How Puerto Rico Went from Being an Economic Miracle to Becoming the Territory with the Largest Public Debt in U.S. History

The “Junta”, as it is called in Puerto Rico, promoted since its arrival austerity measures with the justification that they were necessary to be able to comply with the creditors. Among the policies that faced the most opposition was a cut of almost half of the budget of the University of Puerto Rico and the intention to cut public pensions.
On Tuesday, a U.S. bankruptcy court approved a plan to restructure Puerto Rico’s central government debt.

The so-called Debt Adjustment Plan, which was held by Judge Laura Taylor Swain of the Southern District of New York, incorporates agreements between a number of creditors, reducing $33 billion in bond debt to $7 billion. Annual debt payments would be reduced by 80%.

“There has never been a public restructuring like this in all of the United States or in the world,” David Skeel, chairman of the board, told The Washington Post.

The process was marked by intense clashes between the politicians of the territory, the Junta and the creditors, who on both sides sued each other on multiple occasions in the face of several disagreements.

The bankruptcy cost more than $1 billion, paid for by taxpayers.

In those years, in addition, Puerto Rico experienced two hurricanes of greater intensity and an earthquake. Also the resignation of a governor.

“We are facing a momentous moment in which the government of Puerto Rico is on track to end the bankruptcy process and thus focus on returning to the progress that our people expect and deserve,” the current governor, Pedro Pierluisi, wrote on Twitter once the restructuring plan was announced.

The agreement signed by Swain does not contemplate the proposal of a cut to the pensions of retirees, although it does stop the defined benefit programs that cover teachers and judges.

The debt adjustment plan would take effect on March 15, but could first be challenged in court.
According to the judge, Puerto Rico has the economic resources to meet the payment of the debt until 2034. Over the next few years, it will have to continue with the implementation of “structural reforms” so as not to fall into bankruptcy again.

Original source in Spanish