When the Financial Oversight and Management Board (FOMB) finally leaves Puerto Rico, no law, agency or process will replace one of its most consequential functions: reviewing every major government contract before it is signed.
That gap, FOMB Executive Director Robert Mujica told the island’s financial community Tuesday, is the risk Puerto Rico is not yet prepared for.
“Today, the Oversight Board provides an independent review of every major contract before it is signed,” Mujica said at the Puerto Rican Association of Financial Analysts’ (APAF) first Economic Congress. “I want you all to ask yourselves, when the Board is gone, who is going to do that? As things stand right now, the answer is no one.”
Unless Puerto Rico writes permanent reforms into law, Mujica warned, the island risks repeating the patterns that led to its fiscal collapse. The stakes, he said, are not abstract: before the Board intervened, less than 1% of $70 billion in government contracts ran through any kind of central review process, a gap he called extraordinary for any U.S. jurisdiction.
The distinction between a regulation and a law is not abstract for the companies that do business with the Puerto Rico government. A statute holds regardless of who sits on the Board, who occupies La Fortaleza, or which party controls the Legislature; a regulation can be waived, softened or quietly reversed.
For banks, contractors and investors weighing Puerto Rico risk, that difference determines whether today’s competitive-bidding rules, lobbying limits and contract-duration caps still apply five or ten years from now, long after the Board itself is gone, a scenario that can either keep the island in developing-country status or rise it to first-world economic stability.
REGULATIONS AREN’T LAW
He pointed to a recent example: the Board’s review of a roughly $20 billion natural gas supply contract between the Puerto Rico Electric Power Authority (PREPA) and New Fortress Energy. “The changes that the Board required are projected to save the people of Puerto Rico more than $4 billion,” he said, noting that the inconsistencies uncovered in the solicitation process were significant enough to warrant intervention.
The problem, he stressed, is not isolated. In 2020, when the Board forced competitive bidding for PREPA’s fuel supply contracts, ratepayers saw immediate savings. But those improvements remain fragile because they are regulatory, not statutory.
“Regulations do not have the force of law,” Mujica said. “Puerto Rico has no comprehensive statute regulating lobbying, and contingency lobbying is still permitted.” He noted that most U.S. states ban contingency lobbying because it creates a direct financial incentive tied to the award of a government contract.
He also pointed to the absence of limits on contract duration. “We have seen contracts renewed that have not gone out to bid for 20 years,” he said, calling it a structural failure that would be “unremarkable in any U.S. state” only because every other state already prohibits it.
Mujica did not address it directly, but the warning landed days after the Board revoked its approval of a temporary power-generation contract awarded to Power Expectations, following allegations that one of its consortium partners’ name and signature had been used without authorization. “Headlines like those of the last two weeks are the reasons for the needed reforms,” he said. “They’re not a distraction from it.”
The Power Expectations episode is a case in point. An unreviewed, non-competitive process produced a canceled contract, a law-enforcement referral, and a headline that validates the exact investor skepticism Puerto Rico is trying to shed. A statutory review process, by contrast, gives legitimate bidders a level playing field and gives capital markets a predictable, auditable process they can price into their risk models — rather than a discretionary one that depends on which entity happens to be watching.
That predictability is also what credit rating agencies price in. Mujica pointed to the vetoed budget bill’s five-year financial plans, dedicated infrastructure revenue stream and reserve requirement as exactly the kind of guardrails rating agencies treat as credit positives — measures that can lower Puerto Rico’s borrowing costs and, by extension, the cost of capital for every business operating on the island.
BUILDING A FRAMEWORK THAT OUTLASTS THE BOARD
Mujica framed the moment as a turning point for Puerto Rico’s governance: no longer crisis management, he said, but the construction of a permanent fiscal framework built to survive political cycles.
He noted that the Board has already delivered 16 years of halted deficit spending, 12 debt restructurings and $76 billion in savings for Puerto Rico — “close to $60,000 per household,” he said. But the island still lacks the statutory guardrails that every other state uses to prevent fiscal backsliding.
A recent bill, passed unanimously by the Legislature but vetoed by La Fortaleza after it was amended, would have required five-year financial plans, a capital plan, a dedicated revenue stream for infrastructure, and reserves equal to 13% of spending.
“These are things the rating agencies are going to look at and say: these are credit positives for Puerto Rico,” Mujica said.
He warned that without permanent reforms, Puerto Rico risks undoing the progress made under PROMESA, the federal law that put the island under fiscal oversight. “Unless you make the permanent reforms, that is exactly what is going to happen,” he said. “It is the rules that make you stop from doing things that might be irresponsible.”
‘YOU WILL HAVE TO CLOSE THE DEAL’
After Mujica’s remarks, some of Puerto Rico’s top banking executives offered their reactions, each echoing the same theme: the need for better governance.
José Rafael Fernández, CEO of Oriental Bank, distilled his reaction into a single word: governance. “Puerto Rico must learn to govern itself,” he said. He argued that the banking sector depends on stable governance frameworks, and that the Board’s presence provides credibility and confidence to investors. Without it, he said, “the banking sector in Puerto Rico would have a difficult task at managing its capital.”
Antonieta Pérez, Citi’s country officer and banking head in Puerto Rico, emphasized institutional independence and transparency. She said Puerto Rico needs institutions that are “respectable, independent, transparent and sustainable through time.” Otherwise, she warned, the island risks returning to crisis within five to eight years.
Maritza Abadía, president of Banesco USA’s Puerto Rico operations, reminded the audience that when the Board was created a decade ago, the business community welcomed it as necessary — but noted that the conditions for the Board’s departure have not been met. Until they are, she argued, the Board must remain.
Abadía also noted that Puerto Rico’s economic environment has improved enough that even rating agencies are acknowledging it. But she cautioned that federal reconstruction funds will eventually run out, and the island must build a sustainable economy beyond them. She welcomed Mujica’s shift toward strategic budgeting and long-term economic planning.
Mujica told the financial sector that the next phase of reform, including permitting and tax reform, cannot be led by the Board alone. “You, the business community, will have to close the deal,” he said. “We need you to push the Legislature to complete procurement reform, permitting reform and tax reform.”
He urged them to use their influence, write publicly about the need for guardrails, and insist that reforms be mandatory, not optional.
“The Board is on its way,” he said. “We are on the way to ending our period of oversight.”
But whether Puerto Rico avoids repeating its past, he warned, will depend on whether the island finally enacts the permanent rules that every other U.S. jurisdiction already lives by.
