It has been almost two years since the US Congress enacted the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), a law designed to facilitate the recovery of Puerto Rico’s finances and economy. And yet, these many months later, there is little progress with the debt restructuring or fiscal reforms to report. To allow for discernible progress before PROMESA hits its two-year anniversary in June, the Financial Oversight and Management Board for Puerto Rico should undertake steps in the next few weeks to certify a comprehensive and robust fiscal plan for Puerto Rico. This plan should specify the cash flow available to debt service so that negotiations can begin over the distribution of losses among creditors. Puerto Rico’s tax-supported debt should be reduced from about US$45 billion to about US$6 billion, with debt service fixed at about US$350 million a year. Contingent payment obligations, such as GDP warrants, should be avoided.
CIGI Senior Fellow Gregory Makoff is researches issues in international financial policy, including the management of sovereign debt crises. He is an expert in sovereign debt and an experienced debt capital markets professional.