Distribution of Puerto Rico's outstanding debt as of October 18, 2013 [1]
The public debt of Puerto Rico is the money borrowed by the government of Puerto Rico through the issue of government bonds by the Government Development Bank and other government agencies.
In May 2007, local economists expressed serious concerns when it was revealed that the Puerto Rico public debt equaled to 76% of its gross national product (GNP), making it one of the most indebted countries by percentage in the world, even more than the United States. [2] During the fiscal years 2016-2017 debt rose from 93% to 95% of its gross national product (GNP). [3]
Economists have criticized the government's fiscal policy, whose level of expenditures and indebtness has increased significantly within the past decade while the economy was grown at a much slower pace. Between 2000 and 2006 alone, Puerto Rico's GNP rose 5.37%, while its public debt's relation to GNP rose 18%. [2]
On February 4, 2014 Standard & Poor's downgraded the debt of Puerto Rico to junk status. [4] By early 2017, the Puerto Rican government-debt crisis posed serious problems for the government which was saddled with outstanding bond debt of $70 billion or $12,000 per capita [5] at a time with a 45 percent poverty rate and 12.4% unemployment that is more than twice the mainland U.S. average. [6] [7] The debt had been increasing during a decade long recession. [8]
The Commonwealth had been defaulting on many debts, including bonds, since 2015. With debt payments due, the Governor was facing the risk of a government shutdown and failure to fund the managed care health system. [9] [10] "Without action before April, Puerto Rico’s ability to execute contracts for Fiscal Year 2018 with its managed care organizations will be threatened, thereby putting at risk beginning July 1, 2017 the health care of up to 900,000 poor U.S. citizens living in Puerto Rico", according to a letter sent to Congress by the Secretary of the Treasury and the Secretary of Health and Human Services. They also said that "Congress must enact measures recommended by both Republicans and Democrats that fix Puerto Rico’s inequitable health care financing structure and promote sustained economic growth." [10]
Initially, the oversight board created under PROMESA called for Puerto Rico's governor Ricardo Rosselló to deliver a fiscal turnaround plan by January 28. Just before that deadline, the control board gave the Commonwealth government until February 28 to present a fiscal plan (including negotiations with creditors for restructuring debt) to solve the problems. A moratorium on lawsuits by debtors was extended to May 31. [11] It is essential for Puerto Rico to reach restructuring deals to avoid a bankruptcy-like process under PROMESA. [12] An internal survey conducted by the Puerto Rican Economists Association revealed that the majority of Puerto Rican economists reject the policy recommendations of the Board and the Rosselló government, with more than 80% of economists arguing in favor of auditing the debt. [13]
According to the Government Development Bank, statehood might be the only solution to the debt crisis. Congress has the power to vote to allow Chapter 9 protection without the need for statehood, but in late 2015 there was very little support in the House for this concept. Other benefits to statehood include increased disability benefits and Medicaid funding, the right to vote in Presidential elections and the higher (federal) minimum wage. [14]
By early August 2017, the debt was $72 billion in an era with a 45% poverty rate. The island's financial oversight board said that it would investigate how the debt was caused "and its relationship to the fiscal crisis". [15] The agency also planned to institute two days off without pay per month for government employees, down from the original plan of four days per month; the latter had been expected to achieve $218 million in savings. Governor Ricardo Rosselló rejected this plan as unjustified and unnecessary. [16] In February 2021 governor Wanda Vázquez Garced rejected the agreement reached by the board to reduce the island's debt by 70% arguing the plan was too burdensome for the pensioners and that the bill needed to be approved by the legislature. [17] [18] A new agreement was reached in 2021 to reduce the debt by 80% and governor Pedro Pierluisi supports the agreement. [19]
In May 2023, the United States Supreme Court ruled against a Puerto Rican media organization in its quest to obtain documents from the Federal Council to oversee the island's financial restructuring. The judges said that Congress has not been clear enough about lifting the Board of Financial Supervision and Management's sovereign immunity, which would allow Centro de Periodismo Investigativo Inc. to subpoena the board over documents related to the restructuring of the economy of Puerto Rico..
Puerto Rico, officially the Commonwealth of Puerto Rico, is a Caribbean island, Commonwealth, and unincorporated territory of the United States. It is located in the northeast Caribbean Sea, approximately 1,000 miles (1,600 km) southeast of Miami, Florida, between the Dominican Republic and the U.S. Virgin Islands, and includes the eponymous main island and several smaller islands, such as Mona, Culebra, and Vieques. With roughly 3.2 million residents, it is divided into 78 municipalities, of which the most populous is the capital municipality of San Juan. Spanish and English are the official languages of the executive branch of government, though Spanish predominates.
The government of the Commonwealth of Puerto Rico is a republican form of government with separation of powers, subject to the jurisdiction and sovereignty of the United States. Article I of the Constitution of Puerto Rico defines the government and its political power and authority. The powers of the government of Puerto Rico are all delegated by the United States Congress and lack full protection under the U.S. Constitution. Because of this, the head of state of Puerto Rico is the President of the United States.
Pedro Juan Rosselló González is a Puerto Rican physician and politician who served as the governor of Puerto Rico from 1993 to 2001. He was President of the New Progressive Party from 1991 to 1999 and 2003 to 2008, and served as Senator for the District of Arecibo from 2005 to 2008. His son, Ricardo, was also Governor of Puerto Rico from 2017 to 2019.
The New Progressive Party is a political party in Puerto Rico that advocates statehood. The PNP is one of the two major parties in Puerto Rico with significant political strength and currently holds both the seat of the governor and of the resident commissioner.
Luis Guillermo Fortuño Burset is a Puerto Rican politician who served as the governor of Puerto Rico, an unincorporated territory of the United States, from 2009 to 2013.
General elections were held in Puerto Rico on Tuesday, November 4, 2008, to elect the officials of the government that would serve for the next four years, most notably the Governor of Puerto Rico.
Pedro Rafael Pierluisi Urrutia is a Puerto Rican politician and lawyer currently serving as governor of Puerto Rico since January 2, 2021. He has previously served as secretary of justice, resident commissioner, acting secretary of state, de facto governor of Puerto Rico and as private attorney for Puerto Rico's fiscal oversight board under the Puerto Rico Oversight, Management, and Economic Stability Act. He is a member of the New Progressive Party and the Democratic Party of the United States.
José Ramón González is a Puerto Rican financial executive. He is the President and chief executive officer of the Federal Home Loan Bank of New York since 2014. He formerly served as Senior Executive Vice President of Oriental Financial Group and former president and CEO of Santander Puerto Rico, Puerto Rico's second largest financial institution. González also served from 1986 to 1989 as president of the Puerto Rico Government Development Bank during the administration of Governor Rafael Hernández Colón. In 2016 he was named to the PROMESA oversight board in charge of resolving the Puerto Rican government-debt crisis Where he served until August 2020
The history of Puerto Rico began with the settlement of the Ortoiroid people before 430 BC. At the time of Christopher Columbus's arrival in the New World in 1493, the dominant indigenous culture was that of the Taínos. The Taíno people's numbers went dangerously low during the later half of the 16th century because of new infectious diseases carried by Europeans, exploitation by Spanish settlers, and warfare.
The economy of Puerto Rico is classified as a high income economy by the World Bank and as the most competitive economy in Latin America by the World Economic Forum. The main drivers of Puerto Rico's economy are manufacturing, primarily pharmaceuticals, textiles, petrochemicals, and electronics; followed by the service industry, notably finance, insurance, real estate, and tourism. The geography of Puerto Rico and its political status are both determining factors on its economic prosperity, primarily due to its relatively small size as an island; its lack of natural resources used to produce raw materials, and, consequently, its dependence on imports; as well as its relationship with the United States federal government, which controls its foreign policies while exerting trading restrictions, particularly in its shipping industry.
Ricardo Antonio Rosselló Nevares is a former governor of Puerto Rico who served from 2017 until his resignation in 2019 after overwhelming protests related to the Telegramgate scandal. He is the son of former governor of Puerto Rico and pediatric surgeon Pedro Rosselló.
Antonio Francesco Weiss is a policymaker, financier, and former publisher. He is currently a senior fellow at the Mossavar-Rahmani Center for Business and Government at Harvard's Kennedy School.
The Puerto Rican government-debt crisis was a financial crisis affecting the government of Puerto Rico. The crisis began in 2014 when three major credit agencies downgraded several bond issues by Puerto Rico to "junk status" after the government was unable to demonstrate that it could pay its debt. The downgrading, in turn, prevented the government from selling more bonds in the open market. Unable to obtain the funding to cover its budget imbalance, the government began using its savings to pay its debt while warning that those savings would eventually be exhausted. To prevent such a scenario, the United States Congress enacted a law known as PROMESA, which appointed an oversight board with ultimate control over the Commonwealth's budget. As the PROMESA board began to exert that control, the Puerto Rican government sought to increase revenues and reduce its expenses by increasing taxes while curtailing public services and reducing government pensions. These measures provoked social distrust and unrest, further compounding the crisis. In August 2018, a debt investigation report of the Financial Oversight and management board for Puerto Rico reported the Commonwealth had $74 billion in bond debt and $49 billion in unfunded pension liabilities as of May 2017. Puerto Rico officially exited bankruptcy on March 15, 2022.
The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) is a U.S. federal law enacted in 2016 that serves as a custom-made Bankruptcy law for Puerto Rico. It establishes a process for restructuring debt, and expedited procedures for approving critical infrastructure projects in order to combat the Puerto Rican government-debt crisis. Through PROMESA, the US Congress established a Financial Oversight and Management Board, known colloquially in Puerto Rico as "la junta," to oversee the debt restructuring. With this protection the then-governor of Puerto Rico, Alejandro García Padilla, suspended payments due on July 1, 2016. The FCB's approved fiscal austerity plan for 2017-2026 cut deeply into Puerto Rico's public service budget, including cuts to health care, pensions, and education, in order to repay creditors. By May 2017, with $123 billion in debt owed by the Puerto Rican government and its corporations, the FCB requested the "immediate" appointment of a federal judge to resolve the "largest bankruptcy case in the history of the American public bond market."
Julio A. Cabral Corrada is an entrepreneur, social advocate and policy advisor from Puerto Rico. He focuses on Latin America and Puerto Rico's fiscal, economic, and political affairs.
Carlos José Saavedra-Gutiérrez is a Puerto Rican lawyer and current counsel at Jackson Lewis. Saavedra served in several high profile positions within the Government of Puerto Rico, including Secretary of Labor and Human Resources. Saavedra also served as Chief Legal Officer of the Fiscal Agency and Financial Advisory Authority of Puerto Rico, where he supervised and coordinated Puerto Rico's legal strategy as part of the largest bankruptcy-like municipal restructuring in the history of the United States.
Christian Sobrino Vega is a Puerto Rican attorney and former public executive who held numerous high-level posts within the Administration of former Governor of Puerto Rico, Ricardo Rosselló. Sobrino holds a B.A. in English from Boston College and a J.D. from the University of Puerto Rico School of Law. Prior to entering public service, Sobrino practiced corporate law in various leading firms in Puerto Rico.
Financial Oversight and Management Bd. for Puerto Rico v. Aurelius Investment, LLC, 590 U.S. ___ (2020), was a United States Supreme Court case in which the Court held that appointments to the Financial Oversight and Management Board for Puerto Rico are not subject to the restrictions in the Appointments Clause of the U.S. Constitution. The Court held that all officers of the United States are subject to the Appointments Clause even if their duties relate to Puerto Rico. However, the power they exercise must be primarily federal in nature for the Clause to apply. If the officer exercises powers primarily of a local nature, even if created by federal law, then the officer is not "of the United States" and is exempt from compliance with the Clause. As members of the Board are primarily concerned with the governance of Puerto Rico, even though their decisions have potentially nationwide consequences, their powers are primarily local in nature and need not be appointed in compliance with the Clause.
Financial Oversight and Management Board for Puerto Rico (FOMBPR), colloquially known as La Junta de Control/Supervisión Fiscal is a government entity whose role to revise and approve the budget and obligations of the government of Puerto Rico was created by federal law PROMESA.
A special election to elect shadow senators and shadow representatives from Puerto Rico was held on May 16, 2021. Voters chose two special delegates to the United States Senate and four special delegates to the United States House of Representatives. Their work is to demand that the US Congress respect and enforce the results of the 2020 status referendum, and admit Puerto Rico as the 51st state of the Union.
{{cite news}}: |author= has generic name (help)The bipartisan, seven-member oversight board was created under the federal Puerto Rico rescue law known as PROMESA, passed by the U.S. Congress last year. It is charged with helping the island manage its finances and navigate its way out of the economic jam, including by negotiating restructuring deals with creditors.
Six words: the ability to file for bankruptcy