Abstract
This paper provides a comprehensive breakdown of the ongoing economic crisis in the Commonwealth of Puerto Rico. It explores the backdrop of the crisis by analyzing Puerto Rico’s relationship with the U.S., macroeconomic indicators and pertinent legislations. It’s entirely unique contribution is the analysis of the newly introduced act- PROMESA, which enables Puerto Rico to restructure its debt. We have provided an explanation of the important sections of this legislation which govern the debt negotiation process. The PROMESA act has been extended to apply to other unincorporated territories of the United States as well should they run into arrears, which broadens the scope of this paper. We have extended the findings of pre-existing body of work on sovereign debt restructuring hurdles and explained how PROMESA addresses them. We have also used previous works to suggest measures to expedite Puerto Rico’s debt restructuring process with creditors. This paper could also serve as a handbook for creditors looking to navigate through the post-PROMESA debt restructuring process.
Highlights
The Puerto Rican Debt Crisis is an ongoing financial crisis related to the amount of debt owed by the Government of Puerto Rico
This research paper seeks to shed light on the new legal framework –Oversight Board established under the PROMESA bill and the role that board members must play in helping the island out of the financial crisis
We have traced several usual macroeconomic indicators that are important in a distressed economy but especially pointed out indicators like the rate of migration, labor participation rate, minimum and median wages as compared to states, and how federal legislation like the Jones Act and Section 936 have affected Puerto Rico as a territory
Summary
In an attempt to jumpstart the economy, which began contracting earnestly back in 2006, the government went on a spending spree to build new infrastructure that would create new jobs, increase connectivity that would lead to greater labor mobility This ambitious drive lacked accountability in general and inefficient use of capital has resulted in a massive debt that the government cannot make interest payments without cutting key government services like healthcare, education and public safety. Cost of energy and water supply problems have flared up, discouraging numerous companies and industries from moving their operations in Puerto Rico
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