GLOBAL ECONOMY

Puerto Ricans uncertain as federal board takes control of island's finances

SAN JUAN, PUERTO RICO- APRIL 26: The cupola of San Juan Cemetary as well as colorful homes sit next to the ocean April 26, 2004 in Old San Juan, the original capital city of San Juan, Puerto Rico. The old city is a historic district of seven square blocks made up of ancient buildings and colonial homes, massive stone walls and vast fortifications, sunny parks and cobblestoned streets.  (Photo by Joe Raedle/Getty Images)

SAN JUAN, PUERTO RICO- APRIL 26: The cupola of San Juan Cemetary as well as colorful homes sit next to the ocean April 26, 2004 in Old San Juan, the original capital city of San Juan, Puerto Rico. The old city is a historic district of seven square blocks made up of ancient buildings and colonial homes, massive stone walls and vast fortifications, sunny parks and cobblestoned streets. (Photo by Joe Raedle/Getty Images)  (2004 Getty Images)

For the first time in Puerto Rico's history as a U.S. territory, the island doesn't have the ultimate control of its finances.

Thanks to the acute economic crisis crippling Puerto Rico, a federal assistance plan installed a control board to manage its finances as well as several of its territorial government agencies, but that doesn't mean that the move is going down smoothly with many residents.

A seven-member federal control board appointed by President Barack Obama and members of the U.S. Congress met for the first time in New York on Friday and was interrupted by protesters who yelled, "This is slavery!" and "Stop pillaging Puerto Rico!"

The meeting was livestreamed over the internet following pledges that the board would operate with transparency.

It ordered Gov. Alejandro García Padilla to produce a fiscal plan in two weeks and submit weekly and monthly revenue reports that detail how the government is adhering to its budget.

Members also voted on which Puerto Rico government agencies would come under the board's oversight. They include the island's central government, its largest public university, its heavily indebted utility companies, a Government Development Bank that is running out of cash and a public pension system underfunded by more than $40 billion.

"We're working as quickly as possible," said José Carrion III, who was elected board president, to reporters after the meeting.

The board was approved by Congress in June and is charged in part with helping restructure a portion of a nearly $70 billion public debt that García has said is unpayable. Carrion is one of four Republicans on the board, along with three Democrats. Also on the board is a representative of Puerto Rico's governor who is barred from voting.

During a televised address on Thursday, García urged the board to make the public pension system one of its priorities. He also requested that the board consider intervening in a trial in which a federal judge is expected to soon rule on whether Puerto Rico will have to pay its debts even though the U.S. legislation signed in June also protects the island from lawsuits through February 2017.

"In this process, we will try to make the board understand that, for the recovery to be real, it must deal with the fiscal aspects, while protecting the economic ones," García said Friday.

Puerto Rico has been mired in a decade-long economic slump brought about largely by decades of heavy borrowing. The island has defaulted on several multimillion-dollar bond payments since last year and faces a growing number of lawsuits from creditors trying to recover a portion of their investments. Several government agencies are now operating under a state of emergency that permits withdrawals only for essential public services.

Puerto Rico economist Gustavo Velez said the board will likely soon seek help from the capital markets to generate revenue.

"If it doesn't, then it will have to impose severe austerity measures," he said. "There is no other way to finance the deficit. The government likely will not be able to pay salaries very soon. We're in a downward spiral." 

Based on reporting by the Associated Press.

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