Puerto Rico's governor tells US Senate the island cannot repay debts

[villager]

Source: Guardian

Puerto Rico’s governor, Alejandro García Padilla, told the US Senate on Tuesday that the troubled Caribbean island has “no cash left” and can no longer repay its $72bn debts.

The territory paid a $354m debt due on 1 December, but Padilla said austerity measures had not only eaten into essential services but caused tax revenues to crater. With more than $900m due in January, the governor said his options were restructuring or disaster.

“The consequences of a default without any legal framework to restructure our liabilities are so disastrous that for the past six months we have been executing emergency measures to continue meeting our obligations with our creditors and avoid a disruption of essential services to our citizens,” Padilla said in a prepared statement. “These emergency measures are unsustainable.”

Face to face with the Senate judiciary committee, however, he was more blunt: “Absent an orderly process, [the default’s] effects will be catastrophic. That is why, starting today, the commonwealth of Puerto Rico will have to claw back revenues pledged to certain bond issues in order to maintain essential public services. We have taken this difficult step in the hopes that Congress will act soon, but let us be clear: we have no cash left.”

<snip>


Read more: http://www.theguardian.com/world/2015/dec/01/puerto-rico-debt-govenor-alejandro-garcia-padilla-senate-repayment

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emphasis mine -- but of course, that's exactly what society's owners have planned for me and thee....

[KamaAina]

1. How is this impacting the statehood debate?

I imagine the pro-statehood (repuke) party is seizing upon this as an example of how estado libre asociado (commonwealth) status doesn't work.

[jeff47]

2. Republicans aren't pro-statehood.

Puerto Rico as a state is not likely to elect Republicans to Congress. Adding two Democratic seats to the Senate does not help them.

But it's pretty moot since the next referendum is in 2020.

[KamaAina]

3. No, it's the other way around.

The pro-statehood party down there is allied with the repukes, for who knows what reason, while the pro-commonwealth party supports the Dems. The pro-independence faction is rather small, but may also find a way to make some hay out of this.

[jeff47]

4. I was speaking of the "national" parties, not the PR parties.

I should have made that clear.

[happyslug]

5. Not a bit, the debt is in US Dollars

Thus neither State hood or Independence will solve the problem. Independence could in theory, provided an Independent Puerto Rico manage to borrow money in its own currency and that money is then used to pay off these Debts in US Dollars. At that point Puerto Rico could devalue its own currency and eliminate the debt by reducing its true value (Puerto Rico Dollar becomes equal to US Cents). The problem with that solution is no one is going to exchange debts in US Dollars for Debts in Puerto Rico Dollars do to fears this is what Puerto Rico can do.

State hood is even worse, under the US Constitution states can NOT "impair Contracts' which includes debts, but there is no similar ban on the Federal Government. As a 'Commonwealth', Puerto Rico could ask Congress to abolish the debt or give the Commonwealth the power to do so itself. A Commonwealth is NOT a state and as such the ban on abolishing debts does not apply. On the other hand a Commonwealth is a creation of the Federal Government, Congress can grant (or deny) such creation the ability to abolish debts of such creations. Thus Commonwealth Status may be the best option, for State hood can NOT solve the problem of debts, but being a creation of Congress, Commonwealth status may permit such abolishment.

You will have people argue that the 4th amendment ban on taking property without compensation would include a ban on abolishment of debts, but the courts have NEVER ruled that way. In the case of states, the Courts have relied on the constitutional ban on states abolishing contracts including contracts of debt instead.

Article 1, Section 10:

No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

http://www.archives.gov/exhibits/charters/constitution_transcript.html

Sorry, once you look at the options, State hood is the worse option, Commonwealth Status (and the ability to abolish debts) and Independence (with its ability to abolish debts) are better options.

[turbinetree]

6. Here something to chew on and this countries "free trade" policies................................

http://www.multinationalmonitor.org/hyper/issues/1981/10/neumann.html


http://www.manufacturing.net/news/2007/11/puerto-ricos-pharmaceutical-industry-terminally-ill


http://www.usatoday.com/story/news/2012/10/21/global-drug-manufacturing-oversight/1646487/


Yep , you just gotta to love "free trade"


Honk-----------------------for a political revolution Bernie 2016