Debt and politics will foil Puerto Rico statehood bid

Significance

Under the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) passed by the US Congress earlier this year, the oversight board can set the island’s fiscal policy independent of the insular government should no agreement be reached. Garcia Padilla will depart office in January and a governor from the pro-statehood New Progressive Party of Puerto Rico (PNP), Ricardo Rossello, will inherit the management of complex federal-commonwealth arrangements and the island’s economic and social crisis, as Puerto Rico restructures over 70 billion dollars in debt.

Impacts

• Republican plans to repeal the Affordable Care Act (‘Obamacare’) would worsen Puerto Rico’s public health crisis.
• The Federal Reserve’s interest rate lift-off will punish US sub-national borrowers that have thus far avoided difficult spending cuts.
• Across-the-board US tax cuts, absent special measures, would see potential investors look to the mainland, rather than Puerto Rico.