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ABI Journal

Puerto Rico

07
July
2025
Article Tags
Finance and Banking
Municipal Bankruptcy
Puerto Rico
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Fitch: Strains on Puerto Rico's Banks Eased by US Umbrella

Submitted by jhartgen@abi.org on

The protection of US regulatory oversight over Puerto Rico's banks, including US federal deposit insurance and the intervention authority of the Federal Reserve and the FDIC, is critical to considering the range of possible outcomes facing local banks on the island, says Fitch Ratings. The US umbrella materially differentiates the situation in Puerto Rico versus other regions where the local government is battling a fiscal crisis. Such distinctions are relevant given the comparisons commonly being drawn between Puerto Rico and Greece.

Full analysis.

 

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Puerto Rico

Congress can help ease Puerto Rico’s debt crisis

Submitted by jhartgen@abi.org on
Puerto Rico must indeed reform its public sector, but the structural crisis affecting its economy is such that even dramatic new efficiencies probably wouldn’t produce enough growth to pay its debts as currently structured, according to a Washington Post editorial. For the sake of its economic future, the United States’ best friend in the Caribbean needs the power to negotiate a new, more sustainable deal with its creditors, and Congress should grant it.
 
Read the full editorial.
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Puerto Rico

Puerto Rico's Financial Crisis Is U.S.' Crisis, Too

Submitted by jhartgen@abi.org on
With the financial world transfixed by Greece's debt-driven meltdown, Puerto Rico announces it can't pay its $73 billion in debt. Once again, we're learning that welfare statism is no replacement for fiscal responsibility, according to an editorial in Investor's Business Daily. Compared to Greece's $353 billion in debt, Puerto Rico's $73 billion doesn't sound so big. On a per capita basis, it's about a third less. But appearances deceive. Puerto Rico is in deep, owing actually much more than that amount.
 
Read the full editorial.
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Puerto Rico

Puerto Rico, America’s Greece

Submitted by jhartgen@abi.org on

The origins and consequences of Puerto Rico’s debt crisis are eerily similar to those of Greece’s debt crisis, according to a Washington Post editorial. In both cases, a semi-sovereign, economically uncompetitive entity finds itself mired in slow growth but enmeshed in a currency union with a far larger and stronger neighbor. Both places have been enabled to live beyond their means by years of artificially easy credit — in Puerto Rico’s case, due to U.S. laws making its bonds “triple tax-free.” But, at last, the inevitable day of reckoning has arrived, and as the best and brightest young people cross open borders in search of opportunity, poverty is deepening and policymakers are belatedly waking up to financial reality.

Full editorial.

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Puerto Rico

Puerto Rico Has No Easy Path Out of Debt Crisis

Submitted by jhartgen@abi.org on
Its economy has been mired in recession for years. The public is fed up with austerity. Investors want big premiums to lend to a government deep in debt, with no ability to devalue its currency. Greece? Try Puerto Rico, the U.S. commonwealth whose long-simmering debt crisis — its $72 billion debt equals nearly 70 percent of its economic output, far more than any U.S. state — is about to come to a boil, according to an editorial in The Wall Street Journal.
 
Full editorial. (Subscription required.)
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Puerto Rico

Puerto Rico needs fair treatment

Submitted by jhartgen@abi.org on
Puerto Rico is not requesting, and should not get, a bailout, according to a commentary in The Hill. What Puerto Rico needs is fair treatment from the federal government as one component of a recovery package. On the island, fiscal adjustments are leading to economic contraction, emigration, reduction in tax revenues and the need for further fiscal adjustments. The federal government is contributing to this downward spiral because of discriminatory policies in several areas such as the bankruptcy law, the Jones Act and Medicare regulations.
 
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Puerto Rico

Puerto Rico's options: Default, restructure, bailout or bankruptcy?

Submitted by jhartgen@abi.org on
How exactly Puerto Rico could restructure its mountain of debt is the $72-billion question that everyone from New York to San Juan is asking, according to a commentary in The Hill. As an unincorporated territory of the U.S., Puerto Rico cannot file for bankruptcy protections under Chapter 9 of the United States Bankruptcy Code. Puerto Rico is caught in a legal Catch-22: it is allowed to pile up bonds as if it were a municipality but it cannot restructure or declare bankruptcy like Detroit, Stockton or any of the other American cities that have defaulted in recent memory.  
 
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Puerto Rico

Federalism Form and Function in the Detroit Bankruptcy

Submitted by jhartgen@abi.org on
by Melissa B. Jacoby 
University of North Carolina (UNC) at Chapel Hill - School of Law
 
This article tests the premise of limited federal court involvement in municipal bankruptcy cases against the real world of Detroit’s restructuring. The study is based on listening to digital audio recordings of court hearings and status conferences throughout the case in nearly real time, coupled with other primary source materials. Under the right conditions, we learn, a federal court can formally honor the explicit restrictions in the Bankruptcy Code while functionally exercising significant influence throughout a chapter 9 case. Some of the channels of influence operate beyond public view, including confidential mediation overseen by a powerful chief district judge and the court's feasibility team that, according to witness testimony, collaborated quite extensively with city officials. These tools form what I call the Detroit Blueprint – a procedural precedent sure to affect other municipal restructurings more than the (limited) substantive doctrine the case generated.
 
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Puerto Rico
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