The Clock is Ticking on Puerto Rico’s Debt
Posted on 04/12/2016 @ 12:45 AM
Photo Credit: Ana Martinez/Reuters
By: Luis Torres, LULAC National Director of Policy and Legislation
Last week brought a whirlwind of news on the topic of Puerto Rico. If you’ve been out of the loop, here are the basics. Puerto Rico is in major economic crisis. According to the
House Natural Resources Committee, the committee that has jurisdiction over Puerto Rico matters in the U.S. House, Puerto Rico owes more than 70 billion dollars in debt in the form of bonds. In addition, it has a pension liability of 46 billion dollars (covered by only two billion dollars in net assets), unemployment is at 12 percent, and Puerto Ricans are fleeing the island in droves.
Bottom line, the island cannot make its debt payments and keep essential services funded.
Enter Washington, D.C.
Lawmakers on the Hill, under pressure from advocates, bond holders, and consumer groups, have been working on legislation that would provide Puerto Rico with additional options to address its current financial situation. However, the first draft of the legislation — leaked on the internet— got very mixed reviews. Bond holders balked at the idea of court facilitated debt restructuring, civil rights advocates and Puerto Rican politicians decried the oversight board that they say takes away Puerto Rico’s autonomy. The legislation did not seem to meet anyone’s expectations (a good summary of what’s in the legislation can be found here).
With the clock ticking on Puerto Rico’s pending debt payment on May 1st, and Congressional legislation at a standstill, the Puerto Rican government took matters into its own hands and decided to halt all debt payments and instead, use available funds to prioritize keeping essential public services running.
This set off a scramble by hedge funds holding Puerto Rican debt, who immediately filed lawsuits to freeze the assets of Puerto Rico and prevent the Puerto Rico Development Bank from making payments to local government agencies that need funds to keep services running.
So, now what?
The House Natural Resources Committee is expected to release an “updated” version of its Puerto Rico bill as early as today. Meanwhile Puerto Ricans, who are sticking it out on the island, are left in limbo.
At the end, it is unclear if the newest attempt to rewrite the Puerto Rico legislation will be enough to pass it through a skeptical House and Senate before the clock strikes midnight on May 1st when a 422 million dollar debt payment comes due.
Luis Torres is the Director of Policy and Legislation for the League of United Latin American Citizens. Prior to LULAC, he served as Legislative Director for Congressman Silvestre Reyes, former-Chairman of the House of Representatives Permanent Select Committee on Intelligence, and was one of a handful of Latino Legislative Directors in the U.S. House of Representatives. Additionally, Torres also served as a high school teacher in Washington, D.C. as part of Teach for America. He received a Bachelor of Arts in Government and Sociology from Georgetown University, and a Master of Arts in Teaching from American University.