A number of potential 2020 Democratic presidential contenders are behind a bill that would allow Puerto Rico to terminate its $73 billion in debt.
Sens. Elizabeth Warren, a Massachusetts Democrat, and Bernie Sanders, a Vermont independent, introduced a bill Wednesday that would give the US territory a way out of its crushing debt crisis exacerbated by the damage from Hurricane Maria in 2017.
Rep. Nydia Velázquez, D-New York — the first Puerto Rican woman elected to the House — plans to introduce companion legislation in the House.
The relief act aims to allow US territories to “terminate their public, unsecured debt” if they meet two of the following criteria: population decrease of 5% over 10 years, received major federal disaster assistance and per capita debt going beyond $15,000. Puerto Rico qualifies under these criteria.
The senators propose that Puerto Rico’s governor and Legislature approve the debt relief, since Puerto Rico is a self-governing territory. The bill would then designate a “special master” to allocate $15 billion to creditors Puerto Rico owed. The bill would not extend to bond insurers, large financial firms and hedge fund investors.
Under the bill, eligible US territories would be allowed the option to terminate their debt only once every seven years. The Caribbean island has been in an economic recession for over a decade and in May 2017 it filed for bankruptcy the biggest municipal bankruptcy filing ever in the US.
Four months after filing for bankruptcy, Puerto Rico was hit by the strongest storm the island has seen in 85 years: Hurricane Maria.
When he was a candidate, Donald Trump said he would not “bail out” Puerto Rico, but as President and following Hurricane Maria, Trump floated the prospect of wiping out Puerto Rico’s debt burden.
