THE BOARD WOULD WATCH OVER THE PACT WITH CREDITORS ????
Gov. Alejandro Garcia Padilla insists on the creation of a local Financial Control Board. In Washington they tell us the following about the local board:
We will see what the law says, but an example may be that the creditor agreed upon fiscal control (which the government of Puerto Rico has to comply). If Puerto Rico fails, then negotiation or early maturing of bonds or (would have to pay) the original price. Things like that can certify the external board, certifying that things are going well.
This is so ridiculous that makes you want to cry. The governor is telling us about the local Financial Control Board since the 29th of June. The board appears on the Krueger report and Melba Acosta spoke about it. I wrote that the concept was unconstitutional as conceived by these people since the concept ran into the harsh reality of our Constitution and now seeks to do otherwise. His ideas, however, are laughable. I explain.
The Governor speaks of a board certifying that the government is in compliance or not with agreements with bondholders. What relevance, if any, would this have? If the bondholders believe that the Government is in compliance, the opinion of the board would be irrelevant. If bondholders do not believe that the Government is in compliance, the opinion of the Board would be irrelevant. Moreover, what confidence could bondholders have on Board partial or totally appointed by the Government?
In addition, the role of the Government is to ensure that its agencies comply with their obligations. Delegating that responsibility to a locally appointed Board solves nothing, especially when this function can be delegated to an arbitrator in arbitration proceedings (if it is agreed upon in the bond document) or a court of competent jurisdiction.
Clearly the idea of this Board is to appease Washington. The Governor does not know how the proposed legislation will red and knows that the Board will have no powers to compel the Government or the Legislature to comply with the agreements. Just saying that it fulfills or not with the agreements does not force anyone. Finally, faced with a government that already threatens to violate the Constitution by not paying general obligation bonds, what guarantees do the bondholders have that it would comply with what is said by a Board? What guarantee is there that the government will not go to a court to say that the Board is wrong? The audacity of this Government has no limit.