and issue, perhaps for Different Reasons than my panelists would think. The reason democratic legitimacy matters is because the fundamental relationship between puerto rico and the United States is not a solved issue. In washington, d. C. , there is still the question of representation before congress which has spurred a tremendous Power Movement for statehood. New york, philadelphia, detroit, places where boards have been set up and done these things do not go toward the fundamental relationship between state and society in those places. In puerto rico, that relationship is very much still a question. That democratic legitimacy issue cannot be parked aside as one would think. In that regard let me answer the questions. On the democratic legitimacy of the board itself, youre asking whether it is an esoteric question. I think theres something really interesting about the question of democratic legitimacy. Are we talking about the quality of citizenship argument that our citizens are not adequately represented in support of the mesh in the board that will be making fiscal decisions . Are we talking about the status argument that this is a colonial imposition . I think its important for us to figure exactly what do we mean by that them . I do think this could be an opportunity to raise those questions. I think thats an important matter of debate. I concur there is equality of citizenship argument to be made strongly and this could be an opportunity to raise those questions. I dont see anybody raising them. I see them more in terms of, sort a lot of legitimate questions i see the more in terms of the statistician because there is that fundamental power relationship that has not been solved. On the question, i think theres a lot about, the question of the brain drain. I think its extremely tied to the question of entrepreneurship at also the question of the diaspora. Puerto rico has to understand, this is a process that is emerging from but our institutions are a little hard to catch up on the fact that puerto rico is a transnationalized nation. Thats not the only one. There are several other nations in the world, el salvador comes to mind where theres more money coming in from the people outside than what the country makes in its exports. That is a fundamental rethink of the relationship between its domestic and foreign. Because the identity issue still unsolved of those boundaries are difficult to address a difficult to internalize as a mechanism. The fundamental, theres a great opportunity for puerto rico to rethink its relationship with its diaspora. As a matter of policy to institutionalize a mechanism to which its an sort the importance of the diaspora and to derive from the resources, the capabilities come input into the economy. Theres a tremendous movement, for example, a font of ownership in puerto rico startups. A lot of over think about Economic Solutions are based on the manufacturing model of the 50s, 60s, 70s which as we all know is broken because the are a set of structural factors that dont make it competitive for manufacturing purposes. We could talk about this more but my point to answer the question about the composition of the board, i think it depends on what you want from this board and this goes back to that question. For example, what is the fundamental purpose of the board . Is the fundamental purpose of the board to make sure that finances are straight or to make sure that theres a path forward in Economic Growth . I think to the extent the board should of people representing all those pretty used to be frank with you because those are complementary. Otherwise 10 years from now well be revisiting the same problem because how do you get out of a negative zero of an economy that needs be, intended to sustain its ability to function as a productivity problem at a shrinking tax base that doesnt put the resources necessary to sustain . Thank you. Why dont we go one more round . One very tedious thing about the board in puerto rico is for the most part the politicians are against it, but when they poll the individuals, 7080 of the people in puerto rico for it. Because they are desperate. They dont see the politicians as solving the problems. They just talk about status of this and that instead of giving as you said administrative things, for example, if the problem basically is there has been an admission of too many bones. Why dont we change the system . In virginia where i lived for many years to issue a bond, it had to be sent to the public and the public and to vote on it and approve it. Some sort of mechanism should exist so the people of puerto rico in the future approved bonds or not come after all, if theyre going to be fiscally responsible they should have a say so, and not four or five individuals. I think measures like that is what this board should be proposing, not merely deciding how much money goes to each one, but for the future how are they going to avoid it is happening again . At also how do you come even now with this crisis, the government is proposing a budget that has this huge deficit, and people see how the government wastes money. They keep talking about this crisis or whatever, but hey, they just spent 3 million have a caucus in spanishlanguage and they couldnt even spell it correctly. They keep giving money to these former governors so they can have these associations were they can get together and talk about the wonderful things they did, that they have channel six, channel six is a tv station that nobody sees and when you go past it on saturday night, guess who is there . It is the governors brotherinlaw who is singing away and is getting this. So i think someone who comes in that does not have a vested interest on what the political results are going to be is what is needed. So they will sit and reform the way Puerto Ricans look at things that they think about Good Administration and this and that instead of just status or whatever. Anyhow, also in terms of the political, thinking concretely being abusive, i want to say something. In 1952 was not that International Agreement done. It was a political agreement that the United States allowed Puerto Ricans to have selfgovernment if the respected this constitution that was approved by congress, right . Well, this constitution, who violated that relationship first . It was the puerto rican present government. They approve legislation which was atrocious this year. That legislation, they said that people that were supplies of the government and provided services, the government could force them to continue to keep providing those without compensation, those people could go to court to get compensation. So a number of provisions have been violated by the present government. How can they then turn around and say we are a democracy, this and that. They are not protecting us. The u. S. Government, make sure there is a constitution that protected us, it is government has violated that. Thank you. This is a question for barry in particular but also for the other panelists. Im just wondering if any lessons that one can draw from the recent experience of greece . I find, looking from the outside, that the parallels are a strike, including the question the very profound questions that were asked about the limits of democracy when dealing with extreme economic circumstances. Good morning. My name is maximillian. I want to commend all the panelists for presentations given. Theres a couple things that i disagree with in terms of some of the assumptions and want to have a dialogue about them. Regarding, first, on the idea that a similar circumstances in washington, d. C. , new york and detroit are applicable to puerto rico. And i would like to ask the panel to comment on this. Within detroit, it was part of a judicial system which the people in detroit understood it as such, as part of their legal system. New york was not in a position on the federal government on the state of new york. It was a deal they did with the state of new york and the new york state put up and place a control board. In washington, d. C. It took two sets of legislations two years apart to get through the control board that were both described by mr. Bosworth and others. The first board looked like the one that applies to puerto rico right up without any of the restructuring. But again, d. C. , good or bad has been used with congress intervening directly. No import requesting that since the 1940s. How do you think going back to the democracy issue, but a fundamental point of representation, they have never seen this . How do you expect the control board to really work in puerto rico when theres no parallel in their political system . Pretty much still alive there. At the second part of would ask second part of it as content other of the plan to also engage on this, i know people who are against the control board for the different points that have been raised today, not the but the fundamental question is, even people who agree with you and congress, what is the alternative . What is, what people did need is the attitude what is the alternative. Not whether its in the congressional package. I think people agree at least until for now, this is the best deal Republican Congress is going to get. If you accept that as the premise, what is the alternative that is not federal and can come from puerto rico . Thank you. In the back. Good morning. I just want reflect on a few things some folks said beyond the bandaid that is going to be whatever the legislation is going to be, i think going to puerto rico for the last 20 some odd years and ive consistently watched and ive been working there, consistently watch the economic downturn and infrastructure. You see it in the Education System to use it all across the island. So my question is not a bandaid that were in a situation now, some people referenced detroit, for example, we have an Automotive Industry that drove the entire region and so whats the forwardlooking plan for puerto rico . Cuba is going to come online. Dominican republic is driving tourism right now. Is a consistent decline in tourism receipts from puerto rico. Someone mentioned other opportunities in other industries whether they start opportunity, innovation, or is it, some people mentioned about that doctors are leaving the is there an opportunity, for example, so you have, you reconstructed your tourism sector. And so are the institutions that are in place . I dont know if the brookings or other organizations are looking at the forwardlooking beyond their current debt crisis, and what does the item to look like thank you very, very much. Lets start with trying to maybe this time and then rafael and let barry have the final word. Thank you. Let me very quickly address some of these points. On the first question i just wanted to highlight, legislation, legislators make bad decisions and that bills all the time. To say that because you made, you passed a bad deal you dont have the right to call or decision of democratic legitimacy or call for democratic legitimacy. Its a bit of a misnomer. But i would say, however, that there is in puerto rico state before. State reform can take a variety of forms. So, for example, i mentioned the fact of improper Civil Servant in puerto rico that creates inducement for officials to act towards a public good. A structure where people can move up the civil latter as a result of their achievement for a result of excellence in their performance, and that creates a positive cycle on management. Puerto ricans voted to reduce the size of the legislature, and the government has ignored the mandate. Theres also been proposition to reduce the number of municipalities because that creates governance overlap. Thats it powerful message politicians could be sent to the population that they want to do things different. We can talk about transparency and accountability. Yes, 20 other states penetrate do not have a public audited financial statement, but none of them is facing a credibility crisis like puerto rico so the are things that can be done to shore up the credibility and the awesome things that can be done administratively to address this issue, as we said. On comparison with new york and d. C. Boards, and again i said earlier, i think that the our fundamental differences obviously the comparisons are not automatic. I have encourage colleagues in puerto rico to produce this deep analysis of what those boards look like in comparison with puerto rico because there is a fundamental question. There is a fundamental question about power of symmetry allies at the heart of a lot of the ways in which these mechanisms are set up an in a way that the y exercise their authority and their power. And we just cannot ignore that simply because we are doing in the interest of fiscal probity of economic management. Its an interesting questionable what is the alternative to a fiscal control board, because yes, puerto rico does need a mechanism that can make policies stick, something thats also a credible commitment problem in decisionmaking. However, i dont know necessarily that has to be solely federal or solar local. I think the two things have to coming together because ultimately United States functions through subsidiaries, decisions are locally made for the largest part on many things. Federal control board that fixes problems doesnt solve the long term problems. In that regard i would say there is no Silver Bullet. None of the countries in central america, theres a point made that, none of these countries have a Silver Bullet. Its going rapidly but theres a huge disconnect. I think what is more important for puerto rico is that there is policy cohesion in terms of the various strategies of the first things. We talk started, we talk about medical tourism. We can also talk about supply chain policies and things in that regard, that all of them act cohesively through a single policy framework which i think is part of the lessons from the one of the things that is important for member of greece is there was a lender of last resort willing to work with greece and greek authorities. And i did not have a technical problem. Greece had huge problem of competitiveness. There is no clear answer for it. So there is no Silver Bullet on productivity. Theres a big difference between greece and argentina. Argentina had huge economic bubble, but the fundamentals of productivity and economy were there. Nobody has been looking at those see how they are made compatible with the path we find out of the current crisis. Thanks. A very substantive and puerto rico administration, yet shes making the right case. Puerto ricos challenges are a consequences of our colonial condition. They are a coincidence of corruption of local politicians. And theres no choices we can make locally that we havent been able to make. Such as once powerful tax reform, Corporate Tax reform has not arrived in puerto rico the way it should be. We have not a diversified our fuel base consumption. Energy costs are way too high in puerto rico. We havent really found a local government. Government is just too big at the moment. But something we should put on table that no government has had the political will to actually accomplish meaningful redesigning. Theres no Proper Tax Administration system locally. I mean, the department of the treasury, in puerto rico is a very inefficient. Making sure those who pay taxes pay their taxes. So yes, there is a panoply of elements that render the legitimacy and strength in regards to the inefficiency or local governments. But the issue of the absence of democratic legitimacy of the board, the whole idea of actually writing a wrong with another wrong, bypassing the constitution of puerto rico, the rule of law, the rule of law that we have in order to go in this way really, we can achieve similar goals by actually structuring the board in differently, as ive mentioned before. As regards to kevins comment, about the greek, as my fellow panelists have suggested, in the context of greece, first of all you for completely different political scenario. Greece had a bargaining chip it could actually exit the eurozone , and the European Central bank was involved. The imf was involved. The french were involved. The germans were involved. The exposure of the members were way too high for them not to be involved in the liquidity perspective. In this scenario, perhaps some folks in congress are going to end up realizing, before next month, the puerto rican crisis, we have a Multiplier Effect in the u. S. As bond market. And that may mean that sooner or later the puerto rico crisis will have an effect on the mainland. Because most usual form, usual forms and Capital Investment forms are heavily investing in puerto rico commercial paper. So if puerto rico doesnt pay its debt youll end up having consequences in the mainland. Folks in pensioners in california, a new jersey come across the country will feel it. Somehow that means First Political actors in congress will actually act in a more responsible way than they have done so far. As regards to max questions, legitimacy, yes, i guess the answer to question is that perhaps we could have engineered a process whereby puerto rican actors and actors in congress would have actually engineered a consent mechanism or by folks in be the wholeould board mechanism perhaps by having a local vote on it. 80 of folks in puerto rico support the board can whats the problem of actually putting it to the people for a vote . The most recent poll i saw on the board suggests that perhaps its 4951, or 5050 folks opposing. If thats the case in which the problem of actually putting it to the people on a vote . Like congress did in 1951 . They were putting it to a vote. That would render something illegitimate perhaps. As regards to your proportion of Economic Development, before we get to that conversation we need to make sure that energy costs go down in puerto rico. We need to make sure the board is credible. Its incredible the local government right now came up with a 9. 1 billion budget, ok, in the face of this crisis. In other words, that are suspending payments on the debt that they our still spending like crazy. Thats something that is unjustifiable. It really takes away credibility or whatever credibility was left from the puerto rican government. Thats something that has to be dealt with in a meaningful way moving forward. Thank you. Barry, final word. Well, we differ a little bit, for perspective on what this control board is intended to do. I have thought and i think the intention of the current legislation and its a shortterm are aimed at resolving a financial problem. It is not aimed at solving puerto ricos economic problems and competitiveness going forward. In fact, i think its a terrible for them to try to resolve those sort of issues. So its temporary. Is going to be painful on both sides. Efficacy of bondholders screaming. One of the things that make civilly obligated is that we are not sure who actually holds the debt anymore and what they paid to get it. How do you pay back . That is a complicated system. There are realized losses already. Valuemes to be the actual of the debt has already declined to near 50 of the 75 billion number that was given. When i do a rough calculation, i think puerto rico has enough money in current taxes in the general fund to pay current expenditures. It could have an economic term a primary budget balance. It cant afford to pay anything on the debt at the present time and has no money for any new investment, which is a big problem. So when you think about the investment problem and you think about future debt payments, they are probably going to have to come out of some net increase in taxes to put them on a board. I think also realistically that the idea of Economic Programs to get puerto rico growing again can only be sensibly designed once this damn debt issue is put behind you. You have to resolve it. You have to get down some of this debt. So that puerto rico is back. You cant just keep postponing. What is done with greece so far as they dont make any payment. They just work without maturity of the debt, and they give the very concessionary shortterm interest rates. But theres no end to that process. And without an end i dont see how youre going to get an answer. So i think the focus of the control board should be to make the hard decisions to bring down the debt to a sustainable level as quickly as possible and they need a lot of expertise to determine what in fact puerto rico can afford to pay. When you talk about restructuring, in 2006 our idea was Business Services. We thought puerto rico is sort of the ideally placed geographically between europe, latin america and the u. S. , and it was a bilingual country. It couldve been a good job of promoting Business Service type connections among the three continents. Some people thought that was a good idea. I think time has shown it no longer would work because miami thought it was a great idea. And miami has basically opted in faster than san juan. Im also amazed to learn that order rico is now no more bilingual on the mainland of the United States. The people who speak the language in addition to english is about the same. I dont think they have a big advantage there anymore. I do think they have demonstrated a very strong Higher Education program in engineering, particularly the aerospace industry. They have an excellent reputation there. I think it could do something education and a medical. In medical. Another one other thing that we put together is to look at solar energy. Why didnt they take more advantage of the Obama Administrations extraordinary magnitude of subsidies that it offered for research developing in alternative fuels . So i think that basic message is puerto rico has to diversify their economy. Im still kind of puzzled, i must admit, im actually working on now that i dont understand, is why, hawaii is about as far away from the mainland as puerto rico. Its an island. Its one of the richest states in the union. Puerto rico in my view, is so poor it couldnt possibly support itself as a state. Its 30 of the u. S. Average. Its half the income of the poor est state in the union. I dont understand of people think it could become a state and finance its activities. Why such a big difference . Why does puerto rico do so badly as hawaii does so well . If i understood that i might try to think about some sort of economic policies about how they could do. I dont. I think we have another topic that, hawaii, puerto rico comparison. This has been a very rich and substantive discussion on obviously a very, very series issue. I want to go back to raphaels comment that this deserves a place on hemispheric agenda. And want to thank again kevin and dan for prodding the dialogue, to take this on. And i think certainly i come away with a sense that we need to continue to focus on this. A lot of issues have been raised that deserve a lot more attention and engaging more people in this discussion. Plus theres a lot at stake and its a very critical. I want to thank all of you for your great comments and questions and coming here today. And a special thanks for a superb speakers, thank you. Thank you so much. [applause] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] [captions Copyright National cable satellite corp. 2016] former president bill clinton campaigns for Hillary Clinton at a get out the vote event. Our live coverage of the president to risk continues tuesday night with primaries in six states, california, montana, new jersey, new mexico, and north and south dakota. A more Different Division for our country and the one between democrats for progress, prosperity, fairness, and opportunity and the presumptive nominee on the republican side. Onyou going to win education, no more common core, bring it down. We want it local. With healthto win care, were going to win at the border. Live got to redefine what politics means in america. We need people from coast to fighting back and demanding a government that represents all of us, not just the 1 . 9 00 p. M. Live at eastern for Election Results and your reaction and we will look ahead to the fall battleground states. To theyou on the road white house on cspan, cspan radio, and cspan. Org. Now, democratic candidate senator Bernie Sanders. Residents in california along with five other states will vote in their president ial primaries on tuesday. This is about