Puerto Rico Control Board Names Carrion Chair Amid Protests

  • Carrion is co-founder of Carrion, Laffitte & Casellas Inc.
  • Protesters shout of colonialism after vote is approved

Jose Carrion III was selected to serve as chairman of the Financial Oversight and Management Board for Puerto Rico, the first official step by the commission overseeing the restructuring of the commonwealth’s $70 billion in debt.

Carrion, co-founder of insurance broker Carrion, Laffitte & Casellas Inc., was selected by fellow members of the seven-person panel during a meeting in New York. He is one of four Republicans on the board. The panel was formed on Aug. 31, as required by the Puerto Rico Oversight, Management, and Economic Stability Act that was signed into law in June. The law is known as Promesa, or promise in Spanish.

The appointment may be a slight positive for current bondholders, said Matt Fabian, a partner at Concord, Massachusetts-based Municipal Market Analytics, because of the "establishment view" Carrion brings to the board.

"If the board doesn’t make deep enough cuts, it makes it more challenging for future lenders to Puerto Rico," said Fabian. "If they can’t cut debt and pensions enough, it creates more of a challenge for the future sustainability of Puerto Rico’s finances."

Carrion was raised in San Juan. He graduated with a B.A. from the University of Pennsylvania and received an M.B.A. from the College of Insurance, now St. John’s University. He served as chairman of the Workers Compensation Board in Puerto Rico from 2009 to 2012.

Establishment Links

He is the brother-in-law of Commissioner Pedro Pierluisi, who represents Puerto Rico in Congress. Maria Elan Carrion operates a Puerto Rico-based financial advisory firm that the New York Times said in an April article lobbied for companies that stood to benefit from legislation backed by Pierluisi. The representative and his wife said there was no conflict of interest.

After selecting the chairman and addressing procedural matters, the meeting was interrupted by protesters shouting “stop pillaging Puerto Rico” and “this is slavery.” About 30 people were protesting the role of the panel outside the auditorium of the Alexander Hamilton U.S. Custom House in downtown Manhattan.

The federal government stepped in after Governor Alejandro Garcia Padilla was unable to strike a deal with creditors to reduce Puerto Rico’s debt, in large part because the island wasn’t able to file for bankruptcy if negotiations failed. The U.S. law gave the control board the authority to oversee any debt restructuring, which can now be ordered by a court if bondholders resist.

Bond Defaults

The control board asked that the governor submit the administration’s fiscal adjustment plan by Oct. 14 to steady the island’s finances. The control board will next meet in mid-October and in Puerto Rico in mid-November.

Puerto Rico has been defaulting on debt since August 2015 and in July missed nearly $1 billion of principal and interest, marking the largest payment failure in the $3.8 trillion municipal-bond market. The commonwealth’s next major debt-payment is scheduled for Jan. 1, when $940 million is due.

The debt crisis stems from a legacy of government borrowing while the island was mired in recession. Puerto Rico’s economy has shrunk by an estimated 16.5 percent since 2007 and is forecast to contract by 2 percent in the year ending June 30, 2017, according to the island’s Planning Board, which calculates economic growth. A record number of Puerto Ricans have left the island to find work on the U.S. mainland.

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