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A judge signs an agreement allowing Puerto Rico to start emerging from bankruptcy: NPR

A Puerto Rican flag flutters on an empty beach at Ocean Park, in San Juan, Puerto Rico, in 2020. Puerto Rico’s nearly five-year bankruptcy battle was resolved Tuesday, after A federal judge signs a plan to reduce the U.S. territory’s public debt burden as part of a restructuring process and allow the government to begin repaying creditors.

Carlos Giusti / AP


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Carlos Giusti / AP


A Puerto Rican flag flutters on an empty beach at Ocean Park, in San Juan, Puerto Rico, in 2020. Puerto Rico’s nearly five-year bankruptcy battle was resolved Tuesday, after A federal judge signs a plan to reduce the U.S. territory’s public debt burden as part of a restructuring process and allow the government to begin repaying creditors.

Carlos Giusti / AP

SAN JUAN, Puerto Rico — Puerto Rico’s nearly five-year bankruptcy battle is coming to an end after a federal judge on Tuesday signed off on a plan to cut the U.S. territory’s public debt burden as part of a federal law. restructuring process and allowing the government to begin repaying creditors.

The plan marks the largest municipal debt restructuring in U.S. history and was approved after intense negotiating efforts, heated hearings, and multiple delays as the island struggled. struggling to recover from deadly hurricanes, earthquakes and pandemics that exacerbated its economic crisis.

“There has never been a public restructuring like this anywhere,” said David Skeel, chairman of the federal supervisory board appointed to oversee Puerto Rico’s finances who worked with the judge on the plan. anywhere in the US or in the world.

He noted that no bankruptcy mechanism exists for US countries or states like the one that Puerto Rico has been granted.

“This is an incredibly complex and large and significant bankruptcy, noting that the island has three times as much debt as Detroit,” Skeel said.

In 2015, the Puerto Rican government declared that it could not afford more than $70 billion in public debt that it had accumulated through decades of mismanagement, corruption, and over-indebtedness. It also has more than $50 billion in public pension debt. In 2017, it filed for the largest city bankruptcy in U.S. history, a year after the U.S. Congress established a financial oversight and management board for Puerto Rico.

The central government’s debt restructuring plan went into effect March 15 and could be appealed, although Skeel expects the judge to confirm that.

The board said the plan, signed by federal judge Laura Taylor Swain, would cut Puerto Rico’s public debt by 80 percent and save the island more than $50 billion in debt payments as some creditors agreed to deep cuts. Board members noted that the plan reduced claims against the government from $33 billion to just over $7.4 billion, with 7 cents of every tax dollar going to the service. debt service, compared with 25 cents previously.

“This period of financial crisis is coming to an end,” said Natalie Jaresko, chief executive officer of the board. “We’ve accomplished what many thought was impossible.”

The plan also avoids proposed pension cuts that have led to heated debates and created a rift between the board and Puerto Rico’s legislature and the island’s governor, which has vehemently opposed.

The plan notes that Puerto Rico has enough resources to repay its debt through 2034, but critics say the government does not have enough money to meet debt payments and warns of austerity measures. belly.

Jaresko brushed off those worries, saying that despite the budget cuts, there were no layoffs or agency closures.

“It’s not austerity,” she said. “People look at the last 5 years and think it’s going to stay that way forever, but it’s not.”

Still pending are debt restructurings by several government agencies, including the Puerto Rico Highway and Transportation Authority and the Puerto Rico Electric Power Authority, the largest debt holder.

“This is very important for the Puerto Rican economy because if it means increasing energy costs, it makes us less competitive,” said José Caraballo, Puerto Rican economist and professor. than.

He added that the island will likely enter the market in three to five years to issue bonds for capital projects but warned that it should avoid repeating past mistakes.

“Borrowing is playing with fire,” he said. “You need to have people who know what they’re doing. Otherwise, people can go back to this disaster of what we call a debt crisis.”

Governor Pedro Pierluisi said that although the plan passed Tuesday was far from perfect, it represented a big step forward for the island’s economic recovery.

“We still have a lot of work ahead of us,” he said.

José Luis Dalmau, president of Puerto Rico’s senate and a member of the main opposition party, also praised the plan, calling it a transcendent step for the island’s economic recovery.

“From this point on, a new page of fiscal responsibility, good governance, and unity will lead to a more prosperous economy, job creation environment and more fiscal stability,” he said.

Jaresko noted that the plan has railings to prevent a repeat of the island’s debt crisis, including allowing only long-term loans for capital improvement projects. The council, known as “la junta” in Puerto Rico and opposed by many, is expected to last for at least three more years, or until Puerto Rico has four consecutive balanced budgets, said Skeel. speak.

“We’re not going to stay longer than a day on our mission,” Jaresko said. “Our goal is to accomplish what we have been instructed by Congress.”

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