The U.S. federal control board tasked with managing Puerto Rico's government finances said Wednesday that it will initiate a probe into the reasons behind the island's severe economic crisis.
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The overseeing body also announced that it will investigate how the Caribbean island's debt of US$74 billion dollars was issued and accrued, according to ABC News.
A special committee will be established as part of the investigations which will appoint an independent investigator responsible for reviewing Puerto Rico's egregious debt. The public will be informed of the findings once they are complete.
Economist Vicente Feliciano said that the investigations will fortify the board and government's position “when negotiating with creditors” despite its independence from current debt restructuring hearings taking place in federal court.
He asserted, according to ABC News, that creditors may agree to additional concessions if the probe uncovers details relevant to the federal court investigation.
One aspect that may raise creditors' eyebrows is if the special committee and independent investigator discover that some of the debt had been issued illegally. In which case, many would argue that it shouldn't have to be repaid, Feliciano added.
Hampered by a slew of austerity measures and a crippling 10-year recession, Puerto Ricans have organized mass protests and demonstrations to demand an audit of the public debt.
According to reports by the Debt Audit Commission and the ReFund America Project, roughly US$36.9 billion of that debt is illegal. The amount owed to creditors either involved “extra-constitutional” debt saddled with predatory interest rates or “toxic” interest rate swaps.