1. NS4540 Winter Term 2017 Puerto Rico Receivership

2. Overview Puerto Rico defaulted on its debts in July 2016
The Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) signed into law before the budget cleared the island’s assembly
Short term effect to shield Puerto Rico from judicial sanction for non- payment of the island’s debt obligations
PROMESA will remain in operation until the island has registered four successive years of fiscal surplus
The board will therefore:
Supersede the fiscal authority of the governor and assembly
Make its own independent assessment of Puerto Rico’s true fiscal position
Has power to impose spending cuts beyond those enacted locally
Can reorganize hierarchy of outstanding claims on public debt

3. Assessment
Despite short-term relief from litigation PROMESA will only shelter Puerto Rico authorities from legal redress by island’s creditors until February 2017
At that time US president and Congress need to determine the future of Puerto Rico’s debt service profile.
Federally imposed limits on ability of PR government to set spending priorities and maintain public services may further delegitimize the two main parties political power