Hurricane-torn Puerto Rico says it can’t pay any of its debts for 5 years

Desdemona Despair

By Patricia Mazzei and Mary Williams Walsh
24 January 2018

(The New York Times) – The devastation wrought by Hurricane Maria has made Puerto Rico’s already dire financial situation even worse: The island’s leaders acknowledged late Wednesday that they will not be able to pay down any portion of their more than $70 billion debt for the next five years because of the damage.

Just before the hurricane, Puerto Rico had made plans to pay creditors a total of $3.6 billion through 2022. That was a fraction of the amount due, had the island, a United States territory, not gone into default.

Now, Puerto Rico expects its budget to be $3.4 billion in the red this year — a deficit that will take five years to close — because of the storm’s toll. On Wednesday, Gov. Ricardo A. Rosselló said that measures were needed to help the island’s government achieve a balanced budget, as required by the federal oversight board that controls Puerto Rico’s troubled finances. Without the economic reforms, the deficit would be closer to $8 billion, Mr. Rosselló’s administration estimated. But some creditors sharply criticized the governor’s projections, signaling legal battles to come.

After years of propping up a struggling economy with unsustainable borrowing, Puerto Rico’s financial reckoning was inevitable. The hurricane’s long-lasting impact, a new plan shows, will only make matters worse and extend the suffering of the island’s workers and businesses.

The five-year debt moratorium was part of an updated fiscal plan that Puerto Rico was required to submit to the board on Wednesday. An earlier draft had been approved, with certain exceptions, before Hurricanes Irma and Maria slammed into the Caribbean island in September. But that plan had to be reworked in light of Maria’s vast devastation, which prompted tens of thousands of Puerto Ricans to flee the island amid job layoffs and power blackouts. Nearly a third of customers remain without electricity, more than four months after the storm.

“We already had a recession in Puerto Rico,” Mr. Rosselló said. He added that the hurricane’s “social impact was significant, because of the exodus and population decrease we’ve had in Puerto Rico, and expect to have in the future.” The government projects its population will shrink by 19.4 percent over the next five years, with a total exodus of over 600,000 people.

In the new fiscal plan, the government relies heavily on federal money both to repair damage and rekindle the economy, which the plan estimates contracted by 11.2 percent, nearly triple what the government estimated last year. It calls for receiving $35.3 billion in public assistance from the Federal Emergency Management Agency. But the island hopes to receive “significantly more” in assistance, having requested $94.4 billion in disaster aid from Congress.

Whether Congress will agree to the disaster aid request remains in question. Hurricane relief was kept separate from a stopgap spending bill last month, and lawmakers, embroiled in a political fight over immigration policy, have yet to decide when they might take up the aid bill. [more]

Hurricane-Torn Puerto Rico Says It Can’t Pay Any of Its Debts for 5 Years