Puerto Rico Governor Won’t Run Again, But Many Want Him Out

Michael Deibert and Jonathan Levin
Puerto Rico Governor Won’t Run Again, But Many Want Him Out

(Bloomberg) -- Puerto Rico Governor Ricardo Rossello’s promise on Sunday not to seek re-election was meant to mollify citizens of the bankrupt commonwealth after reams of embarrassing texts leaked from his administration. But on Monday, residents returned to the streets, continuing to demand that he step down.

Protests flared up again in the U.S. territory, where thousands blocked a major highway in San Juan in marches that appeared to rival ones last Wednesday that drew an estimated 100,000 people. The El Nuevo Dia newspaper ran an editorial on its front page with the headline, “Governor is time to listen to people: You have to resign.”

The demonstrations have grown in intensity over the past week as Puerto Ricans vented their outrage after the publication of profane and sexist messages from the governor and his inner circle. The messages came after two former high-ranking aides were indicted over U.S. corruption charges tied to government contracts, underscoring what residents see as a self-dealing political class indifferent to concerns of an island mired in poverty.

“This is our Arab Spring,” said the Puerto Rico-born poet Raquel Salas Rivera, who is Philadelphia’s poet laureate and was among the crowd. “This is a moment without precedent in the history of Puerto Rico. We are pushing for a total transformation of the forces that have harmed Puerto Rican society.”

Rossello said in an address Sunday that he would step down as head of his New Progressive Party. But he pledged to stay in office until the election in 2020, despite demands by protesters and politicians that he leave at once.

“To every Puerto Rican man and woman: I have heard you and I’m listening now,” Rossello, 40, said in an address Sunday. “I’ve made mistakes, and I’ve apologized.”

Battered Islanders

The scandal and Rossello’s about-face cast into uncertainty the island’s grueling effort to cut expenses and streamline government as it tries to strike a deal with creditors.

Wall Street, which rushed to lend to the island despite warnings of insolvency, and residents accustomed to generous if dysfunctional administrations both have been reckoning with an economic calamity and an unpayable debt. Residents have endured a years-long fiscal crisis, record-setting defaults and the bankruptcy that’s diverted much of the power over the island’s recovery from elected officials to an oversight board installed by the federal government.

Puerto Rico is seeking to restructure about $27 billion of obligations tied to the central government and its main utility, the Electric Power Authority. In addition, the government owes $50 billion to current and future retirees.

But the administration is rapidly losing key officials. Rossello’s chief investment officer, Gerardo Portela, submitted his resignation letter Sunday. “The events of the past weeks, including the attitudes reflected in the comments of officials and advisers for the current administration, don’t align with my values and principles,” he said.

Christian Sobrino, the head of the island’s Fiscal Agency and Financial Advisory Authority who participated in the offensive chats, is set to leave by the end of July. The former treasurer, Raul Maldonado, was asked to resign last month after he disclosed a federal investigation into corruption in his department. On Friday, Press Secretary Denisse Perez resigned, saying she made the decision after the shock of being called corrupt in front of her child.

Bondholders are accustomed to financial and political troubles. General obligations with an 8% coupon and maturing in 2035 -- one of the commonwealth’s most actively-traded securities -- changed hands Thursday at 53 cents on the dollar, about the same level as before the federal corruption charges and leaked chats became public.

On Sunday, it wasn’t immediately clear whether Rossello’s move would quell unrest that’s already shutting businesses and prompting cruise ships to divert their visits.

“The address today was redundant; He didn’t have a chance to win the election next year anyway,” said Jose Caraballo, an economist with the University of Puerto Rico. Rossello’s failure to quit “may infuriate hesitant people to protest even more. A necessary condition to reach institutional stability is that he resigns.”

Several Democratic candidates for the U.S. presidency have called on Rossello to go, as has Jenniffer Gonzalez, Puerto Rico’s non-voting member of the House and a member of Rossello’s own New Progressive Party. President Donald Trump has expressed -- again -- his belief that the island is rife with graft and misspent federal aid after Hurricane Maria in 2017. On Sunday night, Alexandria Ocasio-Cortez, a Democratic U.S. representative from the Bronx who is of Puerto Rican descent, tweeted: “Once again: Rosselló must resign.”

Rossello’s political opposition said his refusal to leave could lead to disaster.

“Rossello’s refusal to resign is a political catastrophe for the people of Puerto Rico,” said Ramón Luis Nieves, a former senator of the Popular Democratic Party of Puerto Rico.

Rossello rose to power with a narrow victory in 2016, holding himself out in part as an operator who could help Puerto Rico navigate the messy bankruptcy process already underway. Despite a narrow mandate, he had been able to channel much of the island’s frustration toward the congressionally appointed oversight board.

Last Straw

His administration has also been plagued by investigations into contract irregularities. But he claims he’s the victim of endemic corruption that he’s trying to combat.

The publication of the leaked chats among Rossello and his inner circle served as a last straw for many Puerto Ricans. The chats included tasteless remarks about women, the obese and even Hurricane Maria victims. He and a key cabinet member even mused about shooting the mayor of San Juan, Rossello critic Carmen Yulin Cruz.

After years of crisis, the texts prompted a geyser of fury in a commonwealth wearied by years of crisis. Gustavo Velez, a Guaynabo-based economist and head of consulting firm Inteligencia Economica, said on Sunday that residents shouldn’t have to endure any more indignities.

“Resign already and avoid more suffering for the people of Puerto Rico,” he tweeted.

(Adds details of Monday’s marches in second paragraph.)

--With assistance from Michelle Kaske.

To contact the reporters on this story: Michael Deibert in San Juan at mdeibert@bloomberg.net;Jonathan Levin in Miami at jlevin20@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Stephen Merelman, Virginia Van Natta

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.