Mixed Reaction In Puerto Rico To New Financial Oversight Board
RAY SUAREZ, HOST:
This week, Washington turned its attention to a part of the U.S. that often gets overlooked - the Commonwealth of Puerto Rico. For more than a year, the U.S. territory has been caught in a fiscal crisis, unable to make payments on its $70 billion plus debt and at the same time continuing to pay for basic services like police, education and health care.
This week, President Obama signed a law that will put a federal-appointed oversight board in charge of Puerto Rico's finances.
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BARACK OBAMA: People in Puerto Rico need to know that they're not forgotten, that they're part of the American family, and Congress's responsiveness to this issue, even though this is not a perfect bill, at least moves us in the right direction.
SUAREZ: Joining me now to talk about what this means for Puerto Rico is NPR's Greg Allen. Greg, the law creates a fiscal oversight board appointed by Congress and the White House. It's not made up of elected officials from Puerto Rico who are now in charge of the island's finances. How's that being received on the island of Puerto Rico?
GREG ALLEN, BYLINE: Well, it's a bit of a mixed bag. You have the governor, who's been pushing for this law. The non-voting representative in Congress, our other elected official, has been pushing for this law. They say it's far from perfect. They'd like to see something different, but given the circumstances, it's the best that they could get through Congress.
The business community in Puerto Rico has been positive. But you set those on one side, and on the other side you have just about everybody else. Other political leaders on the island, the leaders in the legislature there, are very negative on this. They see this as a violation of what they believe to be the island's sovereignty. We heard Senator Bernie Sanders, one of the critics of this law, call it colonialism. And that's how many people see it there - the federal government stepping in and basically exerting its authority on the island.
SUAREZ: What will the oversight board be able to do? Can it do what Puerto Rican borrowing authorities haven't been able to do - reschedule debt, make people take haircuts on the bonds?
ALLEN: Well, that is the idea. What's happened is that Puerto Rico, because of its unusual status as a territory, it is not covered by chapter nine bankruptcy law the way that other public institutions within the states are. So for that reason, Puerto Rico has been trying to get that chapter nine bankruptcy authority through Congress hasn't worked. So they've decided to support this instead.
Now, this is not being called a control board. This is being called an oversight board, as a kind of a nod to trying to get away from the charges of colonialism. But this board will be able to enter into voluntary discussions with creditors. But ultimately, it does have the authority to restructure some of the debt there by getting court approval.
And so the creditors will be forced to come to the table, talk openly about this with the knowledge that there's a big stick over their heads if they don't come up with some kind of agreement. The other big stick they have here is that all lawsuits will be on hold for several months while these debt terms are worked out. So it's really going to be talking to the fiscal oversight board or nobody.
SUAREZ: Well, while these things are all being ironed out, will Puerto Rico make any payments?
ALLEN: Well, that'll be the question for the oversight board to determine. There was a $2 billion payment due that Puerto Rico just did not make. And creditors have no recourse now except to go to the oversight board and talk to them about how they can get repayment done.
Now, the oversight board will also take charge of the island's budget. They'll require a balanced budget. They can order certain departments be cut. They can order layoffs, they can order assets of Puerto Rico to be sold. So they can determine how to raise the money to start paying back this debt and then go to the
ALLEN: creditors and say, what terms can we work out with you?
SUAREZ: But also included in the bill signed by the president is a lowering of Puerto Rico's minimum wage. Why is that in there?
ALLEN: Well, that's a controversial provision that many people on the island fought against, and Democrats fought against that. It was a Republican idea. Supporters believe that it will help address the island's high unemployment rate.
You know, the unemployment rate there is at nearly 12 percent, which is more than double the national average. The idea was to try to kick start employment by getting more young people into the workforce.
SUAREZ: During these years of crisis, taxes have been raised, public services have been cut, hundreds of thousands of people have left the island for good. Will this appointment and the provisions of this bill help what's been dogging Puerto Rico over the last 10 years?
ALLEN: Well, it will certainly help. What it does is it buys time. But everyone from the president on down say, this is not the solution. This is just a temporary respite of this crisis that has Puerto Rico by the short hairs. The idea is now that while we work out these repayment schedules for the debt, let's take other action to address its health care problems, its economic problems.
And the president and others have been calling on Congress to go back to work on Puerto Rico now and take up these other issues. But just this issue of coming up with this oversight board took Congress many months of working on and a lot of heavy lifting. So it'll be interesting to see how quickly they want to go back to take up this issue of working on Puerto Rico, which as we mentioned at the top, is a place that Congress likes to ignore.
SUAREZ: That's NPR's Greg Allen. Greg, thanks a lot.