Puerto Rico’s government is in significant financial disarray. The country’s finances and fiscal policy are controlled by separate entities that cannot agree on what is best for the country. The government is more than $123 billion in debt, and the country lacks the infrastructure to climb out the hole. The citizens are shouldering much of the burden of the country’s bad fiscal management.
How Did Puerto Rico Get to This Point?
In the early 1970s, the Puerto Rican government started its dive into the red. They spent more money than they made and, just like any other business, had to get creative to make ends meet. The government chose to issue bonds in an ill-advised attempt at a cash infusion. This practice continued for the next 40 years until the bonds were labeled “junk” by credit bureaus. “Vulture capitalists” bought up the seemingly worthless bonds and are still holding them to cash out when the value returns. Now what?
A Country Declares Bankruptcy…Kind Of
Puerto Rico is a commonwealth of the United States and, as such, U.S. Federal law is applicable. In 2016, the U.S. Government passed the PROMESA Act. This law established a financial oversight board to coordinate debt restructuring like that of personal bankruptcy where a trustee is appointed to control assets and distribute money appropriately.
The appointment of the financial oversight board is important because, like in personal bankruptcy, it halts any attempts by creditors to pursue payment directly or by utilizing the legal system to do so. However, not everyone is thrilled with the broad powers of this board.
Puerto Rico Citizens Suffer
The citizens of Puerto Rico are paying the price for the poor fiscal policy that threw the country into debt. The board, established under the PROMESA Act, is moving to take billions of dollars out of public programs that benefit a struggling workforce. Pension debt is soaring, and retired families are displaced. The financial board is prioritizing payment to creditors over the well-being of the country’s citizens.
The Latest Oversight Board Lawsuit
The governor of Puerto Rico is being sued by the financial oversight board. The Government of Puerto Rico passed a law that provides funding for municipalities to cover the cost of pensions and health insurance. This law passes the debt to the commonwealth, and the oversight board argues that this is a violation of the PROMESA Act as it adds $1.7 billion in debt between 2019 and 2024.
If you are suffering because of mounting debt, you have options. No amount of debt is so large that it can ruin your life. You just have to know how to help yourself. A great first step is to explore your options with a skilled, licensed attorney. Elias Dsouza of Dsouza Legal group has been helping people in your situation for over a decade. Do not live in fear of debt collectors. Contact Elias today for a free consultation and start down the path to financial freedom.