Puerto Rico’s debt restructuring bill moves forward despite criticism

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SAN JUAN, Puerto Rico (AP) – The Puerto Rico Senate and House on Tuesday approved a bill that would halve central government debt, but also sparked protests and led to heated exchanges between lawmakers and a federal board of control which oversees the finances of the American territory.

The bill seeks to end a bankruptcy-like process that began after Puerto Rico announced in 2015 that it could not pay its more than $ 70 billion public debt accumulated over decades of bad debt. management, corruption and excessive borrowing. In May 2017, the government filed the largest municipal bankruptcy ever in the United States

The bill would allow Puerto Rico to reduce its debt by more than $ 30 billion, issue new debt worth $ 10 billion, and allocate some $ 7 billion in cash to cardholders. bonds that have not been paid for almost five years. Critics say Puerto Rico’s government does not have the finances to adhere to the proposed debt service and have warned of upcoming austerity measures.

However, the bill, which squeaked in a 14-13 vote in the Senate and later 34-12 in the House, is still in limbo as it lacks the backing of the oversight board, although the governor of Puerto Rico Pedro Pierluisi is in favor of it.

“Today we have taken a step forward towards ending the bankruptcy of our government and the departure of the board of directors,” he tweeted.

One of the main points of contention between the government of Puerto Rico and the board of directors was a proposal to cut some public pensions. The government refused to approve a bill that contained any sort of cuts to public pensions, while the board sought to cut pensions above $ 1,500 per month by 8.5%, a move that would affect some 40,000 retirees.

Some lawmakers have also demanded zero cuts to the University of Puerto Rico, the island’s largest public university, and the island’s 78 municipalities.

Two organizations that represent the mayors of Puerto Rico warned in a statement that some municipal services could still be cut because of the bill.

“Municipalities have already made great sacrifices and budgetary adjustments to maintain their services, some with reduced hours and others with layoffs,” officials said.

The oversight council issued a brief statement on Tuesday evening saying only that it would carefully assess the measure, although it has previously said it would not approve the bill.

The deadlock between the board and lawmakers threatens to wipe out nearly five years of negotiations with bondholders in a bankruptcy-like process that has generated nearly $ 1 billion in income for the lawyers involved. It could also expose Puerto Rico to litigation that has been temporarily suspended as part of the process and force the government to pay bondholders.

The two sides are set to enter mediation after federal judge in the case, Laura Taylor Swain, warned Monday that she would not postpone the November 8 confirmation hearing on the plan, adding that “my patience is running out “.

Puerto Rican Senator José Antonio Vargas Vidot said it was better to skip the bill and go straight to mediation.

“The patience of the judge is running out, that of the people too”, he declared.


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