Federal judge approves plan to resolve Puerto Rico bankruptcy

A federal judge on Tuesday approved a plan for Puerto Rico to emerge from bankruptcy five years after the island said it would not be able to repay its creditors.

Why is this important: The restructuring plan will reduce Puerto Rico’s outstanding debt by 80% and save the government more than $50 billion in payments amid the island’s struggle to recover from multiple hurricanes, earthquakes land and COVID-19, Puerto Rico’s financial oversight board said.

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Catch up fast: Puerto Rico began to rely increasingly on debt to cover its expenses after 1996, when the United States stopped allowing American businesses to operate tax-free in Puerto Rico, according to the Council on Foreign Relations (CFR).

  • Limited representation in DC, poor local government management and a lack of federal tax provisions have all contributed to the crisis, according to the CFR.

What they say : “Today begins a new chapter in the history of PR,” tweeted the Supervisory and Financial Management Board.

  • “The agreement, while imperfect, is very good for Puerto Rico and protects our retirees, our universities and our municipalities that serve our people,” Gov. Pedro R. Pierluisi said in a statement. statement to the New York Times. “We still have a lot of work ahead of us.”

To note: Members of the financial oversight board, who are primarily federally appointed and not elected, have faced criticism and accusations of incompetence, according to the Washington Post.

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