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U.S. House Passes Puerto Rico Debt Relief Bill

Politics Reuters

Following months of internal wrangling, the U.S. House of Representatives, on Thursday (June 9) passed legislation creating a federal control board to help Puerto Rico cope with crippling debt that is wreaking havoc throughout the island's economy.

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By a vote of 297-127, the House approved the bill, sending it to the Senate for consideration.

Some leading Democratic senators have voiced concerns about provisions, including one that potentially could reduce the minimum wage for young Puerto Ricans.

But given the overwhelming support in the House and a looming July 1 deadline for Puerto Rico to make a $1.9 billion debt payment, senators may be hesitant to delay or tinker very much with the bill.

Following the House vote, the White House in a statement urged the Senate to act promptly "so the president can sign the bill into law ahead of the critical July 1st debt payment deadline."

The legislation was bolstered by rare bipartisan cooperation between the White House and the House's Republicans and Democrats over the past six months.

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Nevertheless, some lawmakers feared that allowing Puerto Rico to restructure its $70 billion debt in a way that changes the seniority of the creditors - for instance by making them all equal or subordinated to pensioners - would set a bad precedent for other U.S. states with debt problems.

Puerto Rico does not enjoy Chapter 9 bankruptcy protection, unlike the 50 U.S. states.

The territory, which has a 45 percent poverty rate amid high unemployment, is also plagued by a growing migration of residents to the U.S. mainland.

Puerto Rico's debt problems come as its government and healthcare industry struggle to contain the spread of the Zika virus, which is blamed for severe birth defects and other neurological diseases.