A financing unit of the Puerto Rican government failed to make a $93.7 million debt-service payment on Wednesday, underscoring recent warnings by Gov. Alejandro García Padilla that the commonwealth, which is seeking a “negotiated moratorium” on its $72 billion of debt, is fast running out of cash.
The unit, the Public Finance Corporation, was created to help with the central government’s chronic budget deficits. It has a little more than $1 billion in outstanding bonds.
The corporation’s bonds are backed by a promise that the Puerto Rican legislature will appropriate the cash needed to pay them down. But officials said that for this fiscal year, which began July 1, lawmakers did not appropriate the funds.
“In accordance with the terms of these bonds, the transfer was not made due to the non-appropriation of funds,” said Melba Acosta Febo, head of the Government Development Bank.
Bonds backed by legislative appropriations are generally considered a weaker credit than general-obligation bonds, and defaulting on such debt is arguably less of a provocation. General-obligation debt is secured by the “good faith and credit” of the central government, and in Puerto Rico it is also backed by an unusual constitutional promise to pay such bonds before any other expenditures. So far Puerto Rico has been making its scheduled payments on its $13 billion of general-obligation bonds.
But Puerto Rico has other payments coming due soon, including $276 million by the end of September to a fund that collects cash to distribute to the general-obligation bondholders. And on Aug. 1, another arm of the government, the Government Development Bank, is scheduled to repay $140 million of principal.
Over the past year much of Puerto Rico’s general-obligation debt was acquired at deeply discounted prices by hedge funds, which stand to make a profit if other types of debt go unpaid, leaving more cash to pay the general-obligation bonds.
Bills have been introduced in both houses of Congress allowing Puerto Rico’s public enterprises access to the bankruptcy courts under Chapter 9; if that were enacted, Puerto Rico might be able to impair its revenue debts. But so far the bills have not won the support of congressional Republicans.
In June, Mr. García Padilla said in an interview with The New York Times that Puerto Rico was in “a death spiral” and he had no choice but to seek relief.
That raised questions about a $416 million revenue-bond payment coming due on July 1, from a large government power authority known as Prepa.
Mr. García Padilla had expressed concern about parting with so much money just before hurricane season, when Prepa was likely to need to marshal its resources for repairs.
But market sources said that at the last minute, monoline insurers that had guaranteed Prepa’s bonds provided enough cash to avoid a default. For them, a default would have triggered costly insurance claims.
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A Puerto Rican flag flies on top of a building in the Old City of San Juan, Puerto Rico, on July 8, 2015. (Christopher Gregory/Bloomberg News)
July 15 at 8:12 PM
DEBT RELIEF
Puerto Rico agency fails to transfer funds
Puerto Rico’s Public Finance Corp. failed to transfer funds to pay the principal and interest on its bonds, according to a filing Wednesday, highlighting the cash problems the U.S. territory is experiencing as it tries to restructure $72 billion in debt.
The transfer of $93.7 million was for a debt-service payment due Aug. 1 by PFC, which provides financing to the island’s agencies.
U.S. Democratic senators on Wednesday introduced a bill to allow Puerto Rico’s public entities to file for bankruptcy under federal laws. Puerto Rico’s public entities currently cannot make use of Chapter 9 bankruptcy laws as entities in U.S. states can and instead have to renegotiate their debts with creditors.
Sens. Richard Blumenthal (Conn.) and Charles E. Schumer (N.Y.) introduced the bill along with 10 other senators. The bill is identical to one introduced in the House this year by Puerto Rico’s resident commissioner, Rep. Pedro Pierluisi (D). “What we are proposing is that those public corporations and municipalities in Puerto Rico be given the same access to Chapter 9 as any similar entities in the United States,” Blumenthal said. Chapter 9 is the section of the U.S. bankruptcy code that deals with municipal bankruptcies.
Giving Puerto Rico access to Chapter 9 would make it easier for the island’s entities to restructure their debts by providing a framework for an orderly process. Without it, they would have to deal with suits filed by competing parties.
Blumenthal said it was a “quirk in the bankruptcy law” that led to Puerto Rico’s exclusion.
“Chapter 9 would provide Puerto Rico and its 3.5 million U.S. citizens the essential legal framework that would allow us to adjust our debts in order to help generate economic growth and establish long-term fiscal stability,” Puerto Rico Gov. Alejandro García Padilla said in a statement.
Padilla said last month that Puerto Rico was unable to pay its debts and put all of the island’s various types of debt on the table for a possible restructuring, not just the debt of the island’s public corporations.
— Reuters
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(Adds reference to House bill)
NEW YORK/WASHINGTON, July 15 (Reuters) - U.S. Democratic senators introduced on Wednesday a bill to allow Puerto Rico's public entities to file for bankruptcy under federal laws as the U.S. territory starts negotiations with creditors to restructure $72 billion in debt.
Puerto Rico's public entities currently cannot make use of Chapter 9 bankruptcy laws as entities in U.S. states can and instead have to renegotiate their debts with creditors.
Senators Richard Blumenthal and Charles Schumer introduced the bill along with 10 other senators. The bill is identical to one introduced in the House earlier this year by Puerto Rico's resident commissioner Pedro Pierluisi.
"What we are proposing is that those public corporations and municipalities in Puerto Rico be given the same access to Chapter 9 as any similar entities in the United States," said Blumenthal at a press conference on Wednesday.
Chapter 9 is the section of the U.S. bankruptcy code that deals with municipal bankruptcies.
The U.S. Treasury said on Wednesday it supported the bill and was encouraged by what it called growing bipartisan recognition for an orderly bankruptcy process in Puerto Rico that the bill would ensure.
"The Puerto Rican people - over 3.5 million U.S. citizens - have persevered through a deep recession, and they should not be left to manage their financial challenges in an untested and potentially disruptive process," the Treasury said.
The bill has been bogged down in committee since February and Republicans, who control the House, have said they want to see more evidence of reforms in Puerto Rico before agreeing to Chapter 9.
Giving Puerto Rico access to Chapter 9 would make it easier for the island's entities to restructure their debts by providing a framework for an orderly process. Without it they would have to deal with suits filed by competing parties.
"Chapter 9 would provide Puerto Rico and its 3.5 million U.S. citizens the essential legal framework that would allow us to adjust our debts in order to help generate economic growth and establish long-term fiscal stability," said Puerto Rico's governor, Alejandro Garcia Padilla, in a statement.
Padilla said in June that Puerto Rico was unable to pay its debts and put all of the island's various types of debt on the table for a possible restructuring.
It was unclear which entities would take advantage of Chapter 9. The largest public corporation, power utility PREPA, has around $9 billion in debt and is currently negotiating a restructuring with its creditors. (Reporting by Edward Krudy; Editing by Cynthia Osterman, Meredith Mazzilli and Alan Crosby)
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-- Posted Wednesday, 15 July 2015 | Share this article | 3 Comments
While Greece is now dominating the debt default stage, the real tragedy is playing out much closer to home, with the downward spiral of Puerto Rico. As in Greece, the Puerto Rican economy has been destroyed by its participation in an unrealistic monetary system that it does not control and the failure of domestic politicians to confront their own insolvency. But the damage done to the Puerto Rican economy by the United States has been far more debilitating than whatever damage the European Union has inflicted on Greece. In fact, the lessons we should be learning in Puerto Rico, most notably how socialistic labor and tax policies can devastate an economy, should serve as a wake up call to those advocating prescribing the same for the mainland.
The U.S. has bombed the territory of Puerto Rico with five supposedly well-meaning, but economically devastating policies. It has:
1. Exempted the Island's government debt from all U.S. taxes in the Jones-Shaforth Act.
2. Eliminated U.S. tax breaks for private sector investment with the expiration of section 936 of the U.S. Internal Revenue Code.
3. Required the nation to abide by a restrictive trade arrangement.
4. Made the Island subject to the U.S. minimum wage.
5. Enabled Puerto Rico to offer generous welfare benefits relative to income.
While passage of such politically popular laws seems benign on the surface (and have allowed politicians to claim that their efforts have helped the poorest Puerto Ricans), in reality they have deepened the poverty of the very people the laws were supposedly designed to help. The lessons here are so obvious that only the most ardent supporters of government economic control can fail to comprehend them
Tax-Free Debt
By exempting U.S. citizens from taxes on interest paid on Puerto Rican sovereign debt, Washington sought to help the Puerto Rican economy by making it easier and cheaper for the Island's government to borrow from the mainland. As a result, Puerto Rican government bonds became a staple holding of many U.S. municipal bond funds. As with Fannie Mae and Freddie Mac bonds a decade ago, many investors believed that these Puerto Rican bonds had an implied U.S. government guarantee. This meant that the Puerto Rican government could borrow for far less than it could have without such a belief. However, this subsidy did not grow the Puerto Rican economy, but simply the size of the government, which had the perverse effect of stifling private sector growth.
In contrast to the tax-free income earned by Americans who buy Puerto Rican government bonds, those with the bad sense to lend to Puerto Rican businesses were taxed on the interest payments that they received. Businesses could have used the funds for actual capital investment (that could have increased the Island's productivity), but instead the money flowed to the Government which used it to buy votes with generous public sector benefits that did nothing to grow the Island's economy or put it in a better position to repay. That problem was left for future taxpayers who no politician seeking votes in the present cared about.
This dynamic is almost identical to what happened in Greece, where low borrowing costs, made possible by the strong euro currency and the implied backstop of the European Central Bank and the more solvent northern European nations, permitted the Greek government to borrow at far lower rates than its strained finances would have otherwise allowed.
Taxing Private Investment
Perversely, as the U.S. government made it easier for the Puerto Rican government to borrow, it made it harder for the private sector to do so. In 2006 the government ended a tax break that exempted corporate profits earned on private sector investment in Puerto Rico from U.S. taxes. As a result, U.S. businesses that had been making investments and hiring workers on the Island pulled up stakes and moved to more tax-friendly jurisdictions. The result was an erosion of the Island's local tax base, just as more borrowing (made possible by triple tax-free government debt) obligated the remaining Puerto Rican taxpayers to greater future liabilities.
The Jones Act
The Jones Act, a 1920 law designed to protect the U.S. merchant marine from foreign competition, has had a devastating effect on Puerto Rico, and should be used as a cautionary tale to illustrate the dangers of trade barriers. Under the terms of this horrible law, foreign-flagged ships are prevented from carrying cargo between two U.S. ports. According to the law, Puerto Rico counts as a U.S. port. So a container ship bringing goods from China to the U.S. mainland is prevented from stopping in Puerto Rico on the way. Instead, the cargo must be dropped off at a mainland port, then reloaded onto an expensive U.S.-flagged ship, and transported back to Puerto Rico. As a result, shipping costs to and from Puerto Rico are the highest in the Caribbean. This reduces trade between Puerto Rico and the rest of the world. Since a large percentage of the finished goods used by Puerto Ricans are imported, the result is much higher consumer prices and fewer private sector jobs. Even though median incomes in Puerto Rico are only 63% of the poorest U.S. state, thanks to the Jones Act, the cost of living is actually higher than the average state.
The Federal Minimum Wage
In 1938 the Fair Labor Standards Act subjected Puerto Rico to a federal minimum wage, but it was not until 1983 that a 1974 act, which required that the Island match the mainland's minimum wage, was fully phased in. The current Federal minimum wage of $7.25 per hour is 77% of Puerto Rico's current median wage of $9.42. In contrast, the Federal minimum is only 43% of the U.S. median wage of almost $17 per hour (Bureau of Labor Statistics (BLS), May 2014). The U.S. minimum wage would have to be more than $13 per hour to match that Puerto Rico proportion. The disparity is greater when comparing minimum wage income to per capita income.
The imposition of an insupportably high minimum wage has meant that entry level jobs simply don't exist in Puerto Rico. Unemployment is over 12% (BLS), and the labor force participation rate is about 43% (as opposed to 63% on the mainland) (The World Bank). A "success" by the Obama administration in raising the Federal minimum to $10 per hour would mean that the minimum wage in Puerto Rico would be higher than the current medium wage. Such a move would result in layoffs on the Island and another step down into the economic pit. I predict that it could bring on a crisis similar to the one created in the last decade in American Somoa when that island's economy was devastated by an unsustainable increase in the minimum wage.
It will be interesting to see if our progressive politicians will have enough forethought and mercy to exempt Puerto Rico from minimum wage increases. But to do so would force them to acknowledge the destructive nature of the law, an admission that they would take great pains to avoid.
Welfare
In 2013 median income in Puerto Rico was just over half that of the poorest state in the union (Mississippi) but welfare benefits are very similar. This means that the incentive to forgo public assistance in favor of a job is greatly reduced in Puerto Rico, as a larger percentage of those on public assistance would do better financially by turning down a low paying job. Because of these perverse incentives not to work, fewer than half of working age males are employed and 45% of the Island's population lived below the federal poverty line (U.S. Census Bureau, American Community Survey Briefs issued Sep. 2014). According to a 2012 report by the New York Federal Reserve Bank, 40% of Island income consists of transfer payments, and 35% of the Island's residents receive food stamps (Fox News Latino, 3/11/14).
In other words, Puerto Rico's problems are strikingly similar to those of Greece. Its government spends chronically more than it raises in taxes, its economy is trapped in a regulatory morass, and its economic destiny is largely in the hands of others.
The solutions to Puerto Rico's problems are simple, but politically toxic for mainland politicians to acknowledge. Puerto Rico must be allowed to declare bankruptcy, the Federal incentive for the Puerto Rican government to borrow money must be eliminated, Puerto Rico must be exempted from both the Jones Act and the Federal Minimum wage, and Federal welfare requirements must be reduced. Puerto Rico already has the huge advantages of being exempt from both the Federal Income Tax and Obamacare, so with a fresh start, free from oppressive debt and federal regulations, capitalism could quickly restore the prosperity socialism destroyed. With the current incentives provided by Acts 20 and 22 (which basically exempt Puerto Rico-sourced income for new arrivals from local as well as federal income tax - see my report on America's Tax Free Zone) and with some additional local free market labor reforms, in a generation it's possible that Puerto Ricans could enjoy higher per capita incomes than citizens of any U.S. state.
If Washington really wanted to accelerate the process, it should exempt mainland residents from all income taxes, including the AMT, on Puerto Rico-sourced investment income, including dividends, capital gains, and interest related to capital investment.
Read the original article at Euro Pacific Capital.
Best Selling author Peter Schiff is the CEO and Chief Global Strategist of Euro Pacific Capital. His podcasts are available on The Peter Schiff Channel on Youtube
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Officials from Puerto Rico met in New York Monday to explain to Wall Street lenders their plan to deal with a fiscal meltdown that threatens to sink the US territory further into a Greek-style financial abyss.
Sounds like progress, right?
Well, that depends on how you define progress. For holders of the island’s more than $70 billion in debt, the increase in taxes and other austerity measures Gov. Alejandro Garcia Padilla says he might consider in exchange for some degree of debt relief might be a good thing.
But for the people of Puerto Rico, it couldn’t be worse. It all but ensures a downward spiral of big government squeezing a smaller and smaller tax base so Wall Street can get a quick payday and we can all take a victory lap and proclaim “crisis averted!”
Yesterday, Melba Acosta, head of Puerto Rico’s Government Development Bank, gave few concrete details how she and other government officials plan on preventing a financial collapse.
In fact, she told nearly 300 investors only that shared sacrifice is needed “from all our stakeholders,” such as citizens of the island and bond holders, though she also said there can be no permanent solution without help from the US federal government. (Translation: Give us bailout money, please, or something close to it.)
President Obama and Congress have also offered little else in the way of a solution to the island’s looming default.
Such lack of political leadership has left Wall Street and some of the island’s financial bureaucrats calling the shots, which guarantees higher taxes and more economic misery even if the “deal” includes some modest debt relief.
This is a tragedy with roots in the big-government solutions to poverty that keep making bad situations worse across the globe.
Puerto Rico isn’t a state; it’s a territory. Despite that, the US government gave it authority to borrow as if it were a state and issue tax-free municipal bonds. With that, Puerto Rico’s debt has exploded even as its economy began to contract, all in an effort to maintain its welfare state.
Wealthy individuals and, more recently, hedge funds have gobbled up Puerto Rico’s various classes of bonds because of this huge tax advantage and because they believed that, like most municipalities, Puerto Rico wouldn’t want to risk default and its consequences, namely investors refusing to buy future bond issues except at steep discounts.
All of which ignored the fact that while municipal defaults are rare, they aren’t unheard of (see: Detroit), and that the US government has pushed the island’s economy further toward the brink with “progressive” policies that would make President Obama, Bernie Sanders and Hillary Clinton proud.
Puerto Rico should have a booming tourist economy. But it doesn’t because since the 1970s, its minimum wage has been equivalent to the federal rate of $7.25. It’s cheaper for the tourist industry to set up shop elsewhere in the Caribbean than in Puerto Rico.
OK — but how about all those tax incentives given to lure big companies, like those in the Pharma industry? That worked for a while, until Bill Clinton caved to his class-warfare buddies who saw the tax loophole benefitting big business and pressured him to phase it out, which he did.
The result: worsening unemployment (now above 12 percent), extremely high crime rates and a fleeing middle class — just what New York City faced in the 1970s during our brush with insolvency. But at least New York was and always will be New York City: The center for finance and international business, and thanks to the precedent set by Rudy Giuliani, a safe place to live.
Puerto Rico has none of that, which makes the hole it finds itself in seem insurmountable. Its debt-to-GDP ratio is close to 70 percent, which is several times higher than the most debt-loaded states. With such a small population (around the size of Connecticut), and low economic growth (its median yearly income is $19,500 compared with $52,000 on the mainland), there’s no way in hell it can possibly pay back all its bills.
But there’s a solution: Be clear with your bond holders. They’ll give up something (perhaps debt relief or at least a temporary reprieve) in exchange for a revamping of the tax code, creating a more business-friendly environment and a plan to cut down the crime rate.
It’s worked elsewhere, why not in Puerto Rico?
Charles Gasparino is a Fox Business Network senior correspondent.
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SAN JUAN, P.R. — On an island that is flirting with default, fending off comparisons to Greece and losing its people to the mainland, the biggest problem most people face is something more elemental — one of the worst droughts in Puerto Rico’s history.
There has been so little rain here that two months ago the government was forced to start rationing water on the populous eastern side of the island, including in many San Juan neighborhoods. Carraizo, the major reservoir serving parts of the city, has dropped nearly 18 feet in recent months, shrinking so noticeably that people can now fish off its sandy shores. The last time water rationing was ordered on the island was two decades ago.
For 160,000 residents and businesses on the island, water is turned off for 48 hours and then back on for 24 hours, sending people into a frenzy of water collection. Another 185,000 are going without water in 24-hour cycles, and 10,000 are on a 12-hour rationing plan.
“This is the strictest rationing we’ve ever had,” said Alberto M. Lázaro, the executive president of the Puerto Rico Aqueduct and Sewer Authority. “It’s been raining, though the showers that should drop water in the east coast are dropping the water in the west coast.”
The drought here has not received as much attention as the one in California and other Western states. But the dry weather, which meteorologists say is caused by the Pacific warming pattern known as El Niño, has spread across much of the Caribbean, affecting countries like Cuba and the Dominican Republican as well as crops and livestock. In Puerto Rico, some reservoirs have come within 30 days of running out of water.
The drought here has cost the water authority as much as $15 million a month as payments have fallen and operating costs have risen, a big hit for an agency already $5 billion in debt. So far, 340,000 households and businesses — about 28 percent of the island’s total — in 13 municipalities are at times going without water. And the problem is growing worse. The United States Drought Monitor reported last week that 73 of 78 municipalities on the island were experiencing drought, some on the extreme side.
The desertlike weather is making it difficult for ranchers to feed their cattle, and farmers on the south coast have postponed planting vegetables so far. Even fish are feeling the pain. At La Plata reservoir in Toa Alta, thousands of sardines have died from lack of oxygen.
On the other hand, tourists are mostly unaffected, because most of the island’s resort hotels are served by a “supertubo,” the North Coast Superaqueduct that pulls water from a separate system in the center of the island.
Ask any of the worst-hit residents about the water scarcity, and they will rattle off the rationing timetable by rote, keeping careful track of when water is turned off and on. Pots, pans, buckets, gallon jugs, liter bottles and garbage cans are scattered about houses like flourishes of conceptual art. So many people have bought cisterns for their roof, some hardware stores have run out.
When the aqueduct releases water, the rush begins — dishes are washed, bodies are scrubbed and, most important, containers are filled in preparation for the next 48 hours.
And while the restrictions have brought out the cranky side of some islanders, particularly those used to tempering Puerto Rico’s swelter by showering once or twice a day, they have also spurred bursts of inventiveness and camaraderie as residents try to capture every drop of water and then recycle those drops in every way imaginable.
“Necessity is the mother of invention,” said Carli Davila, 39, who lives in the Hyde Park section of San Juan, near the University of Puerto Rico. “It’s like Cuba. When you are missing stuff, when you have shortages, you definitely move toward the creative side.”
Mr. Davila, an online video content producer who calls himself compulsive about cleanliness, said he had experienced an epiphany about the global scarcity of water (even though his dirty car and windows are driving him crazy).
“You realize how much water you waste and how much you can do without,” Mr. Davila said, adding that not everyone was being as conscientious. Friends, he said, are showering at work or taking luxurious 30-minute showers on days the water is flowing. “It’s part of the selfish selfie generation.”
After weeks of dealing with rations, Mr. Davila has pieced together a survival system. He cleans his hands in his toilet tank (not the bowl); he washes dishes with water saved in pots and pans next to his kitchen sink; he keeps the dishwasher full, on a countdown toward water; and his fridge is stocked with pitchers of water.
He also equipped his shower with a small “pocket” water holder that when uncapped lets loose a flow of water. It is cold but functional. Next to the shower sits a large plastic garbage can full of water.
Others are equally inventive. One man placed a reverse pump in his pool and uses pool water for his toilet, shower and sinks. Another has punctured the caps of two-liter bottles, to make the water stream out more slowly. Children are going old school and bathing in buckets. Shower water is put in the toilet tank for flushing.
Analdin Saldaña, 83, walked around his old, small wood-framed house, describing his system of buckets, as his wife, who has health problems, watched from the couch. There are the drinking bottles, the paint buckets for the shower, the plastic barrels that fill the paint buckets and the jugs that fill the drinking bottles. He has placed a giant blue drum next to the sink to wash dishes. When the water is on, he fills them all with the garden hose.
“We survive,” he said, adding that he was envious of neighbors with cisterns.
Meanwhile, radio stations and newspapers run public service announcements about the schedules. Advice — including a suggestion that men should shower with their wives, offered up by one former mayor — is traded like gossip. The aqueduct authority provides 95 “oasis” water tanks where people can fill their bottles. And more restaurants and homes have resorted to disposable tableware.
Some activities are simply forbidden, and people risk fines if they are caught. For example, use only recycled water to hose down driveways, fill swimming pools, wash cars or water lawns (and that only during the day).
Cisterns pose a problem. Because they end up holding nearly as much water as some people use in 48 hours, they can undermine the rationing.
Mr. Lázaro, of the aqueduct board, said he was hopeful that an end to the drought was in sight.
“We are optimistic this will pass sooner rather than later,” he said. “We are getting into the season where we get tropical waves every two, three or four days.”
But Puerto Rico is already looking for ways to handle the next drought. It recently finished dredging a part of the Carraizo reservoir to remove decades of sediment and sand; maintenance of the reservoirs has suffered during the economic crisis.
Without more money, options are limited. Dredging would help, Mr. Lazaro said, but so would bringing in more water from the west side of the island and restarting old wells in the north.
But what is needed now — a lot of rain, not just stray showers — is beyond the island’s control. Asked when he thought the natural order would resume and it would pour in Puerto Rico, Mr. Saldaña pointed skyward: “Ask him,” he said.
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After a historic ruling in the First Circuit Court of Appeals earlier this month, same-sex couples in Puerto Rico can finally get married starting today. In October 2014, U.S. District Judge Juan Perez-Gimenez dismissed a challenge to Puerto Rico’s law that bans marriage for same-sex couples. The First District Court of Appeals overturned that decision, making Puerto Rico the second U.S. territory to welcome same-sex marriage as the law of the land.
Today's move brings Puerto Rico into compliance with the Supreme Court's historic decision withObergefell v Hodges.
In March, the government of Puerto Rico made headlines when it announced that it would no longer defend its ban on marriage for same-sex couples. Justice Secretary Cesar Miranda told Reuters, “The decision recognizes that all human beings are equal before the law. We believe in an equal society in which everyone enjoys the same rights.”
The situation for LGBT people around the world varies widely. As some countries embrace equality, in others, LGBT people continue to suffer from discrimination, persecution, and violence.
- Puerto Rico joins 25 countries and territories in opening their doors to marriage equality.
- But around the world LGBT people still face violence, persecution and discrimination. In 10 countries, same sex activity is punishable by death and 75 countries criminalize same-sex relationships. Hundreds of transgender individuals have been brutally murdered in the last year.
- Governments from Nigeria to Kazakhstan have fought to silence equality advocates and organizations with so-called “anti-propaganda” laws and legislation.
Federal Reserve Chairwoman Janet Yellen on Wednesday said the central bank “can’t and shouldn’t be involved in” Puerto Rico’s municipal debt crisis, leaving any potential government intervention to Congress.
“I think it’s appropriate for Congress to consider what’s best to do in this case,” Ms. Yellen told lawmakers during a hearing before the House Financial Services Committee.
While the Fed is staying out of the situation, it is watching developments closely for signals of wider-reaching effects as the commonwealth struggles to repay creditors.
“What we have been doing…is monitoring developments in Puerto Rico,” Ms. Yellen said. “We are looking to see are there risks that are being transmitted to the broader municipal debt market and we’re not seeing signs of contagion.”
Ms. Yellen said she had no informed judgment on the best course of action for the island, though she maintained that it is best the Fed doesn’t step in as a creditor to any state or municipality.
Puerto Rico, a U.S. territory, has about $72 billion in debt outstanding and is struggling with a weak economy and declining population. Gov. Alejandro García Padilla said last month the commonwealth can’t pay its debts and called for negotiations with bondholders.
U.S. lawmakers are weighing legislation that would grant the island’s authorities the power to use chapter 9 of the U.S. bankruptcy code to restructure their huge debt loads. The option is available to municipalities in the 50 states—for example, Detroit used the tool in 2013—but is not available to Puerto Rico.
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