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  • The Capitol building is seen in San Juan, Puerto Rico May 4, 2017.

    The Capitol building is seen in San Juan, Puerto Rico May 4, 2017. | Photo: Reuters

Published 6 May 2019

The fiscal control board has become a powerful symbol of the island’s colonial relationship with Washington and the sacrificing of basic rights in the name of servicing the island’s unmanageable debt load.

A U.S. Appeals Court on Monday gave Puerto Rico's federally created financial oversight board another 60 days to allow for the constitutional reappointment of its members by President Donald Trump and the Senate.

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The board had faced a May 16 deadline set by the Boston-based First Circuit court on Feb. 15 to be validly reappointed or replaced after creditors of the bankrupt U.S. commonwealth successfully challenged members' appointments on constitutional grounds.

Last week, the White House announced the U.S. Senate will be asked to confirm the board's current seven members. The appeals court's order sets a July 15 deadline for that process to be completed.

Both moves allow the board to continue to restructure Puerto Rico's roughly US$120 billion of highly contested debt and pension obligations under a form of bankruptcy filed two years ago in federal court.

However, the board's executive director, Natalie Jaresko, told reporters on Monday the two-month extension may not be sufficient as the Senate confirmation process could take longer.

The appeals court denied the board's request to stay its ruling in the case until there is a final decision by the U.S. Supreme Court.

The board last month petitioned the high court over the ruling, which determined the board had been unconstitutionally appointed because its members are principal U.S. officers and should have been selected by the president "with the advice and consent of the Senate."

Under the 2016 federal PROMESA law, then-President Barack Obama appointed six board members from lists of candidates recommended by Congress, as well as a seventh member in a process that did not require Senate confirmation.

The lawsuit over the board members filed by creditors, including Aurelius Investment LLC and bond insurer Assured Guaranty Corp, also sought a dismissal of Puerto Rico's Title III bankruptcy cases - a move the appeals court rejected.

Deals restructuring the island's sales tax-backed bonds and Government Development Bank debt have won court approval. An agreement over Puerto Rico Electric Power Authority debt was announced on Friday.

According to Jaresko, the board’s recent lawsuits against government vendors, banks and bondholders will not delay the filing of a plan of adjustment for the commonwealth's core debt, which includes its pension liabilities.

She said a plan will be filed in court “as soon as reasonably possible.”

Meanwhile, the commonwealth finally released a fiscal 2016 financial audit that showed a government-wide net deficit grew to nearly US$70.3 billion from US$67.8 billion in fiscal 2015.

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