Puerto Rico's fiscal reform plan addresses its $72 billion debt

In addition to creating a control board, the five-year plan suggests Puerto Rico seek equal treatment from the US government regarding tax incentives and health care reimbursements. 

Ricardo Arduengo
A protestor shouts during a a protest in the financial district of San Juan demanding the island's public debt not be paid to bondholders on July 15. This summer, Gov. Alejandro Garcia Padilla said Puerto Rico's outstanding $72 billion public debt is unpayable given the island's long recession.

Puerto Rico's government released a long-awaited fiscal reform plan on Wednesday that would reduce much of the island's $72 billion public debt and calls for restructuring the remainder at the expense of bondholders.

The five-year plan addresses only $47 billion of the US territory's debt, leaving out debt held by Puerto Rico's troubled power company, as well as its water and sewer company.

During a background briefing, members of the group that worked on the plan said Puerto Rico's Government Development Bank would run out of money by the end of this year if action is not taken and warned that the government would face a liquidity crunch next year if the plan is not implemented.

It is unclear how creditors and bondholders will react to the plan, which still requires approval by Puerto Rico's legislature and governor.

The plan calls for the creation of a five-member control board, whose members would be appointed by the governor but would take into account suggestions from creditors and potentially the federal government. The board would oversee implementation of the plan, but officials said it was too early to say what kind of power the control board would have if the government does not meet financial objectives.

Officials say the government also should consider lowering the minimum wage for young workers, invest in private-public partnerships and cut subsidies to municipalities and the University of Puerto Rico, among other things.

It is unclear how many of these suggestions will be implemented. Officials said they anticipate an intense debate in Puerto Rico's House and Senate and noted that 2016 is an election year.

The plan also states that Puerto Rico should seek equal treatment from the US government regarding tax incentives and health care reimbursements.

Puerto Rico Gov. Alejandro Garcia Padilla has said the $72 billion public debt is unpayable and needs restructuring.

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.