Puerto Rico will hold a plebiscite on its political status Sunday, even though the U.S. Justice Department hasn't approved the wording of the measure.

In the plebiscite backed by Gov. Ricardo Rosselló, voters will be given three choices: “statehood,” “free association/independence,” or the “current territorial status.” The party with the second most legislators in the Puerto Rico House and Senate, the Popular Democratic Party, and the party with the third most legislators, the Puerto Rico Independence Party, are both calling on their voters to boycott the vote.

Puerto Rico Senator José Nadal Power tweeted that Sunday's plebiscite was bad for several reasons.
Popular Democratic Party member José Nadal Power tweeted that the plebiscite "is an unnecessary expense," and is "designed to distract.”

“The PROMESA process may be an impediment to statehood, even if voters in Puerto Rico show they are in favor of making the change," said Moody's Investors Service analyst Ted Hampton. "Congress is unlikely to approve Puerto Rico becoming a state, and that’s particularly true with the current debt restructuring underway."

Statehood would mean the end of the island government’s ability to sell triple-tax exempt bonds in the 50 states. At this point, because of its multiple defaults, it is unable to sell bonds with the tax exemption.

Analysts have various opinions about how statehood would affect the island’s economy or federal aid to the island.

On Wednesday at a conference on Puerto Rico’s debt crisis, Puerto Rico’s nonvoting member on the Oversight Board, Elías Sánchez Sifonte, said it was impossible to create a long-term economic plan for the island without statehood, because Congress could take away any tax status accorded to Puerto Rico at a stroke of the pen.

In 2014 the U.S. government authorized providing $2.5 million to Puerto Rico’s government to hold a plebiscite on its status in the United States and to provide education to voters. The U.S didn’t put a limit on when the money would be used. Before the money was to be released, the U.S. Department of Justice was to notify Congress that the plebiscite ballot and educational materials were consistent with the laws, Constitution, and policies of the United States.

As originally passed earlier this year by Puerto Rico’s government, the ballot would have offered only two choices: statehood or free association/independence. However, the U.S. Acting Deputy Attorney General Dana Boente told Rosselló he wouldn’t ask Congress to release the funds with this ballot.

Rosselló responded by adding the choice of the current territorial status to the ballot. However, the Department of Justice found this change inadequate. It told the governor in April that the federal government could still release the money, but only if the plebiscite was postponed from Sunday so that significant changes could be made to the language.

The governor, who is a member of the pro-statehood New Progressive Party, declined to postpone the plebiscite.

A spokesman for the governor said, "The consultation already follows the federal parameters and the only pending matter would be the certification for the disbursement of the $2.5 million in federal funds. The governor decided to continue with the decolonizing process of Puerto Rico without delays."

There have been several plebiscites on Puerto Rico’s status over the decades. Independence has never received more than a few percentage points of support.

The headline on Sunday’s ballot is “Plebiscite for the immediate decolonization of Puerto Rico.”

On Tuesday Popular Democratic Party Senator José Nadal Power tweeted, “What moves you more to not participate in the so-called plebiscite?” and then asked people to vote among: “It has no federal endorsement, It is an unnecessary expense, Designed to distract, It has no consequences.” The Popular Democratic Party supports the current political status.

In related news, Rosselló signed a bill on Monday to promote the so-called Tennessee Plan for statehood.

In 1795 the region then known as the Southwest Territory held a referendum where 73% of the people indicated support for statehood. The governor and local legislature held a gathering where they declared the territory to be a state. The legislature elected two people to act as representatives in the U.S. House of Representatives and two to be senators in the U.S. Senate.

The territory sent the “representatives” and “senators” to Washington to demand their seats. The Senate initially rejected the entreaty. However, the House agreed to make the territory into a state if it agreed to hold new elections for its positions. The territory’s leaders agreed to this and in 1796 in became a state.

Six other U.S. territories have since become states with approaches at least somewhat similar.

In the Puerto Rico version, the governor will appoint two “senators” and five “representatives” with the consent of the Puerto Rico legislature. They will be charged with “managing and demanding participation and recognition” as members of Congress, according to a statement from the governor’s office. They are to lobby for Puerto Rico to become a state.

The government will give them no salary but will give them a per diem for their work and compensate them for expenses.

In the past week the PDP has said it will sue in the district court to prevent Puerto Rico’s government from sending the pretend members of Congress to Washington.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.