October 11, 2017 Read More →

Trump Is Right on Eliminating Puerto Rico’s Debt

President Trump, who knows a thing or two about bankruptcy, says Puerto Rico’s public debt should be wiped out. I agree.

The commonwealth owes bondholders somewhere on the order of $70 billion, with most of that debt tied to general-obligation bonds, revenue bonds and bonds issued by the Puerto Rico Electric Power Authority.

Ahead of the wide devastation wrought by Hurricanes Irma and Maria, I was of the view that the commonwealth could manage perhaps 20 to 30 percent of its general-obligation and revenue-bond debt and that the power authority could pay off perhaps 30 percent of its debt.

Now, as the island and its economy reel from the carnage of the hurricanes, the only viable way forward is zeroing-out of the bonds in question and an immediate cessation of interest payments. Puerto Rico’s badly crippled economy must rebuild, and the only way for that to happen is for legacy governmental debt to be handled in a way that won’t impair the restoration of markets and physical development.

Trump is right on eliminating Puerto Rico’s debt

Posted in: IEEFA In the News

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