Puerto Rico’s financial troubles are so complex and far-reaching that bankruptcy alone will not solve them, and might even make them worse, experts on financial distress told lawmakers yesterday, the New York Times reported today. Instead, witnesses who testified before the House Agriculture Subcommittee on Indian, Insular and Alaska Native Affairs yesterday recommended appointment of a federal control board, saying that it would have a better chance of resolving Puerto Rico’s debt in the short term and preventing the island from falling into debt again in the future. As evidence, witnesses pointed to Detroit’s recent experience with municipal bankruptcy, the largest so far in American history. Bankruptcy proceedings helped Detroit reduce its debts, they said, but did not leave the city with a recovery plan. By contrast, some pointed to the financial crisis that gripped Washington in the late 1990s. The district never went bankrupt but was placed under supervision of a financial control board and now enjoys a double-A bond rating. “In my view, the time is now for Congress to create an authority that would have as its goals both achieving financial stability and a balanced budget for the island,” said Anthony A. Williams, who served as Washington’s chief financial officer during the period of federal supervision. Read more.
Experts gather tomorrow in San Juan to discuss Puerto Rico's economic distress and other important cross-border insolvency topics at ABI's Caribbean Insolvency Symposium. Click here to register!
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
