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As US Congress Reconvenes, Hearings Over Puerto Rico Loom in January

By on January 4, 2016

The U.S. House Natural Resources Committee is reportedly slated to hold two hearings this month over the Puerto Rico fiscal crisis.

The first lower chamber hearing is expected to take place Jan. 12 and the second on the week of Jan. 24, Reuters reports citing a spokesman for the committee. While it is highly expected other Congressional committees will follow suit in scheduling hearings to address the island’s fiscal and economic crisis, no official announcements have been made as of this writing.  

The commonwealth government is set to resume this month its lobbying efforts on Capitol Hill aimed at securing access to Chapter 9 of the U.S. Bankruptcy Code, which would allow Puerto Rico to restructure more than $20 billion of debt held by its public corporations. The island’s total public debt towers at more than $70 billion not including roughly $40 billion in liabilities under its underfunded pension funds.

Several Puerto Rico-related bills failed to secure passage before Congress left for the Holiday break, including one introduced by a group of GOP senators that seeks tax relief and federal oversight — yet no Chapter 9 access — for the commonwealth. After the end of the session, House Speaker Paul Ryan (R.,Wis.) said the lower chamber would move on the Puerto Rico issue once they reconvene in January, in a bid to have a final solution before the end of March.  

Puerto Rico met most of its more than $850 million due Jan. 4 in payments across several credits. However, it had to “claw back” — or redirect previously pledged revenue — some funds and use certain reserves to complete the payments, among other fiscal maneuvers. The island defaulted on $36 million due Jan. 4 corresponding to the Infrastructure Financing Authority (Prifa). It now joins the Public Financing Corp. (PFC), whose debt obligations have not been met during fiscal year 2016.

For the past several weeks, government officials, including Gov. Alejandro García Padilla, have been pointing at the possibility of lawsuits from creditors as a result of the administration’s latest fiscal decisions, including defaulting on about $36 million of Prifa debt due Jan. 4 and the use of the clawback mechanism. During a Monday interview with CNBC, the governor once again warned against the negative effects a legal battle between Puerto Rico and its creditors would have for all sides.

One measure introduced by a group of Democrat lawmakers seeks to establish a short-term stay on creditor lawsuits until March 31, Ryan’s self-imposed deadline for the U.S. House to address Puerto Rico’s issues. The initiative also failed to secure passage before the end of the session and it remains to be seen if it would be brought back to the table once Congress reconvenes.

Photo:  In this Nov. 22, 2015 photo, The Capitol dome is seen on Capitol Hill.  (AP Photo/Alex Brandon, File)

By Luis J. Valentín

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