US House approves bill to address Puerto Rico financial crisis News
US House approves bill to address Puerto Rico financial crisis

[JURIST] Members of the US House of Representatives approved bi-partisan legislation to relieve financial pressure on Puerto Rico on Thursday. The statute, entitled the Puerto Rico Oversight, Management and Economic Stability Act of 2016 (PROMESA) [text, PDF], creates a financial oversight board and will restructure a portion of Puerto Rico’s $70 billion debt. Deemed as an unfortunate, but necessary consequence to rescuing the territory from its financial crisis, the minimum wage for young workers has been reduced as well. The implications of this bill are wide-reaching, especially in light of the recent Supreme Court decision in Puerto Rico v. Sanchez Valle [JURIST report] and the pending Supreme Court decision in Puerto Rico v. Franklin California Tax-Free Trust [JURIST reports], which affirm that Puerto Rico does not have complete sovereignty. The oversight board, which would be unelected, has been as cause for concern [The Atlantic report] by some. Raúl Grijalva, the ranking Democrat on the House Natural Resources Committee, made it known that he believes this bill is yet “another infringement on the sovereignty of the people of Puerto Rico,” in particular the lack of Puerto Rico representation on the board oversight board and, most importantly, the continued distinction between Puerto Rico and states.This legal distinction strips from Puerto Rico the ability to use bankruptcy to restructure its debt, a method available to all US states.

The Puerto Rico legislature passed a bill [JURIST report] this April, marking its first step towards debt moratorium. At the end of 2015, Puerto Rico was $70 billion dollars in debt. The governor anticipated a government default [Bloomberg report] in 2016, which came to fruition [NYT report] on January 4. The territory has been suffering from a massive recession [BBC report] since 2006, nearly a decade before the governor announced that Puerto Rico was unable to pay its debts. However, the Puerto Rico Electronic Power Authority, a major player in the economic crisis, reached a deal [Bloomberg report] to restructure its debt in December. This deal is the first of many restructuring plans to alleviate the government’s debt. In February, the Puerto Rico Legislature passed a bill [text, PDF, in Spanish] that would restructure the island’s estimated $9 billion debt [JURIST report].