Under the revised legislation, Congress would create a control board to oversee debt restructuring and help manage the USA territory’s financial responsibilities.
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Republicans crafting the bill have been attempting to win a messaging war against some lobbying groups such as the Center for Individual Freedom, whose supporters are allowed to remain secret under rules governing political action committees.
After weeks of delays, House Republicans are moving ahead with legislation to help Puerto Rico manage $70 billion in debt. In addition, it is reeling from a Zika virus outbreak that is hurting its critical tourism industry. Lawmakers are also trying to prevent a massive courtroom brawl between different creditors that could further chill investment in Puerto Rico.
The Obama administration has pushed to make pensions a priority.
House Speaker Paul Ryan said the Puerto Rico bill is ‘exactly where we wanted it’.
“Any future changes will be done in public committee meetings”, Bishop said in a statement Wednesday night.
For a link to a factbox on the bill, click.
Democrats, too, had to be persuaded the control board wouldnt be too powerful and debt restructuring too difficult.Some of the Houses most conservative Republicans appear willing to support the deal.
Puerto Rico defaulted on $370 million in bond payments earlier this month, and it faces a $1 billion payment on July 1, ratcheting up pressure on Congress to act. Please see our terms of service for more information.
The board has the authority to enforce balanced budgets and government reform if the Puerto Rican government fails to do so, including the sale of government assets, the consolidation of agencies and reduction of workforce.
“The legislation would allow the commonwealth to restructure all of its liabilities, provide no bailouts for any creditors, and enable an orderly resolution to Puerto Rico’s worsening crisis”, he said.
Besides blocking island workers from being able to take advantage of a new overtime law recently enacted by the U.S. Labor Department, other changes include language that makes clear the fiscal oversight board’s latitude in prioritizing payments to bondholders.
It sets up a financial control board to oversee the island’s finances and also establishes a process for restructuring the Puerto Rican government’s debt, without which there can be no economic growth or stability on the island.
Choosing the members of the oversight board has been a sticking point in the talks leading up to the introduction of the bill.
In a statement of support, Treasury Secretary Jacob Lew, who has led the Obama administration’s efforts on the Puerto Rico crisis, said the bill includes restructuring tools “that are comprehensive and workable”. The Senate has not yet acted, and Senate Majority Leader Mitch McConnell, R-Ky., has said the chamber is waiting for the House to move first.
Daniel Hanson, an analyst with Height Securities, wrote in a note that the bill “does not definitively protect any creditors”.
GO, or General Obligation bonds are backed by the full faith and credit of the island and are senior to all debt, while COFINA debt is backed by sales tax revenues. “If it isn’t colonialism, it certainly looks like it. Puerto Rico Governor Alejandro García Padilla accepted the restructuring as necessary but said the extraordinary power of the board was “not consistent with our country’s basic democratic principles”.
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Severe economic decline, an accumulation of operating deficits, lack of financial transparency and management inefficiencies, combined with excessive borrowing, “created a fiscal emergency in Puerto Rico”, the legislation states.
