Big changes needed to stem Puerto Rico crisis
Even with a new governor, Puerto Rico’s financial status continues to be in peril. The governor recently announced that the territory will run out of cash in February. At that point, they will no longer have enough money to pay public employees past that point. The new governor was inaugurated on January 2, giving him very little time to resolve the situation. Even with more time however, with $70 billion in debt, resolving this crisis would be incredibly difficult.
In order to get more public funds, the territory may have to borrow more and the Oversight Board will also have an opinion on the matter. The Oversight Board, however, is meant exactly for these situations and will hopefully be helpful in this instance. With the Oversight Board’s assistance, the territory should hopefully manage to overcome this obstacle without acquiring a substantial amount of additional debt.
Another issue that arises from these circumstances is the territory’s inability to receive relief due to the Chapter 9 bankruptcy code. Federal law does not allow Puerto Rico’s municipalities to file for bankruptcy which is currently hurting the territory. If the law was amended to allow more relief and assistance allowing municipalities this power, that would also help Puerto Rico immensely.
It is clear, however, that this threat to the territory is not one that will be solved easily. If further and more intense action is not taken, Puerto Rico will continue to spiral in debt and financial crisis. With hope, the new governor will shift action towards making a substantial change in the way the territory is currently addressing the issue. With the proper legislation and actions with the United States government, Puerto Rico could begin to recover from the crisis. Such actions must go beyond more loans and deals with bond holders. A long lasting and strong change must be made to not only ensure that the territory recovers but also that its future is safe from such a crisis occurring again.
The United States, however, must be ready and accepting of such a change to take place. A Chapter 9 amendment would not be liked by all, but likely would be best for both the United States and Puerto Rico. For now, it remains close to impossible. Instead, Puerto Rico will have to make do with debt restructuring provisions in PROMESA.