Just two days before Puerto Rico plans to default on a large debt payment, the Senate yesterday passed and sent to the White House a relief measure to help the financially desperate island surmount its fiscal crisis, the New York Times reported today. The Senate, eager to follow the House out of town for a long Fourth of July weekend, voted 68 to 30 for the legislation on Wednesday evening after a test vote that morning showed by a wide margin that critics in both parties did not have the numbers to block passage. President Obama will sign the measure, which his Treasury secretary, Jacob J. Lew, had negotiated and lobbied for since December. The rescue package will not prevent Puerto Rico from missing the payment due on Friday on a $2 billion debt, and Republican congressional leaders labored to the end to reassure conservatives that the bill is not a bailout. Instead, the legislation would allow the island’s government to restructure its $72 billion total debt so it can manage payments, and create a bipartisan oversight board mostly of outsiders to guide what is sure to be a painful recovery process. Crucially, given the imminent missed debt payment, the bill also would bar lawsuits by creditors for nonpayment retroactive to December — to provide Puerto Rico “the breathing room,” as Lew put it, for its government and the control board to restructure the crippling debt and devise a new budget plan. Read more.
In related news, Puerto Rico has suffered a population slide that is steeper and more financially disastrous than in any U.S. state since the end of World War II, according to a Wall Street Journal analysis. An exodus of workers, retirees and entire families has shrunk Puerto Rico’s population by more than 9 percent in the past decade to less than 3.5 million, magnifying the territory’s inability to repay its $70 billion in debt. A decade-long recession has left one in nine residents out of work and roughly half dependent on the cash-strapped government for health care. Net migration to the U.S., where Puerto Ricans can move with no restrictions, was 250,000 so far this decade. The island’s labor force shrank 20 percent in the past 10 years, compared with 5 percent growth in the U.S. Read more. (Subscription required.)
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
