Puerto Rico

Alexandria, Va.— The latest American Bankruptcy Institute (ABI) podcast features ABI Resident Scholar Prof. Melissa Jacoby talking with sovereign debt experts Profs. Mitu Gulati of Duke University School of Law and Anna Gelpern of Georgetown University School of Law about Puerto Rico's spiraling financial distress. Gulati and Gelpern compare Puerto Rico’s financial situation to recent sovereign debt crises, and examine current restructuring proposals for Puerto Rico.

Both experts are skeptical of Puerto Rico’s proposed recovery plan released on Feb. 1, as it does not have a mechanism for dealing with hold-out creditors. “The deal that they have proposed, even though it's a massive haircut, is still not enough to get them out of trouble,” said Gulati, one of the architects of Greece's sovereign debt restructuring. “They are going to be back in crisis quite soon if their economy continues to go in the way it is going currently.”

Gelpern, who served as an expert to the United Nations Conference on Trade and Development, points out that Puerto Rico’s financial crisis is not comparable to other sovereign debt crises. “With Puerto Rico, there aren't the usual factors of falling currency and banking systems,” she said. “Very often sovereign governments are reluctant to pull the trigger because they are worried about bank runs and currency collapses. Here you've got a slow hemorrhage of the population and delay isn't helping anyone.”

“What Puerto Rico's been doing the past few years is very much like many very bad sovereign debt crises where they just delay, delay, delay, and cost the public a lot of money,” Prof. Gulati added.

Click here to listen to the podcast.

For more news and analysis on Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.

ABI’s podcast program features interviews with important figures or experts discussing timely bankruptcy topics or issues. ABI podcasts are freely available for members, the public and the press, and can be accessed on ABI’s Newsroom website.

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