Puerto Rico Governor Pitches Statehood as Debt Solution

By Andrew Scurria Features Dow Jones Newswires

Puerto Rico's governor said he would travel to Washington this week to lobby Congress to recognize the U.S. territory's vote in favor of becoming the 51st state, even if it means surrendering its newfound debt-restructuring powers.

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Despite boycotts by opposition parties that depressed voter turnout, Puerto Rican voters delivered "a clear rejection of the current colonial status and a path forward through statehood," Gov. Ricardo Rosselló said in an interview with The Wall Street Journal.

Voters opted for U.S. statehood by a 97% margin in Sunday's vote, though turnout was just 23% as opponents of the governor urged their constituents to snub the vote. The last time Puerto Rico called a plebiscite on its political status, in 2012, 78% of voters turned out.

The results aren't binding on Congress, which must approve any change in Puerto Rico's political status.

The vote also took place without approval from the Justice Department, which had earlier raised objections to the governor's proposed ballot language. He said he would attempt to convince members of Congress that the 3.4 million island residents had nonetheless supplied a mandate in favor of becoming the 51st state.

"The rules that have always applied are, those who go to the ballot box determine the outcome," Gov. Rosselló said.

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U.S. lawmakers, who have historically been skeptical of accepting Puerto Rico as a state, are especially loathe to do so now with the territory grappling with a financial crisis that is stifling its economy and elevating rates of poverty and joblessness, said Amilcar Antonio Barreto, a professor at Northeastern University.

Congress has historically favored keeping the territorial status quo "because it's the constitutional arrangement that gives them maximum flexibility over Puerto Rican affairs," he said.

Lawmakers last year passed a rescue package to install a federal financial oversight board with a mandate to get Puerto Rico's yawning budget gaps under control and tackle its $73 billion mountain of debt.

While many U.S. municipalities can restructure their obligations under chapter 9 of the U.S. bankruptcy code, U.S. states don't have a similar restructuring option to deal with a potential default on their general obligations. The Puerto Rico rescue law, however, gave the oversight board authority to adjust debts obligations in ways the states can't.

Mr. Rosselló said that making Puerto Rico the 51st state would lead to dramatic growth "as the natural reaction of a stronger economy impacting a smaller one," removing the need for those restructuring powers.

"This economic growth would allow us to be able to service our debt adequately even without the tools provided in Promesa," he said, referring to the Puerto Rico Oversight, Management, and Economic Stability Act, which established a process for restructuring debt. "Our debt is simply a symptom of a much greater problem which is our economy."

A national television advertisement released by a pro-statehood group on Tuesday echoed those themes, saying that statehood "benefits all Americans, ends corporate tax breaks and enables Puerto Rico to compete, prosper and pay its fair share on equal footing."

The oversight board last month placed Puerto Rico under what amounts to the largest-ever U.S. municipal bankruptcy. Its delay in approving a $9 billion restructuring deal covering the island power utility has rankled Republicans in Congress who viewed the agreement as a road map toward consensual settlements of Puerto Rico's other debts.

Write to Andrew Scurria at Andrew.Scurria@wsj.com

(END) Dow Jones Newswires

June 13, 2017 17:40 ET (21:40 GMT)