The Debt Audit Movement: Citizens Investigating Their Own Debt

The debt audit movement represents one of the most sophisticated acts of citizen resistance in Puerto Rico's recent history — communities investigating the financial structures that impoverish them.

The Debt Problem:
By 2015, Puerto Rico's public debt had reached approximately $72 billion — making the island one of the most indebted jurisdictions per capita in the world. But questions about the debt's legitimacy had been growing:
1. Was the debt issued in compliance with Puerto Rico's constitutional debt limit?
2. Did the bond issuances follow proper legal procedures?
3. Who benefited from the borrowing? (Wall Street underwriters collected hundreds of millions in fees)
4. Were Puerto Rican citizens informed about the debt being taken on in their name?
5. Was some of the debt 'odious' — incurred without the consent of the governed for purposes that did not benefit them?

The Audit Movement:
- 2015: The Puerto Rico government established a Commission for the Comprehensive Audit of Public Credit
- Citizens groups: Organizations like Espacios Abiertos, the Center for a New Economy, and grassroots coalitions demanded transparency
- Legal analysis: Attorneys and scholars examined bond documents and found potential constitutional violations
- International precedent: Ecuador's successful debt audit (2008) provided a model — Ecuador's audit identified illegitimate debt and reduced payments significantly

Key Findings:
Multiple investigations and analyses revealed:
1. Constitutional debt limit violations: Puerto Rico's constitution limits direct debt to 15% of average revenues from the prior two years. Evidence suggests this limit was circumvented through creative financial structuring.
2. COFINA bonds: Sales tax-backed bonds (COFINA) were structured to avoid the constitutional debt limit — securitizing future sales tax revenue as a separate entity
3. Pension obligation bonds: Bonds issued to fund pensions were essentially borrowing to cover operating expenses — a practice of questionable legality and financial wisdom
4. Underwriter profits: Wall Street banks (including Goldman Sachs, Morgan Stanley, and others) collected hundreds of millions in underwriting fees while marketing Puerto Rico's bonds to investors
5. Rating agency failures: Credit rating agencies maintained investment-grade ratings for Puerto Rico bonds even as the fiscal situation deteriorated — enabling continued borrowing

The PROMESA Obstacle:
When Congress passed PROMESA (2016) and established the Fiscal Oversight Board:
- The FOMB did not conduct a comprehensive debt audit
- Instead, the FOMB focused on restructuring through Title III (bankruptcy-like proceedings)
- The audit movement argued that you cannot restructure what you haven't audited — repaying illegitimate debt is itself unjust
- The FOMB's position: restructuring should proceed regardless of how the debt was incurred

The Colonial Dimension:
1. The debt was accumulated under a colonial system where Puerto Rico had no voting representation in Congress
2. Wall Street banks profited from lending to a vulnerable colonial jurisdiction with limited financial oversight
3. The FOMB — imposed by Congress, unelected — manages the debt without Puerto Rican democratic input
4. Austerity measures cut services to repay debts that may have been illegally issued
5. The concept of 'odious debt' in international law applies: debt incurred by a non-representative regime should not bind its people

Current Status:
The debt restructuring under PROMESA's Title III proceeded without a comprehensive audit. Puerto Rico's Plan of Adjustment (2022) restructured the debt but did not fully investigate its legitimacy. The audit movement continues to argue that Puerto Ricans deserve to know how their debt was created, who profited, and whether it was legal.