World Leaders Meet to Tackle COVID Debt and Development Crises

Washington DC - The G20 and Paris Forum convened a global virtual High-Level Ministerial conference for 39 countries focused on the economic, debt and development impacts of the coronavirus. 

"The meeting offered recommendations to the G20 as it tries to build consensus on next steps for dealing with the coronavirus economic impacts," noted Eric LeCompte, a United Nations finance expert and the Executive Director of the religious development group Jubilee USA. "G20 Finance Ministers meet next week and will move forward decisions on debt relief and development aid for developing countries."

In April, the G20 moved forward a plan to suspend debt payments for 73 of the world's poorest countries. 41 of the 73 countries are accepting the relief.

"Next week's G20 meeting will focus on extending the debt payment suspension into 2021," said LeCompte. "While suspending the debt payments will generate billion of dollars for poor countries to deal with the coronavirus, the G20 plan still faces challenges. Not all G20 countries are fully participating and the private sector and commercial banks won't commit to join in debt relief measures. We also have the whole category of developing Middle Income Countries who are left out of debt relief plans."

The July 8th, High-Level Ministerial Conference, "Tackling the COVID-19 Crisis, Restoring Sustainable Capital Flows and Robust Financing for Development," included speeches from the heads of the IMF and World Bank. The World Bank's David Malpass called on China's Development Bank to join the debt suspension and he noted that some countries will need debts permanently reduced. Kristalina Georgieva, the head of the IMF, urged world leaders to start to look more closely at the challenges that Middle Income Countries like tourism dependent small island states face.

"The coronavirus crisis is destroying livelihoods and economies," noted LeCompte. "Expanding and increasing debt relief so people can survive the economic and health impacts of the crisis is essential for the developing world."

Read the conference agenda as a PDF here.

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Bond Buyer Quotes Eric LeCompte on Child Poverty in Puerto Rico

The future of Puerto Rico is cloudy. The economy has been in decline for all but two years since 2006, the government is loaded with debt, much of it in default, and competing forces are litigating its future.

For the territory to improve, sources said the Oversight Board and the local government should act differently in the next in the next few years to put it on solid footing.

“The Puerto Rican leadership needs to develop a working plan rooted in community needs that places all interests into a workable context," said Tom Sanzillo, director of finance at Institute for Energy Economics and Financial Analysis.

“The bondholders must end their insistence on unrealistically high levels of repayment of legacy debt. Their continued pressure for repayment plans that bear no relationship to Puerto Rico’s economic reality is an impediment to fiscal solvency, sound economic growth, and political consensus,” Sanzillo said.

Center for Popular Democracy Co-director of Community Dignity Campaigns Lopez Varona said the board “should be abolished. The board was created, and has acted, as a representative of the bondholders. As part of our demands on recovery and reconstruction efforts, we believe that there are models of community that can be implemented to make sure that resources are used in an equitable and proper manner.

“Legislation should also be passed to protect pension holders, rectify labor cuts, and labor incentives such as increases in the minimum wage should be implemented,” Lopez Varona said.

All observers think governing bodies have to change their behavior, but they differ on the shape of that change.

Puerto Rico Oversight Board Executive Directory Natalie Jaresko said she hoped for greater collaboration with the local government. With this the two sides could finish the debt restructuring, assure the sustainability of budgets, and put in place mechanisms so that there will be fiscal sustainability in the future including timely Comprehensive Annual Financial Reports and budget controls.

Center for a New Economy Public Policy Director Sergio Marxuach said the local government has to come to realize the board actually exists and it needs to engage with the board.

The board, on the other hand, shouldn’t be too aggressive with the local government and should try to negotiate with it, he said.

Banco Popular Chief Financial Officer Carlos Vazquez also agreed: “A better environment of cooperation between the board and the local government would speed up the process and would make it significantly less costly for the people of Puerto Rico, as both sides would save millions of dollars in legal and advisory fees as well as significant time, which is now being spent in legal proceedings.”

Advantage Business Consulting President Vicente Feliciano said the board and local government should collaborate on areas of agreement until the November elections. After that there will be more opportunity for the local government to compromise on disagreements with the board.

Others called for policy changes.

University of Puerto Rico Professor José Colón said the island had a fundamental problem of not having an economic model. Without this, “we will get nowhere.”

The board and “local government should put out updated audited financials, a receiver should be appointed for PREPA, and a ‘grand bargain’ [in the debt restructuring] should be hatched out as soon as possible,”T&T Capital Management Chief Executive Officer Tim Travis said.

“The board needs to drive things like the development of reliable and timely data regarding the commonwealth and its economy and government finances ... The board should be more assertive in the policy arena, pushing Congress to do things like provide something similar to [the historic] Section 936 [tax exemption for the island],” said Muni Credit News Publisher Joseph Krist.

Calero Consulting Group President Heidie Calero also said the board and local government has to lobby Congress. With COVID-19 and the U.S.-China trade wars, there is an opportunity for the pharmaceutical sector in Puerto Rico to bridge this gap in the health chain supply under the American flag and at relatively lower costs. Puerto Rico needs to make a convincing case before U.S. Congress and President Trump or whoever is the president of the U.S. in 2021.”

She and Marxuach agreed with Colón on the importance of developing an economic plan.

Additionally, Calero called for “true educational reform.”

Jubilee USA Network Executive Director Eric LeCompte also focused on the island’s children, saying that budgets must reduce the high child poverty rate on the island.

Many said the future was unclear.

Marxuach said the uncertainty stemmed from Title III bankruptcy Judge Laura Taylor Swain’s decisions in some of the bankruptcies, the lack of clarity as to when a COVID-19 vaccine will be developed, how fast the local economy rebounds from the current downturn, and how fast federal funds flow to rebuild the island.

Marxuach said the uncertainty led to one of the Center for a New Economy’s concerns with the board’s five-year fiscal plan. “It will probably be useless in six months.”

Because of this, everyone should consider introducing contingency bonds — bonds paid on the basis of economic activity, Marxuach said.

José Villamil, Chairman of Estudios Técnicos, agreed as to the uncertainty of the island’s economic future. Federal Hurricanes Maria and Irma reconstruction assistance and the use of the funds “are the main factor on economic performance in the next three to five years.”

Vazquez and Calero agreed the future was unclear.

“All we can hope for is for continued progress in economic matters (budget management, debt restructuring and structural improvement in the government), as well as the evolution of an economic plan/model that will be able to propel Puerto Rico to sustainable and continued economic activity,” Vazquez said.

José Villamil, Chairman of Estudios Técnicosagreed the future was uncertain but said that, “What happens in bankruptcy, will greatly impact the Puerto Rico economy. Instead of focusing on removing as much debt as possible and bailing out an incredibly corrupt government, Puerto Rico should embrace opportunity and do everything it can to attract business. It should honor as many of its obligations as possible, upgrade the utility, and seek out offshored manufacturing.”

“If [the Puerto Rican people] don’t do this, I think Puerto Rico will languish and struggle to attract a quarter of the potential business they could,” Travis said. “They will remain highly reliant on the mainland and the Federal government, and will struggle to have any access to capital markets, meaning the infrastructure will remain dilapidated.

Travis said he thought the local government would lose its case concerning Highways and Transportation Authority revenues either in the District Court or, if not there, in the Appeals court. This would open the door to a “Grand Bargain” on the GO, HTA, and Puerto Rico Electric Power Authority debt. He said he didn’t think there’d be an overall debt settlement before there was a ruling on the HTA debt.

Like Travis, Cate Long, Puerto Rico commentator, said there was a danger the government will fail to regain an ability to borrow. “The likelihood that credit rating agencies will assign ratings [in the next five years] seems pretty low since Puerto Rico refuses to disclose their audited financials. This means that Puerto Rico will have limited access to the retail municipal market since brokerages cannot put clients into unrated debt.

“Maybe Puerto Rico will be permanently exiled from the municipal market and trade as a sovereign credit in competition with other Caribbean issuers,” Long said.

Villamil was also pessimistic about the future: “We anticipate an economy at least until 2024-25 that will grow very, very slowly.”

Villamil said November’s gubernatorial election probably wouldn’t change much. All the major party candidates except one are “fairly conservative not in an ideological sense only, but also in terms of being cautious and not focused on the needed structural transformations that the island’s situation calls for.”

The one exception is San Juan Mayor Carmen Yulín Cruz but she doesn’t have a chance to be elected, Villamil said.

“I do not foresee any significant changes in how government and the legislature operates regardless of which party wins in November,” Villamil said. “This, of course, is not a welcome development.”

Puerto Rico Attorney John Mudd agreed. His assessment of the next five years was: “Disaster, since the politicians do not want to make any changes in the way they do business.”

University of Puerto Rico Professor Emilio Pantojas, referring to the two main political parties in Puerto Rico, said New Progressive Party and Popular Democratic Party “governments are corrupt. They use federal moneys as patronage or business opportunities for their followers. See what happened with the [contracts for the] COVID-19 tests. There are no good results to be expected. The debt is simply not payable.”

Yet one observer was optimistic about the future. Feliciano said, “I am cautiously optimistic. A proper debt restructuring should be approved by Judge Swain sometime in 2021. After this, moderate economic growth should resume.

“The bankruptcy process consumes enormous quantities of management attention, which is a scarce commodity in the government of Puerto Rico. It is also very expensive,” Feliciano said.

However, Feliciano is in the minority. More participants and observers are pessimistic. On May 27 Board Member Andrew Biggs wrote on Twitter, “Although structural reforms could bring huge economic benefits to the people of Puerto Rico, the politicians aren’t willing to bear the (smaller & shorter-term) political costs. I wish it were different, but Puerto Rico 20 years from now will likely be very similar to today.”

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Jubilee USA Anti-Money Laundering Act of 2020 Letter

The Honorable Mitch McConnell 
Majority Leader, U.S. Senate
317 Russell Senate Office Building
Washington, DC 20510
 
The Honorable Chuck Schumer 
Minority Leader, U.S. Senate
322 Russell Senate Office Building
Washington, DC 20510
 
The Honorable James Inhofe
Chairman, U.S. Senate Armed Services Committee
205 Russell Senate Office Building
Washington, DC 20510

The Honorable Jack Reed
Ranking Member, U.S. Senate Armed Services Committee
728 Hart Senate Office Building
Washington, DC 20510

June 29, 2020

Leader McConnell, Leader Schumer, Chair Inhofe and Ranking Member Reed,

On behalf of 750 national religious bodies and institutions, faith communities and Jubilee USA member organizations, I urge you ensure that the Anti-Money Laundering Act of 2020 becomes an amendment to the National Defense Authorization Act (S Amendment 2198 to S4049).

The Senate should ensure quick passage of this and similar pieces of legislation that reveal the true owner of "anonymous" shell companies to government authorities. Some shell companies hide those who profit from human trafficking and dictators use them to steal development aid and debt relief. Without basic transparency measures, shell companies can foster Medicare and Medicaid fraud, harm our national security and contribute to a loss of nearly a trillion dollars a year to the developing world. 

My organization, Jubilee USA Network, coordinated 100 faith communities and organizations to urge Congress to pass strong transparency measures that reveal the true ownership of these anonymous companies. In the attached anti-money laundering support letter, please see a listing of these groups that include some of the largest religious institutions and groups in the United States, including: Christian Church (Disciples of Christ), The Episcopal Church, The Evangelical Lutheran Church in America, The National Council of Churches, The Presbyterian Church (USA), The United Church of Christ, The United Methodist Church - General Board of Church and Society, Catholic religious orders and Jewish, Christian and Muslim communities.

As you know, this amendment is sponsored by Senators Mike Crapo (R-ID), Sherrod Brown (D-OH), Tom Cotton (R-AR), Mark Warner (D-VA), Mike Rounds (R-SD), Doug Jones (D-AL), Jerry Moran (R-KS), Bob Menendez (D-NJ) and John Kennedy (R-LA).

While we believe the adoption of this measure is a positive step forward to protect the vulnerable and improve transparency, we look forward to continuing to work with you to further strengthen this and related transparency initiatives.

I am grateful for your public service. Please know that I and our member institutions continue to hold you in prayer as you make critical decisions for our country and on behalf of those who are most vulnerable.

Gratefully,

Eric LeCompte
Executive Director
Jubilee USA Network

CC: US Senate Members
Enc: Attached Letter


June 29, 2020

Dear Senator,

“When the righteous increase, the people rejoice, but when the wicked rule, the people groan.” --- Proverbs 29:2

As communities of faith, we are grateful for your public service and we pray for your efforts daily. We are grateful for the efforts you've supported of Jubilee USA Network to build a more accountable and transparent economic system.

We write to urge you to support legislative actions in line with our faith - Jubilee legislation that promotes transparency, fights corruption and protects the vulnerable.

In particular, we invite you to cosponsor the Corporate Transparency Act and the ILLICIT Cash Act, which reveal the true owners of anonymous shell corporations to law enforcement.

This legislation is essential as it:

  • stops ways that human traffickers hide and make profits
  • prevents the exploitation of vulnerable communities in the United States through Medicaid and Medicare fraud
  • curbs the theft of development and debt relief aid
  • reveals theft from corrupt foreign governments of public monies
  • can help raise revenue in the developing world

We are thankful for your support of these vital pieces of Jubilee legislation that protect and lift the vulnerable.


Signatories below as of 6/29/20

Denominations and Denominational Representations
Christian Church (Disciples of Christ)
The Episcopal Church
The Evangelical Lutheran Church in America
The National Council of Churches
The Presbyterian Church (USA)
The United Church of Christ
The United Methodist Church, General Board of Church and Society

Religious Institutions, Faith Organizations and Denomination Offices
Africa Faith and Justice Network
Africa Women and Youth Initiative
United Methodist Women
Daughters of Charity USA
Franciscan Action Network
Columban Center for Advocacy and Outreach
American Friends Service Committee
Church of the Brethren Office of Peacebuilding and Policy
Disciples Center for Public Witness
Disciples Home Missions of the Christian Church (Disciples of Christ)
Jubilee USA Network
Leadership Conference of Women Religious
Pax Christi USA
Sojourners
United Church of Christ, Justice and Witness Ministries

Congregations, Faith Communities and Religious Groups
All Saints Episcopal Church -- Salt Lake City, UT
Ascension Lutheran Church -- Thousand Oaks, CA
Athens Catholic Community Peace and Justice Committee -- Athens, OH
Bernardine Franciscan Sisters -- Reading, PA
Bethel Lutheran Church -- Los Angeles, CA
B'nai Harim -- Pocono Pines, PA
California Lutheran University
Central Pacific Conference United Church of Christ -- OR
Congregation Gates of Heaven -- Schenectady, NY
Crossroads United Church of Christ -- Indianola, IA
Dominicans of Sinsinawa -- Sinsinawa, WI
First Congregational Church of Alameda, CA
First Congregational Church of Chicago UCC
First Presbyterian Church -- Portland, OR
Grey Nuns of the Sacred Heart -- Philadelphia, PA
Harbor House -- Thousand Oaks, CA
Holy Spirit Missionary Sisters, USA JPIC -- Waukegan, IL
IHM Sisters - Justice, Peace and Sustainability Office -- Monroe, MI
Immanuel Lutheran Church of Los Altos, California -- Los Altos, CA
Interfaith Worker Justice, New Mexico
InterReligious Task Force On Central America and Colombia -- Cleveland, OH
Iowa City Pax Christi -- IA
Jubilee Albany Capitol Region, NY
Jubilee Massachusetts
Jubilee Northwest -- Seattle, WA
Jubilee San Diego
Jubilee Southern California
Jubilee Ventura County -- CA
Jubilee Vermont
Lutheran Office of Public Policy -- California
Mary House Inc -- New Providence, NJ
Messiah Lutheran Church -- Schenectady, NY
Middlebury Friends Meeting -- Middlebury, VT
Mission Committee of the First Trinitarian Congregational Church (United Church of Christ) -- Concord, MA
Missionary Oblates of Mary Immaculate
Mount Tabor Lutheran Church -- Salt Lake City, UT
Muslims for Economic Justice
Nicaragua Center for Community Action -- Berkley, CA
Pax Christi Dallas -- TX
Pax Christi Florida
Pax Christi Hazel Crest -- IL
Pax Christi Hilton Head -- SC
Pax Christi Illinois
Pax Christi Metro New York
Pax Christi San Antonio -- TX
Franciscan Sisters of the Atonement -- Garrison, NY
Global Justice Institute, Metropolitan Community Churches -- New York, NY
St. John's Episcopal Church -- Chicago, IL
Prince of Peace Lutheran Church -- Philadelphia, PA
Congregation of the Sisters, Servants of IHM -- Scranton, PA
St. Pius X Catholic Church -- Portland, OR
La Vista Ecological Learning Center -- Godfrey, IL
Pax Christi Pacific Northwest -- Seattle, WA
Pax Christi Seed Planters -- Crete, IL
Pax Christi St. Maurice/Broward Florida
Pax Christi Western NY
Peace Lutheran Church -- Danville, CA
Pilgrim United Church Of Christ -- Carlsbad, CA
Provincial Council Clerics of St. Viator -- Las Vegas, NV
Roswell Presbyterian Church -- Roswell, GA
Saint Mark's Episcopal Cathedral -- Seattle, WA
San Dieguito United Methodist Church -- Encinitas, CA
Sinsinawa Dominican Peace and Justice Office -- WI
Sisters of Charity of Leavenworth JPIC Office, KS
Sisters of Charity of New York
Sisters of St. Francis of Philadelphia -- Aston, PA
Society of the Holy Child Jesus -- Philadelphia, PA
Sisters of Mercy of the Americas - Institute Justice Team -- Silver Spring, MD
Glenmary Home Missioners -- Cincinnati, OH
Sisters of Providence Office of Peace, Justice, and Sustainability -- St Mary-of-the-Woods, IN
South Coast Interfaith Council -- Long Beach, CA
South East Area Mission and Justice Committee of the Massachusetts Conference of the United Church of Christ -- Framingham, MA
St. Alban's Episcopal Church -- Albany, CA
St. Mary's Episcopal Church -- New York, NY
Temple Beth El of South Orange County -- Aliso Viejo, CA
The River Church South -- Quincy, MA
University Christian Church (Disciples of Christ)/United Church of Christ -- San Diego, CA
Ursuline Sisters of Cleveland -- Cleveland, OH

 

You can download a PDF version of the letter here

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Bond Buyer Features Eric LeCompte on Puerto Rico and PROMESA

Four years after passage of the Puerto Rico Oversight, Management, and Economic Stability Act, many observers say the Oversight Board it created has not accomplished its stated goals and doesn’t have enough power to fix the island's woes as it continues to struggle.

The local government's inertia and PROMESA's unwieldy structure, along with uncontrollable natural disasters and a global pandemic, has made for a perfect storm for any sort of Puerto Rico recovery.

President Barack Obama signed PROMESA on June 30, 2016. Since then, restructuring settlements have been reached for three of the island’s 18 classes of debt. Using PROMESA, the board and the Puerto Rico U.S. District Court approved deals for Puerto Rico Sales Tax Financing Corp. (COFINA), Government Development Bank bonds and notes, and ports-related Puerto Rico Infrastructure Finance Authority debt.

Nearly all the remaining 15 classes of debt will also be restructured.

Board Executive Director Natalie Jaresko has said it’s impossible to develop a structurally balanced budget for the island without having an adopted restructuring settlement for the central government debt. PROMESA requires the board to remain until there has been four years of structurally balanced budgets.

Though more than a dozen bondholders or their representatives were contacted, only one responded. Many bondholders continue to participate in the bankruptcy process.

At least 17 people answered questions about their confidence in the process, whether the law should be changed, and hopes and expectations for the future.

The Oversight Board takes stock
In an interview on Wednesday, Board Member David Skeel and Executive Director Natalie Jaresko pointed to several areas they think the law has helped. Skeel said there had been "enormous progress" using the law’s Title III and Title VI to advance debt restructuring.

Prior to the COVID-19 epidemic Jareskso said the board had done "quite well" by reaching a deal with broad array of bondholders on the central government’s debt. After the virus spread to the island and the consequent lockdown to the economy, the board will have to relook at the deal, she said.

Jaresko said the board had broken the cycle of deficit spending and because of its work, Puerto Rico’s government is "in a fiscally sustainable environment."

She also said the board had created a "depoliticized road for the economy." Nearly all groups across the political spectrum now agree the board’s goals, as found in its fiscal plans, are the proper goals, she said.

While there is disagreement about implementation, some agree that labor participation and the labor markets need to improve, the electricity sector must improve, the competitiveness and ease of doing business must improve, and that there must be educational reform, she said.

“The issue is being able to manage your way through the change and that is hard, especially with these interruptions,” Jaresko said, referring to Hurricane Maria, the January earthquakes, and the COVID-19 epidemic.

As concrete achievements, Jaresko pointed to the creation of an emergency budget reserve and a recent announcement that private firm LUMA would take over the island’s electrical transmission and distribution from the Puerto Rico Electric Power Authority.

However, even its drafters have criticisms. A federal official who had been involved in crafting the law said that when it was created those involved knew there had to be a pairing of debt restructuring and oversight. The former has been more successful than the latter, the official said.

The Puerto Rico board wasn’t given the powers the Detroit emergency manager, New York control board, and Washington, D.C. control board were given in those distressed situations, the official said.

"We underestimated the local government’s willingness to oppose the board," the official said. The Puerto Rico board doesn’t have enough power to straighten out the island and the local government doesn’t want to take the necessary steps, he said.

Board member Andrew Biggs said similar comments in tweets in late May and early June. “I went into this process hopeful that things could really improve in Puerto Rico. But PR’s problem isn’t this-or-that public policy, that in theory could easily be fixed. It’s a dysfunctional system that produces those policies, and that system won’t fix itself. Pessimistic now.”

Experts weigh in
“To some extent the board has been asked to do an impossible job,” said José Javier Colón, University of Puerto Rico professor. What the board needed was the power to jumpstart the economic relations between the island and the 50 states. But Congress didn’t give the board this power, he said.

Center for a New Economy Policy Director Sergio Marxuach agreed that things haven’t been going well and Congress bears some of the blame. U.S. Treasury officials had incorrect assumptions about Puerto Rico politicians when they created the law.

They thought local government officials would accept the board’s proposals as well as its dictates. But Puerto Rico politics is very different from that in the U.S., he said, adding the pushback from local officials was predictable.

Center for a New Economy Public Policy Director Sergio Marxuach said Congress has some blame for PROMESA's failings in practice.

Several other commentators said the law wasn’t working and the blame lied with the board, but their criticisms varied.

Center for a Popular Democracy’s Julio Lopez Varona said, “PROMESA has failed to resolve the Puerto Rican debt crisis and in doing so, it has brought suffering and hardship to the people of Puerto Rico. In the last three years, Puerto Rico has faced a worsening economic crisis, natural disasters, and severe austerity measures.”

Lopez Varona, who is co-director of Community Dignity Campaigns for the center, continued, “While PROMESA requires every approved fiscal plan to ‘ensure the funding of essential public services,’ in practice, the [board] has failed to define or discuss essential services in any fiscal plan to date ... Even worse, since its inception, the unelected [board] has been riddled with conflicts of interest that have made many organizations question the real motives of the [board].”

Coming from a different perspective, Tim Travis, chief executive officer of T&T Capital Management, said, “I think PROMESA has been an unmitigated disaster. The intent was to grandfather the original [Puerto Rico Electric Power Authority] deal, honor pledges and liens, put an emphasis on obtaining consensual deals, and put Puerto Rico on a path to accountability, transparency, and fiscal responsibility so that it could once again gain access to capital markets.

T&T owns general obligation, PREPA, HTA, and COFINA bonds.

“Instead the Oversight Board and government of PR have yet to provide current audited financials or anything close to it. They have rejected multiple PREPA deals that had been agreed upon after months of negotiations, setting PREPA back even further and hurting the island greatly. Puerto Rico is the only municipal bankruptcy that has increased spending during the bankruptcy process, which is absurd," he said.

Board spokesman Matthias Rieker responded, "The Oversight Board used its mandate under PROMESA to break the Government of Puerto Rico’s cycle of deficit spending. The government rightsizing measures in the Certified Fiscal Plan have already reduced the government’s payroll and overall operating expenses while securing essential government services, as mandated under PROMESA. The general fund budget, looking only at operational costs, declined from $8.9 billion in fiscal year 2016 to $6.2 billion in fiscal year 2020, a more than 30% reduction. The general fund budget operational costs for the coming fiscal year 2021 are projected to increase to $7 billion because of COVID-19 and the reclassification of certain expenses (about $600,000) from the Special Revenue budget.

"Separately and in addition, since fiscal year 2018, the government’s budget also includes paygo pension costs, which did not exist in general fund budgets before. That cost fluctuates between $2.5 billion and $2.6 billion per year, prior to any pension reform proposed in the Plan of Adjustment. Ensuring pensions is mandated under PROMESA. Further, the government must budget for Puerto Rico’s expenditures on Medicaid, which fluctuate dramatically based on Federal funding. Medicaid costs not included in the above general fund budget numbers has fluctuated from about $400 million to over $1.5 billion. The Oversight Board has always ensured that the Certified Fiscal Plan projects costs of Medicaid based on current Federal legislation."

Travis said the Oversight Board has worked with a select few "vulture hedge funds" to try to cram unfair deals that hurt long-term supporters and financiers of Puerto Rico.

“The [board] has tried to break liens and pledges, including on the GO bonds, which are guaranteed before any other expense, including salaries, via the constitution of Puerto Rico. They have spent four years and well over a billion dollars litigating and have almost nothing to show for it,” Travis said.

Puerto Rico commentator Cate Long said, “Generally one measures ability to manage public finances by the timeliness of audited financial statements and paying debts as they come due. According to this criteria PROMESA has been an enormous failure as the Puerto Rico government have only published their audited financials for fiscal year 2016 and fiscal year 2021 begins on July 1.

“Also PROMESA required the payment of interest on debt during the pendency of the bankruptcy and instead the Oversight Board has allowed the government to accumulate $19 billion in cash. Puerto Rico has increased their spending since filing for bankruptcy in May, 2017 and has cut taxes multiple times,” Long said.

For others the measure of failure is quite simple.

Attorney John Mudd said after four years there should have been an approved plan of adjustment for the central government debt. Jubilee Executive Director Eric LeCompte said all of the debt restructuring should have been completed by now. Mudd is an attorney for unsecured creditor Servicios Integrales en la Montaña in the bankruptcy as well as a long-time commentator on the board and the bankruptcy.

Advantage Business Consulting President Vicente Feliciano said PROMESA prevented debt restructuring from going into a tailspin.

Others were more positive about the law and the board.

Chief Financial Officer Carlos Vazquez of Banco Popular — the largest bank in Puerto Rico — said, “Like any law intended to address multi-faceted and complex problems, the statute is far from perfect. Having said that, to the extend we are making progress in improving the PR government’s income statement (via controlled and prudent management of the budget); the government’s balance sheet (via debt renegotiations) and structural challenges (via government restructuring); then the statute is moving matters in the correct direction.”

Advantage Business Consulting President Vicente Feliciano said of PROMESA, “It is certainly working because without a stay in the claims to the government of Puerto Rico, the restructuring process would have gone into a tailspin of conflicting claims and chaos. Regrettably, the actions undertaken under the PROMESA umbrella have been derailed twice by the largest external setbacks to the economy of Puerto Rico since German U-boats were sinking merchant ships in the Caribbean: Hurricane Maria and the Covid-19 pandemic.”

Estudios Técnicos Chairman José Villamil said, “PROMESA, through the [board], has returned some degree of sanity to fiscal management, and I am convinced that had there been no [board] the local political class would have made the situation much, much worse than it is.”

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The Business Times, Taipei Times and Reuters cite Eric LeCompte on G20/World Bank Debt Plans

WASHINGTON, June 22 (Reuters) - The Group of 20 major economies’ debt relief initiative for the world’s poorest countries has made good progress but additional relief and greater participation by private sector creditors are needed, World Bank President David Malpass said on Monday.

Malpass told Reuters in an interview that 35 of 73 eligible countries were participating in the G20 initiative, which will freeze debt service payments on official bilateral debt through year-end, and more had expressed interest.

The Debt Service Suspension Initiative (DSSI) will free up $12 billion that countries can use to deal with the health and economic strains caused by the coronavirus, a new World Bank database shows.

Malpass said the pandemic had clearly delivered a “very serious, long-lasting setback” to the global economy that was hitting the poorest countries especially hard.

The relief agreed by G20 members and the Paris Club of official creditors in April was helping, but further steps would be needed to prevent the economic crisis from widening rates of poverty, he said.

He did not endorse calls by African countries and others for an extension of the debt holiday through 2022 and cancellation of some debts, but said further steps would be needed.

“We need to look for ways to provide additional debt relief for the poorest countries and then look at the broader situation facing developing countries,” he said.

He also urged the private sector to boost its participation.

“It doesn’t really make sense for the commercial creditors to continue taking in, requiring and legally enforcing payments from the ... poorest countries that have been struck by both the pandemic and the deepest economic recessions since World War Two,” he said.

Some countries have been reluctant to seek such relief out of concern it could harm their credit ratings and access to international capital markets.

The new database would provide increased transparency about debt levels and creditors, a key step in creating an attractive investment climate to promote future growth, Malpass said.

Eric LeCompte, executive director of Jubilee USA Network, said having the data in one place would make it easier to deal with an impending wave of debt restructurings.

“It’s no longer a question of if, now it’s just a matter of when,” he said.

The G20’s International Financial Architecture Working Group is due to meet virtually on Tuesday to discuss the initiative and private sector participation, LeCompte said. (Reporting by Andrea Shalal; Editing by Sandra Maler, Kim Coghill and Sonya Hepinstall)

 

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SDR Global Webinar

 English-Spanish translation (by Zoom streaming)

Spanish version

Curing the Coronavirus Health & Economic Crisis in Developing Countries & Emerging Resilient as a Global Community;

Injecting Special Drawing Rights & Zero Debt Solutions

Global Webinar

June 25th 

19:30 New Delhi • 16:00 Harare • 15:00 London • 10:00AM Washington DC  

11:00AM Buenos Aires • 9:00AM Quito • 16:00 Brussels • 14:00 Accra • 23:00 Tokyo

 

Developing countries faced debt and financial crisis prior to COVID-19. Inequality exacerbates the economic crisis spurred by the coronavirus in developed and developing countries. Too many countries, due to austerity policies, wrestled with weakened health systems and soaring unemployment before the coronavirus hit. Over 110 countries seek emergency support. The suspension of debt payments for a few countries is not enough to get through the crises, let alone being able to achieve the Sustainable Development Goals to end poverty and address inequality. Development aid, boosting tax revenues, curbing tax evasion and corruption are necessary, but cannot deliver enough resources or the urgent resources needed.

 

The United Nations Secretary General and UN agencies, African Finance Ministers, the International Monetary Fund, many countries and civil society organizations, call for a new and large issuance of IMF Special Drawing Rights (SDRs) to offer efficient, unconditional and rapid means of providing liquidity to all developing countries.

 

Accessing these critical global reserve funds requires the IMF Executive Directors and the G20 to make an urgent decision that impacts every person in the world.

 

Panelists

The Honorable Minister for Finance of Ghana, Ken Ofori-Atta (TBC)

Andres Arauz, former Director of the Central Bank of Ecuador

Patricia Miranda, Global Advocacy Director, Latindadd

Jean Saldanha, Executive Director, Eurodad

Matthew Martin, Advisor of OIF Finance Ministers and Director of Development Finance International

Eric LeCompte, Executive Director, Jubilee USA Network (Moderator)

 

During this webinar, we will address:

  • What are SDRs, how are they issued, and how do they work?
  • Why were they issued in previous global financial crises, like 2008?
  • How do SDRs benefit low and middle income countries to fight the current health, economic and social crisis?
  • What is the amount of financial reserves that is needed?
  • What is the process of distributing SDRs from developed to developing countries?
  • What, if any, power do these actions give the IMF over countries?

 

Register here: https://zoom.us/webinar/register/8315924362490/WN_Coyl6vuPREeAIFHNzYKdoA

For more information, contact coord@jubileeusa.org.

 

   

 

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Catholic Profiles Interviews Eric LeCompte on Addressing Poverty

Gordon: When were you appointed as Executive Director of Jubilee USA Network, and what have been some of the most rewarding experiences that you have had to date?

Eric: I took over the reigns of Jubilee USA in April 2010. Working at Jubilee USA is a fulfillment of my Catholic vocation. The most rewarding experience of my career is working with, supporting and advising Catholic and other Christian, Jewish and Muslim leaders. Working with the Bishops and Catholic religious orders of the United States, Caribbean, Puerto Rico, Africa, and Latin America as well as major interfaith leaders in all of these regions can only be described as a gift.

Together this interfaith work has had unprecedented results. We’ve moved forward major policies to address the structural causes of poverty - debt, tax, and trade issues. In Africa, our efforts brought aid and debt relief monies to confront the Ebola epidemic that hit Sierra Leone, Liberia and Guinea. We created a new process at the International Monetary Fund that strengthened healthcare and built new hospitals across the region.

In the Caribbean, we rallied religious leaders to deal with financial crisis and high poverty rates head on. In Puerto Rico, our work with religious leaders yielded new processes to address the 60 percent child poverty rate.

Globally, our work at Jubilee USA with the Holy See and interfaith religious partners won policies to address the causes of poverty worldwide. Together, we won new global policies to stop the exploitive behavior of vulnerable communities and decreased global corruption. It's been our efforts that called attention to the financial crisis and the reality that developing countries can't deal with poverty without dealing with high debt loads, budget transparency and tax evasion.

At the same time, the great reward of supporting and working with Catholic and other religious leaders in every corner of our world has also met challenges. While our successes together are myriad, our work must continue to address the root causes of poverty.

The same causes of poverty also spur inequality, human rights abuse, terrorism, war, and environmental degradation. I admire the teaching of our Holy Father who frames all of these issues in the economic issues that I am privileged to work on.

Gordon: You have been a tireless advocate for the reduction of poverty globally. Poverty may have a different connotation in different parts of the world. Please share your definition of poverty with our readers.

Eric: Global standards assume that anyone living on less than $1.90 a day lives in extreme poverty. But in the simplest of terms, poverty is not having enough healthy food to eat or receive basic education or health-care or have access to decent shelter. In every country of the world and on every continent, there are severe forms of need and extreme poverty.

As a Catholic and as someone who works on the causes of poverty, we can not separate these issues from the causes of inequality. The wealthiest 80 people in the world have more wealth the half of the world's population. 80 people on earth own more than the bottom 3.6 billion people in the world. The causes of poverty, that I work on, are debt, tax, trade, and transparency policies. It's why our work at Jubilee USA Network is so incredibly important.

Gordon: What are our moral obligations as Catholics to address poverty?

Eric: Our faith requires us as a moral obligation to not only be charitable but to address the primary causes of poverty. As Catholics, scripture and Catholic doctrine and the Holy Father call us to do everything in our power to end poverty.

The Catholic Church is at the forefront of articulating that we can not end poverty without addressing the structural causes of poverty.

Gordon: In your opinion and based on your testimony to the US Congress, how has the United States addressed the support of the people in need in Puerto Rico?

Eric: I think that the US Government has addressed the situation of Puerto Rico in a range of ways. I testified several times before Congress met with Puerto Rico’s former and current Governor and testified to the Congressionally installed oversight board of Puerto Rico. My message, rooted in Catholic teaching, is that it is imperative for decision makers to protect the vulnerable, limit austerity policies, protect the environment and reduce the nearly 60 percent child poverty rate on the island.

Our message is met with many responses. Both positive and negative.

Puerto Rico remains a colony of the United States and as such, decisions the US Government makes impact Puerto Rico. The Catholic Church, the Archbishop of San Juan and Caritas has been heroic in their advocacy for Puerto Rico’s people. Working with the Catholic and other interfaith religious groups on the island has brought a strong response from the Obama and Trump White Houses as well as Republican and Democratic leadership. The partnership of the US Conference of Catholic Bishops has also been instrumental.

Because of our role with Catholic partners, we won a process to restructure the debt and reduce austerity. We’ve won rules for preferential treatment of poor communities. At this point, we’ve won more than 40 billion dollars in hurricane aid. We’ve ensured that policies are in place so Puerto Rico can rebuild to withstand the next storm.

With that noted, we still face enormous challenges. Creditor groups are successfully preventing positive debt restructuring and the island needs another 80 billion in aid. Our work as Catholics to lift and defend the people of Puerto Rico is so essential now and must continue.

Gordon: As a member of expert working groups to the United Nations Conference on Trade and Development (UNCTAD) and the United Nations Human Rights Office of the High Commissioner, what is your experience can nations do to more effectively deal with life-threatening poverty wherever it occurs?

Eric: Life-threatening poverty is caused by structural policies. Debt, tax, and trade policies are why resources are poorly distributed and why poverty exists. It's why Catholic teaching is so important in terms of going beyond the important works of charity and working towards acts of justice. Our Savior reminds us of this when he declares the year of the Lord’s favor or the year of Jubilee, in his first public act in Luke’s gospel. He reiterates the call of the prophets: in order to live in harmony with one another, we must act for justice.

Countries must go beyond giving aid, we need to implement policies that will end poverty. The developing world loses a trillion dollars a year because of tax evasion and corruption. Countries around the world lose hundreds of billions annually because of a lack of public budget transparency and irresponsible borrowing. For every 1 dollar in aid developing countries receive, they lose 5 dollars in debt payments. At the United Nation, the IMF and in every country in the world, we can change these policies. Even minor shifts will release hundreds of millions of people from the bondage of poverty.

Gordon: You address the diverse challenges of religion, politics and economics often in the Wall Street Journal, the Washington Post, the Associated Press, Bloomberg, McClatchy News Service, National Public Radio, Agence-France Presse, Market Place, CNN Money, the Financial Times and The Hill. What issues have resulted in the most feedback?

Eric: Sharing the Gospel with the media is critical for our efforts. Because we raise these issues in the mainstream media, there is a broader understanding of the actual structures that create global poverty.

Many of us don't realize how issues like debt, tax, and trade are the source of inequality and poverty. These issues impact our lives almost as much as the very oxygen we breathe. The media, just like most of us, is yearning to understand and communicate these issues. It's how why we spend so much time engaging with them.

Gordon: Jesus asked us to live our neighbor as ourselves Considering we are members of a global community and a global religion, who is our neighbor?

Eric: In our global community, we are all neighbors. In this global economy, what happens to one of us impacts all of us. We are called to love our neighbors, no matter who they are or where they call home.

Gordon: Thank you for this exceptional interview.

Read more here.

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Eric's UN COVID Address, Global News Coverage

Friends,

Jubilee USA's Eric LeCompte addressed a special session of the United Nations on coronavirus recovery on Tuesday. Eric articulated the global policies that need to move forward to lift the vulnerable, ensure the developing world can access healthcare and for all of us to be protected from financial crisis that rivals the Great Depression.

In his UN speech, Eric raises the need for emergency United Nations Security Council action, tackling inequality and corruption and changing laws to protect Puerto Rico, Ecuador, Ghana and all countries from debt crisis.

The speech promoted news ideas that are gaining momentum to confront the health and economic impacts of the coronavirus. The address received in-depth and featured coverage the you read in Associated PressFox News and the Washington Post.

Our Jubilee USA UN remarks highlight that we can emerge from this crisis with hope, more resilience and more inclusive global society.

Please read and share our Jubilee United Nations coronavirus address.

Thanks to your support and partnership, our coronavirus campaigns are moving forward with the United Nations, G7, G20 and White House. 

Thousands of you signed our petitions. More than 130 groups from the largest Christian and Jewish groups to the AFL-CIO signed our statement on debt, transparency and crisis response policies to world leaders. Recently, Eric spoke to National Public Radio's Marketplace about how the crisis could drive 60 million more people into extreme poverty and that we must take action.

In the coming days and weeks, we'll depend on you to act with us as we move the G20 in July.

Gratefully,

Zach Conti
Director of Policy and Advocacy
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Fox News, Houston Chronicle, San Francisco Chronicle and Associated Press Feature Eric LeCompte United Nation COVID Speech

UNITED NATIONS (AP) — The president of the U.N. Economic and Social Council called for urgent action Tuesday to help the growing number of countries already facing or at risk of “debt distress” because of the economic impact of the coronavirus pandemic.

Norway’s U.N. ambassador, Mona Juul, head of the 54-nation U.N. body, told a meeting on financing and recovery for the crisis that the decision by the world’s 20 major economic powers to freeze debt service payments for the world’s poorest countries through the end of the year isn’t enough.

She said the Group of 20’s freeze will free about $11 billion until the end of the year, but it’s estimated that eligible countries have an additional $20 billion in multilateral and commercial debt combined coming due in 2020.

Juul said that means even if the moratorium is extended to 2021, “many countries will have to make difficult choices between servicing their debt, fighting the pandemic and investing in recovery.”

Eric LeCompte, executive director of Jubilee USA Network, an alliance of more than 75 U.S. organizations and 700 faith communities working for debt relief, was sharply critical of the resistance of private creditors, commercial lenders and banks to participate in debt relief calls — despite calls by the G-20, International Monetary Fund, World Bank and United States.

“Because of the enormity of this crisis and the long-term challenges the markets could face, the fact that some private and commercial creditor blocks are not participating ... baffles the mind,” he told the virtual meeting.

LeCompte said the U.N. Security Council must act “given that this crisis could devastate all of us, poor countries and the markets.”

He called on the Security Council to follow its “precedent in 2003 when it protected the assets of Iraq from creditor payments and now immediately make the same decision for the 73 countries that need this protection most to compel private creditors to join the G-20.”

“This decision would protect the assets of these countries and mandate that debt relief from official bilateral creditors is not used to pay private creditor debt,” LeCompte said.

He also said that instead of calling or inviting private creditors to participate, officials should say they “expect” their participation “in order to help compel it.”

LeCompte welcomed last week’s strong announcements from World Bank Group President David Malpass and said the IMF, G-20 and U.N. agencies should strengthen previous statements to say they “expect” private creditor participation in debt relief.

Malpass told last Thursday’s largest gathering of world leaders since the coronavirus pandemic began that he was among the first to call for a debt moratorium, and he welcomed the support of G-20 countries for a suspension of debt service payments by all bilateral creditors and “comparable treatment by commercial creditors.”

“I have been vocal in stating that all official bilateral creditors should participate, that commercial creditors should also participate on comparable terms and not exploit the debt relief of others,” Malpass said, “and that much more is needed, including longer term debt service relief and, in many cases, permanent and significant debt reduction.”

Read more here

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G7 Finance Ministers Discuss Coronavirus Debt and Transparency Impacts for Developing Countries

Washington, DC - Amidst questions of upcoming G7 meeting dates and which countries are participating, G7 Finance Ministers met virtually about economic issues related to the COVID-19 pandemic. The G7 meeting focused on aid, debt and transparency issues affecting developing countries impacted by the coronavirus.

"The G7 clearly sees the need for greater debt transparency policies and that poor countries will likely need more debt relief to address the impacts of the coronavirus," stated Jubilee USA Director Eric LeCompte. LeCompte addressed these issues at a special session of the United Nations on Tuesday, "Unfortunately, the G7 seems blind to the role of private and commercial creditors who hold large portions of poor country debt."

Kristalina Georgieva, the head of the International Monetary Fund, World Bank leader David Malpass and US Treasury Secretary Steven Mnuchin attended the meeting.

"Private creditors cannot be asked for voluntary participation. The crisis is so great that we must compel private and commercial creditor participation in debt transparency and relief measures," shared LeCompte who on Tuesday urged the United Nations Security Council to compel private creditor participation, "If private creditors are not told to come to the negotiation table, we run the risk that debt cancellation and relief could be used to pay private creditors."

Read Eric LeCompte's Remarks to the United Nations here.

Read the G7 Finance Meeting Statement here.

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