Puerto Rico already had a debt problem before Hurricane Maria. Its government had been borrowing too much money for years, and, with the population of the island dwindling, began missing payments to its creditors. Congress then passed the PROMESA law, which created an oversight board that would make fiscal decisions for Puerto Rico and allowed limited bankruptcy. That board wound up signing off on a ten-year fiscal plan, which economists Martin Guzman and Joseph Stiglitz said
risks leading to the flawed conclusion that Puerto Rico can manage a recovery with a much smaller haircut than it needs. Unless the plan is urgently redefined on the basis of credible assumptions, Puerto Rico will not recover, debt sustainability will not be restored, and the Board will have failed in its mission.
Their criticism is that the PROMESA board failed to appreciate how poor conditions on the island really are. The board’s assumptions form the basis for restructuring negotiations between Puerto Rico and its bondholders, newly permitted under PROMESA….