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Puerto Rico May Lose Control of Island’s Finances

Puerto Rico May Lose Control of Island’s Finances
February 19
14:13 2016

Puerto Rico has been eager to hear Congress address the $70 billion debt crisis the island is facing, but new reports show that the island may not be happy with the outcome.

Republicans are arguing that Puerto Rico has proven time and time again that it is incapable of managing its finances and needs an external party to do so moving forward. This external party could be responsible for cutting expenses. On the other hand, Democrats would prefer if Puerto Rico underwent a court-supervised process to eliminate its debt. Despite these differences, many investors believe a mixture of both of these ideas will pass.

In Puerto Rico, officials released their proposal to reduce debt by 46% under a bond exchange program. The program would reduce tax-supported debt down to $26.5 billion, with annual debt payments topped off at 45% of government revenue.

Anthony A. Williams, former mayor of Washington D.C., is set to testify in the Republicans’ case for setting up control over Puerto Rico’s finances. Williams has said in the past that he believes Puerto Rico would benefit from having someone with an appreciation for the island control their finances from afar.

Orrin Hatch, a Utah Republican Senator, has proposed a bill that would create an authority to hold financial control over Puerto Rico without restructuring its current government. Hatch is among the pack of Republicans who have fought against Puerto Rico being allowed to file for Chapter 9 bankruptcy.

Congress is being pushed to find a solution to the problem of Puerto Rico by the end of the first quarter. Over $422 million is due to investors by May and $2 billion by July, so the island is pressed for time.

“We have a lot of discussion about what to do and as long as it doesn’t involve the use of federal tax dollars, I think it is something we ought to try to figure out some way forward on,” said Senate Majority Leader Mitch McConnell of Kentucky. “Exactly what the way forward is at this point, I’m not sure. But we certainly agree that it’s a big problem and we need to see what role, if any, we should play in it.”


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Mina Sinai

Mina Sinai

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