Puerto Rico's U.S-appointed oversight board approved Monday a revised version of a fiscal plan proposed by Governor Ricardo Rossello to tackle the island's debt crisis that will ramp up heavy-handed austerity with cuts to public spending.
The board voted unanimously to order Puerto Rico to implement 10 percent cutbacks in its public pension system, lay off tens of thousands of workers and slash bonuses. The board's amendments to the plan, which deepened Rossello's proposed haircut to public spending, will be implemented if Puerto Rico's government cannot find alternative ways to generate the savings.
Rossello had resisted those measures because he said they would represent too big of an economic impact for many on the island of 3.4 million people. Board members pushed the austerity agenda by warning that the government is running out of money and that everyone in Puerto Rico will need to make sacrifices.
The board had previously rejected Rossello's plan saying it didn't comply with PROMESA, the controversial 10-year debt restructuring and oversight act passed by U.S. Congress to manage the island's economic woes.
Some of the amendments recommended by interim executive director Ramon Ruiz Comas and supported by the board's other six members included eliminating the Christmas bonus for public employees as a safeguard to ensure additional cash in case any other PROMESA measures don't yield the desired results.
Ruiz Comas also called for a "fundamental reform in the retirement system," which includes a 10 percent reduction in pensions "protecting the most vulnerable pensioners."
Now, advocates are calling for urgent restructuring to bring Puerto Rico's debt load into a manageable amount.
"A deep cut in Puerto Rico's debt is now needed as the oversight board previously noted," Eric LeCompte, executive director of the religious development group Jubilee USA," said in a statement Monday. "Without enough debt relief to bring the debt back to sustainable levels, no fiscal plan can be enough for economic recovery."
"As any fiscal plans are implemented, special attention must be paid to protecting vulnerable communities," he added.
The fiscal control board, appointed by former President Barack Obama after being approved by Congress, has been criticized for deepening Puerto Rico's colonial relationship with the United States, as it has control over the island's finances as well as the authority to construct its own fiscal plan if it sees Rosselli's plan as insufficient.
The country has a debt of nearly US$73 billion, a 45 percent poverty rate and an unemployment rate more than twice the average of U.S. states.
Puerto Rico's status as a U.S. colony forbids it from making any independent decisions about its economy, particularly regarding debt. This status denies it the legal right to file for bankruptcy or negotiating new debt terms, which would allow the protection of public assets and pay for essential services.
Puerto Rico has been a U.S. territory since 1898 when the U.S. usurped it from the Spanish Empire, and there's a new push for the territory to become a U.S. state. Many Puerto Ricans who support it say that becoming the 51st U.S. state could help the island tackle the deficit.