US Treasury Secretary Lew Reiterates He Sees Human Crisis in Puerto Rico
SAN JUAN – During his latest visit to Puerto Rico’s capital, U.S. Treasury Secretary Jacob J. Lew reiterated Monday that the human crisis on the island is real and growing, urging Congress to act over the commonwealth’s fiscal crisis before there is “nothing left to restructure.”
He called once again for Congressional action that provides Puerto Rico with access to an orderly restructuring regime and independent oversight, which Lew described as “the only option” that could help the U.S. territory tackle its fiscal crisis once and for all.
Lew visited Eleanor Roosevelt Elementary School and Centro Médico in San Juan, where he highlighted the “crumbling infrastructure” and the funding woes affecting the island’s healthcare and education services.
“It is heartbreaking,” the Treasury secretary told reporters at Centro Médico, after describing his visit to the island’s leading public medical center.
Lew said there has been progress in negotiations between Treasury and the House Natural Resources Committee over the Puerto Rico Oversight, Management & Economic Stability Act (Promesa) — a bill that would establish strong, independent fiscal oversight board that would also control the commonwealth’s access to a debt-restructuring mechanism.
As he has previously said, the Treasury secretary stressed that Promesa is not a bailout, but warned that if it gets to a point where “there is nothing to restructure,” a federal bailout could be possible to avoid further chaos.
It is expected that a new version of Promesa will be released later this week, while a markup hearing could take place as soon as next week. Nevertheless, concerns remain over the proposed legislation’s passage, as it keeps struggling to achieve enough support from both sides of the aisle.
Meanwhile, Lew will also meet with officials from the Puerto Rican government along with business and community leaders.
Lew was already expected to highlight how the debt crisis “has already harmed the health, safety, and welfare” of people living in Puerto Rico, according to a media advisory released before his visit.
Lew last visited the island early this year, also urging for prompt Congressional action over the matter. He added at the time that the commonwealth was “already in default,” with a crisis that was imposing “a real hardship on the people of Puerto Rico.”
A day after Puerto Rico defaulted on roughly $370 million due on Government Development Bank debt due May 2, Lew urged once again for prompt congressional action, stating that “the crisis is real,” and is quickly approaching a complete unwinding that could increase the risk of spilling over to the rest of the municipal bond market.
By listing the wide range of hardships he says the island has been facing lately as it maneuvers through its fiscal and economic woes, Lew conceded last week it is a challenge having Congress members act fast enough before the crisis goes up a couple of notches this summer, when more than $1.5 billion in debt payments come due.
The Treasury secretary wrote to Congress leaders last week, warning that further inaction only gives oppositors to the Puerto Rico bill more time to continue making inaccurate and misleading claims about the proposed legislation.
“I believe there are [some creditors] who want to maximize their chance of getting a dollar on the dollar, even if everyone else gets nothing and even if the whole system collapses,” Lew said last week, noting that is why a restructuring mechanism is necessary.
He stressed that this mechanism can’t be one that requires all creditors to buy in, warning about having holdout creditors dragging the process for years. “If this goes into litigation and the different classes of bondholders are fighting in court for 10 to 15 years, there won’t be anything left of Puerto Rico,” said Lew, who echoed these concerns while speaking to the press in San Juan on Monday.