US Federal Judge Releases Puerto Rico From Bankruptcy, Slashes Municipal Debt by 80%
00:52 GMT 19.01.2022 (Updated: 09:40 GMT 17.09.2023)
© AP Photo / Dennis M. Rivera Pichardo
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A US federal judge resolved a five-year battle over Puerto Rico’s bankruptcy on Tuesday, slashing the US territory’s debt by 80% as part of a restructuring plan allowing it to pay off US creditors without hated cuts to the island’s pension plan.
Judge Laura Taylor Swain of the US District Court for the Southern District of New York approved a plan pitched by the Financial Oversight and Management Board for Puerto Rico to cut the island’s public debt by 80%, from $33 billion to just over $7.4 billion. According to a news release by the board, the deal will save the government more than $50 billion in debt service payments.
According to the board, the deal gives San Juan the ability to pay off its debt by 2034, provided it accepts more cuts to public services and price hikes.
The control board is a group of seven unelected officials given vast power to restructure Puerto Rico’s finances by the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), a 2016 law passed by the US Congress after the territory’s government said it was unable to pay its $70 billion public debt. However, locally the board is known simply as “the junta” for its dictatorial power.
The following year, the Puerto Rican government declared bankruptcy, beginning the process that led to Tuesday’s settlement. The PROMESA board used austerity measures to put a tight rein on the territory’s finances and ensure it could pay its creditors on Wall Street, which included an attempt to slash the pension fund that had been chronically mismanaged for years.
That same year, 2017, Puerto Rico suffered its worst natural disaster in recorded history: a direct strike by Hurricane Maria, a powerful Category 5 storm that annihilated the country’s electrical infrastructure and killed 3,000 Boricuans. The public utility company, Puerto Rico Electric Power Authority (PREPA), was sold to private buyers in January 2018, who formed the corporation LUMA Energy. However, it still holds PREPA’s substantial debt, which was not included in the deal approved on Tuesday.
Demonstrations rocked the island in 2019 demanding the resignation of then-Governor Ricardo Rosselló, who was seen by angry Boricuans as facilitating the control board’s fleecing of the island.
Puerto Rico was seized from Spain by the US in 1898 during the Spanish-American War, and was subsequently turned into a US territory. Nationalists and critics have accused the US of colonialism, and multiple uprisings in the 20th century sought to shake off US rule over the island. A parallel social movement has sought Puerto Rico’s admittance as a US state.
