SAN JUAN Oct 22 As Puerto Rico desperately seeks to stabilize its crumbling economy, two issues have come to the fore: the immediate question of whether it can file for bankruptcy, and the longer-term debate about its status as a U. S. commonwealth.
Both issues were discussed at a hearing on Puerto Rico's $72 billion debt crisis, held on Thursday by the U. S. Senate Committee on Energy and Natural Resources.
'SUPER' CHAPTER 9
Puerto Rico, because it is not a state, lacks access to Chapter 9 bankruptcy, which allows cities and public agencies - but not states - to file for bankruptcy. The island's cities and public agencies would, however, have access if Puerto Rico were a state.
Pedro Pierluisi, Puerto Rico's representative in Congress and witness at Thursday's hearing, has introduced a bill to extend Chapter 9 to Puerto Rico, but it has stalled in Congress.
The U. S. Treasury revealed ahead of Thursday's hearing it supports going a step further by granting bankruptcy protections to Puerto Rico's government itself. So-called "Super Chapter 9" is more radical than what Pierluisi's bill seeks and would face an uphill battle in Congress. If enacted, it would allow Puerto Rico to use bankruptcy to restructure all its debt, not just the small portion held by public agencies that would be eligible if Chapter 9 were extended.
Pierluisi said he opposes Super Chapter 9, while bondholders said they oppose any version of Chapter 9.
COMMONWEALTH OR STATEHOOD
Status is the political fault line in Puerto Rico, whose legislature comprises one party that favors making Puerto Rico a state and another that opposes changing its status.
As a commonwealth, Puerto Rico has neither the freedom of sovereign authority nor the protections accorded to U. S. states.
Pierluisi, a pro-statehooder running to unseat the pro-commonwealth Garcia Padilla in next year's gubernatorial election, told Congress on Thursday the "only way to treat Puerto Rico fairly" is to make it a state.
Pierluisi wants to put the statehood question to a vote in Puerto Rico. The island last year received $2.5 million in federal money to ask voters whether Puerto Rico should be a state, but the vote has not happened, which some pro-statehood leaders attribute to stall tactics by Garcia Padilla.
If elected governor, Pierluisi said, he would hold the vote sometime in 2017 and expects most residents to support statehood, based on past referendums.
While statehood would require an act of Congress, a ballot vote financed with federal money might be harder for Congress to
ignore than past referendums.
Separately, advisers for several Puerto Rico bondholder groups are scheduled to meet on Tuesday with advisers for the U. S. territory to discuss debt restructuring, after key talks with one of the groups collapsed, Reuters reported exclusively, citing two sources familiar with the matter. (Reporting by Nick Brown; Editing by Steve Orlofsky)
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