Puerto Rico’s debt situation reaches a critical point May 1, the date a $425 million debt payment comes due. Of course, the island – already spending about one third of its budget to pay debt, at great cost to government services – has no money. It has $72 billion in debt and an economy that will be in recession for 10 years come May, a trend quickly becoming known as “the lost decade.”
Congress has proposed a plan that calls for a financial oversight board, controlled mainly by outsiders, to which Puerto Rico objects, although it looks likely to remain part of the bill since trust between Washington and San Juan has seriously eroded. There are other parts of the bill that Puerto Rico finds objectionable, such as a two-tiered minimum wage (a mostly Republican idea that voters are beginning to see enacted elsewhere, such as Democratic New York).
In recent days the Wall Street Journal and the New York Times each have editorialized in favor of a more tempered proposal, one not so influenced by the hedge funds that bought Puerto Rico bonds at big discount late in the game and are looking for a big payday. Neither newspaper, however, would do away with the financial control board, which would be similar to the one Washington, D.C. labored under for several years. Each paper considers the debt restructuring provision of the bill too lengthy and onerous.
Puerto Rico and Puerto Ricans living stateside have been lobbying for extension of federal bankruptcy laws to Puerto Rico that would be applicable to certain heavily-indebted agencies (not the entire island, as has been misrepresented).
This is where the Florida connection comes in.
The WSJ warned in its editorial, titled “Puerto Rico on the Brink”: “Republicans can do nothing, watch Puerto Rico default and slide into a deep recession while Democrats exploit the issue. Adiós to Florida’s 29 electoral votes and Marco Rubio ’s Senate seat.” About 1 million Puerto Ricans reside in Florida, nearly rivaling the Cuban population.
Cue the NY Times (“Only Congress Can Rescue Puerto Rico”): “If Congress does not act now, Puerto Rico’s financial crisis could drag on for years. The island’s government would have to cut more public services, and more of the island’s 3.5 million people would seek a better life on the mainland.” Over 112,000 Puerto Ricans migrated to the states from the island in the first 10 months of 2015.
˜˜María Padilla, Editor