About The Promesa Law in Puerto Rico 2016

The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) is a US federal law enacted in 2016 that established a financial oversight board, a process for restructuring debt, and expedited procedures for approving critical infrastructure projects in order to combat the Puerto Rican government-debt crisis.

Through PROMESA, the US Congress established an appointed Fiscal Control Board (FCB), known colloquially in Puerto Rico as "la junta," to oversee the debt restructuring.

With this protection the then-governor of Puerto Rico, Alejandro García Padilla, suspended payments due on July 1, 2016.

The FCB's approved fiscal austerity plan for 2017-2026 cut deeply into Puerto Rico's public service budget, including cuts to health care, pensions, and education, in order to repay creditors.

By May 2017, with $123 billion in debt owed by the Puerto Rican government and its corporations, the FCB requested the "immediate" appointment of a federal judge to resolve the "largest bankruptcy case in the history of the American public bond market."

In response to legal challenges by creditors trying to reverse the debt recovery actions, the Supreme Court ruled in June 2020 that the Board's appointment, performed by the President only, was consistent with the Appointments Clause.

The Foraker Act of 1900 prevented the government of Puerto Rico and all of its municipalities from entering into debt in excess of seven percent of the aggregate tax value of its property.

PROMESA enables the island's government to enter a bankruptcy-like restructuring process and halt litigation in case of default.

Specifically, the establishment of the Financial Oversight and Management Board of Puerto Rico known colloquially as "La Junta", operates as an automatic stay of creditor actions to enforce claims against the government of Puerto Rico.

The oversight board is to facilitate negotiations, or, if these fail, bring about a court-supervised process akin to a bankruptcy.

The board is also responsible for overseeing and monitoring sustainable budgets.

The President appointed all seven members of the board, six of whom were chosen from a list of individuals recommended by Congressional leaders and had previous ties to profitable industries in Puerto Rico.

The Governor of Puerto Rico (or a designee) serves ex officio as an eighth member without voting rights.

PROMESA authorizes the oversight board to designate a territory or territorial instrumentality as a "covered entity."

Once designated, the covered entity is subject to the terms of PROMESA.

On September 30, 2016, the oversight board designated the Commonwealth of Puerto Rico and certain other territorial instrumentalities as covered entities under PROMESA.

As a covered entity, Puerto Rico is required to submit a fiscal plan.

• A fiscal plan must provide a method to achieve fiscal responsibility and access to the capital markets, and: provide for estimates of revenues and expenditures in conformance with agreed accounting standards and be based on
• - applicable laws; or
• specific bills that require enactment in order to reasonably achieve the projections of the Fiscal Plan;

• ensure the funding of essential public services;
• provide adequate funding for public pension systems;
• provide for the elimination of structural deficits;
• for fiscal years covered by a Fiscal Plan in which a stay under subchapters III or IV is not effective, provide for a debt burden that is sustainable;
• improve fiscal governance, accountability, and internal controls;
• enable the achievement of fiscal targets;
• create independent forecasts of revenue for the period covered by the Fiscal Plan;
• include a debt sustainability analysis;
• provide for capital expenditures and investments necessary to promote economic growth;
• adopt appropriate recommendations submitted by the Oversight Board under section 2145(a) of this title;
• include such additional information as the Oversight Board deems necessary;
• ensure that assets, funds, or resources of a territorial instrumentality are not loaned to, transferred to, or otherwise used for the benefit of a covered territory or another covered
• territorial instrumentality of a covered territory, unless permitted by the constitution of the territory, an approved plan of adjustment under subchapter III, or a Qualifying Modification approved under subchapter VI; and
• respect the relative lawful priorities or lawful liens, as may be applicable, in the constitution, other laws, or agreements of a covered territory or covered territorial instrumentality in effect prior to June 30, 2016.

La Ley de Supervisión, Administración y Estabilidad Económica de Puerto Rico, comúnmente conocido como la ley PROMESA según las iniciales de la ley en inglés, es una ley federal de los Estados Unidos aprobado en 2016 para hacer frente a la crisis económica de Puerto Rico.

La ley permite que el gobierno de Puerto Rico entre en un procedimiento de reestructuración de la deuda que ha ocasionado un aumento en la pobreza y necesidad en la clase trabajadora de la isla.

Esta ley coloca a Puerto Rico en una situación de precariedad, poniendo como prioridad el pago a los bonistas de la Isla, desmantelando los sistemas de salud y educación.