PREPA debt deal reached amid resistance to audit, dire economic warnings
Puerto Rico’s debt situation is constantly changing, with a recent change being the agreement of a new PREPA debt deal. PREPA, or the Puerto Rico Electric Power Authority, has about $8.9 million dollars of debt currently. There was a previous plan on the books, but Governor Rossello stated that he wanted to reopen negotiations back when he took office. With a 15% haircut and maturity times extended to 2047, the new plan is expected to save $2.2 million in debt servicing cost over five years, a $1.5 million increase over the previous plan. In addition, the deal may reduce customers bills by as much as $90 annually for the next five years.
However, there are fears about the PREPA deal, and Puerto Rico’s debt plan in general. Nobel economics laureate Joseph Stiglitz has recently stated that he fears that the austerity measures included in the plan put Puerto Rico at risk of an even deeper depression. The large cuts to government spending are cause for significant concern, according to Stiglitz. He is the former chief economist and senior vice president of the World Bank, and has been interested in Puerto Rico’s financial situation for many years. He suggests that Puerto Rico should implement a policy similar to Argentina, in which issued bonds were linked to the GDP. In this system, creditors get nothing if the economy does not improve, but as it improves, they receive a percentage.
Another issue recently coming to light is the Puerto Rican government’s resistance to audit. Many within the government say that it would only cause harm, as it would be expensive to undertake, and those guilty of causing Puerto Rico’s debt crisis would not be punished anyways. In addition, they claim that it would only help creditors, and anyone who increased government spending beyond their resources would be guilty, that that those increases were made in tiny amounts and by many various people across the government. There are groups who are very interested in seeing an audit completed, such as The Citizen Front for the Debt’s Audit and the Ecumenical and Interreligious Coalition of Puerto Rico, who have demonstrated in the territory’s Capitol over the past few weeks.