Puerto Rico governor signs debt issuance law

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Puerto Rico Gov. Wanda Vázquez signed a law putting restrictions on future issuances of debt from Puerto Rico and its public corporations.

Vázquez announced the signing on Wednesday afternoon.

Puerto Rico Gov. Wanda Vazquez
Puerto Rico Gov. Wanda Vázquez said the law is a step for Puerto Rico towards restoring credibility and transparency.

“This measure responds to the need that we had before us for the government of Puerto Rico to once again have credibility and transparency, and establish uniform and responsible processes for the issuance of any future debt,” the governor said.

The governor said that Senate Bill 1447, Debt Issuance Liability Law, requires long-term debt to only be used for capital improvements, to have durations of 30 years or less, and to commence principal repayment within two years.

The Puerto Rico House of Representatives and Senate have approved the bill.

“The Puerto Rico Constitution already limits the term of debt issuance to 30 years and requires balanced budgets," said Cate Long, a frequent commenter about Puerto Rico debt. "I don't think anything in this law varies from the constitutional framework already in place.

“Puerto Rico has a massive amount of cash and [the Puerto Rico Oversight, Management, and Economic Stability Act] requires the commonwealth to pay interest on currently outstanding debt while the bankruptcy goes on,” Long said. “Paying Christmas bonuses and refusing to pay interest on current debt speaks volumes when it comes to intent to Puerto Rico to follow the rule of law.”

Vázquez settled on a central government plan of adjustment with various parties first in September 2019 and then, in an updated form, in March. It included restrictions on debt issuance.

Portions of the plan devoted to bonds are currently under renegotiation. However, the restrictions are likely to continue in any new plan.

On Wednesday, Vázquez said the law she signed went beyond the terms found in the negotiated plan of adjustment because the restrictions extend to the commonwealth’s public corporations and authorities.

On Wednesday an Oversight Board spokesperson said subsequent Puerto Rico governments could change this law but that changing the confirmed plan of adjustment would be more difficult. For the latter to happen, parties to the plan as well as a law court would have to sign off.

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