Puerto Rican Governor Pedro Pierluisi signed a law by the end of Tuesday on a bill that would halve U.S. local debt by half, but also sparked protests and led to heated exchanges between lawmakers and the governing body of the U.S. regional treasury.
The law aims to end a collapse-like process that began after Puerto Rico announced in 2015 that it would not be able to repay its more than 70 billion public debt accumulated over decades of over-indebtedness, mismanagement and corruption. In May 2017, the government filed a lawsuit against the largest municipal disaster in the U.S.
The law will allow Puerto Rico to reduce its debt by more than $ 30 billion, issue a new $ 10 billion debt and provide about $ 7 billion to bond owners who have not been paid for five years. Critics say the Puerto Rican government does not have the funds to monitor the proposed debt service and warn of future spending cuts.
However, the law, following a bill passed by 14-13 votes in the Senate and later 34-12 in the House, is still confusing because it lacks the support of the governing body, despite Gov. Pedro Pierluisi of Puerto Rico in the harvest.
"Despite the huge obstacles, today we have taken a big step towards ending the collapse and leaving the financial regulatory board," Gov. Pierluisi in a written statement.
One of the biggest disputes between the Puerto Rican government and the board was the proposed reduction in some public pensions. The government has refused to pass a bill containing any form of public pension cuts, while the board seeks to reduce pensions by more than $ 1,500 a month by 8.5%, a move that will affect some 40,000 retirees.
Other lawmakers also demanded that the University of Puerto Rico, the island's largest public university, and 78 of the island's 78 municipalities.
"That is why we must not give up in our struggle to protect the pensions of retirees, to provide the funding required by our University and to ensure that our municipalities can help their people," Pierluisi said in a statement after signing the bill. the law.
Two organizations representing mayors throughout Puerto Rico have warned in a statement that some city and city resources may be cut off by law.
"Municipalities are already making great sacrifices and changes in the budget to keep their services in good condition, some reducing hours and others being laid off," officials said.
The governing body issued a brief statement at the end of Tuesday saying it would only consider the move, although it had previously said it would not accept the law.
Disagreements between the board and the legislature threaten to cancel almost five years of negotiations with bond owners as part of a bankruptcy-like process that has cost an estimated $ 1 billion for the lawyers involved. It could also expose Puerto Rico to suspended cases as part of the process and force the government to pay prisoners.
Both sides are expected to negotiate after the state judge in the case, Laura Taylor Swain, warned Monday that she would not postpone the November 8 confirmation hearing on the program, adding that "my patience has expired."
Puerto Rican Senator José Antonio Vargas Vidot had said it was best to break the bill and go straight to mediation.
"The judge's patience is running out, and so are the people," he said.