Puerto Rico control board will squeeze debt holdouts

Significance

The announcement would mark the largest subnational bankruptcy in US history, with Puerto Rico facing debt obligations of 73 billion dollars from an array of public entities and 49 billion dollars of unfunded pension liabilities. Demonstrators on May 1 in the capital of San Juan criticised Puerto Rico Governor Ricardo Rossello’s administration, US lawmakers, the island’s federal fiscal control board and budgetary austerity.

Impacts

• Mulled port improvements and electricity liberalisation reforms could offer some economic bright spots for Puerto Rico.
• A June referendum on Puerto Rico’s status is unlikely to clarify a path from the status quo as an indebted and unincorporated US territory.
• US President Donald Trump will oppose any congressional efforts to boost federal transfers to Puerto Rico.
• However, Democrats may attempt to secure greater funding in legislative negotiations to cater to urban expatriate Puerto Rican voters.