The process of debt restructuring in Puerto Rico has been, if nothing else, an alarming case study in conflicts of interest, cronyism, and putting politics ahead of doing the right thing. As the island struggles to regain its financial footing under the heavy burden of unfunded liabilities and falling credit ratings, it would appear that some of those appointed to solve the problem are more concerned with preserving their own reputations—as well as their future political career—than with doing the job they were hired to do.
Following the model of the District of Columbia and Detroit, Puerto Rico is relying on a financial control board, operating independently of elected officials, to negotiate debt settlements with bondholders. This would be a sensible, elegant solution were it not for the fact that several members of the board have conflicts of interest that provide the wrong incentives for the island’s financial future.
