Puerto Rico set to substantially reduce debt following Rosselló’s resignation
Following the resignation of former Governor Ricardo Rosselló (NPP, D), the Financial Oversight & Management Board for Puerto Rico has put out a new plan to remove 60% of Puerto Rico’s debt through auspicious plans and cuts to the general budget and other places across the board. This new plan comes just 2 months after the leadership shift on the islands and a generally tumultuous couple of years since the financial trouble lead to the bankruptcy and the creation of the oversight board in 2017. This plan includes several key facets that have effects on the people and businesses of Puerto Rico.
The cuts will include an 8.5% cut to pensions which has been repeatedly opposed by the previous government in Puerto Rico. This cut has been reported to apply to retirees that collect $1,200 dollars a month or more. The pension budget cuts were a topic that has been discussed at length with the board and the government since the pension system has over $50 billion in unfunded pension liabilities and benefits. Many of the previous debates regarding restructuring came to a standstill regarding pensions and employee benefits in the past. While the previous governor heavily fought against this idea, the new governor, Wanda Vazquez (NPP, D), took a different stance on the issue, calling it the ‘best alternative’ at the moment. This agreement also cuts the taxpayer responsibility from upwards of 30% of the debt payment to under 9%.
Puerto Rico has been working with creditors since the declaration of bankruptcy and the back and forth has been challenging to find an agreement over. Former Governor Rosselló had been working with the stakeholders in this issue, but repeatedly sparred with them over action items he thought were not to be touched, such as the pensions. Vazquez, on the other hand, has so far had a more amicable relationship in terms of the debt restructuring. This proposition of this agreement must now come before a judge in federal court. Other propositions for agreements have been deemed unconstitutional and rejected and with such a large number to cut debts it is unclear how this will be received by the court.
