In response to the Puerto Rican Government emergency welfare act, where the Governor called upon Puerto Rico to cease paying bondholders in favor of supporting essential public works necessary for the welfare and health of the Island, Congress has been pressured to come up with a relief plan. A May 1st debt payment of 422 Million USD looms in wait. Thus far investor lobbyists have been successful in blocking any federal government aid to Puerto Rico. Legislators in favor of doing nothing are taking the position that they should allow the problem to work its way through the courts like most defaults would.
Puerto Rico may have planned this maneuver all along. It's brilliant. Since the Federal government won't allow a bankruptcy they realize they fit into the grey area that allows them to simply not pay, forcing the hand of the government they must answer to. There really wasn't any other option. The full debt isn't payable, the tax base is eroding, and public works would suffer under any austerity measure previously suggested by bondholders and Congress. Both parties probably knew this was a likely outcome. The stance of allowing the Courts to work through the problem may be the right one. After all, this is a simple matter of not paying debt once it all comes down to it.
This is certainly good news for the people of Puerto Rico. At least they can, in the short run, continue to fund water, schools, hospitals, and other essential services. I hope the voters understand their Governor took a bold step by introducing this emergency legislation during the early morning hours last week. It was the best option given optimal game theory and the legal and financial constraints at his disposal. He should be commended for these actions during a time when the Puerto Rican Government has been highly ridiculed and scrutinized for being incompetent and corrupt.
Puerto Rico may have planned this maneuver all along. It's brilliant. Since the Federal government won't allow a bankruptcy they realize they fit into the grey area that allows them to simply not pay, forcing the hand of the government they must answer to. There really wasn't any other option. The full debt isn't payable, the tax base is eroding, and public works would suffer under any austerity measure previously suggested by bondholders and Congress. Both parties probably knew this was a likely outcome. The stance of allowing the Courts to work through the problem may be the right one. After all, this is a simple matter of not paying debt once it all comes down to it.
This is certainly good news for the people of Puerto Rico. At least they can, in the short run, continue to fund water, schools, hospitals, and other essential services. I hope the voters understand their Governor took a bold step by introducing this emergency legislation during the early morning hours last week. It was the best option given optimal game theory and the legal and financial constraints at his disposal. He should be commended for these actions during a time when the Puerto Rican Government has been highly ridiculed and scrutinized for being incompetent and corrupt.
(Condado, Ashford Avenue area, October 2014)
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