Governor Garcia Padilla sent a letter to each member of the U.S. Senate, asking them to vote for PROMESA.
PROMESA, the Puerto Rico Oversight, Management, and Economic Stability Act, is a bill that establishes a fiscal oversight board in Puerto Rico and gives that board the power to restructure debt in Puerto Rico. Puerto Rico is specifically excluded from Chapter 9 of the U.S. bankruptcy code, the part which allows states to let their municipalities (cities, public utilities, etc.) declare bankruptcy. Under PROMESA, Puerto Rico could restructure debts.
Since Puerto Rico currently has over $70 million in debts and is expected to default again on payments this week, the ability to restructure those debts is important. Governor Garcia Padilla has already stated that he would not be able to make the July 1 payment even if he shut down the government completely. Creditors have sued Puerto Rico and Governor Garcia Padilla himself, saying that Puerto Rico’s constitution guarantees that certain creditors will be paid, even if that means doing without essential services on the Island.
The governor’s letter asks the recipients to vote for PROMESA. “I write to request that you vote in favor of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) before the end of the month,” it begins. “The House of Representatives passed PROMESA, which provides Puerto Rico a solution to its decade-long economic crisis. Although imperfect and intrusive to Puerto Rico’s autonomy, it is the only alternative available to reach a sustainable level of debt.”
The House has already passed the bill, but there are those in the Senate who oppose it strongly. One reason is that PROMESA includes an option for the governor to set a lower minimum wage for young workers in Puerto Rico. Resident Commissioner Pedro Pierluisi says that no governor will ever do that, so the clause has no teeth.
There are also those, including Senator Bob Menendez of New Jersey, who want Governor Garcia Padilla to have the power to appoint board members. And some, including Senator Bernie Sanders, who want the Fed to buy Puerto Rico bonds, something the Fed has said they will not be able to do.
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