First modification:
The island emerged this week from the largest restructuring of public debt in the history of the United States, although it will not yet be able to enter the global financial markets and must resolve the bankruptcy procedures for the debt of 5,800 million dollars that the Puerto Rico Authority has. Highways and Transportation of Puerto Rico and the Electric Power Company.
“The plan is not perfect.” Puerto Rico began a new stage this week with the start of payment of its multi-million dollar debt, which went from 34,000 to 7,400 million dollars, a reduction of nearly 80%, thanks to the entry into force of an adjustment plan.
Omar Marrero, executive director of the Financial Advisory Authority and Fiscal Agency, announced on Tuesday that the so-called Debt Adjustment Plan, PAD, began to be executed after years of negotiation between the island, the bondholders, the insurers and the Meeting.
“Today we begin a new fiscal era. With the transaction that enters into force to make said Adjustment Plan effective, Puerto Rico marks a transcendental moment in its efforts to leave bankruptcy behind,” Marrero said.
The PAD will allow the island to repay billions of dollars to bondholders for the first time in several years. It will also resolve $1 billion worth of claims filed by local residents and businesses.
The restructuring will allow the regional government of the American territory to issue bonds worth more than 10,000 million dollars and reestablish up to 1,300 million dollars taken from the public pension system.
“It is an extremely important moment that we have been working on for 6 years, since the PROMESA Law in 2016,” he said, referring to the law approved during Barack Obama’s mandate and which allowed the island to declare bankruptcy.
We did it! Today we begin a new fiscal era for Puerto Rico. With the restructuring of the central government debt, we mark the end of a chapter and look to the future with optimism and hope for our people. pic.twitter.com/mTYMhB3XDp
– Omar Marrero (@prsecestado) March 15, 2022
“This is a significant success,” said Natalie Jaresko, executive director of the Federal Control Board that oversees Puerto Rico’s finances and its debt restructuring process. “Staying bankrupt has been a drag on the economy in multiple ways,” she added.
The Board, as the institution headed by Jaresko is known, was widely criticized on the island for being considered an imposition by the White House, as well as for approving unpopular measures that could not be debated by any local authority.
Although Jaresko previously announced his retirement for April 1, the board will remain in his position until Puerto Rico has four consecutive balanced budgets, a feat that has yet to be achieved.
The restructuring was approved last January by a federal judge and softens the claims against the Government of Puerto Rico from 33,000 million dollars to just over 7,400 million. In this way, 7 cents of every taxpayer dollar goes to debt service, compared to 25 cents previously.
“This is a transcendental moment,” commented Pedro Pierluisi, governor of Puerto Rico, while adding that “the plan is not perfect… but it has many good things.”
Puerto Rico accumulated more than $70 billion in public debt and more than $50 billion in public pension liabilities during decades of corruption, mismanagement and excessive lending.
In 2017, Puerto Rico filed for the largest municipal bankruptcy in US history, and just months later the devastating Hurricane Maria hit the island, knocking out the power grid and causing billions of dollars in damage.
Several analysts recommend that the PAD should go hand in hand with an economic growth plan for Puerto Rico and thus avoid falling into bankruptcy again.
With EFE and AP
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