THE FAILURE OF PROMESA

Noel Zamot. (GFR Media)

NOEL ZAMOT ON THE FAILURE OF PROMESA

"The outgoing Revitalization Coordinator reveals that government officials hindered the program the Board had to implement and prevented multi-million dollar investments in Puerto Rico."

EL NUEVO DIA 

Thursday, March 14, 2019 

By Joanisabel González

"The government´s intention to control  private capital  arriving on the island and situations such as that of an investor who submitted a proposal to later discover that people related to the government had shared the idea with third parties for them to develop it are some of the reasons that contributed to the failure of the Critical Projects program that the Oversight Board had to implement, revealed the outgoing Revitalization Coordinator, Noel Zamot. 

Zamot said at a recent investor conference that he is not angry at anyone in the government, but that he is “frustrated”. In addition, he acknowledged that the stories he shared with the audience could lead to his dismissal. 

Zamot filed his resignation to the Board on February 13. When he leaves office this week, he will leave behind a defined process to evaluate and approve projects that - because of their economic impact or benefit to infrastructure - could be classified as "critical", according to PROMESA Title V. 

However, according to Zamot, having developed this "transparent" process, with citizen participation, could have been one of the reasons for the failure of the only initiative to boost the island´s economy established in PROMESA. Title V provides an expedited permits process for development related projects that the Board classifies as "critical". 

"I leave office on March 15," said retired U.S. Air Force Colonel Noel Zamot, it was almost like relief. He spoke at “The Pursuit of 8%”, an event held by Consultiva Internacional, an investment advisory firm.

GOVERNMENT UNDER INVESTIGATION 

Zamot was describing his experience as the Board Revitalization Coordinator the same day that the federal Department of Housing and Urban Development (HUD) announced the approval of $ 8.2 billion in recovery funds. 

That day, when El Nuevo Día revealed the approval of the federal allocation, the audience at the San Juan Marriott Resort & Stellaris Casino broke into applause. 

There, Zamot, also an engineer,  explained why, after about 20 months in office, he leaves just after getting the approval of a critical project under PROMESA Title V,  the View Point housing complex in Hato Rey, which involves an investment of $ 25 million. 

"Let's be honest, coordinating with a government that is going through a massive crisis, is bankrupt and while everyone is investigating it, is very challenging," said Zamot in referring to the countless obstacles he faced. 

The first challenge to implement Title V was the federal law itself, since according to Zamot, the section includes language that seems to contradict itself. 

The second point that affected the program was the little knowledge that people,  investors and the media has on the scope of the law. 

Zamot seemed to be joking when he said that many thought his job was to manage and share millions of dollars among friends when, actually, his role was to draw the attention of investors so that private capital would contribute to restoring the island´s infrastructure, since Puerto Rico did not access money or financial markets to carry out such projects. 

LIKE THE MYTH OF SISYPHUS

During the summer of 2017, this first Gulf war veteran accepted the position of Revitalization Coordinator, one of the only three executive positions created under PROMESA. 

The other two are the Executive Director, Natalie Jaresko, and the general counsel, a position held by Jaime El Koury. 

Zamot suggested that after years in the diaspora, he was coming back to the island hoping to contribute to its recovery. He arrived at the Board with energy after a long career in the army, where following procedures and acting diligently to successfully complete a mission is considered the norm and not the exception. 

As an engineer with two master's degrees and other two degrees related to aeronautics, he accepted the role almost as if it were a mission. He said that when he was considering for the position in the Board, he had in mind what Winston Churchill, former British Prime Minister, once said “To each comes in their lifetime a special moment when they are figuratively tapped on the shoulder and offered the chance to do a very special thing, unique to them and fitted to their talents. What a tragedy if that moment finds them unprepared or unqualified for that which could have been their finest hour."

According to PROMESA, the Revitalization coordinator is the person authorized to evaluate projects submitted by the private sector or the government to the Board. Once the analysis has been completed, the coordinator recommends the Board if the project should receive an expeditious treatment in the permit process or not. 

In Zamot’s words, in less than a year, his team and him "went from zero to heroes" to develop a process that had the participation of all government permitting agencies and regulatory entities such as the Energy Bureau. This,  took place amid obstacles and the impact of hurricane María in September 2017. The projects that came to the Board were made public on an online platform created specifically to address the issue. 

"They would tell us that we were imposing a process, but it was not like that, everything was done in the most transparent fashion," Zamot said. 

According to Zamot, the moment he and his team tried to take PROMESA Title V from paper to reality, he found multiple obstacles, to the point of describing his work as that of the Greek mythical figure, Sisyphus: "What I really do is to lift this rock up, and every day, the rock comes back and crushes me and I try again." 

For Zamot, once it was clear that the Board’s project evaluation process was advancing, some people in the government did not like the idea. 

"Basically, the government came out to tell me that it was deploying private capital (in Puerto Rico) and we (the government) are not controlling it," Zamot said, noting that he could not understand the government's position, since Puerto Rico "is not Russia," and because he found that other government officials were as disappointed as he was. 

Zamot did not provide names or reference to any particular government agency. 

However, he did talk about a project that took more than 50 meetings and, after having gone a long way in the process, the agency told the proponent that the project was not of interest. About two weeks after the investor was notified, the agency published a request for proposals (RFP) in a Puerto Rican newspaper with language identical to the investor's project. 

In another case, said Zamot, the project was of interest to the government, but the agency decided to take that project itself and creating "a consortium" and developing it on its own. There were other cases where proposals were being discussed with "someone´s friends.".

According to Zamot, at another time, they were cutting the cake " before it was baked," when it came to contracts that would be awarded. He said that although he indicated that he needed an open hiring process, the answer he received was "this is the way we do it here." 

"If you are an investor, that will probably send chills down your spine," Zamot said. 

In an attempt to save the initiative, Zamot reported the the situation to the Board and the entity suggested that only government-endorsed projects be examined, but this would have undermined the objective of the federal law. In addition, according to Zamot, the agency had its hands tied regarding the situation, because it could not go against the government on the economic development issue while also confronting the Rosselló Nevares administration on tax issues. 

 $ 3 BILLION LOST 

Despite the obstacles and the devastation caused by Hurricane María, Zamot managed to get enough attention so that, in less than a year, some 50 projects arrived at his door, many related to the energy sector, according to El Nuevo Día archives. 

Zamot said these projects totaled an estimated $ 8.4 billion in investments.

  But once the evaluation process was delayed or the government fine-tuned its plans in sectors such as energy, some proponents withdrew their proposals. 

According to Zamot, probably half of the investment in the Board´s evaluation portfolio would not have met the requirements to be designated as ”critical” under PROMESA Title V. But the engineer stressed that at least some $ 3 billion of those could have benefited Puerto Rico. 

Only that figure would have doubled the resources that the government allocated this year to permanent improvements. According to the current budget, the government would allocate approximately $ 1.664 billion to capital improvements. 

This week, in a separate event, the executive director of the Public-Private Partnerships Authority (P3), Omar Marrero, told the press that the government does not need PROMESA Title V to carry out infrastructure projects that the government understands are necessary for Puerto Rico. 

Zamot lamented that the capital that could have reached the final stage of Title V has already gone to other Caribbean islands, where there are also reconstruction processes. 

"That has already left and will not return," said the engineer, who incidentally revealed that the reason for the federal government to delay the release of disaster relief funds - like HUD funds - is the lack of processes in the island´s government that can convince federal authorities of the proper use of the funds. 

Despite the experience, Zamot said he felt somewhat hopeful, since he indicated that there are several areas of great potential in Puerto Rico, such as the aerospace cluster in the northwest area of the island. 

According to Zamot, the island´s investment potential is high, as well as the capacity to develop successful business initiatives, but those opportunities are in areas "where government intervention is not needed".