By Caribbean News Now contributor
WASHINGTON, USA — Puerto Rico is facing a major debt crisis, and the US territory announced on Sunday that it would be unable to make $422 million in debt repayments that were due by the close of business on Monday. Meanwhile, New York City is sending a million condoms to Puerto Rico to help the island battle the zika virus.
Puerto Rico and its agencies have accumulated more than $70 billion in debt after years of borrowing to fill budget deficits and pay bills as its economy shrunk and residents left the island for work on the US mainland.
Additionally, underfunded pension obligations to hundreds of thousands of public- and private-sector workers in the territory amount to over $40 billion, according to estimates.
Meanwhile, an apparently dysfunctional and disinterested Congress has so far unsuccessfully grappled with legislation to address the island’s financial crisis since, unlike Detroit, without legislative change Puerto Rico cannot declare bankruptcy.
While House Speaker Paul Ryan called for a Puerto Rico bill by March 31, it has yet to move out of the House Natural Resources Committee. House Majority Leader Kevin McCarthy said last week that he is “hopeful” the bill will pass the lower chamber by July 1.
The proposed legislation would create a tough new seven-member financial control board for the territory and would oversee court-supervised restructuring of the island’s debt.
However, this has met some local resistance based on the perceived implication that Puerto Ricans are unfit to manage their own economy, or their own government.
Writing in the National Review on Monday, Congressman Darrell Issa, who some 18 months ago famously accused Guyana in South America of being the source of Ebola (he was apparently confused with Guinea in West Africa), argued for the creation of a Puerto Rico oversight board.
Issa noted on Monday how Congress addressed the financial woes of Washington, DC, in the 1990s. In this case, he said, Congress created an oversight board that supervised the city’s budgeting and spending practices, which stayed in place for six years until DC was able to get back on sound financial footing and had its fourth consecutive balanced budget.
“We could make this same practice work in Puerto Rico – a strong independent control board would provide oversight of the island’s finances and help them regain control of their bloated budget,” he said.
“Puerto Rico’s problems are symptomatic of irresponsible budgeting and careless overspending, and the only remedy is long-term financial reforms,” Issa added.
Also on Monday, the senior creditors of the Puerto Rico Sales Tax Financing Corporation (COFINA) issued a statement regarding Puerto Rico Governor Alejandro Garcia Padilla’s executive order to suspend debt payments owed by the Government Development Bank (GDB).
“Without the legal framework and restructuring tools required to address this debt crisis, Puerto Rico’s leaders will continue making decisions out of desperation. Governor Padilla’s executive order to default on nearly $370 million in bond payments should underscore for Congress that the cost of political inaction is rising and reinvigorate members’ efforts to pass the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA),” said former Senator Judd Gregg, an advisor to the COFINA Senior Bondholders Ad Hoc Group.
Meanwhile, Puerto Rico, which has recorded one death from the zika virus, has so far been hit with 570 locally transmitted cases, more than anywhere else in the United States, and the outbreak is expected to get worse.
Zika is linked to a severe birth defect called microcephaly, where babies are born with unusually small heads.
Last month, Dr Anne Schuchat, the Centers for Disease Control and Prevention (CDC) principal deputy director, warned that “there could be hundreds of thousands of cases of zika virus in Puerto Rico, and perhaps hundreds of affected babies”.
The virus is largely spread by mosquitoes but can also be transmitted through sex.
For this reason, one million official “NYC Condoms” will be donated to the Puerto Rico Department of Health, officials said on Monday.
“As the zika virus epidemic spreads and we continue to learn more about the risk of sexual transmission and birth defects, we wanted to use our resources to help our longstanding partners in Puerto Rico,” New York City Health Commissioner Mary Bassett wrote to her Puerto Rican counterpart, Ana Ríus Armendáriz.
