Here is an article about the stalemate and some of the issue that prevent it. Looks like everybody is a little right.
1. They don't have access to US Bankruptcy protections and want it. A key provision to restructuring debt.
2. A bill that would help with this, comes with strings attached. This goes without saying. Corporations, even cities who go into bankruptcy have judicial oversight on their spending. All major expenditures reviewed and approved. You can't file bankruptcy and send your executive staff to france for a company picnic. Towns cannot arbitrarily double key personnel's salaries, etc. However, due to the scope of this, a panel would provide additional oversight. PR doesn't want that. Puerto Rican officials are wary that granting too much power to the fiscal oversight board at the center of legislation drafted by House Natural Resources Committee Chairman
Rob BishopRob BishopAn unconstitutional oversight board for Puerto Rico?Pelosi’s Puerto Rico dilemmaOvernight Finance: Puerto Rico defaults on 2MMORE (R-Utah) would
steal from the territory’s autonomy. GarcĂa Padilla pushed back hard against a powerful board in his remarks Sunday, arguing it should not be designed to overrule the decisions of the island’s elected officials. I think the fact that they are in this mess shows elected officials need oversight. They want the protections US laws and courts provide, but want to remain autonomous. Funny how that works.
3. Labor and pensions prioritized over creditors. This is a non-starter. As mentioned before. Bankruptcy is a legitimate way to restructure debt, its legitimacy is based on consistent rules that favor the people taking the most risk, creditors. To move labor and pensions to the front of the line shocks the system, meaning any future debt issuances, or restructures would have a lower credit rating which translates to a higher cost of capital, which is a downward spiral. I said when Chryslers debt was restructured favoring labor that that set a dangerous precedent. If you as a creditor are not reassured the banks will favor you in bankruptcy, you simply will not loan to higher credit risk going forward. That would make restructure under better terms impossible. Unlike mortgages, which our gov't mandates high credit risk people have access to (creating a whole host of other problems), private individuals and entities need not loan money to gov't. An entity like PR can only raise capital by taxes or debt. The cost of debt is beyond the control of any entity, no matter what they would have you believe. Being a welfare state, they seem dependent on a small pool of taxpayers and debt issuances to sustain themselves. PR can issue 0% interest debt on 1 billion tomorrow, if the market doesn't think it can recover that because their elected officials are irresponsible or bankruptcy courts do not follow normal rules, they won't get 1 billion dollars from the market. They may only get 850 million on debt with a 1 year maturity. That is called market implied interest and cannot be regulated or controlled by gov't forces. This is why I love studying debt markets, they tell you more about a country or entity than anything else.
I don't see this as much of a partisan battle as much as both sides of the aisle agreeing that there are certain provisions necessary for which the beggar (PR) doesn't seem to agree with. They could pass a bill tomorrow if normal bankruptcy rules followed and proper judicial/bankruptcy oversight consistent with any other large scale municipal or corporate bankruptcy were followed.
http://www.thehill.com/...-puerto-rico-problem
"In the world I see you are stalking elk through the damp canyon forests around the ruins of Rockefeller Center. You'll wear leather clothes that will last you the rest of your life. You'll climb the wrist-thick kudzu vines that wrap the Sears Towers. And when you look down, you'll see tiny figures pounding corn, laying stripes of venison on the empty car pool lane of some abandoned superhighway." T Durden