Judge Delays Ruling on Puerto Rico Debt Deal

international | economics and finance | press release Friday January 18, 2019 18:11 by Kate Zeller - Jubilee USA Network

White House Opposes Island's Food Assistance Funding

On Thursday, Judge Laura Taylor Swain delayed approval of a $17 billion debt deal between Puerto Rico "COFINA" creditors and the island's oversight board.

On Thursday, Judge Laura Taylor Swain delayed approval of a $17 billion debt deal between Puerto Rico "COFINA" creditors and the island's oversight board. Citing concerns that her ruling could alter Puerto Rico's constitution, the judge requested additional materials to review on Monday from the federally appointed oversight board.

"We are concerned that the plan under consideration doesn't cut enough debt," said Eric LeCompte who heads Jubilee USA and has monitored the island's financial situation since 2015. "I am worried that this type of plan will mean Puerto Rico will be trapped in an endless cycle of debt."

In court, opponents of the debt plan requested that Swain further delay any decision until the Internal Revenue Service can review the tax status of new bonds that are a part of the deal. The IRS can not currently assess the bonds because their doors are shuttered during the US Government partial shutdown.

Swain is also considering canceling another $6 billion of Puerto Rico's debt that the fiscal oversight board argues violated constitutional debt limits. 
"Puerto Rico debt from 2012 and 2014 bonds should be voided as the island had already exceeded it's legal debt limit," said LeCompte who serves on United Nation finance expert groups. "The island wrestles with a 60% child poverty rate and is still recovering from the hurricanes. Debt needs to be cut for both legal reasons and moral reasons."

As the Puerto Rico bankruptcy process continues, the government shutdown is slowing a budget decision on $600 million dollars in food aid for poor families in the US Territory. On Thursday, the White House wrote Congress opposing funding for Puerto Rico's Nutrition Assistance Program (NAP) that aids more than a million people on the island. The House of Representatives approved NAP funding in their version of the budget, now stalled during the shutdown.

"Access to food for poor families should not be used as a political bargaining chip in the budget shutdown negotiations," said LeCompte. "Puerto Rico is trapped in debt and rebuilding from hurricanes. Cutting food subsidies to the poor is just inhumane."