Burdened by $120 billion in combined bond and pension debt, Puerto Rico filed the most significant US municipal bankruptcy in history last May. Following this collapse, the region’s finances are now under the management of a seven-member board appointed by federal lawmakers, who are trying to engineer Puerto Rico’s Recovery.
A blueprint for the region’s turnaround was expected last week, but this has now been delayed until the end of January. The turnaround plan is now due on January 24. Fiscal proposals for Puerto Rico’s debt-laden power utility, PREPA, and sewer authority, PRASA, have also been extended to the same date.
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The due date has been pushed back to allow lawmakers to account for the devastation wreaked by Hurricane Maria, which battered the island in September, killing dozens and decimating local infrastructure. The fiscal plan is supposed to provide guidelines for restructuring and serve as the basis for debt restructuring talks with creditors.
However, with the region still reeling from the hurricane, it’s not clear to what degree a revised plan will be able to help. According to Reuters, even before the storm, the plan forecast just $800 million a year available to service debt, which is around one-quarter of what Puerto Rico owes to creditors.
Puerto Rico’s Recovery: It won’t be easy
According to rating agency Moody’s, Puerto Rico’s recovery will be an uphill struggle to try and rebuild the battered territory’s finances. For a start, out-migration from the region is taking away jobs and tax revenue. An estimated 200,000 people relocated to Florida in September, around 6% of the overall population according to Moody’s. An outflow of human capital similar to that seen in New Orleans after Hurricane Katrina would cut Puerto Rico’s population in half from around 3.3 million to 1.7 million according to Moody’s estimates.
