Puerto Rico rescue can prevent investor ‘chaos’: U.S. official

U.S. Treasury Secretary Jack Lew (L) looks on as Puerto Rico's Governor Alejandro Garcia Padilla (C) shakes hands with Counselor to the Secretary Antonio Weiss in San Juan, January 20, 2016. REUTERS/ALVIN BAEZ

U.S. Treasury Secretary Jack Lew (L) looks on as Puerto Rico’s Governor Alejandro Garcia Padilla (C) shakes hands with Counselor to the Secretary Antonio Weiss in San Juan, January 20, 2016.
REUTERS/ALVIN BAEZ

REUTERS – The U.S. Congress must allow Puerto Rico to erase a share of its debt or investors will face a long, uncertain fight to recover their money from the cash-strapped island, a U.S. Treasury official said on Wednesday.

Republicans who control Congress outlined a plan this week to help Puerto Rico write off billions of dollars in debt if an agreement with creditors is out of reach.

That plan would create a forum for investors to negotiate with Puerto Rico officials while the island’s government tries to curb deficit spending that has created $70 billion in debt.

Such a plan would signal to Wall Street that the Puerto Rico financial crisis is manageable, said Antonio Weiss who is handling the issue for the Treasury Department.

Without Congressional action, Weiss said, investors face years of combat in the courts.

“Chaos will ensue and the (Puerto Rico) economy will face another lost decade,” he told the Natural Resources panel of the House of Representatives.

As a territory of the United States, Puerto Rico answers to Congress and its people are American citizens. Roughly 2.5 percent of the island’s population is migrating to the mainland each year to escape the financial crisis, Weiss said.

House Speaker Paul Ryan on Tuesday say the Congressional rescue plan was the right move but many Republicans disagree.

Wall Street would be rattled if Congress rewrote the terms of Puerto Rico debt and that could sour investor appetite for other municipal bonds, said Rep. Jeff Duncan of South Carolina.

“I believe we’re going down a slippery slope here,” Duncan said on Wednesday at a hearing on the proposal.

Rather than meddle in markets, Duncan said, lawmakers should stand aside and let Puerto Rico settle its disputes with investors.

Rob Wittman, a Virginia Republican who also sits on the Natural Resources panel agreed.

“Congressional intervention at this point would serve to alter the rule of law,” he said in a statement.

The Puerto Rico rescue effort will face a test on Thursday with a scheduled vote on the Natural Resources committee.

If a majority of Republicans turn their back on the plan or Democrats shun the proposal, Ryan will have a hard time getting a rescue through Congress.

“It would be horrible if I can’t get a majority from both parties,” Rep. Rob Bishop, chairman of the Natural Resources committee told reporters on Wednesday.

Weiss told lawmakers that the current rescue plan was not perfect but it was the cheapest option since it only involves rewriting some rules for investors.

Meanwhile, the Zika virus is spreading across Puerto Rico and the island is poorly-equipped to handle that emergency while the financial crisis looms.

“The alternative to this legislation… will in fact become a bailout,” he said.

(Reporting by Patrick Rucker, Richard Cowan and Susan Heavey; Editing by Jeffrey Benkoe, Kevin Drawbaugh and Bernard Orr)

Los comentarios para este artículo han sido cerrados.