Puerto Rico’s long bankruptcy battle is coming to end after a federal judge on Tuesday okayed a plan to restructure the US territory’s public debt.
The plan was approved after exhaustive bargaining efforts, fiery hearings and multiple delays caused by deadly hurricanes and earthquakes that have hit the island in recent years. The coronavirus pandemic has also intensified the US territory’s economic crisis.
What is in the deal?
The plan — the largest municipal debt restructuring in US history — would slash the territory’s debt by nearly 80% and save it more than $50 billion (€44.1 billion) in debt service payments, the federal board that has supervised Puerto Rico’s accounts since 2016 said on Twitter.
Judge Laura Taylor Swain signed off on the fiscal adjustment project on Tuesday, after the plans were approved by the island’s authorities in October last year.
The plan also does not include previously proposed pension cuts, which caused heated debate and were strongly opposed by Puerto Rico’s governor and lawmakers.
How have officials reacted?
The case and legal process was unprecedented in the United States — highlighting the legal difficulties faced by US territories which are legally classed differently than US states. The island also had three times as much debt as the city of Detroit, which filed for bankruptcy in 2013.
“There has never been a public restructuring like this anywhere in America or in the world,” said David Skeel, the chairman of the federal board appointed to oversee Puerto Rico’s accounts.
“This was an astonishingly complex and large and important bankruptcy,” Skeel added.
Puerto Rico’s economic recovery has also been hampered by repeated natural disasters, including deadly hurricanes and earthquakes
Puerto Rico’s governor, Pedro Pierluisi, said the judicial decision “represents a great step for the economic recovery” of the island.
“We are facing a transcendental moment in which the Government of Puerto Rico is on its way to ending the bankruptcy process,” he said in a tweet.
The long road to bankruptcy
Puerto Rico has seen stringent austerity policies since 2005, implemented by successive governments to try to reduce its debt.
The island’s government declared in 2015 that it was unable to pay a debt of more than $70 billion that it had accumulated through decades of mismanagement, corruption and excessive borrowing.
The US Congress then created a law called Promesa that enabled Puerto Rico’s government to file a bankruptcy petition in May 2017.
dvv/rs (AFP, AP)
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