Puerto Rico officially exited bankruptcy Tuesday, nearly six years after Congress imposed an outside control board, known as PROMESA, to run the island’s economy. In the largest debt restructuring plan in U.S. history, PROMESA reduced the biggest chunk of Puerto Rico’s debt to $7.5 billion from an original $33 billion, but the board’s plan required an upfront cash payment of $7 billion to those bondholders, and it also included a swap for $10 billion in new bonds.
Still to be resolved is the fate of other portions of Puerto Rico’s massive debt, including some $9 billion owed by its electric power authority and $6 billion owed by its highway authority. In addition, the commonwealth government has already had to pay more than $1 billion in legal and professional fees related to bankruptcy, mostly to U.S. firms.
Critics say austerity measures imposed by the fiscal control board will make any economic recovery impossible. Those measures include a nearly 50% cut in the annual budget of the main public university and a requirement that Puerto Rico spend up to $2.3 billion annually to shore up its public employee pension system.