Puerto Rico debt relief bill clears hurdle in Senate

Reuters News
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Posted: Jun 29, 2016 11:15 AM

By Susan Cornwell

WASHINGTON (Reuters) - A relief plan to help Puerto Rico address its $70 billion debt cleared a critical hurdle in the U.S. Senate on Wednesday, getting the super majority it needed to advance to debate and a final vote this week.

The measure, which got 68 votes, is identical to the plan passed by the House of Representatives this month. Congress will try to send it to President Barack Obama to sign into law by July 1, when Puerto Rico faces a potential default on a chunk of its debt if it cannot make a $1.9 billion payment.

The Obama administration backs the measure. Treasury Secretary Jack Lew went to Capitol Hill this week to urge senators to vote for the relief plan for the Caribbean island, which has been waiting for months for Congress to act as its economic crisis worsened.

It was unclear how quickly the Senate would move to a final vote on the bill. Senate rules allow for debate to continue for up to 30 hours after the procedural vote, but senators could agree to speed up the action.

The legislation would create a federal oversight board, appointed by Washington, with power to restructure Puerto Rico’s unmanageable debt.

Many Puerto Ricans are leery about the proposed board, fearing that it could usurp the island’s governmental powers and place investors’ concerns over local  priorities.

Some Democrats have bridled at a Republican provision written into the legislation that potentially could lower the minimum wage for some young workers, as well as weakening some overtime pay rules. Some Republicans, meanwhile, say they are concerned the bill would amount to a bailout of the island, something supporters of the bill deny.

Thirty-two senators voted against passage; 18 Republicans and 13 Democrats. Bernie Sanders, an independent who sought the Democratic nomination for president, also voted against.

After the vote, the price on Puerto Rico's benchmark 2035 General Obligation debt rose, as did share prices of some monoline bond insurance companies with exposure to portions of the island's debt.

Leaders of both political parties in the Senate warned that failure to pass the legislation by Friday could lead to a U.S. taxpayer-funded bailout.

"This is the best and possibly the only action we can take to help Puerto Rico," Senate Majority Leader Mitch McConnell said on the Senate floor.

"Doing nothing now ... (is) the surest route to both a taxpayer funded bailout of Puerto Rico and a humanitarian crisis for its people," he said.

Senate Democratic Leader Harry Reid said that while be backs the legislation, he shares the concerns of many Democratic opponents.

"I take issue with the oversight board, their excessive powers and appointment structure," Reid said, adding he was unhappy with provisions affecting overtime rules and wages for Puerto Rican workers.

But Reid said he would vote for passage because Puerto Rico needed the help before July 1.

"Otherwise we ... turn them over to the hedge funds and they will sue them to death," Reid said.

Puerto Rico, a U.S. territory whose 3.5 million residents are U.S. citizens, is reeling from a 45 percent poverty rate, a steady flow of migration to the U.S. mainland that shrinks its tax base and shuttering of essential services.

(Reporting by Susan Cornwell, additional reporting by David Morgan; editing by Richard Cowan, Daniel Bases and David Gregorio)