January 25, 2016

The Hill: An Emerging Consensus on Puerto Rico’s Debt

By: Vicente Feliciano

There is emerging consensus on Puerto Rico’s debt. It involves some form of a federal financial-control board, a legal structure for debt restructuring and somewhat better treatment of Puerto Rico on some federal programs. The concept that providing a mechanism for debt restructuring is a bailout is becoming discredited.

Initially, Anne Krueger, a consultant to the Puerto Rican government, advocated some form of debt restructuring. Later, she was joined by the likes of Nobel Prize-winner Joseph Stiglitz, economists from the Federal Reserve Board and economists from the U.S. Treasury Department. Lately, they have been joined by the likes of Desmond Lachman of the conservative think tank American Enterprise Institute, who published a column in The Hill favoring a legal framework for restructuring Puerto Rico debt.

Initially, mainstream media such as The New York Times published editorials advocating debt restructuring for Puerto Rico. Later, stalwarts from the financial media such as Bloomberg, joined in. Lately, the investor-friendly Wall Street Journal published an editorial favoring a legal mechanism for restructuring Puerto Rico’s debt.

Bondholders tried to frame the discussion as one between themselves and the government of Puerto Rico as to which route was best for the well-being of Puerto Ricans. As of now, every significant segment of Puerto Rico’s civil society is in favor of a legal framework for debt restructuring. This runs the gamut from religious leaders to local media and professional associations, to former Puerto Rico Gov. Luis Fortuño, who is a Republican. The few local Republican politicians who initially opposed debt restructuring have gone quiet.

Read more here.