Puerto Rico passes bill to create fiscal oversight board

ReutersNov 18 Puerto Rico’s Legislature on Tuesday approved introducing a governor-appointed board to oversee the island’s finances, a step its government hopes will show creditors it is serious about spending reforms.

The fiscal oversight board, proposed by Governor Alejandro Garcia Padilla in an October bill, would include five members appointed by the U.S. territory’s governor. It was passed by both chambers on Tuesday night, just ahead the midnight expiration of the legislative session. It now moves to the governor’s office for its enactment.

Among the amendments to the bill was a measure to specify that the board will endorse, rather than approve, the commonwealth’s five-year fiscal and economic plan, and will mostly certify, rather than control, fiscal practices.

The board kept some budget-control powers over the central government in the amended bill, but not to the degree set out in the governor’s version.

Puerto Rico is mired in economic crisis, with a 45 percent poverty rate and some $70 billion in debt that Garcia Padilla has called “unpayable.”

Some analysts expect the island to default as early as December 1, when more than $350 million in debt payments fall due.

Garcia Padilla has called for concessions from financial creditors, but has faced resistance from bondholders who have demanded spending reforms as a condition for easing repayment terms.

Also on Tuesday, House Speaker Jaime Perelló anticipated that the governor could be announcing soon he will convene a special session of the island’s Legislature to continue discussions on a separate bill designed to implement a financial restructuring at PREPA, the island’s utility carrying more than $8 billion of debt.

PREPA has already reached a restructuring deal with some of its creditors, but the deal would require a debt exchange and the creation of a new charge on customers’ bills, which the bill seeks to formalize.

The bill would also make changes to PREPA’s governance and management.

Under the restructuring agreement, Puerto Rico’s Legislature has a deadline of Friday to pass the bill, though the deadline could be extended. (Reporting by a contributor in San Juan; Writing by Nick Brown in San Juan and Rory Carroll in San Francisco; Editing by Eric Meijer)

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