Congress Considers Plan To Restructure Puerto Rico's $72 Billion Debt

Apr 25, 2016
Originally published on April 27, 2016 4:07 pm
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KELLY MCEVERS, HOST:

Puerto Rico's financial crisis is at an important tipping point this week. Congress is considering a plan to restructure the U.S. territory's more than $72 billion debt. And time is running out. If Congress doesn't act, Puerto Rico is expected to miss a $400 million debt payment next week, a default that NPR's Greg Allen reports might signal the start of the island's financial meltdown.

GREG ALLEN, BYLINE: The saga that is Puerto Rico's crushing debt crisis has been running for over a year. It's a story that involves eye-glazing things like tax law, municipal bonds and hedge funds. But its impact is enormous, contributing to a stagnant economy that spurred a half-million people to leave the island.

And with a major default looming, many are beginning to speculate what a total collapse of Puerto Rico's finances would mean for bond markets and the U.S. economy. But how to make it interesting enough to grab America's attention? On his HBO show, John Oliver recruited the Pulitzer Prize-winning author of the hit Broadway play "Hamilton," Lin-Manuel Miranda.

(SOUNDBITE OF TV SHOW, "LAST WEEK TONIGHT WITH JOHN OLIVER")

LIN-MANUEL MIRANDA: (Singing) Yeah, my family is from Puerto Rico, the tropical destination where you can spend your Washingtons, the spot where you vacation, a commonwealth with not a lot of wealth, a not-quite nation, $70 billion topic of conversation.

ALLEN: Earlier this year, House speaker Paul Ryan made Puerto Rico a priority and pledged the House would craft a plan to help the island repay its bills. Fresh from his success on Broadway, Miranda has lobbied Congress to act, even offering tickets to "Hamilton" if that would help.

(SOUNDBITE OF TV SHOW, "LAST WEEK TONIGHT WITH JOHN OLIVER")

MIRANDA: (Singing) Paul Ryan, I'll come sing "Hamilton" at your house. I'll do-si-do with Pelosi. I'll wear my "Hamilton" blouse. Your citizens are suffering. Stop the bleeding. Stop the loss. Help Puerto Rico. It's just 100 miles across.

ALLEN: But there are those working to stop the plan taking shape in the House. Here's an ad that's been running in Washington and in the districts of some House members.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED MAN: Retirement accounts crushed, a bailout on the backs of savers and seniors. Tell Congress stop the Washington bailout of Puerto Rico.

ROB BISHOP: Well, you know, they've spent a whole lot of time running it in my district, and it hasn't changed my opinion because I understand what the details are.

ALLEN: That's Rob Bishop, a Republican from Utah and chairman of the House Natural Resources Committee. Bishop's committee has released two drafts of a plan for Puerto Rico, and is now working with the White House on a third that he hopes to bring for a vote this week if possible. There's bipartisan support for the plan, which would set up a fiscal control board and an orderly process for restructuring the island's debt.

It's also supported by bond funds and other creditors that hold Puerto Rican debt. The groups leading the opposition are harder to pin down. The one that paid for the ad campaign, the Center for Individual Freedom, doesn't disclose where its money comes from. Bishop believes, though, that opposition is being led by hedge funds looking to maximize the return they get on Puerto Rican debt they bought at discount prices.

BISHOP: There is a niche group that bought really cheap and want full-face dollars. And they think if there was chaos, if everything broke down, there probably would be a bailout and then they probably would be first in line to get paid back in full-face credit.

ALLEN: Bishop says critics who call it a taxpayer-funded bailout are wrong, that the bills uses no federal money to help Puerto Rico. In Puerto Rico, elected officials are watching the deliberations in Congress with a mixture of hope and dread that color much of the island's dealings with Washington. Sen. Ramon Luis Nieves opposes creation of a fiscal control board, saying it would violate the island's sovereignty. But like most on the island, he believes the solution to Puerto Rico's financial woes lies with Congress.

RAMON LUIS NIEVES: Puerto Rico's not asking for a bailout. We're not asking for a bailout. We're asking for the tools to help ourselves.

ALLEN: If Congress doesn't act, Puerto Rico's expected to default on a $422 million debt payment due next Monday. Greg Allen, NPR News, Miami. Transcript provided by NPR, Copyright NPR.