Washington, D.C. — The passage of the Puerto Rico Oversight, Management, and Economic Stability Act, or PROMESA, will forestall crisis for Puerto Ricans, said Center for American Progress President and CEO Neera Tanden in a statement. The bill passed a procedural hurdle in the Senate this morning and is expected to be approved later today. The legislation was recently cleared by the U.S. House of Representatives.
On July 1, the Puerto Rican government will default on approximately $800 million in general obligation bonds, a payment that the government lacks the funds to make. Under the Puerto Rico Constitution, the commonwealth’s treasury secretary must prioritize payment on these bonds, which could put Puerto Rico’s future in the hands of the hedge funds and other creditors who hold this debt. Without passage of PROMESA, hedge funds and other debtholders will likely sue to be paid, which could siphon resources from hospitals, schools, police, and emergency services.
Tanden’s full statement is below:
With PROMESA, Congress is acting responsibly to forestall an immediate humanitarian and economic crisis in Puerto Rico. The island’s future is an issue that spans party lines, and at a time when both sides in Congress cannot seem to agree on much, it is encouraging that Republicans and Democrats were able to work together on this bill. The legislation will allow Puerto Rico to restructure its debt and provide relief from the territory’s unsustainable debt obligations, while requiring that public worker pensions be adequately funded as Puerto Rico develops a new fiscal plan.
To be sure, PROMESA is not perfect—it is not a silver bullet that will solve all of Puerto Rico’s fiscal and economic problems. CAP has outlined a number of areas in which the legislation could have been improved. However, given the severity of the situation in Puerto Rico, this legislation represents necessary and immediate aid for the territory to prevent a needless catastrophe. I applaud Congress for working to pass this bill and look forward to its swift and fair implementation. Going forward, I hope both parties will continue working together to support Puerto Rico’s recovery and ultimately end its unequal treatment in federal laws and social safety programs.
Last week, the Center for American Progress Action Fund hosted Puerto Rico Gov. Alejandro García Padilla, Counselor to the U.S. Treasury Secretary Antonio Weiss, Puerto Rico Resident Commissioner Pedro Pierluisi, and Massachusetts Institute of Technology economist Simon Johnson for a discussion on PROMESA and the economic and humanitarian consequences of a failure by Congress to act.
Related resource: Congress Must Pass PROMESA to Prevent Crisis in Puerto Rico by Marc Jarsulic and Erin Cohan
For more information or to speak with an expert, contact Allison Preiss at [email protected] or 202.478.6331.
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