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Puerto Rico debt crisis looms

April 21st, 2016

 

Puerto Rico has no clear path forward after a plan stalled in the United States Congress to help with the crippling debt that the U.S. territory is currently facing, according to Reuters.

 

Puerto Rico is currently looking at a May 1 deadline to repay about $422 million to Government Development Bank bankholders. In total, Puerto Rico has about $72 billion worth of debt, according to The New York Times.

 

According to Reuters, the Republicans who control the House of Representatives met privately for around 90 minutes on Friday, April 15, to discuss ideas.

 

“There may be different ways to fix a problem that may include doing nothing and allow it to work through the court system,” said Representative Mick Mulvaney (R-S.C) following the meeting.

 

Legislation to help Puerto Rico restructure its debt was introduced to the House of Representatives on Tuesday, April 12. The text of the bill, according to The New York Times, showed various revisions written by hand, suggesting that representatives had engaged in last-minute edits to satisfy all parties involved.

 

The bill would give Puerto Rico certain powers that are usually only available to areas declaring bankruptcy. According to The New York Times, the bill is scheduled to be addressed on the floor of the House of Representatives sometime in the week of April 18.

 

Speaker Paul Ryan (R-WI) praised the Natural Resources Committee, which has been in charge of the negotiations thus far, according to USA Today.

 

“Congress has a constitutional and financial responsibility to bring order to the chaos that is unfolding in the U.S. territory — chaos that could soon wreak havoc on the American bond market,” Ryan said. Without naming names, he said the bill “holds the right people accountable for the crisis.”

 

The bill also contains provisions that are meant to reassure the Puerto Rican citizens that Congress does not want to overstep the local elected government during the upcoming debt negotiations. A previous draft of the bill contained amendments that would have allowed for the creation of an oversight board, run by the United States, which would have significant power over Puerto Rican affairs, according to The New York Times.

 

Puerto Rico’s governor, Alejandro García Padilla, called this draft “shameful and degrading” because it would deprive Puerto Rico of its own elected government.

 

“If the board is able to impose taxes and reduce services and to fire people from their jobs, it would not only be undemocratic but it would also be unfair,” he said, adding that he had not yet had a chance to read the bill and did not want to evaluate it until he knew what was in the details.

 

The new bill also gives Puerto Rico the power to impose the terms of a broad debt settlement even on holdout creditors, a power usually only available in bankruptcy.

 

But Puerto Rico and its supporters in Congress and the Obama administration have argued that without this provision, the island will likely be hounded by creditors for years, according to USA Today.

 

Editor’s Note: Information from The New York Times, Reuters and USA Today was used in this report.