Organizations say oversight board has deepened fiscal instability in 10 years

Eva Prados Rodríguez, executive director of the Citizen Commission for the Audit of Public Credit, said in a new analysis prepared by a coalition of civil society organizations that the Financial Oversight and Management Board’s portrayal of “savings” is misleading.

By THE STAR STAFF

A coalition of civil society organizations released a new analysis on Wednesday arguing that Puerto Rico has endured “a lost decade” under the federal Financial Oversight and Management Board, concluding that the body’s policies have deepened fiscal instability and worsened quality of life across the island.

The report, “La Década Perdida: La verdadera cara de la Junta,” was prepared by the Citizen Commission for the Audit of Public Credit (Comisión Ciudadana para la Auditoría del Crédito Público), the Cities League (Liga de Ciudades), Sembrando Sentido and Right to Democracy. The groups contend that, despite the oversight board’s claims of success in debt restructuring and fiscal governance, its approach has relied on austerity measures, increased dependence on federal funds, privatization and higher service costs -- all while failing to address the structural causes of Puerto Rico’s economic crisis.

Eva Prados Rodríguez, executive director of the Citizen Commission, said the board’s portrayal of “savings” is misleading. She argued that the entity omits billions in cash payments and bonus payments to bondholders when presenting its debt‑reduction calculations.

“The Board doesn’t save us money -- it costs us,” Prados Rodríguez said. “In practice, Puerto Rico has had to pay far more to bondholders than was announced, from $10 billion in cash payments at the signing of agreements to annual extra payments now exceeding $1.5 billion.”

According to the coalition’s analysis, the oversight board’s fiscal strategy mirrors the policies of past administrations that contributed to the island’s financial collapse: austerity, reliance on federal recovery funds and the promotion of “structural reforms” that, the authors argue, have not produced economic growth. The report asserts that the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) prioritized debt repayment and balanced budgets while leaving intact the political and economic model that fueled stagnation and massive public borrowing.

The groups also argue that the modest economic recovery of recent years was driven not by the board’s measures but by an unprecedented influx of federal disaster and reconstruction funds. Rather than using that moment to build long‑term fiscal stability, the report states, the board leveraged the temporary boost to negotiate higher debt payments, benefiting creditors at the expense of future sustainability.

The analysis highlights the impact of contingent value instruments, commonly known as CVIs, tied to sales‑tax revenue, which allow bondholders to receive additional payments when sales and use tax IVU collections rise -- a trend influenced by federal spending. The organizations say this design has led to disproportionate gains for creditors.

Cristina M. Miranda Palacios, executive director of the Cities League, emphasized the strain on municipalities. She noted that between 2017 and 2024, certified fiscal plans dismantled the Equalization Fund through cumulative cuts, while promised alternatives never materialized.

“A key mechanism of municipal support was taken apart without establishing another capable of replacing it,” Miranda Palacios said.

The report also criticizes the oversight board’s approach to contracting and privatization, arguing that these became the primary tools of government reform without first strengthening public‑sector capacity. This, the authors say, increased risks of inefficiency, weakened oversight and reduced the government’s ability to deliver essential services.

Issel Masses of Sembrando Sentido pointed to the board’s own contract review registry, noting that fewer than 1% of contracts submitted for evaluation have been rejected. She said some contracts were approved even after the board identified deficiencies, including competition concerns and risks associated with selected contractors.

Adi Martínez Román, co‑director of Right to Democracy, underscored the broader democratic implications of the oversight board’s authority, arguing that its power to override local legislation reinforces a colonial legal framework rooted in the Insular Cases. She warned that PROMESA’s model could be replicated in other U.S. territories, including American Samoa, Guam, the Northern Mariana Islands and the U.S. Virgin Islands.

“After 10 years, the fact that the Board has not delivered the benefits it promised to local communities shows that its continued impositions on democratic self‑governance can no longer be justified -- if they ever could be,” the organizations said.

The full report is available at comisionauditoriapr.org in the “Informes” section.