SAN JUAN, Puerto Rico – Top Puerto Rico legislators pledged on Thursday to help local investors in government bonds who face deep losses as the U.S. territory defaults on a series of debts due to an economic crisis.
Carlos Mendez, the president of Puerto Rico's House of Representatives, promised to seek tax credits for local bondholders who suffer losses. And Senate President Thomas Rivera Schatz said he would push for legislation that would give them priority in buying public property or getting government loans to open a business.
But Schatz drew a sharp distinction between the individual bondholders, many of them island residents, and what he called "vulture funds" — promising there would be no laws to favor the outside hedge funds that are also fighting for repayment of billions owed them.
"There is no quick or easy solution to solve this disaster," he said.
The lawmakers appeared before hundreds of Puerto Ricans at a conference organized by an advocacy group representing some of the estimated 60,000 individual bondholders — many of them locals.
They hold roughly $15 billion of the nearly $70 billion public debt that Puerto Rico is seeking to restructure as the government runs out of money. Hedge funds hold about a third, and officials say it's not clear who holds the rest.
Gov. Ricardo Rossello also was scheduled to speak at the event in a bid to appease bondholders, many of whom have filed lawsuits that have been temporarily blocked (by congressional action that also created a federal control board (with power to impose austerity measures?). The deadline on the stay on lawsuits expires in May, but the government has asked the control board overseeing the island's finances to extend it until December.
Members of the crowd pelted officials with questions about when they might be paid, what kind of losses they might face and why the debt has not been audited. One asked whether the government can guarantee that at least interest will be paid.
"The government aims to meet those obligations," Schatz said. "But it wouldn't be honest of us to say it's guaranteed."
The federal control board is expected to approve a 10-year fiscal plan on Monday that many believe will be amended to include additional austerity measures.
Among the bondholders was retiree Mercedes Pont, who worked in publicity until she got laid off in 2011. She had invested in Puerto Rico bonds because they were triple-tax exempt and she believed they were low risk. She said she always followed her mother's advice to never depend financially on any man, but she now depends on others to help pay her power and water bills because of her losses.
"It's been humiliating to have to change my life around from being a completely independent woman," she said. "It's a situation of frustration, anger, desperation and complete abandon. ... I invested in Puerto Rico and they owe me."