Inside the Billion-Dollar Battle for Puerto Rico's Future - The New York Times
Link to Article
I wanted to share the above named article from the December 19, 2015 edition of the New York Times. It provides a great background and overview of events leading up to the current situation. Insight into the political and financial landscape is explained in an easy to understand way. The article effectively explains the "sides" to each argument. Although they seem clear, they are indeed ambiguous.
Total Debt: 70 Billion USD maturing over 5-10 years
Party 1 - Debtors (Puerto Rican Government (65% of debt, PR Power Authority (35% of debt))
Party 2 - Lenders (20% Puerto Rican; 35% Hedge Funds; 45% Bondholders)
Party 3 - The US Federal Government
What do lenders want?
To get paid. This is the only possible solution for them. They aren't even willing to take a haircut on the debt owed. They will go to any extent to ensure they get what they want. Political contributions, lobbying efforts, will all protest a bailout or debt restructuring of any kind. Even a deal where the Power Authority was allowed to declare bankruptcy (or restructure debt) in an effort to restructure debt (33%) was strongly lobbied against by the holders of that specific debt. The deal would have cost US taxpayers nothing yet it was not even considered. Marco Rubio, for example, is stuck in the middle of a Tea Party base and a Puerto Rican constituency that helped elect him to Senate in Florida. A supporter of relief for Puerto Rico 6 months ago, Rubio has since backed away from sponsoring a relief bill and now says a "bailout" should be a last resort. Just the fact they are calling it a "bailout" and not "debt restructuring" (like many companies engage in on a regular basis) shows the power of politics.
What do debtors want?
They want to pay the debt but they can't. If they can't pay they want someone to give them the money (bailout) or they want debt restructuring (loan forgiveness). They know they can't pay so they are just waiting for situation to necessitate relief described in the previous sentence. They are also hiring lobbyists of their own to promote a bailout.
What does the US Federal Government want?
They promote stability. They know the debtors can't pay and the lenders will have no mercy. They won't approve a bailout because the lobbyists have done their job with the Republican led Congress. Obama can't successfully pass special Chapter 9 bankruptcy protection for US Territories in a Republican Congress. They don't want a humanitarian crisis to take place on an island where 40% live in poverty so they offer a bandaid in the form of $3 Billion USD if the island submits to financial oversight.
Link to Article
I wanted to share the above named article from the December 19, 2015 edition of the New York Times. It provides a great background and overview of events leading up to the current situation. Insight into the political and financial landscape is explained in an easy to understand way. The article effectively explains the "sides" to each argument. Although they seem clear, they are indeed ambiguous.
Total Debt: 70 Billion USD maturing over 5-10 years
Party 1 - Debtors (Puerto Rican Government (65% of debt, PR Power Authority (35% of debt))
Party 2 - Lenders (20% Puerto Rican; 35% Hedge Funds; 45% Bondholders)
Party 3 - The US Federal Government
What do lenders want?
To get paid. This is the only possible solution for them. They aren't even willing to take a haircut on the debt owed. They will go to any extent to ensure they get what they want. Political contributions, lobbying efforts, will all protest a bailout or debt restructuring of any kind. Even a deal where the Power Authority was allowed to declare bankruptcy (or restructure debt) in an effort to restructure debt (33%) was strongly lobbied against by the holders of that specific debt. The deal would have cost US taxpayers nothing yet it was not even considered. Marco Rubio, for example, is stuck in the middle of a Tea Party base and a Puerto Rican constituency that helped elect him to Senate in Florida. A supporter of relief for Puerto Rico 6 months ago, Rubio has since backed away from sponsoring a relief bill and now says a "bailout" should be a last resort. Just the fact they are calling it a "bailout" and not "debt restructuring" (like many companies engage in on a regular basis) shows the power of politics.
What do debtors want?
They want to pay the debt but they can't. If they can't pay they want someone to give them the money (bailout) or they want debt restructuring (loan forgiveness). They know they can't pay so they are just waiting for situation to necessitate relief described in the previous sentence. They are also hiring lobbyists of their own to promote a bailout.
What does the US Federal Government want?
They promote stability. They know the debtors can't pay and the lenders will have no mercy. They won't approve a bailout because the lobbyists have done their job with the Republican led Congress. Obama can't successfully pass special Chapter 9 bankruptcy protection for US Territories in a Republican Congress. They don't want a humanitarian crisis to take place on an island where 40% live in poverty so they offer a bandaid in the form of $3 Billion USD if the island submits to financial oversight.
La Perla (North Corner) October 2014
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